-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, YFSANjuoTTbCttvOJrxBn8Sb2U6cRUPIQ9yoEi99R47zQGIs27TtL5CMJnBfBlTx sW9fmyl2d2RHSUb0dmD7Fw== 0000715633-94-000002.txt : 19940404 0000715633-94-000002.hdr.sgml : 19940404 ACCESSION NUMBER: 0000715633-94-000002 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19940103 FILED AS OF DATE: 19940331 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VONS COMPANIES INC CENTRAL INDEX KEY: 0000715633 STANDARD INDUSTRIAL CLASSIFICATION: 5411 IRS NUMBER: 381623900 STATE OF INCORPORATION: MI FISCAL YEAR END: 1230 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-08452 FILM NUMBER: 94519794 BUSINESS ADDRESS: STREET 1: 618 MICHILLINDA AVE CITY: ARCADIA STATE: CA ZIP: 91007 BUSINESS PHONE: 8188217000 MAIL ADDRESS: STREET 1: 618 MICHILLINDA AVENUE CITY: ARCADIA STATE: CA ZIP: 91007 FORMER COMPANY: FORMER CONFORMED NAME: ALLIED SUPERMARKETS INC /MI//NEW/ DATE OF NAME CHANGE: 19870805 10-K 1 FINAL 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 ---------------------- FORM 10-K (Mark One) /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended January 2, 1994 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------- ------- Commission File Number 1-8452 ---------------------- THE VONS COMPANIES, INC. (Exact name of registrant as specified in its charter) Michigan 38-1623900 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 618 Michillinda Avenue, Arcadia, California 91007 (Address of principal executive offices and zip code) Registrant's telephone number, including area code (818) 821- 7000 ---------------------- Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered - -------------------- ----------------------------------------- Common Stock, $.10 par value per share New York Stock Exchange ---------------------- Securities registered pursuant to section 12(g) of the Act: None (Title of class) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.[ ] Aggregate market value of voting stock held by nonaffiliates of the registrant as of March 14, 1994: Common Stock, par value $.10 per share - $433,061,474. The number of shares of Common Stock outstanding as of March 14, 1994 - 43,341,926. DOCUMENTS INCORPORATED BY REFERENCE: Portions of the Annual Report to Shareholders for fiscal year ended January 2, 1994 are incorporated by reference into Parts II and IV. Portions of the Proxy Statement for the Annual Meeting of Shareholders to be held on May 11, 1994, are incorporated by reference into Part III, to be filed no later than May 8, 1994. PART I ITEM 1: BUSINESS General The Vons Companies, Inc. ("Vons" or the "Company") is the largest supermarket chain in Southern California (including Clark County, Nevada) based on sales. As of January 2, 1994, Vons operated 345 supermarkets and food and drug retail stores. Vons also operates a fluid milk processing facility, an ice cream plant, a bakery, a delicatessen kitchen, and distribution facilities for meat, grocery, produce and general merchandise. Vons believes that it is a leader in the successful introduction of innovative supermarkets and food and drug combination stores as well as in the operation of multiple store types which are designed to serve diverse customer needs. Vons operates under the names "Vons," "Vons Food and Drug," "Pavilions," "Tianguis," and "EXPO." The Company's marketing platform is built on offering the customer greater value than found elsewhere by combining competitive pricing with superior selection, quality, service and convenience. Vons' grocery business began operations in 1906. From 1969 until December 1985, it was owned, along with certain other merchandising businesses, by Household International, Inc. In 1985, these merchandising businesses were acquired by a newly formed corporation in a leveraged buyout, organized in part by the Company's present management. During 1986, all of these acquired merchandising businesses, other than the grocery business, were sold. On July 22, 1987, the newly formed corporation was merged (the "Allied Merger") with and into Allied Supermarkets, Inc., a Michigan corporation ("Allied"), and the surviving corporation was renamed The Vons Companies, Inc., a Michigan corporation. On the same date as the Allied Merger, substantially all of the business previously operated by Allied was sold to a company organized by the former management of Allied, leaving the Company with operations located only in Southern California, as they existed prior to the Allied Merger. On August 29, 1988, the Company purchased substantially all of the operations of Safeway, Inc. ("Safeway") in Southern California. At the time of the acquisition (the "Safeway Acquisition"), these operations included 162 supermarkets and manufacturing and distribution facilities. As a result of the Safeway Acquisition and other purchases of Vons common stock, Safeway, through a wholly-owned subsidiary, is Vons' largest shareholder, with approximately 35% of the outstanding shares of Vons common stock. Safeway is an affiliate of Kohlberg Kravis Roberts and Co. On January 28, 1992, Vons acquired the supermarket business of Williams Bros. Markets, Inc. ("Williams Bros.") which included 18 supermarkets. These stores are located primarily in Santa Barbara and San Luis Obispo counties, in the central coast of California. Strategic Restructuring In response to the weak economic environment in the regions it serves, and other factors having a negative impact on sales, the Company commenced a cost containment and strategic restructuring program during fourth quarter 1993. The program includes the accelerated closure of underperforming facilities and a reduction in administrative staff. In addition, the Company reorganized its store district operation in 1993 to be leaner and more efficient. The Company is pursuing other potentially significant initiatives designed to increase efficiency and lower its cost structure over time. This program is expected to produce significant expense reductions which the Company will reinvest into its business through lower prices and improved store service levels. In January 1994, the Company introduced the "Vons Value Program." This program emphasizes low prices everyday and represents a strategic repositioning of the Company's market focus. The Vons Value Program began with price reductions on at least 3,000 items per store and included improved store signage to better inform customers as to the many ways to save money at Vons, including the newly reduced prices, weekly advertised specials and free membership club savings. Double coupons will remain an integral part of the Vons offering. An important component of the Vons Value Program is an increase in the amount of labor allocated for check-out. The Company believes that customer satisfaction will be increased by improving the speed of check-out. Overall store conditions will also improve as personnel from peripheral departments spend less time supporting check-out. As well, the Company's marketing campaign has been restructured to communicate the Vons Value Program price reductions and improved store service levels and will place greater emphasis on electronic media. The Vons Value Program is a long term strategy, the implementation of which will extend beyond 1994. The program is intended to initially benefit sales, which in turn will improve the Company's ability to achieve strong, sustainable earnings growth over the long run. Store Types The Company operates six store types: Vons, Vons Food and Drug, Vons Super Combo, Pavilions, Tianguis, and EXPO. Each type is designed for a different customer segment as evidenced by the store location, appearance and product offerings. A key strategy of the Company is to tailor its store and merchandise offerings to reflect its diverse customer base. In March 1993, Vons introduced Vons Super Combo and in June 1993, EXPO. Vons intends to continue developing distinct store identities which it believes are in demand by its customers. The Company operates multiple store types and supports them with centrally controlled marketing, advertising, buying, real estate development, management information systems, distribution, manufacturing, accounting and administration to maximize operating leverage and profitability. The following table shows, by store type, the number of Vons stores in operation at the end of each of the years indicated and the number of stores opened, closed or converted during each year:
VONS FOOD VONS AND SUPER VONS DRUG COMBO PAVILIONS TIANGUIS EXPO TOTAL ------ ------ ------ --------- -------- ------ ------ 1991: Beginning store count.. 209 77 - 26 8 - 320 Stores opened.......... - 4 - 1 1 - 6 Stores closed or sold.. (5) (1) - - - - (6) Store type conversions. (2) 1 - 1 - - - ------ ------ ------ --------- -------- ------ ------ Ending store count..... 202 81 - 28 9 - 320 ------ ------ ------ --------- -------- ------ ------ 1992: Stores opened.......... 1 3 - 4 - - 8 Stores acquired........ 18* - - - - - 18 Stores closed or sold.. (1) - - - - - (1) Store type conversions. (2) 2 - - - - - ------ ------ ------ --------- -------- ------ ------ Ending store count..... 218 86 - 32 9 - 345 ------ ------ ------ --------- -------- ------ ------ 1993: Stores opened.......... 1 4 3 - - 4 12 Stores closed or sold.. (9) (3) - - - - (12) Store type conversions. 2 3 - - (6) 1 - ------ ------ ------ --------- -------- ------ ------ Ending store count..... 212 90 3 32 3 5 345 ------ ------ ------ --------- -------- ------ ------ ------ ------ ------ --------- -------- ------ ------ Average gross square feet per store at January 2, 1994...... 29,000 42,300 71,400 43,300 52,800 73,700 35,000 ------ ------ ------ --------- -------- ------ ------ ------ ------ ------ --------- -------- ------ ------ - ------------------- * Represents the Williams Bros. acquisition
Vons monitors the operating performance of all of its stores and closes or disposes of stores that do not satisfy its strategic, marketing or financial goals. Stores closed or sold typically represent underperforming units due to changes in market area or lease terms, the closure of which generally affects operating results favorably. Vons' traditional supermarket stores operate under the name "Vons." These stores offer extensive assortments of food products, including departments for dry groceries, produce, meat, seafood, dairy, wine and liquor as well as limited assortments of general merchandise, including greeting cards and health and beauty care items. Most Vons supermarkets also have in-store bakeries, service floral, service delicatessens with fresh and prepared foods and service seafood departments. In the first quarter of 1994, in connection with the Company's restructuring program, the Williams Bros. stores were converted to the Vons name and are included with the Vons store type. This conversion was made to offer central coast customers the Vons stores' marketing program and eliminate costs associated with maintenance of a separate marketing program. The "Vons Food and Drug" stores combine traditional supermarket selection and service departments with a pharmacy that is supported by a wide assortment of health and beauty care items, cosmetics and other merchandise typically found in a drug store. These stores tend to be larger than Vons' traditional supermarket stores, and generally include expanded selections of general merchandise, housewares and kitchenware. A larger version of the Vons Food and Drug store is the "Vons Super Combo" store which offers customers the convenience of one-stop shopping. While this store offers product selections and service departments similar to a Vons Food and Drug store, it also includes additional departments such as video rental, dry cleaning, mailing service and one-hour photo. Targeted to consumers interested in contemporary food selections, "Pavilions" stores are designed for a clientele conscious of food trends, who typically spend more discretionary income on food and food-related items. Pavilions stores offer expanded selections of food products and a variety of service departments. The stores generally offer selections of prepared foods, produce, wines and such service departments as hot bakeries, service floral, delicatessens, service meat departments and service seafood departments. Many Pavilions stores also offer extensive general merchandise emphasizing food-related products of department store quality, a larger health and beauty care department, a cosmetics department, and a complete pharmacy. Selected stores also offer an in-house candy shop, sausage and smoke shop, bagel shop, sushi bar, and high quality prepared Chinese food. Vons introduced "EXPO" stores in June 1993 as a competitive store type designed to appeal to the highly price-sensitive customer. The stores include a large section devoted to items typically found in warehouse club stores and a deep discount pharmacy and health and beauty care department, as well as a traditional core grocery section. Prices are set to be competitive with warehouse clubs on like items, and lower overall than any traditional supermarket competitor in its market area. Costs of operation of the stores are also low due to low cost product presentation methods, a low cost labor contract and customer bagging of their purchases. Selected stores also offer peripheral departments such as banks and dry cleaners. In response to changing market conditions, two "Tianguis" stores were converted to Vons stores, three stores were converted to Vons Food and Drug stores and one store was converted to EXPO. The Company intends to either convert the remaining three Tianguis stores to another store type in 1994 or to close the stores, eliminating the "Tianguis" type. Store Remodel Projects and New Store Openings Another key strategy of the Company is to augment sales growth through the continuation of its ongoing chainwide remodel program and new store opening program. In 1993, the Company maintained its goal of having 80% of its stores either newly opened or remodeled within the preceding five years. The Company completed 59, 68 and 66 store remodel projects in 1993, 1992 and 1991, respectively. Store remodel projects typically result in immediate and sustained sales improvements as well as improved controllable operating profit margins. Store remodel projects are also undertaken to mitigate potential sales declines that might otherwise arise from competitor new store openings or remodels. Store remodel projects enable Vons to present a store appearance consistent with Vons' evolving store types and to continuously update the store base through the introduction, where possible, of service departments and new merchandising modules, which are intended to generate higher gross margins and build store traffic. Vons' remodel program also includes important store improvements, such as remerchandising to reflect contemporary design with new decor packages and selected fixture replacements. All new and remodeled stores, along with selected other stores, are also remerchandised to a dense merchandising configuration. Dense merchandising, which includes re-engineered equipment and innovative fixtures, fully utilizes linear and cubic space. With this strategy, the Company can effectively deliver a wider assortment of product and service choices to its customers without increasing the selling square footage of the store. In addition to continuing its remodel program, the Company plans to open ten to 15 new stores in 1994. The Company's new store opening program does not include the effect of possible store acquisition opportunities which could arise in the future. Toward this end, Vons expects to continue its practice, which is ongoing, of conducting exploratory discussions with potential sellers of groups of stores or other retail supermarket chains. Vons' cash capital expenditures for store projects were $253.7 million and $188.0 million in 1993 and 1992, respectively. The average cost of a store remodel project is approximately $1.1 million. It is anticipated that 1994 capital expenditures for Vons' remodel and new store programs will be funded out of cash provided by operations, revolving debt and/or through operating leases. The capital expenditure program has substantial flexibility and is subject to revision based on various factors, including but not limited to business conditions, changing time constraints, cash flow requirements and competitive factors. Marketing and Competition Southern California is one of the largest and most competitive markets for retail grocery sales in the United States. Vons' store network ranges from Fresno on the north to the Mexican border on the south and from the Pacific Ocean on the west to Clark County, Nevada on the east. This market area includes Fresno, Imperial, Inyo, Kern, Los Angeles, Mono, Orange, Riverside, Santa Barbara, San Bernardino, San Diego, San Luis Obispo, Tulare and Ventura counties, California as well as Clark County, Nevada. Based on independently prepared research purchased by Vons, the Company has the largest market share by dollar volume in Southern California of any supermarket operator. Vons faces a number of major as well as smaller competitors in its market. The Company believes that in recent years the increase in the number of competitors' stores and the entrance of new competitors in its market area have intensified competition and this trend is expected to continue. In addition, convenience stores, drug stores, specialty stores, warehouse stores, membership stores as well as discount stores and fast food and other restaurants compete for the same customers. All store types utilize promotional buying opportunities to pass along special values to their customers. Also, stores offer customers additional savings through the use of double coupons, advertised weekly specials and its free membership club which offers customers special values and programs and enables the Company and its vendors to target specific customer segments. Vons' marketing and communication strategy is based on a combination of newspaper, direct mail, television and radio advertising. Vons' marketing research indicates the principal competitive factors in the retail supermarket business include price, service, quality of products, breadth of product assortment, store condition, and store location. Vons' research also indicates that customers, in response to economic conditions, are placing greater emphasis on price. Vons is responding to this trend through the newly implemented Vons Value Program. Vons believes that its strengths are its reputation for offering good values through competitive prices, low-priced advertised specials and doubling of manufacturers' coupons, all of which are intended to be enhanced through the Vons Value Program; its high quality and wide selection of fresh produce, meat and seafood; its excellent store condition; friendly personnel and its convenient store locations. Merchandising and Store Operations An average store offers selections ranging from approximately 40,000 to 50,000 merchandise items. It is Vons' policy to emphasize brand-name grocery products and quality and freshness in its seafood, produce and meat selections. In addition, Vons carries its proprietary Jerseymaid dairy products as well as private label products in the grocery, delicatessen, frozen food, bakery, health and beauty care, and general merchandise departments of its stores. Vons' private label grocery, general merchandise and health and beauty care items as well as its manufactured bakery, dairy and ice cream products accounted for approximately 13% of total retail sales in 1993. The Company intends to increase this percentage over time through the introduction of additional private label items. In conjunction with its restructuring program, Vons is committed to being the low cost operator in the market areas it serves. Vons' strategy is to decrease over time its operating costs through aggressive buying, maintenance and introduction of various merchandising and technological innovations and stringent cost controls. Through technological innovation, Vons has experienced improved operational efficiency. Examples include the VonsChek automated check approval system and introduction of new high productivity side-bar scanners in checkstands which operate through a PC based point-of sale system providing price and descriptions for most items by Universal Product Code (UPC). All Vons stores are equipped with an electronic receiving system for products delivered directly to stores by vendors, electronic time and attendance reporting, and computerized labor scheduling. Vons' central buying office monitors warehouse inventory levels and product movement daily for buyer analysis and action. The management control system produces key weekly operating data by store and by region. In addition, the Company is expanding its test of a new electronic shelf tag system from nine to 20 stores. This system is expected to improve pricing accuracy and control labor costs and, based on further testing to be completed in 1994, may be considered for implementation in additional stores. Vons has further expanded its pricing accuracy agenda by implementing an in-store shelf tag printing system and by connecting the scales in the meat, deli, and other service departments to the in-store database. In addition, price changes are electronically transmitted to an in-store database which controls pricing throughout each store. Vons stresses uniformity of operations at each store and provides detailed operational procedures to guide store management. In addition, the Company improves the consistency of store operations through its policy to develop store managers internally and to rotate them from store to store. All store managers participate in a bonus program based upon individual store performance and are included in the Company's stock option program. Support and Other Services In 1993, the Company operated a fluid milk processing facility, an ice cream plant, a central bakery, a delicatessen kitchen and a meat grinding and cooking facility. Vons' delicatessen kitchen produces many of the prepared food items sold in the service and self-service delicatessen departments of Vons' stores. Vons operates four distribution complexes in California, located in El Monte, San Diego, Ontario and Santa Fe Springs. The Company utilizes advanced computerized inventory and labor management systems throughout its distribution network. As of January 2, 1994, Vons operated a fleet of 449 tractors and 1,366 trailers, of which 146 and 389, respectively, were leased and the remainder were owned. The Company's transportation department utilizes on-board electronic trip recorders to monitor travel times and a sophisticated computerized routing system. Approximately 77% of store sales in 1993 represented inventories supplied by these distribution centers, and the balance was delivered directly to the stores by vendors. Governmental Regulation Vons is subject to regulation by a variety of governmental agencies, including the California Department of Alcoholic Beverage Control, the California State Board of Pharmacy, the California Department of Agriculture, the U.S. Food and Drug Administration, the U.S. Department of Agriculture and state and local health departments and weights and measures agencies. In connection with the Safeway Acquisition, Vons, Safeway and certain other parties entered into a consent order (the "Consent Order") with the Federal Trade Commission (the "FTC") whereby Vons divested three retail grocery stores and Safeway divested nine retail grocery stores to competitors in Southern California. The Consent Order, among other things, also limits for ten years the acquisition by Vons of existing supermarkets from any other party in certain trade areas where both Vons and Safeway operated stores prior to the Safeway Acquisition, allowing a specified number of such acquisitions within any 12- month period in some areas and prohibiting acquisitions in others. In connection with the Williams Bros. acquisition, the Company entered into a consent order with the FTC whereby the Company divested one of the Williams Bros. store locations and among other things, agreed to seek FTC approval before acquiring any supermarket, or any interest in any company owning a supermarket, in San Luis Obispo County over the next ten years. Employees At January 2, 1994, Vons employed approximately 11,500 full- time and 18,100 part-time employees as follows:
Non- Union Union Total ------ ------ ------- Hourly.................. 27,200 800 28,000 Salaried................ - 1,600 1,600 ------ ------ ------- Total Employees......... 27,200 2,400 29,600 ------ ------ ------- ------ ------ -------
The Company and other major supermarket chains bargain collectively with their employees' unions through an organization called the Food Employers Council (the "FEC"). In the fall of 1993, the Company through the FEC, renegotiated three-year contracts with the United Food and Commercial Workers' and Meat Cutters' unions. The master contract with the International Brotherhood of Teamsters' union will expire in September 1994. Like its major competitors, pursuant to its collective bargaining agreements, Vons contributes to various union sponsored multi-employer pension plans. Under pertinent law, a participating employer which totally or partially withdraws from a multi-employer pension plan could be liable for unfunded vested benefits, which could be substantial. Insurance Vons carries insurance customary in the supermarket industry to protect the Company against catastrophic loss, including earthquake insurance. The Company is approved in both California and Nevada to self-insure workers' compensation and general liability exposures and maintains third-party insurance for loss exposures in excess of self-insured retentions and deductibles. Executive Officers of the Registrant Set forth below is certain information concerning the executive officers of the Company:
Name Age Position - ---- --- -------- Roger E. Stangeland 64 Chairman of the Board and Chief Executive Officer Neill F. Crowley, III 51 Executive Vice President, Store Support Michael F. Henn 45 Executive Vice President, Chief Financial Officer and Chief Administrative Officer Peter M. Horn, III 55 Executive Vice President, Store Operations Robert J. Kelly 49 Executive Vice President, Procurement and Marketing Terrence J. Wallock 49 Executive Vice President, General Counsel and Secretary
Officers are elected annually and are subject to removal at any time, with or without cause, by the Company's Board of Directors, subject to all rights under employment contracts, if any. Mr. Stangeland has been a Director, Chairman of the Board and Chief Executive Officer of the Company for more than the last five years. Mr. Crowley was appointed Executive Vice President, Store Support of the Company in November 1993. He was Executive Vice President, Marketing and Distribution of the Company from May 1991 to November 1993. From 1987 to 1991, Mr. Crowley was President of Skaggs Alpha Beta in Texas. Mr. Henn has been Executive Vice President and Chief Financial Officer of the Company since December 1987 and was appointed Chief Administrative Officer of the Company in August 1991. Mr. Horn was appointed Executive Vice President, Store Operations of the Company in November 1993. He was Executive Vice President of the Company from May 1991 to November 1993 and continued as Vons Retail Business Unit General Manger, a position he held since December 1987. Mr. Horn was Senior Vice President of the Company from July 1987 to May 1991. Mr. Kelly was appointed Executive Vice President, Procurement and Marketing of the Company in November 1993. He was Executive Vice President, Buying and Merchandising of the Company from May 1991 to November 1993. Mr. Kelly was Senior Vice President, Procurement of the Company from 1989 to May 1991. He was Group Vice President of Pavilions/Pantry Stores from July 1987 to 1988. Mr. Wallock was appointed Executive Vice President and General Counsel of the Company in November 1993 and continues in the position of Secretary of the Company which he has held since March 1991. He was Senior Vice President, Chief Legal and Security Officer of the Company from August 1991 to November 1993. From March 1991 to August 1991, he was Senior Vice President and General Counsel of the Company. From 1977 to 1991, Mr. Wallock served as counsel to Denny's Inc. rising to the position of Vice President, General Counsel and Secretary. ITEM 2: PROPERTIES As of January 2, 1994, Vons leased 258 of its stores and owned 87 of its stores. At January 2, 1994, 217 of Vons' leases provided for contingent rental based on a percentage of sales over specified amounts, which typically range from 1% to 1.5% of total gross sales, less amounts expended for common area maintenance, real estate taxes and insurance; the balance had no percentage rent clauses. Store leases have various expiration dates through 2018. Renewal options range up to 40 years. The following table lists the number of such store leases for open stores that are due to expire (assuming exercise of all renewal options) in each of the specified periods:
Number of Calendar Years Expiring Leases -------------- --------------- 1994-1998.......... 5 1999-2003.......... 17 2004-2008.......... 24 2009-2013.......... 28 2014-2018.......... 22 2019 and thereafter 162
The Company has a $116.7 million mortgage loan on 52 properties requiring monthly principal and interest payments of approximately $1 million with a one-time payment of approximately $111 million in July 1997. The Company has other real estate notes and mortgages covering eight properties totalling $16.1 million due in varying monthly installments with maturity dates from 1994 to 2009. Vons' stores are usually located in active shopping centers and generally have several co-tenants, which typically include a drugstore; although the newer stores, which are usually food and drug combination stores, tend to be in shopping centers without drugstores. Vons owns distribution and manufacturing facilities in El Monte, California, which are located on approximately 63 acres of land. The El Monte facilities include two warehouses with an aggregate of 764,000 square feet and a meat grinding and cooking facility, including a warehouse with an aggregate of 256,000 square feet. Vons leases distribution operations located in Santa Fe Springs, California. These distribution operations include several warehouses and a transportation center. The operations cover approximately 1,040,000 square feet located on approximately 78 acres of land. The lease expires in 1995 with three five-year and one one-year options to extend. Vons leases a 450,000-square-foot forward buy warehouse located in the City of Industry. The lease expires in 1996 with two three-year options to extend. A 95,000-square-foot frozen food distribution facility is leased in Ontario, California. The lease expires in 1996 with four six-month options to extend. Vons leases one distribution facility and a forward buy warehouse in San Diego, California. The distribution facility is approximately 365,000 square feet and the lease expires in 2002. Vons has an operating agreement to use up to an aggregate of 210,000 square feet in the forward buy warehouse. Vons owns a 244,000-square-foot building in Arcadia, California, used for its corporate administrative offices. The manufacturing operations consist of a fluid milk processing facility, an ice cream plant and a bakery, all leased and located in the City of Commerce, California. The leases for the fluid milk processing facility and ice cream plant expire in 1996 with two five-year options to extend. The lease for the bakery expires in 1997 with three five-year options to extend. ITEM 3: LEGAL PROCEEDINGS In addition to routine litigation incidental to the conduct of its business, the Company has been named in a number of lawsuits in state and Federal courts in Washington, Nevada, Idaho and California arising from claims of food-borne illness that allegedly was contracted from the consumption of hamburgers at certain Jack-In-The-Box restaurants in early 1993. The restaurants involved were either directly operated by Jack-In- The-Box, a division of Foodmaker, Inc. ("Foodmaker"), or through franchisees. The suits allege that the hamburger patties in question were processed by the Company before being cooked and served by a Jack-In-The-Box outlet. The plaintiffs in these actions seek unspecified damages for illnesses ranging from minor diarrhea to serious kidney and intestinal infection. Several deaths are alleged to have resulted from the incidents and, in those cases, the plaintiffs seek damages for wrongful death. The Company is insured against various losses, including those for bodily injury. The Company also has been named as a defendant in a suit filed on July 2, 1993, in the Superior Court of the State of California for the County of San Diego, by franchisees of Foodmaker who operate Jack-In-The-Box outlets in various states. Also named as defendants were Foodmaker and a number of meat suppliers and slaughterhouses. The complaint seeks an estimated $100 million for lost profits and compensation for an alleged reduction in the value of the franchisees' businesses, as well as unspecified damages for alleged emotional distress. On July 19, 1993, Foodmaker filed a cross-complaint against the Company and subsequently voluntarily dismissed a separate action which it had previously brought. The cross-complaint asserts various tort and contract theories and seeks, among other things, indemnity as well as lost profits and compensation for a reduction in Foodmaker's stock price. Foodmaker's cross-complaint seeks unspecified damages, although the Company has been advised that Foodmaker may potentially claim damages of approximately $400 million, including the aforesaid claims of the franchisees. The Company is vigorously contesting the lawsuits against it, and has filed its own cross-complaint against Foodmaker and certain of its franchisees seeking damages in an amount substantially higher than the amount of damages claimed by Foodmaker. In addition to the cases discussed above, the Company, along with the other major supermarket chains in Southern California, has been named as a defendant in three nearly identical class action lawsuits filed in late November and early December 1992 in the Superior Court of the State of California for the County of Los Angeles. In these cases the plaintiffs allege claims for antitrust violations, restraint of trade and false advertising in connection with the pricing of fluid milk in Los Angeles County. They seek unspecified damages and injunctive relief. The Company intends to vigorously defend these cases. The Company believes that the above-described lawsuits are unlikely to result in liability which would be material to the consolidated financial position of the Company. ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to the security holders of the Company for a vote during the quarter ended January 2, 1994. PART II ITEM 5: MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS Vons' common stock is listed on the New York Stock Exchange ("NYSE") (Symbol-VON). The shares have been listed on the NYSE since March 20, 1986. As of March 14, 1994, there were approximately 6,171 shareholders of record. The table below sets forth the high and low sales prices for Vons' common stock as reported on the NYSE Composite Tape during the fiscal periods specified:
52 Weeks Ended 53 Weeks Ended January 2, January 3, 1994 1993 ----------------- ----------------- High Low High Low ---- --- ---- --- 1st quarter.... $26 3/8 $22 1/2 $29 1/8 $23 1/8 2nd quarter.... 24 1/2 21 29 23 3/4 3rd quarter.... 23 3/8 16 1/4 24 1/2 19 1/2 4th quarter.... 18 7/8 15 3/8 27 7/8 22
The Company paid no dividends on its common stock in fiscal years 1993, 1992, and 1991. Management of the Company does not expect to pay cash dividends in the foreseeable future. Certain Company debt agreements restrict the Company from paying cash dividends or making other distributions on stock under certain circumstances. Under its most restrictive debt agreement, the Company had $46.0 million available for dividends and distributions at January 2, 1994. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources" and Note 6 to the Consolidated Financial Statements contained in the Company's Annual Report to Shareholders for the fiscal year ended January 2, 1994 incorporated herein by reference. ITEM 6: SELECTED FINANCIAL DATA See "Five-Year Selected Financial Data" contained in the Company's Annual Report to Shareholders for the fiscal year ended January 2, 1994 incorporated herein by reference. ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS See "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in the Company's Annual Report to Shareholders for the fiscal year ended January 2, 1994 incorporated herein by reference. ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Financial statements and supplementary data as set forth in Item 14(a) of Part IV of this document are incorporated herein by reference. ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES None. PART III ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this Item is incorporated by reference from the Company's definitive Proxy Statement for the Annual Meeting of Shareholders to be held May 11, 1994, where it appears under the caption "Election of Directors." The information set forth under Item 1 of this Form 10-K under the caption "Executive Officers of the Registrant" is also incorporated herein by reference. ITEM 11: EXECUTIVE COMPENSATION The information required by this Item is incorporated by reference from the Company's definitive Proxy Statement for the Annual Meeting of Shareholders to be held May 11, 1994, where it appears under the caption "Executive Compensation." ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this Item is incorporated by reference from the Company's definitive Proxy Statement for the Annual Meeting of Shareholders to be held May 11, 1994, where it appears under the captions "Principal and Management Shareholders." ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this Item is incorporated by reference from the Company's definitive Proxy Statement for the Annual Meeting of Shareholders to be held May 11, 1994, where it appears under the caption "Executive Compensation - Compensation Committee Interlocks and Insider Participation" and "Certain Transactions." PART IV ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) Exhibits and Financial Statements and Schedules (1) Financial Statements The following items contained in the Company's Annual Report to Shareholders for the fiscal year ended January 2, 1994 are incorporated by reference into Part II of this report. Pages in Annual Report to Shareholders ------------ Financial Statements: Consolidated Statements of Operations for the fiscal years ended January 2, 1994, January 3, 1993 and December 29, 1991............ 20 Consolidated Balance Sheets as of January 2, 1994 and January 3, 1993.............. 21 Consolidated Statements of Cash Flows for the fiscal years ended January 2, 1994, January 3, 1993 and December 29, 1991............ 22 Consolidated Statements of Shareholders' Equity for the fiscal years ended January 2, 1994, January 3, 1993 and December 29, 1991............ 23 Notes to the Consolidated Financial Statements......... 24-34 Independent Auditors' Report..... 35 (2) Financial Statement Schedules Pages in this Document -------- Independent Auditors' Report..... S-1 II Amounts Receivable from Related Parties and Promoters, and Employees Other than Related Parties for the fiscal years ended January 2, 1994, January 3, 1993 and December 29, 1991... S-2 V Property, Plant and Equipment for the fiscal years ended January 2, 1994, January 3, 1993 and December 29, 1991........ S-3 VI Accumulated Depreciation and Amortization of Property, Plant and Equipment for the fiscal years ended January 2, 1994, January 3, 1993 and December 29, 1991............ S-4 VII Guarantees of Securities of Other Issuers as of January 2, 1994.............. S-5 VIII Valuation and Qualifying Accounts as of January 2, 1994 and January 3, 1993..... S-6 X Supplementary Income Statement Information for the fiscal years ended January 2, 1994, January 3, 1993 and December 29, 1991... S-7 Schedules other than those listed above are omitted because of the absence of the conditions under which they are required. (3) Exhibits See index to exhibits immediately following page S-7. (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended January 2, 1994. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. THE VONS COMPANIES, INC. /S/ ROGER E. STANGELAND By: -------------------------------- Roger E. Stangeland Chairman of the Board and Chief Executive Officer Date: March 29, 1994 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated. Signature Title Date --------- ----- ---- /S/ ROGER E. STANGELAND Chairman of the March 29, 1994 - --------------------------------- Board and Chief Roger E. Stangeland Executive Officer Member-Board of Directors /S/ MICHAEL F. HENN Executive Vice March 29, 1994 - --------------------------------- President, Michael F. Henn Chief Financial Officer and Chief Administrative Officer /S/ PAMELA K. KNOUS Vice President, March 29, 1994 - --------------------------------- Finance (Chief Pamela K. Knous Accounting Officer) /S/ STEVEN A. BURD Member-Board of March 29, 1994 - --------------------------------- Directors Steven A. Burd /S/ WILLIAM S. DAVILA Member-Board of March 29, 1994 - --------------------------------- Directors William S. Davila /S/ FRITZ L. DUDA Member-Board of March 29, 1994 - --------------------------------- Directors Fritz L. Duda /S/ JAMES H. GREENE, JR. Member-Board of March 29, 1994 - --------------------------------- Directors James H. Greene, Jr. /S/ ROBERT I. MACDONNELL Member-Board of March 29, 1994 - --------------------------------- Directors Robert I. MacDonnell /S/ PETER A. MAGOWAN Member-Board of March 29, 1994 - --------------------------------- Directors Peter A. Magowan /S/ CHARLES E. RICKERSHAUSER, JR. Member-Board of March 29, 1994 - --------------------------------- Directors Charles E. Rickershauser, Jr. /S/ ELIZABETH A. SANDERS Member-Board of March 29, 1994 - --------------------------------- Directors Elizabeth A. Sanders /S/ WILLIAM Y. TAUSCHER Member-Board of March 29, 1994 - --------------------------------- Directors William Y. Tauscher [This page appears on KPMG Peat Marwick letterhead] INDEPENDENT AUDITORS' REPORT The Board of Directors The Vons Companies, Inc.: Under date of February 15, 1994, we reported on the consolidated balance sheets of The Vons Companies, Inc. and subsidiaries as of January 2, 1994 and January 3, 1993, and the related consolidated statements of operations, shareholders' equity, and cash flows for the fifty-two week period ended January 2, 1994, the fifty-three week period ended January 3, 1993 and the fifty-two week period ended December 29, 1991, which are included in the Annual Report to Shareholders for fiscal year ended January 2, 1994. These consolidated financial statements and our report thereon are incorporated by reference in the January 2, 1994 Annual Report on Form 10-K. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related consolidated financial statement schedules in the Annual Report on Form 10-K as of January 2, 1994 and January 3, 1993 and for the fifty-two week period ended January 2, 1994, the fifty-three week period ended January 3, 1993 and the fifty-two week period ended December 29, 1991. These consolidated financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statement schedules based on our audits. In our opinion, such schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. As discussed in Note 8 to the consolidated financial statements, the Company adopted the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" in the fifty-three week period ended January 3, 1993. /s/ KPMG Peat Marwick Los Angeles, California February 15, 1994 THE VONS COMPANIES, INC. AND SUBSIDIARIES SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES For the Fiscal Years Ended January 2, 1994, January 3, 1993, and December 29, 1991 All amounts in millions of dollars
Balance at End of Year Balance at ---------------- Beginning Non- Name of Debtor of Year Additions Deductions Current current - -------------- ---------- --------- ---------- ------- ------- January 2, 1994: Charles E. Rickershauser, Jr. (1). $ .1 $ - $ - $ - $ .1 January 3, 1993: $ - $ .1 $ - $ - $ .1 Charles E. Rickershauser, Jr. (1). December 29, 1991 (2): - - - - - (1) Amount represents notes secured by common stock. The notes dated January 3, 1992 and July 22, 1992 bear interest at the Federal mid-term rate in effect under Internal Revenue Code Section 1274(d) each month. For December 1993, this rate was 5.01%. Both notes and accrued interest are due December 31, 1997. (2) There was no activity.
THE VONS COMPANIES, INC. AND SUBSIDIARIES SCHEDULE V-PROPERTY, PLANT AND EQUIPMENT For the Fiscal Years Ended January 2, 1994, January 3, 1993, and December 29, 1991 All amounts in millions of dollars
Balance Balance at Other at Principal Beginning Changes End of Depreciation of Fiscal Additions Retirements Williams Bros. Add Fiscal Rates (%) Year at Cost or Sales Acquisition(1) (Deduct) Year --------------- --------- --------- ----------- -------------- -------- -------- Fiscal year 1993: Land....... $ 171.8 $ 46.6 $ .1 $ - $ 1.7 $ 220.0 Buildings.. 2-1/2 299.9 26.9 2.6 - 1.5 325.7 Leasehold Improve- ments..... 6-2/3 to 33-1/3 265.1 42.5 1.9 - (3.4) 302.3 Fixtures and Equipment. 10 514.9 152.9 9.9 - .3 658.2 Assets under Capital Leases.... 3-1/3 to 33-1/3 67.2 13.3 4.0 - (.1) 76.4 --------- --------- ----------- -------------- -------- -------- $ 1,318.9 $ 282.2 $ 18.5 $ - $ - $1,582.6 --------- --------- ----------- -------------- -------- -------- --------- --------- ----------- -------------- -------- -------- Fiscal year 1992: Land....... $ 143.5 $ 16.7 $ - $ 7.5 $ 4.1 $ 171.8 Buildings.. 2-1/2 278.1 16.1 .1 6.7 (.9) 299.9 Leasehold Improve- ments..... 6-2/3 to 33-1/3 231.9 30.5 .6 4.4 (1.1) 265.1 Fixtures and Equipment. 10 372.0 154.3 15.5 6.2 (2.1) 514.9 Assets under Capital Leases.... 3-1/3 to 33-1/3 49.7 18.1 .6 - - 67.2 --------- --------- ----------- -------------- -------- -------- $ 1,075.2 $ 235.7 $ 16.8 $ 24.8 $ - $1,318.9 --------- --------- ----------- -------------- -------- -------- --------- --------- ----------- -------------- -------- -------- Fiscal year 1991: Land....... $ 140.2 $ 4.5 $ 1.2 $ - $ - $ 143.5 Buildings.. 2-1/2 255.9 22.3 .9 - .8 278.1 Leasehold Improve- ments..... 6-2/3 to 33-1/3 217.8 14.9 1.3 - .5 231.9 Fixtures and Equipment. 10 288.0 115.1 29.8 - (1.3) 372.0 Assets under Capital Leases.... 3-1/3 to 33-1/3 51.0 - 1.3 - - 49.7 --------- --------- ----------- -------------- -------- -------- $ 952.9 $ 156.8 $ 34.5 $ - $ - $1,075.2 --------- --------- ----------- -------------- -------- -------- --------- --------- ----------- -------------- -------- -------- (1) Assets acquired in connection with Williams Bros. acquisition.
THE VONS COMPANIES, INC. AND SUBSIDIARIES SCHEDULE VI-ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT For the Fiscal Years Ended January 2, 1994, January 3, 1993, and December 29, 1991 All amounts in millions of dollars
Balance at Balance at Beginning Charged to Other End of of Fiscal Costs and Retirements Changes Add Fiscal Year Expenses or Sales (Deduct) Year ---------- ---------- ----------- ----------- ---------- Fiscal year 1993: Buildings.............. $ 35.4 $ 8.8 $ .5 $ 1.1 $ 44.8 Leasehold Improvements. 62.0 16.7 .4 (1.0) 77.3 Fixtures and Equipment. 170.6 59.8 6.9 (.1) 223.4 Assets under Capital Leases............... 18.7 5.6 2.8 - 21.5 ---------- ---------- ----------- ----------- ---------- $ 286.7 $ 90.9 $ 10.6 $ - $ 367.0 ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------- ----------- ---------- Fiscal year 1992: Buildings...... $ 27.4 $ 8.0 $ - $ - $ 35.4 Leasehold Improvements. 47.8 14.7 .5 - 62.0 Fixtures and Equipment. 137.3 48.9 15.6 - 170.6 Assets under Capital Leases............... 15.1 4.1 .5 - 18.7 ---------- ---------- ----------- ----------- ---------- $ 227.6 $ 75.7 $ 16.6 $ - $ 286.7 ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------- ----------- ---------- Fiscal year 1991: Buildings.............. $ 21.7 $ 7.8 $ 1.8 $ (.3) $ 27.4 Leasehold Improvements. 34.2 14.0 .2 (.2) 47.8 Fixtures and Equipment. 125.5 38.8 27.5 .5 137.3 Assets under Capital Leases............... 11.8 4.0 .7 - 15.1 ---------- ---------- ----------- ----------- ---------- $ 193.2 $ 64.6 $ 30.2 $ - $ 227.6 ---------- ---------- ----------- ----------- ---------- ---------- ---------- ----------- ----------- ----------
THE VONS COMPANIES, INC. AND SUBSIDIARIES SCHEDULE VII-GUARANTEES OF SECURITIES OF OTHER ISSUERS As of January 2, 1994 All amounts in millions of dollars
Nature of Issuer of any Default Securities Amount Treasury of by Guaranteed Guaranteed Amount Issuer of Issuer of by Title and Owned by Securities Nature of Securities Registrant of Issue Outstanding Registrant Guaranteed Guarantee Guaranteed - ----------- ------------ ----------- ---------- ----------- ---------- ----------- The Edmond The $ 0.4 None N/A Guarantee N/A Industrial Edmond of Development Industrial principal Authority/ Development and T.G. & Y. Authority, interest Stores Co. T.G. & Y. Project Stores Co.- Warehouse First Mortgage Revenue Bonds Series A City of Industrial $ 0.8 None N/A Guarantee N/A Kansas Revenue of City, Bonds Series principal Kansas/ July 1, 1974 and T.G. & Y. interest Stores Co. Project
THE VONS COMPANIES, INC. AND SUBSIDIARIES SCHEDULE VIII-VALUATION AND QUALIFYING ACCOUNTS As of January 2, 1994 and January 3, 1993 All amounts in millions of dollars
Additions Balance at ---------------------- Balance at Beginning Charged to Changed to End of of Fiscal Costs and Other Fiscal Description Year Expenses Accounts Deductions Year - ------------------------ ---------- ---------- ---------- ---------- ---------- Fiscal Year 1993: Restructuring Reserve $ - $ 56.9 $ - $ 3.4 (1) $ 53.5 Fiscal Year 1992 (2): - - - - - (1) Represents amounts paid during fiscal year ended January 2, 1994. (2) There was no activity
THE VONS COMPANIES, INC. AND SUBSIDIARIES SCHEDULE X-SUPPLEMENTARY INCOME STATEMENT INFORMATION For the Fiscal Years Ended January 2, 1994, January 3, 1993, and December 29, 1991 All amounts in millions of dollars
Charged to Item Costs and Expenses - ---- ------------------ Advertising: Fiscal Year 1992................... $ 62.4 ------------------ ------------------ Fiscal Year 1991................... $ 67.9 ------------------ ------------------
Advertising for fiscal year 1993, maintenance and repairs, depreciation and amortization of intangible assets, preoperating costs and similar deferrals, taxes other than payroll and income taxes, and royalties are omitted because the amounts do not exceed one percent of total sales and revenues, as reported in the related consolidated statements of operations. THE VONS COMPANIES, INC. AND SUBSIDIARIES INDEX TO EXHIBITS The following exhibits are filed as a separate section of this report: Exhibit No. Description of Exhibit Sequentially Numbered Page - ------- ---------------------- -------------------------- 10.1.3 Amendment to Loan Agreement dated October 18, 1991, by and among the Registrant, the banks named therein, and Bank of America, as Agent, dated March 11, 1993. 10.1.4 Amendment to Loan Agreement dated October 18, 1991 by and among the Registrant, the banks named therein, and Bank of America, as Agent, dated December 7, 1993. 10.2 Term Loan Agreement by and among the Registrant, the banks named therein, and Bank of America, as Agent, dated December 13, 1993. 10.12 Amendment 1994-1 to The Vons Companies, Inc. Pension Plan, dated March 23, 1994. 10.13 Termination Agreement by and among the Registrant, Warehouse Investment Partners and other parties named thereto dated December 15, 1993. 13 Portions of the Annual Report to Shareholders for the fiscal year ended January 2, 1994. 24 Independent Auditors' Consent. THE VONS COMPANIES, INC. AND SUBSIDIARIES INDEX TO EXHIBITS Exhibit No. Description of Exhibit Sequentially Numbered Page - ------- ---------------------- -------------------------- Management Contracts or Compensatory Plans or Arrangements: 10.25 Letter Agreement dated December 2, 1993 confirming employment and separation agreements between the Registrant and Garrett R. Nelson. 10.26 Settlement Agreement and Mutual Release between the Registrant and Dennis K. Eck, dated October 29, 1993 as amended and supplemented. 10.27 The Vons Companies, Inc. 401(k) Wrap-Around Plan effective October 18, 1993. The following exhibits are incorporated herein by reference: Exhibit No. Description of Exhibit Incorporated By Reference From - ------- ---------------------- ------------------------------ 3.1 Amended Restated Articles of Exhibit 3.1 to Registrant's Incorporation of the Registrant Annual Report on Form 10-K for as amended on May 13, 1992. fiscal year ended January 3, 1993. 3.2 By-Laws of the Registrant as Exhibit 3.2 to Registrant's amended on November 28, 1990. Annual Report on Form 10-K for fiscal year ended December 30, 1990. 4.1 Indenture by and among the Exhibit 4.2 to Registrant's Registrant and Chemical Bank, Statement No. 33-45430 on Form as Trustee, dated February 15, S-3. 1992. THE VONS COMPANIES, INC. AND SUBSIDIARIES INDEX TO EXHIBITS Exhibit No. Description of Exhibit Incorporated By Reference From - ------- ---------------------- ------------------------------ 4.1.1 Officers' Certificate and Note Exhibits 4.1 and 4.2 to regarding the 9-5/8% Senior Registrant's Report on Form Subordinated Notes due April 1, 8-K dated March 17, 1992. 2002. 4.1.2 Officers' Certificate and Note Exhibits 4.1 and 4.3 regarding the 8-3/8% Senior to Registrant's Report on Form Subordinated Notes due 8-K dated September 24, 1992. October 1, 1999. 4.2 Indenture between Registrant Exhibit 2 to Registrant's and National Bank of Detroit, Report on Form 8-K dated as Trustee, dated May 15, 1986, May 15, 1986. including form of 6-5/8% Senior Subordinated Debentures due 1998 attached as Exhibit A thereto. 10.1 Loan Agreement by and among the Exhibit 10.1 to Registrant's Registrant, the banks named Annual Report on Form 10-K for therein, and Security Pacific fiscal year ended December 29, National Bank, as Agent, dated 1991. October 18, 1991. 10.1.1 Amendment to Loan Agreement Exhibit 10.1.1 to Registrant's dated October 18, 1991, by and Annual Report on Form 10-K for among the Registrant, the banks fiscal year ended January 3, named therein, and Bank of 1993. America, as Agent dated June 24, 1992. 10.1.2 Amendment to Loan Agreement Exhibit 10.1.2 to Registrant's dated October 18, 1991, by and Annual Report on Form 10-K for among the Registrant, the banks fiscal year ended January 3, named therein, and Bank of 1993. America, as Agent, dated December 16, 1992. 10.3 Agreement Not to Compete dated Exhibit 10.2 to Registrant's August 29, 1988, by and among Quarterly Report on Form 10-Q the Registrant, Safeway for quarter ended October 9, Southern California, Inc., 1988. Safeway U.S. Holdings, Inc., and Safeway Stores Incorporated. THE VONS COMPANIES, INC. AND SUBSIDIARIES INDEX TO EXHIBITS Exhibit No. Description of Exhibit Incorporated By Reference From - ------- ---------------------- ------------------------------ 10.3.1 Amendment to Agreement Not to Exhibit 10.2 to Registrant's Compete dated August 29, 1988, Quarterly Report on Form 10-Q by and among the Registrant, for quarter ended June 18, Safeway Southern California, 1989. Inc., Safeway U.S. Holdings, Inc., and Safeway Stores, Incorporated, dated April 17, 1989. 10.3.2 Amendment to Agreement Not to Exhibit 10.2.2 Registrant's Compete dated August 29, 1988, Annual Report on Form 10-K for by and among the Registrant, fiscal year ended December 30, Safeway Southern California, 1990. Inc., Safeway U.S. Holdings, Inc., and Safeway Inc., dated December 21, 1990. 10.4 Metropolitan Life Insurance Exhibit 10.13 to Registrant's Company loan to the Registrant Annual Report on Form 10-K for represented by Deed of Trust fiscal year ended January 3, and Security Agreement 1988. Assignment of Rents and Fixture Filing dated July 22, 1987 by and among the Registrant, as Trustor, Ticor Title Insurance Company, as Trustee and Metropolitan Life Insurance Company, as Beneficiary. 10.5 Standstill Agreement dated Exhibit 10.20 to Registrant's December 3, 1987 by and among Annual Report on Form 10-K for the Registrant, Safeway fiscal year ended January 3, Southern California, Inc., 1988. Safeway Stores, Incorporated, Kohlberg Kravis Roberts & Co., Safeway U.S. Holdings, Inc., and KKR Associates. 10.5.1 Amendment to Standstill Exhibit 28.7 to Registrant's Agreement dated December 3, Quarterly Report on Form 10-Q 1987 by and among the for quarter ended June 18, Registrant, Safeway Stores, 1989. Incorporated and other parties thereto, dated April 5, 1989. THE VONS COMPANIES, INC. AND SUBSIDIARIES INDEX TO EXHIBITS Exhibit No. Description of Exhibit Incorporated By Reference From - ------- ---------------------- ------------------------------ 10.5.2 Amendment to Standstill Exhibit 10.13.2 to Registrant's Agreement dated December 3, Annual Report on Form 10-K for 1987 by and among the fiscal year ended December 30, Registrant, Safeway Inc., 1990. and other parties thereto, dated December 21, 1990. 10.6 Asset Purchase Agreement dated Exhibit 2.2 to Registration March 20, 1987 between Allied Statement No. 33-12886 on Form Supermarkets, Inc., and S-4. Meadowdale Foods, Inc., as amended (without exhibits). 10.7 Amended and Restated Exhibit B to Registrant's Proxy Acquisition Agreement and Plan Statement for Annual Meeting of of Merger and Reorganization Shareholders on November 10, dated December 3, 1987 by and 1988. among the Registrant, Safeway Southern California, Inc., Safeway Stores, Incorporated, Safeway Stores 23, Inc., Safeway Stores 27, Inc., Safeway Stores 29, Inc., Safeway Stores 30, Inc., Vons Merger Sub 1, Inc., Vons Merger Sub 2, Inc., Vons Merger Sub 3, Inc., and Vons Merger Sub 4, Inc., (without exhibits or schedules). 10.8 Registration Rights Agreement Exhibit 28.8 to Registrant's with Roger Stangeland dated Quarterly Report on Form 10-Q April 7, 1989. for quarter ended March 26, 1989. 10.9 Registration Rights Agreement Exhibit 28.9 to Registrant's with Fritz Duda dated Quarterly Report on Form 10-Q April 7, 1989. for quarter ended March 26, 1989. 10.10 Registration Rights Agreement Exhibit 28.10 to Registrant's with William Tauscher dated Quarterly Report on Form 10-Q April 7, 1989. for quarter ended March 26, 1989. THE VONS COMPANIES, INC. AND SUBSIDIARIES INDEX TO EXHIBITS Exhibit No. Description of Exhibit Incorporated By Reference From - ------- ---------------------- ------------------------------ 10.11 Asset Purchase Agreement Exhibit 10.23 to Registrant's between the Registrant and Annual Report on Form 10-K for Williams Bros. Markets, fiscal year ended December 29, Inc., dated December 31, 1991. 1991. Management Contracts or Compensatory Plans or Arrangements: 10.14 Management Stock Option Plan Exhibit 10.3 to Registrant's of the Registrant dated Annual Report on Form 10-K for July 22, 1987. fiscal year ended January 3, 1988. 10.15 1987 Deferred Income Plan Exhibit 10.17 to Registrant's adopted April 1, 1987 on Annual Report on Form 10-K for behalf of Registrant, fiscal year ended January 3, including forms of 1988. Participation Agreements for Base Salary and Bonus Award. 10.16 1990 Stock Option and Appendix A to Registrant's Restricted Stock Plan dated Proxy Statement for Annual January 24, 1990. Meeting of Shareholders on May 17, 1990. 10.16.1 Amendment dated February 17, Exhibit 10.13.1 to Registrant's 1993 to 1990 Stock Option Quarterly Report on Form 10-Q and Restricted, Stock Plan for the quarter ended March 28, dated January 24, 1990. 1993. 10.17 Directors' Stock Option Plan Appendix A to Registrant's dated September 17, 1991. Proxy Statement for Annual Meeting of Shareholders on May 13, 1992. 10.18 Severance Agreement between The Registrant's Proxy the Registrant and Senior Statement for Annual Meeting of Management and Key Employees Shareholders on May 13, 1992, dated February 19, 1992. where it appears under the caption "Compensation through Plans - Severance Agreements." THE VONS COMPANIES, INC. AND SUBSIDIARIES INDEX TO EXHIBITS Exhibit No. Description of Exhibit Incorporated By Reference From - ------- ---------------------- ------------------------------ 10.19 Long-Term Incentive The Registrant's Proxy Compensation Plan between the Statement for Annual Meeting of Registrant and certain senior Shareholders on May 13, 1992, executive officers dated where it appears under the February 19, 1992. caption "Compensation through Plans - Long-Term Incentive Compensation Plan." 10.20 Letter dated February 9, 1990 Exhibit 10.24 to Registrant's confirming employment Annual Report on Form 10-K for arrangements between the fiscal year ended December 29, Registrant and Dennis K. Eck, 1991. as amended by a Letter Agreement dated March 17, 1992 between the Registrant and Mr. Eck. 10.21 Letter dated April 25, 1991 Exhibit 10.25 to Registrant's confirming employment Annual Report on Form 10-K for arrangements between the fiscal year ended December 29, Registrant and Neill Crowley, 1991. as amended by a Letter Agreement dated March 17, 1992 between the Registrant and Mr. Crowley. 10.22 1992 Supplemental Executive Exhibit 10.19 to Registrant's Retirement Plan by and among Annual Report on Form 10-K for the Registrant and certain fiscal year ended January 3, officers effective April 30, 1993. 1992. 10.23 The Vons Companies, Inc. Exhibit 10.20 to Registrant's Officer Short-Term Incentive Annual Report on Form 10-K for Compensation Plan by and fiscal year ended January 3, among the Registrant and 1993. certain officers. 10.24 Arrangement with Jack C. Exhibit 10.21 to Registrant's Shewmaker for consulting Annual Report on Form 10-K services. for fiscal year ended January 3, 1993. EX-1 2 EXHIBIT 10.1.3 Exhibit 10.1.3 Amendment No. 3 --------------- Reference is made to that certain Loan Agreement dated as of October 18, 1991, as amended (the "Loan Agreement") among The Vons Companies, Inc., Bank of America National Trust and Savings Association (as successor by merger to Security Pacific National Bank), as Agent, and the Banks party thereto. Terms defined in the Loan Agreement are used herein with the same meanings. RECITALS -------- A. Borrower has advised the Banks that its consolidated financial statements for the Fiscal Year ended January 3, 1993 will reflect non-cash charges for the initial implementation of new accounting and reporting standards for non pension post retirement benefits and for income taxes are required by recent Statements Nos. 106 and 109 of the Financial Accounting Standards Board. Such consolidated financial statements will be delivered by Borrower to the Banks in accordance with Section 7.1 of the Loan Agreement. --- B. As contemplated by Section 1.3 of the Loan Agreement, Borrower, the --- Agent and the Banks desire to amend certain of the financial covenants contained in the Loan Agreement to conform those covenants as criteria for evaluating Borrower's financial condition to substantially the same criteria as were effective prior to the application of such Financial Accounting Standards. It is intended that the amended financial covenants hereinafter set forth apply to the financial condition of Borrower as measured by the consolidated financial statements described above and to those hereafter delivered by Borrower to the Banks pursuant to Section 7.1 of the Loan --- Agreement. AGREEMENT --------- Borrower, the Agent and the Banks hereby agree as follows: 1. Section 6.13. Section 6.13 of the Loan Agreement is amended to read as ------------ ---- follows: "6.13 Leverage Ratio. Permit the Leverage Ratio to be, at the end of -------------- each Fiscal Quarter ending during each Fiscal Year set forth below, greater than the ratio set forth opposite that Fiscal Year:
Fiscal Year ending on or about Ratio ------------------ ----- December 31, 1991 4:00:1:00 December 31, 1992 4:00:1:00 December 31, 1993 and thereafter 3.70:1:00"
2. Section 6.14. Section 6.14 of the Loan Agreement is hereby amended to ------------ ---- read as follows: "6.14 Minimum Shareholders' Equity. Permit Shareholders' Equity to be, ---------------------------- at the end of each Fiscal Quarter, less than the sum of (a) $335,000,000 --- plus (b) an amount equal to 75% of Consolidated Net Income for each ---- Fiscal Quarter ending after June 16, 1991 (without reduction for any deficit Consolidated Net Income during any such Fiscal Quarter)." 3. Counterparts. This Amendment may be executed in counterparts in ------------ accordance with Section 11.7 of the Loan Agreement. ---- 4. Confirmation. In all other respects, the Loan Agreement is hereby ------------ confirmed. Dated as of March 11, 1993. THE VONS COMPANIES, INC. By /s/ V. L. Miller ----------------------------------------- Its Vice President & Treasurer --------------------------------------- [Printed Name and Title] BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By /s/ David Price ----------------------------------------- David Price Its Vice President -------------------------------------- [Printed Name and Title] BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as a Bank By /s/ D. V. Arriola ----------------------------------------- Its Dennis V. Arriola, Vice President ------------------------------------- [Printed Name and Title] NATIONSBANK OF NORTH CAROLINA, N.A., as a Bank By /s/ W. B. Guffey ----------------------------------------- William B. Guffey Its Vice President ------------------------------------- [Printed Name and Title] THE BANK OF NOVA SCOTIA, as a Bank By /s/ Suzanne L. Baird ----------------------------------------- Its Representative ------------------------------------- [Printed Name and Title] CIBC, INC., as a Bank By /s/ Thomas C. Ludlow ----------------------------------------- Thomas C. Ludlow Its Vice President ------------------------------------- [Printed Name and Title] CONTINENTAL BANK, N.A., as a Bank By /s/ Wyatt R. Ritchie ----------------------------------------- Its Wyatt R. Ritchie, Vice President ------------------------------------- [Printed Name and Title] UNION BANK, as a Bank By /s/ Ann M. Yasuda ----------------------------------------- Its Ann M. Yasuda, Vice President ------------------------------------- [Printed Name and Title] CITICORP USA, INC., as a Bank By /s/ Barbara A. Cohen ----------------------------------------- Barbara A. Cohen Its Vice President ------------------------------------- [Printed Name and Title] SOCIETE GENERALE, as a Bank By /s/ Maureen Kelly ----------------------------------------- Its Vice President ------------------------------------- [Printed Name and Title] THE FIRST NATIONAL BANK OF CHICAGO, as a Bank By /s/ L. Gene Beube ----------------------------------------- Its SVP ------------------------------------- [Printed Name and Title] ABN AMRO BANK, N.V., Los Angeles International Branch, as a Bank By /s/ J. A. Prouijs /s/ David J. Stassel J. A. Prouijs ----------------------------------------- David J. Stassel Its AVP Vice President ------------------------------------- [Printed Name and Title] THE CHASE MANHATTAN BANK, N.A., as a Bank By /s/ Dawn Lee Lum ----------------------------------------- Dawn Lee Lum Its Vice President ------------------------------------- [Printed Name and Title] FIRST INTERSTATE BANK OF CALIFORNIA, as a Bank By /s/ W. J. Baird ----------------------------------------- Its William J. Baird, Vice President ------------------------------------- [Printed Name and Title] BANK OF HAWAII, as a Bank By /s/ Cynthia L. Davis ----------------------------------------- Its ------------------------------------- [Printed Name and Title] THE TOKAI BANK, LTD. LOS ANGELES AGENCY, as a Bank By /s/ Hitoshi Ozawa ----------------------------------------- Hitoshi Ozawa Its Assistant General Manager ------------------------------------- [Printed Name and Title] EX-2 3 EXHIBIT 10.1.4 Exhibit 10.1.4 AMENDMENT NO. 4 --------------- Reference is made to that certain Loan Agreement dated as of October 18, 1991, as amended to date (the "Loan Agreement") among The Vons Companies, Inc., the Banks therein named and Bank of America National Trust and Savings Association (as successor by merger to Security Pacific National Bank), as Agent. Terms defined in the Loan Agreement are used herein with the same meanings. RECITALS -------- A. Section 6.9(e) of the Loan Agreement permits Borrower to incur ------ Senior Medium Term Borrowings subject to (i) an absolute dollar limitation of $100,000,00 on the amount thereof which may be outstanding at any time and (ii) approval by the Agent of the documentation evidencing such Senior Medium Term Borrowings. B. Bank of America National Trust and Savings Association has offered to provide, through a syndicate of banks, a $150,000,000 term credit facility to Borrower to mature on January 31, 1996 (the "Proposed Credit Facility"), which will constitute Senior Medium Term Borrowings and in which each of the Banks will have the opportunity to participate. C. Borrower has requested that Section 6.9(e) of the Loan Agreement ------ be amended to permit the Proposed Credit Facility. Borrower, the Agent and the Banks hereby agree as follows: 1. Section 1.1. Section 1.1 of the Loan Agreement is hereby amended ----------- --- by striking the definition of "Reference Banks" therein contained and substituting the following in place thereof: "'Reference Banks' mean Bank of America National Trust and Savings Association and such other two Banks as may from time to time be acceptable to the Agent and Borrower." 2. Section 6.9(e). Section 6.9(e) of the Loan Agreement is hereby -------------- ------ amended by striking the figures "$100,000,000" in clause (i) thereof and - substituting in their place the figures "$150,000,000." 3. Approval by Agent. The parties hereto hereby stipulate that the ----------------- execution by Bank of America National Trust and Savings Association of the documentation evidencing the Proposed Credit Facility shall be considered approval thereof by the Agent for purposes of Section 6.9(e). ------ 4. Counterparts. This Amendment may be executed in counterparts in ------------ accordance with Section 11.7 of the Loan Agreement. ---- 5. Confirmation. In all other respects, the Loan Agreement is hereby ------------ confirmed. THE VONS COMPANIES, INC. By /s/ V. L. Miller ------------------------------------------------ Virginia L. Miller Its Vice President and Treasurer --------------------------------------------- [Printed Name and Title] BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By /s/ D. M. Terrance ------------------------------------------------ David M. Terrance Its Vice President -------------------------------------------- [Printed Name and Title] BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as a Bank By /s/ D. V. Arriola ------------------------------------------------ Dennis V. Arriola Its Vice President -------------------------------------------- [Printed Name and Title] NATIONSBANK OF TEXAS, N.A., as a Bank By /s/ Michele Shafroth ------------------------------------------------ Its SVP -------------------------------------------- [Printed Name and Title] THE BANK OF NOVA SCOTIA, as a Bank By /s/ Suzanne L. Baird Suzanne L. Baird ------------------------------------------------ Its Representative -------------------------------------------- [Printed Name and Title] CIBC, INC., as a Bank By /s/ Thomas Ludlow Thomas Ludlow ------------------------------------------------ Its Vice President -------------------------------------------- [Printed Name and Title] CONTINENTAL BANK, N.A., as a Bank By /s/ Wyatt Ritchie ------------------------------------------------ Its Wyatt Ritchie, Vice President -------------------------------------------- [Printed Name and Title] UNION BANK, as a Bank By /s/ Ann M. Yasuda ------------------------------------------------ Its Ann M. Yasuda, Vice President -------------------------------------------- [Printed Name and Title] CITICORP USA, INC., as a Bank By /s/ W. P. Stengel ------------------------------------------------ W. P. Stengel Its Vice President -------------------------------------------- [Printed Name and Title] SOCIETE GENERALE, as a Bank By /s/ Maureen Kelly ------------------------------------------------ Its Vice President -------------------------------------------- [Printed Name and Title] THE FIRST NATIONAL BANK OF CHICAGO, as a Bank By /s/ L. Gene Beube ------------------------------------------------ L. Gene Beube Its Senior Vice President -------------------------------------------- [Printed Name and Title] ABN AMRO BANK, N.V., Los Angeles International Branch, as a Bank By /s/ John Miller /s/ David J. Stassel ------------------------------------------------ David J. Stassel Its Vice President Vice President -------------------------------------------- [Printed Name and Title] THE CHASE MANHATTAN BANK, N.A., as a Bank By /s/ Raymond G. Schuville ------------------------------------------------ Raymond G. Schuville Its Managing Director -------------------------------------------- [Printed Name and Title] FIRST INTERSTATE BANK OF CALIFORNIA, as a Bank By /s/ Edwina G. Kew ------------------------------------------------ Its Edwina G. Kew, Vice President -------------------------------------------- [Printed Name and Title] BANK OF HAWAII, as a Bank By /s/ Cynthia L. Davis ------------------------------------------------ Cynthia L. Davis Its Vice President -------------------------------------------- [Printed Name and Title] THE TOKAI BANK, LTD. LOS ANGELES AGENCY, as a Bank By /s/ Hitoshi Ozawa ------------------------------------------------ Hitoshi Ozawa Its Asst. General Manager -------------------------------------------- [Printed Name and Title] EX-3 4 EXHIBIT 10.2 Exhibit 10.2 EXECUTION TERM LOAN AGREEMENT Dated as of December 13, 1993 among THE VONS COMPANIES, INC. THE BANKS HEREIN NAMED and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent TABLE OF CONTENTS ----------------- Page ---- Article 1. Definitions and Accounting Terms............. 1 -------------------------------- 1.1 Certain Defined Terms............................. 1 --------------------- 1.2 Other Defined Terms............................... 8 ------------------- 1.3 Other Provisions.................................. 8 ---------------- Article 2. Waivers and Amendments.................. 8 ---------------------- 2.1 Notice of Proposed Amendment or Waiver............ 8 -------------------------------------- 2.2 Amendment or Waiver of the Syndicated Loan ------------------------------------------ Agreement....................................... 8 --------- Article 3. Loans.......................... 9 ----- 3.1 Loans-General..................................... 9 ------------- 3.2 Reference Rate Loans.............................. 10 -------------------- 3.3 CD Rate Loans..................................... 11 ------------- 3.4 Eurodollar Rate Loans............................. 11 --------------------- 3.5 Optional Termination of Commitment Upon --------------------------------------- Change in Control............................... 12 ----------------- 3.6 Voluntary Reduction of the Commitment........... 12 ------------------------------------- 3.7 Agent's Right to Assume Funds Available......... 12 ------------------------------------- Article 4. Payments; Fees...................... 12 -------------- 4.1 Principal and Interest............................ 12 ---------------------- 4.2 Arrangement Fee................................... 14 --------------- 4.3 Participation Fee................................. 14 ----------------- 4.4 Agency Fee........................................ 14 ---------- 4.5 Increased Commitment Costs........................ 14 -------------------------- 4.6 Eurodollar and CD Matters......................... 14 ------------------------- 4.7 Late Payments..................................... 15 ------------- 4.8 Miscellaneous Payment Matters..................... 15 ----------------------------- Article 5. Representations and Warranties.............. 15 ------------------------------ 5.1 Existence and Qualification; Power; ---------------------------------- Compliance with Law............................. 15 ------------------- 5.2 Authority; Compliance with Other Instruments and ------------------------------------------------ Government Regulations.......................... 15 ---------------------- 5.3 No Governmental Approvals Required................ 16 ---------------------------------- 5.4 Subsidiaries...................................... 16 ------------ 5.5 Financial Statements.............................. 16 -------------------- 5.6 No Other Liabilities; No Material Adverse Effect.. 17 ------------------------------------------------ 5.7 Title to Assets................................... 17 --------------- 5.8 Intangible Assets................................. 17 ----------------- 5.9 Existing Indebtedness and Contingent Obligations.. 17 ------------------------------------------------ 5.10 Governmental Regulation.......................... 17 ----------------------- 5.11 Litigation....................................... 17 ---------- 5.12 Employee Matters................................. 17 ---------------- 5.13 Binding Obligations.............................. 17 ------------------- 5.14 No Default....................................... 18 ---------- 5.15 Pension Plans.................................... 18 ------------- 5.16 Tax Liability.................................... 18 ------------- 5.17 Regulation U..................................... 18 ------------ Article 6. Affirmative Covenants --------------------- (Other Than Information And --------------------------- Reporting Requirements)................. 18 ----------------------- 6.1 Payment of Taxes and Other Potential Liens........ 18 ------------------------------------------ 6.2 Preservation of Existence......................... 18 ------------------------- 6.3 Maintenance of Properties......................... 19 ------------------------- 6.4 Maintenance of Insurance.......................... 19 ------------------------ 6.5 Compliance with Laws.............................. 19 -------------------- 6.6 Inspection Rights................................. 19 ----------------- 6.7 Keeping of Records and Books of Account........... 19 --------------------------------------- 6.8 Use of Proceeds................................... 19 --------------- 6.9 Subsidiary Guaranty............................... 19 ------------------- 6.10 Maintenance of Borrower Net Assets............... 19 ---------------------------------- Article 7. Negative Covenants.................... 19 ------------------ Article 8. Information and Reporting Requirements.......... 20 -------------------------------------- 8.1 Financial and Business Information................ 20 ---------------------------------- 8.2 Compliance Certificate............................ 20 ---------------------- Article 9. Conditions.......................... 21 ---------- 9.1 Initial Advance................................... 21 --------------- 9.2 Any Advance....................................... 22 ----------- Article 10. Events of Default and Remedies Upon Events of Default.. 22 ----------------------------------------------------- 10.1 Events of Default................................ 22 ----------------- 10.2 Remedies Upon Event of Default................... 24 ------------------------------ Article 11. The Agent........................ 25 --------- 11.1 Agency Provisions................................ 25 ----------------- Article 12. Miscellaneous.................... 26 ------------- 12.1 Cumulative Remedies; No Waiver................... 26 ------------------------------ 12.2 Amendments; Consents............................. 26 -------------------- 12.3 Costs, Expenses and Taxes........................ 26 ------------------------- 12.4 Other Miscellaneous Provisions................... 27 ------------------------------ Exhibits - -------- A - Commitment Assignment and Acceptance B - Compliance Certificate C - Note D - Opinion of Counsel E - Request for Loan F - Subsidiary Guaranty Schedules - --------- 1.1 Pro Rata Shares of the Banks 4.4 Subsidiaries 4.7 Liens and Rights of Others 4.9 Indebtedness TERM LOAN AGREEMENT ------------------- Dated as of December 13, 1993 This Term Loan Agreement ("Agreement") is entered into by and between The Vons Companies, Inc., a Michigan corporation ("Borrower"), Bank of America National Trust and Savings Association, a national banking association, and each other bank signatory hereto as set forth on the signature pages of this Agreement and any Eligible Assignee which may hereafter execute and deliver a Commitment Assignment and Acceptance that is registered with the Agent pursuant to Section 11.8 of the Syndicated Loan ---- Agreement (as incorporated herein pursuant to Section 12.4) (collectively, the ---- "Banks" and individually a "Bank"), and Bank of America National Trust and Savings Association, as Agent, with reference to the following: A. The Agent is the agent and one of the banks party to that certain Loan Agreement dated as of October 18, 1991, as amended through the date hereof (the "Syndicated Loan Agreement", defined with more particularity below) by and among Borrower, Bank of America National Trust and Savings Association (as successor by merger to Security Pacific National Bank), as agent, and the Syndicate Banks referred to herein. B. Borrower has requested that the Agent and Banks provide the term credit facility described in this Agreement as Senior Medium Term Borrowings (as such term is defined in the Syndicated Loan Agreement), subject to the execution of an amendment to the Syndicated Loan Agreement changing the maximum principal amount of Senior Medium Term Borrowings permitted thereunder. C. Borrower and the agent under the Syndicated Loan Agreement, acting with the consent of the Syndicate Majority Banks (as defined herein) have entered into the amendment of the Syndicated Loan Agreement referred to above, and all of the Syndicate Banks have been afforded the opportunity to participate in this Agreement. In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree as follows: Article 1. Definitions and Accounting Terms -------------------------------- 1.1 Certain Defined Terms. As used in this Agreement, the --------------------- following terms shall have the meanings set forth respectively after each: "Advance" means the advance to be made to ------- Borrower by a Bank pursuant to Article 3. --------- "Agent" means Bank of America National Trust and ----- Savings Association, as agent for the Banks hereunder and under the other Loan Documents, and each successor agent. "Agent's Office" means the Agent's address as -------------- set forth on the signature pages of this Agreement, or such other office as the Agent may designate in writing to the Borrower and the Banks. "Agreement" means this Term Loan Agreement, --------- either as originally executed or as it may from time to time be supplemented, modified, amended, renewed, extended or supplanted. "Arranger" means BA Securities, Inc. -------- "Assessment Rate" means, for each CD Rate Loan, --------------- that percentage determined solely by the Agent, representing the maximum annual assessment rate incurred by any of the Reference Banks (disregarding any offsetting amounts that may be available to such Reference Banks to the extent that such offsetting amounts arose out of transactions other than those pursuant to this Agreement) in providing insurance (through the Federal Deposit Insurance Corporation or any successor) for new nonpersonal time deposits in effect at the commencement of the applicable CD Period. "Bank" means any of the banks signatory to this ---- Agreement, their successors and, upon the effective date after registration with the Agent of a Commitment Agreement and Acceptance executed by an Eligible Assignee, such Eligible Assignee. "Bank of America" means Bank of America National --------------- Trust and Savings Association, its successors and assigns. "CD Base Rate" means, for each CD Rate Loan, an ------------ annual rate, determined solely by the Agent, as the average (rounded upward to the nearest 1/100 of 1%) of the bid (secondary) rates quoted to each Reference Bank by two recognized New York certificate of deposit dealers, selected by each Reference Bank, at or about 9:00 a.m., San Francisco time, on the first day of the applicable CD Period for the purchase at face value of certificates of deposit issued by the Reference Banks for approximately the same period as the applicable CD Period and in an amount approximately equal to that CD Rate Loan. "CD Rate" means, for each CD Rate Loan, that ------- rate per annum, determined solely by the Agent, pursuant to the following formula (with each component expressed as a decimal and rounded upward to the nearest 1/100 of 1%): CD Base Rate for that CD Rate Loan --------------------- + Assessment Rate 1.00 - CD Reserve Percentage "CD Rate Loan" means a Loan made hereunder and ------------ designated as a CD Rate Loan in accordance with Section 3.1(c). ------ "CD Rate Spread" means 11/16 of 1% (68.75 basis -------------- points). "CD Reserve Percentage" means, for each CD Rate --------------------- Loan, that percentage, determined solely by the Agent, representing the maximum aggregate incremental reserve, asset and/or special deposit requirements of any of the Reference Banks (disregarding any offsetting amounts that may be available to such Reference Bank to decrease such requirements to the extent that such offsetting amounts arose under transactions other than those pursuant to this Agreement) under Regulation D and any other applicable governmental regulation, with respect to new nonpersonal time deposits for approximately the same time period as the applicable CD Period and in an aggregate amount approximately equal to that CD Rate Loan. "Closing Date" means the time and Banking Day on ------------ which the conditions set forth in Section 9.1 --- are satisfied or waived pursuant to Section 12.1. ---- "Commitment" means, subject to Section 3.5, ---------- --- $150,000,000.00. "Commitment Assignment and Acceptance" means a ------------------------------------ Commitment Assignment and Acceptance executed by a Bank and an Eligible Assignee substantially in the form of Exhibit A and registered with the --------- Agent. "Compliance Certificate" means a compliance ---------------------- certificate in the form of Exhibit B signed, on --------- behalf of Borrower, by a Senior Officer of Borrower. "Default Rate" means the interest rate described ------------ in Section 4.7. --- "Designated Eurodollar Market" means, for any ---------------------------- Eurodollar Rate Loan, the Eurodollar Market(s) designated solely by each of the Reference Banks to be the appropriate Eurodollar Market for that Eurodollar Rate Loan. "Designated Eurodollar Market Day" means any -------------------------------- Banking Day on which the Reference Banks accept deposits in the Designated Eurodollar Market. "Determined solely by the Agent" means, with ------------------------------ respect to any calculation relating to interest, fees or other charges under this Agreement, a calculation made solely by the Agent using a method that is commonly used by the Agent and other banks in performing similar calculations in similar transactions, which method may not necessarily be that which yields the most favorable result to Borrower. "Eurodollar Rate" means, for each Eurodollar Rate --------------- Loan, an annual rate, determined solely by the Agent, consisting of the average (rounded upward to the nearest 1/100 of 1%) of the rates offered to each Reference Bank by prime banks for deposits of immediately available Dollars in the Designated Eurodollar Market at or about 11:00 a.m., local time in the Designated Eurodollar Market, on the day two Designated Eurodollar Market Days preceding the first day of the applicable Eurodollar Period for approximately the same time period as the applicable Eurodollar Period and in an amount approximately equal to that Eurodollar Rate Loan. "Eurodollar Rate Loan" means a Loan made -------------------- hereunder and designated as a Eurodollar Rate Loan in accordance with Section 3.1(c). ------ "Eurodollar Rate Spread" means 9/16 of 1% (56.25 ---------------------- basis points). "Eurodollar Reserve Percentage" means, for each ----------------------------- Eurodollar Rate Loan, that percentage, determined solely by the Agent, representing the maximum aggregate incremental reserve requirements of any of the Reference Banks (disregarding any offsetting amounts that may be available to such Reference Bank to decrease such requirements to the extent that such offsetting amounts arose under transactions other than those pursuant to this Agreement) under Regulation D and any other applicable governmental regulations, with respect to eurocurrency obligations (as defined in Regulation D) for approximately the same time period as the applicable Eurodollar Period and in an aggregate amount approximately equal to that Eurodollar Rate Loan. "Event of Default" has the meaning set forth for ---------------- such term in Section 10.1. ---- "Incorporated Provisions" means the terms of ----------------------- Syndicated Loan Agreement Sections 1.1 (to the --- extent that the definitions set forth therein are incorporated herein by reference), 1.2 through --- 1.7, 2.12, 3.8 through 3.12, 3.14 through 3.22, --- ---- --- ---- ---- ---- 4.1, 4.4, 4.7 through 4.12, 4.15, 4.16, 4.17, 5.1 --- --- --- ---- ---- ---- ---- --- through 5.5, 5.7, 5.10, 6.1 through 6.21, 7.1(a) --- --- ---- --- ---- ------ through 7.1(i), 9.1(g), 9.1(i), 9.1(j), (9.1(k), ------ ------ ------ ------ ------- 9.1(m), 9.2(c), 9.2(d), 10.1 through 10.8, 11.1, ------ ------ ------ ---- ---- ---- 11.2, and 11.4 through 11.24 and, to the extent ---- ---- ----- used in any such Section, the definitions set forth in Section 1.1 of this Agreement. --- "Interest Period" means, as applicable, a CD --------------- Period or a Eurodollar Period. "Loan" means the group of Advances made on the ---- Closing Date by the Banks. "Loan Documents" means, collectively, this -------------- Agreement, the Notes, the Subsidiary Guaranty and any other agreement or instrument that may hereafter be executed and delivered by Borrower or a Subsidiary of Borrower in favor of the Agent or the Banks relating to or in furtherance of this Agreement. "Maturity Date" means January 31, 1996. ------------- "Note" means any of the promissory notes issued ---- by Borrower to each Bank evidencing the Advance by that Bank under the Commitment substantially in the form of Exhibit C, either as originally --------- executed or the same may from time to time be supplemented, modified, amended, renewed, extended or supplanted. "Obligations" means all present and future ----------- obligations of every kind or nature of Borrower or any Party at any time and from time to time owed to Agent or the Banks under any one or more of the Loan Documents, whether due or to become due, matured or unmatured, liquidated or unliquidated, or contingent or noncontingent, including obligations of performance as well as --------- obligations of payment, and including interest --------- that accrues after the commencement of any proceeding under any Debtor Relief Law by or against Borrower or any Affiliate of Borrower. "Opinion of Counsel" means the favorable written ------------------ legal opinion of Terrence J. Wallock, Esq., general counsel to Borrower, substantially in the form of Exhibit D, together with copies of --------- all factual certificates and legal opinions upon which such counsel has relied. "Projections" means the financial projections ----------- dated October 29, 1993 heretofore furnished by Borrower (through the Agent) to the Banks. "Pro-Rata Share" means, with respect to each -------------- Bank, the percentage set forth opposite the name of that Bank on Schedule 1.1. ------------ "Reference Banks" means Bank of America and such --------------- other two Banks as may from time to time be mutually acceptable to the Agent and Borrower. "Reference Rate" means the rate of interest -------------- publicly announced from time to time by Bank of America in San Francisco, California, as its "Reference Rate." The Reference Rate is a rate set by Bank of America based upon various factors, including the Bank of America's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans. Bank of America may price loans at, above or below the Reference Rate. Any change in the Reference Rate shall take effect on the day specified in the public announcement of such change. "Reference Rate Loan" means a Loan made ------------------- hereunder and designated as a Reference Rate Loan in accordance with Section 3.1(c). ------ "Request for Loan" means a request for a Loan ---------------- signed by a Responsible Official of Borrower, substantially in the form of Exhibit E. --------- "Subsidiary Guaranty" means the guaranty of the ------------------- Obligations executed by each wholly-owned Significant Subsidiary of Borrower substantially in the form of Exhibit F, either as originally --------- executed or as the same may from time to time be supplemented, modified, amended, renewed, extended or supplanted. "Syndicated Loan Agreement" means that certain ------------------------- Loan Agreement dated as of October 18, 1991 among Borrower, Bank of America National Trust and Savings Association (as successor by merger to Security Pacific National Bank), as agent, and the banks party thereto, as the same has heretofore been amended, and subject to Section 2.2 as the same may hereafter be amended from --- time to time. Subject to Section 2.2, in the --- event that the Syndicated Loan Agreement is terminated, then the provisions thereof that are incorporated by reference herein shall be deemed to be such provisions as in effect immediately prior to such termination. "Syndicate Banks" means each of the banks under --------------- the Syndicated Loan Agreement. "Syndicate Majority Banks" means the "Majority ------------------------ Banks" under and as defined in the Syndicated Loan Agreement. "Term Majority Banks" means, as of any date of ------------------- determination, Banks under this Agreement whose Notes evidence more than 50% of the aggregate Indebtedness evidenced by the Notes. "Type" means, when modifying a Loan, a Reference ---- Rate Loan, a Eurodollar Rate Loan or a CD Rate Loan. 1.2 Other Defined Terms. Except for the defined ------------------- ------ terms set forth in Section 1.1, terms defined in the Syndicated Loan --- Agreement are used herein with the same meanings. 1.3 Other Provisions. Sections 1.2, 1.3, 1.4, 1.5, ---------------- --- --- --- --- 1.6, and 1.7 of the Syndicated Loan Agreement are incorporated herein by - --- --- this reference. Article 2. Waivers and Amendments ---------------------- 2.1 Notice of Proposed Amendment or Waiver. In the event -------------------------------------- that any amendment to the Incorporated Provisions is proposed or requested, Borrower shall concurrently furnish to the Agent and each Bank which is not a Syndicate Bank a copy of such proposal or request together with all written materials provided to all or substantially all of the Syndicate Banks connection therewith. In the event that Borrower makes such a proposal or request, or provides information to the Syndicate Banks in connection with such a proposal or request at any meeting of the Syndicate Banks, it shall either, at the option of Borrower (a) provide each of the Banks which are not Syndicate Banks with the opportunity to attend and participate in such meeting of the Syndicate Banks (provided that such Banks shall be entitled to attend -------- only so long as a representative of Borrower is present) or (b) provide such Banks with the opportunity at a reasonably coincidental time to meet separately with substantially the same representatives of Borrower and receive substantially the same information. 2.2 Amendment or Waiver of the Syndicated Loan Agreement. ---------------------------------------------------- Provided that (a) Borrower has complied in all material respects with Section 9.1 and (b) Borrower delivers to the Agent an Officer's Certificate stating - --- that an amendment or waiver to an Incorporated Provision has been adopted by the Syndicate Banks in the form attached to such Officer's Certificate, the Agent and the Banks agree that concurrently with the delivery of such an Officer's Certificate, such Incorporated Provision shall be deemed to have been similarly amended or waived, mutatis mutandis effective as of the ------- -------- same date, provided that, in the event that the agent under the Syndicated -------- Loan Agreement or the Syndicate Banks receive any consideration in exchange for any such amendment or waiver, the Agent and the Banks shall concurrently receive similar consideration which in any event (a) in the case of any fee, shall be an amount which is proportionately equal to the proportion that the Commitments bear to the commitments under the Syndicated Loan Agreement, (b) in the case of any increase to the "CD Rate Spread," "Eurodollar Rate Spread," "Prime Rate Spread" then in effect under the Syndicated Loan Agreement, shall be proportionately equal to the percentage increase in such spread components, and (c) in the case of any collateral or guarantees, shall be extended to the Agent and the Banks on a pari passu basis. Promptly following any such ---- ----- amendment or waiver of the Incorporated Provisions, the Agent shall deliver a notice to the Borrower and the Banks of such amendment or waiver. Nothing set forth in this Section shall cause the amendment or waiver of any Section of this Agreement other than the Incorporated Provisions, merely by reason of an ----- ---- amendment or waiver of any similar Section of the Syndicated Loan Agreement, unless such amendment or waiver is agreed to by the Banks in accordance with Section 12.2 of this Agreement. ---- Article 3. Loans ----- 3.1 Loans-General. ------------- (a) Subject to the terms and conditions set forth in this Agreement, on the Closing Date each Bank shall, pro rata according to that Bank's Pro Rata Share of the Commitment, make an Advance to Borrower under the Commitment in such amount as Borrower may request; provided that, giving -------- effect to such Advance, the aggregate principal Indebtedness evidenced by the Notes will not exceed the Commitment. (b) Subject to the terms and conditions set forth in this Agreement, at any time and from time to time from the Closing Date through and including the Banking Day immediately prior to the Maturity Date, each Bank shall, pro rata according to that Bank's Pro Rata Share of the Commitment, make Advances to Borrower under the Commitment in such amounts as Borrower may request that do not result in any increase in the outstanding principal Indebtedness evidenced by the Notes. Advances deemed made under this Section 3.1(b) are solely for the purpose of effecting a change from one Type of Loan - ------ to another Loan of the same or any different Type. (c) Subject to the next sentence, each Loan shall be made pursuant to a Request for Loan which shall specify the requested (i) date of such Loan, (ii) type of Loan, (iii) amount of such Loan, and (iv) Interest Period for such Loan, if the same is to be a Eurodollar Rate Loan or a CD Rate Loan. Unless the Agent has notified, in its sole and absolute discretion, Borrower to the contrary, a Loan may be requested by telephone, telecopier or telex by a Responsible Official of Borrower, in which case Borrower shall confirm such request by promptly mailing a Request for Loan conforming to the preceding sentence to the Agent. (d) Promptly following receipt of the Request for Loan under Section 3.1(a), the Agent shall notify each Bank by telephone, ------ telecopier or telex of the amount and type of the Loan and that Bank's Pro Rata Share of the Loan. Not later than 11:00 a.m. San Francisco time on the date specified for the Loan, each Bank shall make its portion of the Loan in immediately available funds available to the Agent at the Agent's Office. Upon fulfillment of the applicable conditions set forth in Article 9, the Loan --------- shall be wire transferred or credited in immediately available funds to such demand deposit bank account of Borrower as Borrower may designate in writing to the Agent. (e) The principal amount of each Loan shall be not less than $20,000,000 and shall be an integral multiple of $10,000,000. (f) The Advances made by each Bank under the Commitment shall be evidenced by its Note. (g) A Request for Loan shall be irrevocable upon the Agent's first notification thereof. (h) If no Request for Loan (or telephonic or other request for loan referred to in the second sentence of Section 3.1(c), if applicable) ------ has been made within the requisite notice periods set forth in Sections 3.2, --- 3.3 or 3.4 in connection with a Loan which, if made, would not increase the - --- --- outstanding principal Indebtedness evidenced by the Notes, then Borrower shall be deemed to have requested a Reference Rate Loan in an amount equal to the amount necessary to cause the outstanding principal Indebtedness evidenced by the Notes to remain the same and, subject to Section 9.2, the Banks shall make --- the Advances necessary to make such Loan notwithstanding Sections 3.1(c) and ------ 3.2. - --- 3.2 Reference Rate Loans. Each request by Borrower for -------------------- a Reference Rate Loan shall be made pursuant to a Request for Loan (or telephonic or other request for loan referred to in the second sentence of Section 3.1(c), if applicable) received by the Agent, at the Agent's ------ Office, not later than 10:00 a.m. San Francisco time, on the Banking Day specified for the making of the Reference Rate Loan. All Loans shall constitute Reference Rate Loans unless properly designated as CD Rate Loans or Eurodollar Rate Loans pursuant to Sections 3.3 or 3.4. --- --- 3.3 CD Rate Loans. ------------- (a) Each request by Borrower for a CD Rate Loan shall be made pursuant to a Request for Loan (or telephonic or other request for loan referred to in the second sentence of Section 3.1(c), if applicable) ------ received by the Agent, at the Agent's Office, not later than 10:00 a.m., San Francisco time, at least two (2) New York Days before the first day of the applicable CD Period. (b) At or about 9:00 a.m., San Francisco time, on the first day of the applicable CD Period, the Agent shall determine the applicable CD Rate (which determination shall be conclusive in the absence of manifest error) and promptly shall give notice of the same to the Banks and Borrower by telephone or telecopier. (c) Unless the Term Majority Banks otherwise consent no CD Rate Loan may be requested during the continuance of a Default or Event of Default. (d) Nothing contained herein shall require the Banks to fund any Advance pertaining to a CD Rate Loan by acceptance of a nonpersonal time deposit or issuance of a certificate of deposit. 3.4 Eurodollar Rate Loans. --------------------- (a) Each request by Borrower for a Eurodollar Rate Loan shall be made pursuant to a Request for Loan (or telephonic or other request for loan referred to in the second sentence of Section 3.1(c), if applicable) ------ received by the Agent, at the Agent's Office, not later than 10:00 a.m., San Francisco time, at least three (3) Designated Eurodollar Market Days before the first day of the applicable Eurodollar Period. (b) At or about 9:00 a.m., San Francisco time, two (2) Designated Eurodollar Market Days before the first day of the applicable Eurodollar Period, the Agent shall determine the applicable Eurodollar Rate (which determination shall be conclusive in the absence of manifest error) and promptly shall give notice of the same to the Banks and Borrower by telephone or telecopier. (c) Unless the Term Majority Banks otherwise consent no Eurodollar Rate Loan may be requested during the continuance of a Default or Event of Default. (d) Nothing contained herein shall require the Banks to fund any Advance pertaining to a Eurodollar Rate Loan in the Designated Eurodollar Market. 3.5 Optional Termination of Commitment Upon Change in ------------------------------------------------- Control. If following the occurrence of a Change in Control, the Synidicate - ------- Majority Banks exercise their right pursuant to Section 2.11 of the Syndicated ---- Loan Agreement to reduce or to terminate all or a portion of any of the commitments under the Syndicated Loan Agreement, then the Term Majority Banks shall have the right, upon at least five (5) Banking Days' prior written notice to Borrower, to (i) terminate the Commitments, in the case of the termination of the commitments under the Syndicated Loan Agreement or (ii) ratably reduce the Commitments, in the case of the reduction of the commitments under the Syndicated Loan Agreement. The rights of the Term Majority Banks under this Section shall be exercised during the period ending on the later of (i) the date which is sixty (60) days following such Change in Control and (ii) the date which is five (5) Banking Days's following the exercise by the Syndicate Majority Banks of their rights under Section 2.11 of ---- the Syndicated Loan Agreement. Borrower covenants that it will notify the Agent in writing promptly after it obtains knowledge of a Change in Control or the exercise by the Syndicated Majority Banks of their rights under Section 2.11 of the Syndicated Loan Agreement. ---- 3.6 Voluntary Reduction of the Commitment. Borrower shall ------------------------------------- have the right, at any time and from time to time, without penalty or charge, upon at least three (3) Banking Day's prior written notice to the Agent, voluntarily to reduce, permanently and irrevocably, in aggregate amounts in an integral multiple of $5,000,000, or to terminate, all or a portion of the Commitment. 3.7 Agent's Right to Assume Funds Available. Section 2.12 of --------------------------------------- ---- the Syndicated Loan Agreement is incorporated herein by this reference. Article 4. Payments; Fees -------------- 4.1 Principal and Interest. ---------------------- (a) Interest shall be payable on the outstanding daily unpaid principal amount of each Loan from the date thereof until payment in full and shall accrue and be payable at the rates set forth herein, before and after default, before and after maturity, before and after any judgment, and before and after the commencement of any proceeding under any Debtor Relief Law, with interest on overdue interest to bear interest at the Default Rate to the extent permitted by applicable Laws. (b) Interest accrued on each Reference Rate Loan shall be due and payable on each Quarterly Payment Date. Except as otherwise ------ provided in Section 4.7, the unpaid principal amount of any Reference Rate --- Loan shall bear interest at a fluctuating rate per annum equal to the Reference Rate. Each change in the interest rate hereunder shall take effect simultaneously with the corresponding change in the Reference Rate. (c) Interest accrued on each CD Rate Loan which is for a term of 90 days or less shall be due and payable on the last day of the related CD Period. Interest accrued on each other CD Rate Loan shall be due and payable on the date which is 90 days after the date such CD Rate Loan was made and on the last day of the related CD Period. Except as otherwise ------ provided in Section 4.7, the unpaid principal amount of any CD Rate Loan shall --- bear interest at a rate per annum equal to the CD Rate for that CD Rate Loan plus the CD Rate Spread. - ---- (d) Interest accrued on each Eurodollar Rate Loan which is for a term of three months or less shall be due and payable on the last day of the related Eurodollar Period. Interest accrued on each other Eurodollar Rate Loan shall be due and payable on the date which is three months after the date such Eurodollar Rate Loan was made and on the last day of the related Eurodollar Period. Except as otherwise provided in Section 4.7, the unpaid --- principal amount of any Eurodollar Rate Loan shall bear interest at a rate per annum equal to the Eurodollar Rate for that Eurodollar Rate Loan plus the ---- Eurodollar Rate Spread. (e) If not sooner paid, the principal Indebtedness evidenced by the Notes shall be payable as follows: (i) the principal amount of each Eurodollar Rate Loan and CD Rate Loan shall be payable on the last day of the Interest Period for such Loan; (ii) the principal Indebtedness evidenced by the Notes shall be immediately payable in Cash, to the extent that the principal Indebtedness evidenced by the Note exceeds at any time the Commitment as then in effect; and (iii) the principal Indebtedness evidenced by the Notes shall in any event be payable in Cash on the Maturity Date. (f) The Notes may, at any time and from time to time, voluntarily be prepaid at the election of Borrower in whole or in part without premium or penalty; provided that: (i) any partial prepayment of a Reference -------- Rate Loan, CD Rate Loan or Eurodollar Rate Loan shall be in an amount not less than $20,000,000 which is an integral multiple of $1,000,000, (ii) the Agent must have received written notice (or telephonic notice confirmed promptly in writing) of any prepayment at least one Banking Day before the date of prepayment in the case of Reference Rate Loans, two Banking Days before the date of prepayment in the case of CD Rate Loans and three Banking Days before the date of prepayment in the case of Eurodollar Rate Loans, (iii) each prepayment of principal, except for partial prepayments on Reference Rate Loans, shall be accompanied by prepayment of interest accrued through the date of payment on the amount of principal paid and (iv) in the case of any prepayment of any CD Rate Loan or Eurodollar Rate Loan, Borrower shall promptly upon demand reimburse the Banks for any loss or cost directly or indirectly resulting from the prepayment, determined as set forth in Section 4.6. --- 4.2 Arrangement Fee. On the Closing Date, Borrower --------------- shall pay to the Agent, for the account of the Arranger, the arrangement fee described in a letter agreement between Borrower and Arranger. The arrangement fee is solely for the account of the Arranger and is not refundable. 4.3 Participation Fee. On the Closing Date, Borrower ----------------- shall pay to the Agent, for the account of the Banks according to their Pro Rata Share of the Commitment, a participation fee equal to 1/8 of 1% (12.5 basis points) of the Commitment. Such participation fee is for the provision by the Banks of the credit facilities under this Agreement and is not refundable. 4.4 Agency Fee. On the Closing Date, and on each anniversary ---------- thereof, Borrower shall pay to the Agent the agency fee described in a letter agreement between Borrower and Agent. The agency fee is solely for the account of the Agent and is not refundable. 4.5 Increased Commitment Costs. Section 3.8 of the -------------------------- --- Syndicated Loan Agreement is incorporated herein by this reference, mutatis ------- mutandis. - -------- 4.6 Eurodollar and CD Matters. Sections 3.9, 3.10, 3.11 and ------------------------- --- ---- ---- 3.12 of the Syndicated Loan Agreement are incorporated herein by this - ---- reference, mutatis mutandis. ------- -------- 4.7 Late Payments. Should any installment of principal or ------------- interest under the Notes or any other amount payable under any Loan Document not be paid when due, it shall thereafter bear interest at a fluctuating interest rate per annum at all times equal to the sum of the Reference Rate plus 2%, to the extent permitted by applicable Law, until paid in full - ---- (whether before or after judgment). 4.8 Miscellaneous Payment Matters. Sections 3.14, 3.15, ----------------------------- ---- ---- 3.16, 3.17, 3.18, 3.19, 3.20, 3.21 and 3.22 of the Syndicated Loan Agreement - ---- ---- ---- ---- ---- ---- ---- are incorporated herein by this reference. Article 5. Representations and Warranties ------------------------------ Borrower represents and warrants to the Agent and the Banks that: 5.1 Existence and Qualification; Power; Compliance with Law. ------------------------------------------------------- Section 4.1 of the Syndicated Loan Agreement is incorporated herein by this --- reference. 5.2 Authority; Compliance with Other Instruments and ------------------------------------------------ Government Regulations. The execution, delivery, and performance by - ---------------------- Borrower, and by each Subsidiary of Borrower, of the Loan Documents to which it is a Party have been duly authorized by all necessary corporate action, and do not: (a) require any consent or approval not heretofore obtained of any stockholder, partner, security holder, or creditor of such Party; (b) violate or conflict with any provision of such Party's charter, certificate, articles of incorporation or bylaws; (c) result in or require the creation or imposition of any Lien or Right of Others upon or with respect to any Property now owned or leased or hereafter acquired by such Party; (d) constitute a "transfer of an interest" or an "obligation incurred" that is avoidable by a trustee under Section 548 of the Bankruptcy Code of 1978, as amended, or constitutes a "fraudulent transfer" or "fraudulent obligation" within the meaning of the Uniform Fraudulent Transfer Act as enacted in any jurisdiction or any analogous Law; (e) violate any Requirement of Law applicable to such Party; or (f) result in a breach of or constitute a default under, or cause or permit the acceleration of any obligation owed under, any indenture or loan or credit agreement or any other Contractual Obligation to which such Party or any of its Property is bound or affected; and neither Borrower nor any Subsidiary of Borrower is in violation of, or default under, any Requirement of Law or Contractual Obligation, or any indenture, loan or credit agreement described in Section 5.2(f) in any ------ respect that would constitute a Material Adverse Effect. 5.3 No Governmental Approvals Required. Except such as have ---------------------------------- heretofore been obtained, no authorization, consent, approval, order, license or permit from, or filing, registration, or qualification with, or exemption from any of the foregoing from, any Governmental Agency is or will be required to authorize or permit the execution, delivery, and performance by Borrower or any Subsidiary of Borrower of the Loan Documents to which it is a Party. 5.4 Subsidiaries. Section 4.4 of the Syndicated Loan ------------ --- Agreement is incorporated herein by this reference; provided that the -------- Schedule 4.4 therein referred to shall instead refer to Schedule 4.4 to - ------------ ------------ this Agreement. 5.5 Financial Statements. Borrower has furnished to the -------------------- Banks (a) the audited consolidated financial statements of Borrower and its Subsidiaries as at January 3, 1993 and for the Fiscal Year then ended, and (b) the unaudited condensed consolidated financial statements of Borrower and its Subsidiaries as at October 10, 1993 and for the Fiscal Quarter then ended. The financial statements described in clauses (a) and (b) are in - - accordance with the books and records of Borrower and its Subsidiaries, were prepared in accordance with Generally Accepted Accounting Principles and fairly present in accordance with Generally Accepted Accounting Principles consistently applied the consolidated financial condition and results of operation of Borrower and its Subsidiaries as at the dates and for the periods covered thereby, subject, in the case of the financial statements described in clause (b), to normal year-end accruals and audit adjustments. - 5.6 No Other Liabilities; No Material Adverse Effect. ------------------------------------------------ Borrower and its Subsidiaries do not have any material liability or material contingent liability not reflected or disclosed in the balance sheet described in Section 5.5(b) or the notes to the other financial statements described in ------ Section 5.5, other than liabilities and contingent liabilities arising in the --- ordinary course of business subsequent to October 10, 1993. As of the Closing Date, there has been no event or circumstance occur that constitutes a Material Adverse Effect since October 10, 1993 or, as of any date subsequent to the Closing Date, since the Closing Date. 5.7 Title to Assets. Section 4.7 of the Syndicated Loan --------------- --- Agreement is incorporated herein by this reference; provided that the -------- Schedule 4.7 therein referred to shall instead refer to Schedule 4.7 to - ------------ ------------ this Agreement. 5.8 Intangible Assets. Section 4.8 of the Syndicated Loan ----------------- --- Agreement is incorporated herein by this reference. 5.9 Existing Indebtedness and Contingent Obligations. ------------------------------------------------ Section 4.9 of the Syndicated Loan Agreement is incorporated herein by this --- reference; provided that the Schedule 4.9 therein referred to shall instead -------- ------------ refer to Schedule 4.9 to this Agreement. ------------ 5.10 Governmental Regulation. Section 4.10 of the Syndicated ----------------------- ---- Loan Agreement is incorporated herein by this reference. 5.11 Litigation. Section 4.11 of the Syndicated Loan Agreement ---------- ---- is incorporated herein by this reference. 5.12 Employee Matters. Section 4.12 of the Syndicated Loan ---------------- ---- Agreement is incorporated herein by this reference. 5.13 Binding Obligations. Assuming due execution and delivery ------------------- by the other parties thereto, each of the Loan Documents to which Borrower or any Subsidiary of Borrower is a Party will, when executed and delivered by Borrower or the Subsidiary, as the case may be, constitute the legal, valid, and binding obligation of Borrower or the Subsidiary, as the case may be, enforceable against Borrower or the Subsidiary, as the case may be, in accordance with its terms, except as enforcement may be limited by Debtor ------ Relief Laws or by equitable principles relating to the granting of specific performance and other equitable remedies as a matter of judicial discretion. 5.14 No Default. No event has occurred and is continuing that ---------- is a Default or an Event of Default. 5.15 Pension Plans. Section 4.15 of the Syndicated Loan ------------- ---- Agreement is incorporated herein by this reference. 5.16 Tax Liability. Section 4.16 of the Syndicated Loan ------------- ---- Agreement is incorporated herein by this reference. 5.17 Regulation U. Section 4.17 of the Syndicated Loan ------------ ---- Agreement is incorporated herein by this reference. 5.18 Disclosure. No written statement made by Borrower, or any ---------- representative of Borrower, to the Banks in connection with this Agreement or any Loan has contained, as of the date such written statement was made, any untrue statement of a material fact (which has not been corrected as of the Closing Date or, in the case of a written statement made subsequent to the Closing Date, prior to reliance thereon by the Banks, in a subsequent written statement made by Borrower or a representative of Borrower) or has omitted a material fact (which has not been corrected as of the Closing Date or, in the case of a written statement made subsequent to the Closing Date, prior to reliance thereon by the Banks, in a subsequent written statement made by Borrower or a representative of Borrower) necessary to make the statements contained therein not misleading under all the circumstances existing at the date of such written statement and in the context in which it was made, including information contained in all other written statements previously delivered. Nothing in this Section shall be construed to apply to the financial statements described in Section 5.5 or to the Projections. --- Article 6. Affirmative Covenants --------------------- (Other Than Information And -------------------------- Reporting Requirements) ---------------------- As long as any Loan remains unpaid, or any other Obligation remains unpaid or unperformed, or the Commitment remains outstanding, Borrower shall, and shall cause each of its Subsidiaries to, unless the Agent (with the written approval of the Term Majority Banks) otherwise consents in writing: 6.1 Payment of Taxes and Other Potential Liens. Section 5.1 of ------------------------------------------ --- the Syndicated Loan Agreement is incorporated herein by this reference. 6.2 Preservation of Existence. Section 5.2 of the Syndicated ------------------------- --- Loan Agreement is incorporated herein by this reference; provided that the -------- cross references therein contained shall be construed as cross references to Sections of the Syndicated Loan Agreement. 6.3 Maintenance of Properties. Section 5.3 of the Syndicated ------------------------- --- Loan Agreement is incorporated herein by this reference. 6.4 Maintenance of Insurance. Section 5.4 of the Syndicated Loan ------------------------ --- Agreement is incorporated herein by this reference. 6.5 Compliance with Laws. Section 5.5 of the Syndicated Loan -------------------- --- Agreement is incorporated herein by this reference. 6.6 Inspection Rights. Any time during regular business hours ----------------- and as often as requested, permit the Agent or any Bank or any employee, agent, or representative thereof to examine, audit and make copies and abstracts from the records and books of account of, and to visit and inspect the Properties of Borrower and its Subsidiaries, and to discuss the affairs, finances, and accounts of Borrower and its Subsidiaries with any of their officers or employees; provided that none of the foregoing shall require -------- Borrower to disclose information respecting its employees or customers which would violate any Law or shall unreasonably interfere with the normal business operations of Borrower or any of its Subsidiaries. 6.7 Keeping of Records and Books of Account. Section 5.7 of the --------------------------------------- --- Syndicated Loan Agreement is incorporated herein by this reference. 6.8 Use of Proceeds. Use the proceeds of the Loan for working --------------- capital and general corporate purposes. 6.9 Subsidiary Guaranty. Cause each of its wholly-owned ------------------- Significant Subsidiaries hereafter formed, acquired or qualifying as a Significant Subsidiary, to execute and deliver a joinder of the Subsidiary Guaranty promptly following such formation, acquisition or qualification. 6.10 Maintenance of Borrower Net Assets. Section 5.10 of the ---------------------------------- ---- Syndicated Loan Agreement is incorporated herein by this reference. Article 7. Negative Covenants ------------------ As long as any Loan remains unpaid or any other Obligation remains unpaid or unperformed, or the Commitment remains outstanding, Borrower shall not, and shall cause each of its Subsidiaries to not, unless the Agent (with the written approval of the Term Majority Banks) otherwise consents in writing, violate or fail to comply with any of the covenants contained in Sections 6.1 through 6.21 (provided that the cross references therein --- ---- -------- contained shall be construed as cross references to Sections of the Syndicated Loan Agreement) of the Syndicated Loan Agreement, incorporated herein by this reference. Article 8. Information and Reporting Requirements -------------------------------------- 8.1 Financial and Business Information. As long as any Loan ---------------------------------- remains unpaid or any other Obligation remains unpaid or unperformed, or the Commitment remains outstanding, Borrower shall, unless the Agent (with the written approval of the Term Majority Banks) otherwise consents in writing, deliver to the Banks at its own expense: (a) Concurrently with delivery thereof pursuant to the Syndicated Loan Agreement, each of the financial statements, projections, reports and notices described in Sections 7.1(a) through 7.1(i) of the Syndicated Loan Agreement, ------ ------ which Sections are hereby incorporated herein by this reference (provided, that nothing herein shall require -------- delivery of duplicates of any of the foregoing to a Bank which, in its capacity as a Bank under the Syndicated Loan Agreement, has previously received any such financial statement, projection, report or notice); and (b) Such other data and information as from time to time may reasonably be requested by any of the Banks. 8.2 Compliance Certificate. As long as any Loan remains unpaid ---------------------- or any other Obligation remains unpaid or unperformed, or the Commitment remains outstanding, Borrower shall (unless the Agent with the approval of the Term Majority Banks otherwise consents in writing) deliver to the Banks, not later than 60 days after the close of each Fiscal Quarter and 105 days after the close of each Fiscal Year, a Compliance Certificate dated as of the last day of the Fiscal Quarter or Fiscal Year, as the case may be. Article 9. Conditions ---------- 9.1 Initial Advance. The obligation of the Banks to make the --------------- initial Advance is subject to the following conditions, each of which shall be satisfied prior to or concurrently with the making of the initial Advance: (a) The Agent shall have received all of the following, each dated as of the Closing Date (unless otherwise specified or unless the Agent otherwise agrees) and all in form and substance satisfactory to the Agent and legal counsel for the Agent: (1) executed counterparts of this Agreement sufficient in number for Borrower, the Agent and each of the Banks, provided that the Agent may accept facsimile -------- signature pages from any Bank as evidence of its execution of this Agreement upon the undertaking of such Bank to promptly provide original counterpart signature pages; (2) the Notes executed by Borrower in favor of each Bank, each in a principal amount equal to that Bank's Pro Rata Share of the Commitment; (3) the Subsidiary Guaranty executed by each Significant Subsidiary of Borrower; (4) with respect to Borrower and each Significant Subsidiary of Borrower, such documentation as the Agent may reasonably require to establish the due organization, valid existence and good standing of Borrower and each such Subsidiary, its qualification to engage in business in each jurisdiction in which it is engaged in business or required to be so qualified, its authority to execute, deliver and perform any Loan Documents to which it is a Party, and the identity, authority and capacity of each Responsible Official thereof authorized to act on its behalf, including, --------- without limitation, certified copies of articles of incorporation and amendments thereto, bylaws and amendments thereto, certificates of good standing and/or qualifications to engage in business, certificates of corporate resolutions, incumbency certificates, and the like; (5) the Opinion of Counsel; (6) an Officer's Certificate of Borrower affirming, to the best of his or her knowledge, that the conditions set forth in Sections 9.1(d) and 9.1(e) have been satisfied; ------ ------ (7) a Request for Loan; and (8) such other assurances, certificates, documents, consents or opinions as the Agent may reasonably require. (b) The Agent shall have been paid the arrangement fee and agency fee described in Sections 4.2 and 4.4. --- --- (c) The Agent shall have been paid the participation fee, for the account of the Banks, described in Section 4.3. --- (d) The representations and warranties of Borrower contained in Article 5 shall be true and correct. --------- (e) Borrower and its Subsidiaries and any other Parties shall be in compliance with all the terms and provisions of the Loan Documents. 9.2 Any Advance. The obligation of the Banks to make any ----------- Advance is subject to the conditions precedent that the representations and warranties contained in Section 5.13 and 5.18 shall be true and correct in all ---- ---- material respects on and as of the date of the Advance as though made on and as of that date, and that there has not occurred an Event of Default that is then continuing. Article 10. Events of Default and Remedies Upon Events of Default ----------------------------------------------------- 10.1 Events of Default. There will be a default hereunder if ----------------- any one or more of the following events ("Events of Default") occurs and is continuing, whatever the reason therefor: (a) failure to pay any installment of principal on the Notes on the date when due; or (b) failure to pay any installment of interest on the Notes, or to pay any fee or other amounts due the Bank hereunder, within five (5) calendar days after the date when due; or (c) any failure to comply with Section 6.1 of the --- Syndicated Loan Agreement; or (d) any failure to comply with Sections 6.3, 6.4, 6.7, --- --- --- 6.8, 6.9, 6.10 or 6.11 of the Syndicated Loan Agreement --- --- ---- ---- which shall remain unremedied for a period of thirty (30) calendar days from the date of such Default or, if the Term Majority Banks determine (and the Syndicate Majority Banks have made the same determination, if the Syndicated Loan Agreement is then in effect) that such Default constitutes a Material Adverse Effect, such shorter period as may be specified by the Term Majority Banks by written notice to Borrower, provided that no such period may be shorter than -------- the similar period specified by the Syndicate Majority Banks; or (e) Borrower or any other Party fails to perform or observe any other term, covenant, or agreement contained in any Loan Document on its part to be performed or observed within the later of (i) thirty (30) calendar days after notice by the Agent of such Default or (ii) if Borrower or such other Party has commenced efforts to remedy such Default, such period not exceeding sixty (60) calendar days after notice by the Agent of such Default during which Borrower or such other Party is diligently pursuing such efforts; or (f) any representations or warranty in any Loan Document or any certificate, agreement, instrument, or other document made or delivered, on or after the Closing Date, pursuant to or in connection with any Loan Document proves to have been incorrect when made in any material respect and the interests of the Banks under this Agreement have been materially and adversely affected by reason of such incorrect representation or warranty; or (g) Section 9.1(g) of the Syndicated Loan Agreement is ------ incorporated by this reference; or (h) any Loan Document, at any time after its execution and delivery and for any reason other than the agreement of the Bank or satisfaction in full of all the Obligations, ceases to be in full force and effect or is declared by a court of competent jurisdiction to be null and void, invalid, or unenforceable in any respect which is, in the reasonable opinion of the Term Majority Banks (and, if the Syndicated Loan Agreement is then in effect, in the reasonable opinion of the Syndicate Majority Banks), materially adverse to the interest of the Banks; or any Party thereto denies that it has any or further liability or obligation under any Loan Document; or (i) Section 9.1(i) of the Syndicated Loan Agreement is ------ incorporated by this reference; or (j) Section 9.1(j) of the Syndicated Loan Agreement is ------ incorporated by this reference; or (k) Section 9.1(k) of the Syndicated Loan Agreement is ------ incorporated by this reference; or (l) the occurrence of an Event of Default (as such term is or may hereafter be specifically defined in any other Loan Document) under any Loan Document; or (m) Section 9.1(m) of the Syndicated Loan Agreement is ------ incorporated by this reference. 10.2 Remedies Upon Event of Default. Without limiting any other ------------------------------ rights or remedies of the Agent or the Banks provided for elsewhere in this Agreement or the Loan Documents, or by applicable Law or in equity, or otherwise: (a) Upon the occurrence of any Event of Default, and so long as any such Event of Default shall be continuing (other than an Event of Default described in Section 10.1(j): ------- (i) all commitments to make Advances, and all other obligations of the Banks and all rights of Borrower and any other Parties under the Loan Documents shall be suspended without notice to or demand upon Borrower, which are expressly waived by Borrower, except that the Term Majority ------ Banks may waive the Event of Default or, without waiving, determine, upon terms and conditions satisfactory to the Term Majority Banks, to reinstate the Commitment and make further Advances; and (ii) the Term Majority Banks may declare the unpaid principal of or unperformed balance of all Obligations due to the Banks hereunder and under the Notes, all interest accrued and unpaid thereon, and all other amounts payable under the Loan Documents to be forthwith due and payable, whereupon the same shall become and be forthwith due and payable, without protest, presentment, notice of dishonor, demand, or further notice of any kind, of all of which are expressly waived by Borrower. (b) Upon the occurrence of any Event of Default described in Section 10.1(j): ------- (i) all commitments to make Advances, all other obligations of the Banks and all rights of Borrower and any other Parties under the Loan Documents shall terminate without notice to or demand upon Borrower, which are expressly waived by Borrower, except that all, the Banks may ------ waive the Event of Default or, without waiving, determine, upon terms and conditions satisfactory to the Banks, to reinstate the Commitment and make further Advances; and (ii) the unpaid principal of or unperformed balance of all Obligations due to the Banks hereunder and under the Notes, and all interest accrued and unpaid on such Obligations, and all other amounts payable under the Loan Documents shall be forthwith due and payable, without protest, presentment, notice of dishonor, demand, or further notice of any kind, all of which are expressly waived by Borrower. (c) Sections 9.2(c) and 9.2(d) of the Syndicated Loan ------ ------ Agreement are incorporated herein by this reference. Article 11. The Agent --------- 11.1 Agency Provisions. Sections 10.1, 10.2, 10.3, 10.4, 10.5, ----------------- ---- ---- ---- ---- ---- 10.6, 10.7 and 10.8 of the Syndicated Loan Agreement are incorporated herein - ---- ---- ---- by this reference. Article 12. Miscellaneous ------------- 12.1 Cumulative Remedies; No Waiver. Section 11.1 of the ------------------------------ ---- Syndicated Loan Agreement is incorporated herein by this reference. 12.2 Amendments; Consents. Section 11.2 of the Syndicated Loan -------------------- ---- Agreement (other than the reference contained therein to Section 2.9 of the --- Syndicated Loan Agreement) is incorporated herein by this reference, mutatis ------- mutandis. - -------- 12.3 Costs, Expenses and Taxes. Borrower shall pay on demand the ------------------------- reasonable out-of-pocket costs and expenses of the Agent in connection with the negotiation, preparation, execution and delivery of the Loan Documents. Borrower shall pay on demand the reasonable out-of-pocket costs and expenses of the Agent and the Banks in connection with the amendment, waiver, refinancing, restructuring, reorganization (including a bankruptcy reorganization, if such payment is approved by the bankruptcy court) or any of the foregoing that is requested by Borrower whether or not granted by the Banks. Borrower shall in any event pay on demand the reasonable out-of pocket costs and expenses of the Agent and the Banks in connection with the enforcement of any Loan Documents. The aforesaid costs and expenses shall include without limitation filing fees, recording fees, title insurance fees, appraisal fees, search fees, and other out-of-pocket expenses and the reasonable fees and out-of-pocket expenses of any legal counsel, independent public accounts, and other outside experts retained by the Agent and (except ------ in connection with the negotiation, preparation, execution and delivery of the initial Loan Documents) any of the Banks, including the reasonably allocated costs of in-house attorneys employed by the Agent and, in the proper case, any Bank. Borrower shall pay any and all documentary and other taxes (other than income or gross receipts taxes generally applicable to banks) and all costs, expenses, fees, and charges payable or determined to be payable in connection with the filing or recording of this Agreement, any other Loan Document, or any other instrument or writing to be delivered hereunder or thereunder, or in connection with any transaction pursuant hereto or thereto, and shall reimburse, hold harmless, and indemnify the Agent and each Bank from and against any and all loss, liability, or legal or other expense with respect to or resulting from any delay in paying or failure to pay any tax, cost, expense, fee, or charge or that any of them may suffer or incur by reason of the failure of Borrower to perform any of its Obligations. Any amount payable to the Agent or any Bank under this Section shall bear interest from the date of receipt of demand for payment at the rate then in effect for Reference Rate Loans. 12.4 Other Miscellaneous Provisions. The provisions of ------------------------------ Sections 11.4, 11.5, 11.6, 11.7, 11.8, 11.9, 11.10, 11.11, 11.12, 11.13, ---- ---- ---- ---- ---- ----- ---- ----- ----- ----- 11.14, 11.15, 11.16, 11.17, 11.18, 11.19, 11.20, 11.21, 11.22, 11.23 and - ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- 11.24 of the Syndicated Loan Agreement are incorporated herein by this - ----- reference. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written. THE VONS COMPANIES, INC., a Michigan corporation By /s/ M. F. Henn ----------------------------------- Michael F. Henn Executive Vice President and Chief Financial Officer By /s/ V. L. Miller ----------------------------------- Virginia L. Miller Vice President and Treasurer The Vons Companies, Inc. 618 Michillinda Avenue Arcadia, California 91007 Attn: Chief Financial Officer Telecopier: (818) 821-7912 Telephone: (818) 821-7021 with a copy to: The Vons Companies, Inc. 618 Michillinda Avenue Arcadia, California 91007 Attn: General Counsel Telecopier: (818) 821-7901 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By /s/ D. M. Terrance ----------------------------------- David Terrance Vice President Bank of America National Trust and Savings Association Global Agency #5596 1455 Market Street, 13th Floor San Francisco, California 94103 Telecopier: (415) 622-4894 Telephone: (415) 622-7011 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as a Bank By /s/ Dennis V. Arriola ----------------------------------- Dennis V. Arriola Vice President Bank of America National Trust and Savings Association 555 South Flower Street, 11th Floor (Unit 5618) Los Angeles, California 90071 Telecopier: (213) 228-2756 Telephone: (213) 228-2678 THE CHASE MANHATTAN BANK, N.A., as a Bank By:/s/ Raymond G. Schuville ----------------------------------- Title: M. D. -------------------------------- Address for Notices: 1 Chase Plaza, 3rd. Floor -------------------------------------- San Francisco, California 94111 -------------------------------------- -------------------------------------- Attn: Suzanne L. Baird --------------------------------- Telecopier: 212 552-1457 ------------ Telephone: 213 552-3771 ------------ FIRST INTERSTATE BANK OF CALIFORNIA, as a Bank By:/s/ Edwina G. Kew ----------------------------------- Title: Vice President -------------------------------- Address for Notices: 707 Wilshire Boulevard, W16-13 -------------------------------------- Los Angeles, CA 90017 -------------------------------------- -------------------------------------- Attn: William J. Baird --------------------------------- Telecopier: (213) 614-2569 -------------- Telephone: (213) 614-5590 -------------- NATIONSBANK OF TEXAS, N.A., as a Bank By:/s/ W. B. Guffey ----------------------------------- Title: Vice President -------------------------------- Address for Notices: 901 Main Street -------------------------------------- Dallas, Texas 75202 -------------------------------------- -------------------------------------- Attn: Lending Support --------------------------------- Telecopier: 214-508-0944 ------------ Telephone: 214-508-3089 ------------ ABN AMRO BANK, N.V., as a Bank By:/s/ David J. Stassel /s/ Corry Klein David Stassel Corry Klein ----------------------------------- Corporate Title: Vice President Banking Officer -------------------------------- Address for Notices: 300 South Grand Avenue, Suite 1115 -------------------------------------- Los Angeles, CA 90071 -------------------------------------- -------------------------------------- Attn: Margaret Saito -------------------------------- Telecopier: 213-687-2061 ------------ Telephone: 213-687-2098 ------------ THE BANK OF NOVA SCOTIA, as a Bank By:/s/ Suzanne L. Baird Suzanne L. Baird ----------------------------------- Title: Representative -------------------------------- Address for Notices: 101 California Street, 48th Floor -------------------------------------- San Francisco, California 94111 -------------------------------------- -------------------------------------- Attn: Suzanne L. Baird --------------------------------- Telecopier: 415/397-0791 ------------ Telephone: 415/986-1100 ------------ CIBC, INC., as a Bank By:/s/ Thomas C. Ludlow Thomas C. Ludlow ----------------------------------- Title: Vice President -------------------------------- Address for Notices: 300 South Grand Avenue, Suite 2700 -------------------------------------- Los Angeles, California -------------------------------------- -------------------------------------- Attn: Tom Ludlow --------------------------------- Telecopier: 213/346-0157 ------------ Telephone: 213/617-6229 ------------ SOCIETE GENERALE, as a Bank By:/s/ Maureen Kelly ----------------------------------- Title: Vice President -------------------------------- Address for Notices: 2029 Century Park East -------------------------------------- Suite 2900 -------------------------------------- Los Angeles, CA 90067 -------------------------------------- Attn: Doris Yun --------------------------------- Telecopier: 310 203-0539 ------------ Telephone: 310 788-7116 ------------ THE TOKAI BANK, LTD., LOS ANGELES AGENCY, as a Bank By:/s/ Hitoshi Ozawa ----------------------------------- Hitoshi Ozawa Title: Asst. General Manager -------------------------------- Address for Notices: 534 West Sixth Street -------------------------------------- Los Angeles, Califonria 90014 -------------------------------------- -------------------------------------- Attn: Poebus Hun --------------------------------- Telecopier: 213/892-2818 ------------ Telephone: 213/892-2853 ------------ UNION BANK, as a Bank By:/s/ Ann M. Yasuda ----------------------------------- Ann M. Yasuda Title: Vice President -------------------------------- Address for Notices: Union Bank -------------------------------------- 445 South Figueroa Street, 13th Floor -------------------------------------- Los Angeles, CA 90071-1602 -------------------------------------- Attn: Ann M. Yasuda --------------------------------- Telecopier: (213) 629-5328 -------------- Telephone: (213) 236-6604 -------------- BANK OF HAWAII, as a Bank By:/s/ Elizabeth O. Maclean ----------------------------------- Title: Assistant Vice President -------------------------------- Address for Notices: 130 Merchant Street, 20th Floor -------------------------------------- Corporate National Banking -------------------------------------- Honolulu, Hawaii 96813 -------------------------------------- Attn: Cynthia L. Davis, V.P. --------------------------------- Telecopier: (808) 537-8301 -------------- Telephone: (808) 537-8016 -------------- Schedule 1.1 to Term Loan Agreement
Bank Commitment Amount Pro Rata Share - ---- ----------------- -------------- BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION $45,000,000 30.00000000% THE CHASE MANHATTAN BANK, N.A. $15,000,000 10.00000000% FIRST INTERSTATE BANK OF CALIFORNIA, $15,000,000 10.00000000% NATIONSBANK OF TEXAS, N.A. $15,000,000 10.00000000% ABN AMRO BANK, N.V. $10,000,000 6.66666667% THE BANK OF NOVA SCOTIA $10,000,000 6.66666667% CIBC, INC. $10,000,000 6.66666667% SOCIETE GENERALE $10,000,000 6.66666667% THE TOKAI BANK, LTD., LOS ANGELES AGENCY $7,500,000 5.00000000% UNION BANK $7,500,000 5.00000000% BANK OF HAWAII $5,000,000 3.33333332% TOTALS $150,000,000 100.00000000%
SCHEDULE 4.4 SUBSIDIARIES
Shrs Authrzd/ Company Status Outstanding Notes - --------------------------------------------------------------- Miramar Associates California gen. part. None 3 Vons Food Services, California Inc. corp. 2,500/95 1,2 - ------------------------ 1. All shares owned by The Vons Companies, Inc. 2. All shares are common stock unless otherwise noted. 3. Owned 50% by The Vons Companies, Inc. and 50% by Fritz Duda Interests.
SCHEDULE 4.4 Page 1 of 1 SCHEDULE 4.7 EXISTING LIENS AND RIGHTS OF OTHERS ----------------------------------- 1. Vons Meat Service Center at 10150 Lower Azusa Road, El Monte, California. This property is encumbered by a deed of trust; Trustee - Ticor; Beneficiary - Massachusetts Mutual Life Insurance Company; securing payment of note in the amount of $9,900,000. Note matures September 30, 2003. 2. Group of 52 Vons stores in California. This property is encumbered by a deed of trust; Trustee - Ticor; Beneficiary - Metropolitan Life Insurance Company; securing payment of note in the amount of $125,000,000. Note matures July, 1997. 3. Vons Store #152, Pasadena, California - 155 West California Boulevard. This property is encumbered by a deed of trust dated March 26, 1979; Trustor Borrower; Trustee - Ticor; Beneficiary - Southwestern Life Insurance Co.; securing payment of note in the amount of $2,100,000. Note matures April 1, 2004. 4. Vons Store #151, Bakersfield, California - 3041 Wilson Road. This property is encumbered by a deed of trust dated March 26, 1979; Trustor - Borrower; Trustee - Ticor; Beneficiary - Southwestern Life Insurance Company; securing payment of note in the amount of $1,520,000. Note matures April 1, 2004. 5. Vons Store #121, Vista, California - 940 South Santa Fe Avenue. This property is encumbered by a deed of trust dated January 30, 1978; Trustor - - Borrower; Trustee - Ticor; Beneficiary - Southwestern Life Insurance Co.; securing payment of note in the amount of $1,250,000. Note matures February 1, 2003. 6. Vons Store #356, National City, California - 1220 Plaza Boulevard. This property is encumbered by a mortgage. Beneficiary - Calpers; securing payment of a note in the amount of $2,765,000. Note matures June 29, 2009. 7. Borrower has entered into an agreement to sell Vons Store #35060 (Burbank) for $3,000,000. 8. Borrower has entered into an agreement to sell Vons Store #310 (Santa Maria) for $1,800,000. Escrow to close December 17, 1993. 9. Williams Bros. #315, 316, & 318. These properties are encumbered by various deeds of trust; Beneficiary - various; securing payments of notes in the amount of $4,542,500. Notes have various maturities, but do not exceed December 1, 2000. 10. Borrower has entered into an agreement by which it will assume approximately 60 leases currently owned by Collins & Aikman, Inc. which had operated as Builders Emporium and Ole's. In connection with this transaction, Borrower has entered into agreements with various parties pursuant to which hose parties shall assume certain of the leases. Schedule 4.7 Page 1 of 1 KEH060/1 SCHEDULE 4.9 EXISTING INDEBTEDNESS AND CONTINGENT OBLIGATIONS (000'S)
Total Outstanding ----------------------- Description of Description on Instrument Due Date Rate Amount As of Property Encumbered - ---------------------------------------------------------------------------------------------------------- Allied Senior Subordinated Debentures (Face Amount) May 15, 1998 6.625% 91,459* Dec. 8, 1993 None The Vons Companies, Inc. Senior Subordinated Debentures October 1, 1999 8.375% 100,000 Dec. 8, 1993 None The Vons Companies, Inc, Senior Subordinated Notes April 1, 2002 9.625% 150,000 Dec. 8, 1993 None Uncommitted Short Term Facilities (Face Amount) 1 Year or less Various 383,120 Dec. 7, 1993 None Capitalized Leases over $5,000: DFT Properties, Inc. Jan 31, 2019 N/A 5,552 Nov. 7, 1993 Vons#505 (Bakersfield) AMI Properties, Inc. Jan 31, 2018 N/A 5,011 Nov. 7, 1993 Vons #506 (Fresno) NationsBanc Leasing July 15, 1997 to N/A 9,101 Nov. 7, 1993 Tractors/Trailers April 22, 1998 Letters of Credit in accordance with attached schedule * The Company has repurchased and cancelled debentures totaling $31,541.
Schedule 4.9 Page 1 of 3
Total Outstanding ----------------------- Description of Description on Instrument Due Date Rate Amount As of Property Encumbered - --------------------------------------------------------------------------------------------------------- Mortgage Financing: Metropolitan Life Insurance July 1, 1987 9.250% 117,020 Nov. 7, 1993 Group of 52 Stores Mortgage Financing Massachusetts Mutual Life Sept 30, 2003 8.500% 6,414 Nov. 7, 1993 Vons Meat Prossing Insurance Mortgage Financing Facility Southwestern Life Insurance Feb 1, 2003 8.375% 763 Nov. 7, 1993 Vons #121 (Vista) Company Mortgage Financing Southwestern Life Insurance April 1, 2004 8.500% 1,013 Nov. 7, 1993 Vons #151 Company Mortgage Financing (Bakersfield) Southwestern Life Insurance April 1, 2004 8.500% 1,400 Nov. 7, 1993 Vons #152 Company Mortgage Financing (Pasadena) Calpers June 29, 2009 11.500%*** 2,445 Nov. 7, 1993 Vons #356 (National City) Acquired Indebtedness of Williams Bros.: Mortgages Various 6.0-12.25% 3,777 Nov. 7, 1993 Williams Bros. #315, 316 & 318 *** 11.5% + Additional Income Interest based upon Gross Income performance
Schedule 4.9 Page 2 of 3
Total Outstanding ----------------------- Description of Description on Instrument Due Date Rate Amount As of Property Encumbered - ---------------------------------------------------------------------------------------------------------- Contingent Obligations: Guarantees of Industrial Revenue Bonds: TG&Y City of Edmond July 1, 1996 7.000% 700 Jan 3, 1993 TG&Y Edmond, OK Warehouse TG&Y City of Kansas City July 1, 1999 5.75-7.375% 900 Jan 3, 1993 TG&Y Kansas City, KS Warehouse Meadowdale - As successor to Allied Supermarkets, Inc., Borrower has various contingent obligations arising from obligations of Meadowdale Foods, Inc. and M-Foods, Inc. including certain obligations of Allied Supermarkets, Inc. assumed by Meadowdale Foods, Inc. on 7/22/87.
Schedule 4.9 Page 3 of 3 SCHEDULE OF LETTERS OF CREDIT
BofA Amount as L/C# of 12/5/93 Beneficiary Maturity - ---------------------------------------------------------------- Standby Letters of Credit: 216099 2,300,000 Board of Trustees, 12/31/93 Central States Southeast and Southwest Areas Pension Fund 216095 200,000 Employers Reinsurance 07/01/94 Corporation 216093 2,200,000 Lumbermans Mutual 04/26/94 216091 70,887,657 Self-Insurance Plans, 05/30/94 State of California 216094 750,000 Self-Insurance Plans, 01/01/94 State of Nevada 217336 3,600,000 LDI Corporation 11/1/94 216098 2,000 City of Carpinteria 09/23/94 218628 1,788,000 Collins & Aikman Group, Inc. 05/25/94 ----------- 81,727,657 TOTAL STANDBY LETTERS OF CREDIT Commercial Letters of Credit: 423132 105,220 Fine Toy, Co., LTD 01/13/94 ----------- 105,220 TOTAL COMMERCIAL LETTERS OF CREDIT ----------- 81,832,877 GRAND TOTAL LETTERS OF CREDIT ----------- -----------
Page 1 of 1 [EXHIBIT A] COMMITMENT ASSIGNMENT AND ACCEPTANCE AGREEMENT ---------------------------------------------- THIS COMMITMENT ASSIGNMENT AND ACCEPTANCE AGREEMENT ("Agreement") dated as of __________________, 19___ is made with reference to that certain Term Loan Agreement dated as of December 13, 1993, among The Vons Companies, Inc. ("Borrower"), the Banks therein named and Bank of America National Trust and Savings Association, as Agent for itself and for the Banks (as amended as of the date hereof, the "Loan Agreement") and is entered into between the "Assignor" described below, in its capacity as a Bank under the Loan Agreement, and the "Assignee" described below. Assignor and Assignee hereby represent, warrant and agree as follows: 1. Definitions. Capitalized terms defined in the Loan Agreement ----------- are used herein with the meanings set forth for such terms in the Loan Agreement. As used in this Agreement, the following capitalized terms shall have the meanings set forth below: "Assignee" means __________________________________. -------- "Assigned Pro-Rata Share" means ___________% of the Commitment of the ----------------------- Banks under the Loan Agreement, being equal to $______________. "Assignor" means ______________________________. -------- "Effective Date" means __________________, the effective date of this -------------- Agreement determined in accordance with Section 11.8 of the Syndicated Loan ---- Agreement (as incorporated by reference into the Loan Agreement pursuant to Section 12.4 thereof). 2. Representations and Warranties of the Assignor. The Assignor ---------------------------------------------- represents and warrants as follows: a. As of the date hereof, the Pro-Rata Share of the Assignor is _____% of the Commitment (without giving effect to assignments thereof which have not yet become effective). The Assignor is the legal and beneficial owner of the Assigned Pro-Rata Share and the Assigned Pro-Rata Share is free and clear of any adverse claim. b. The outstanding principal balance of Advances made by Assignor is $______________. c. The Assignor has full power and authority, and has taken all action necessary to execute and deliver this Agreement and any and all other documents required or permitted to be executed or delivered by it in connection with this Agreement and to fulfill its obligations under, and to consummate the transactions contemplated by, this Agreement, and no governmental authorizations or other authorizations are required in connection therewith; d. This Agreement constitutes the legal, valid and binding obligation of the Assignor. Assignor makes no representation or warranty and assumes no responsibility with respect to the financial condition of Borrower or the performance by Borrower of the Obligations, and assumes no responsibility with respect to any statements, warranties or representations made or in connection with the Loan Agreement or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Agreement or any Loan Document other than as expressly set forth above. 3. Representations and Warranties of the Assignee. The Assignee ---------------------------------------------- hereby represents and warrants to the Assignor as follows: (a) The Assignee has full power and authority, and has taken all action necessary to execute and deliver this Agreement, and any and all other documents required or permitted to be executed or delivered by it in connection with this Agreement and to fulfill its obligations under, and to consummate the transactions contemplated by, this Agreement, and no governmental authorizations or other authorizations are required in connection therewith; (b) This Agreement constitutes the legal, valid and binding obligation of the Assignee; (c) The Assignee has independently and without reliance upon the Assignor and based on such information as the Assignee has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Assignee will, independently and without reliance upon the Agent or any Bank, and based upon such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Agreement; (d) The Assignee is an "Eligible Assignee" within the meaning of the Loan Agreement; (e) The Assignee has received a copy of the Loan Agreement, together with copies of the most recent financial statements delivered pursuant to Section 8.1 of the Loan Agreement; and --- (f) If Assignee is organized under the Laws of a jurisdiction outside the United States of America, attached hereto are the forms prescribed by the Code certifying Assignee's exemption from United States withholding taxes with respect to all payments to be made to Assignee under the Loan Agreement. 4. Assignment. On the terms set forth herein, Assignor, as of ---------- Effective Date, hereby irrevocably sells, assigns and transfers to the Assignee all of the rights and obligations of the Assignor under the Loan Agreement, the other Loan Documents and Assignor's Note, in each case to the extent of the Assigned Pro-Rata Share, and the Assignee irrevocably accepts such assignment of rights and assumes such obligations from the Assignor on such terms and as of the Effective Date. As of the Effective Date, Assignee shall have the rights and obligations of a "Bank" under the Loan Documents, except to the extent of any arrangements with respect to payments referred to in Section 5 hereof. Assignee hereby appoints and authorizes Agent to exercise - such powers under the Loan Agreement as are delegate to the Agent by Article 11 of the Loan Agreement. -- 5. Payment. On the Effective Date, Assignee shall pay to the ------- Assignor, in immediately available funds, an amount equal to the purchase price, as agreed between the Assignor and the Assignee, of the Assigned Pro- Rata Share. The Assignor and the Assignee have entered into a letter agree- ment, of even date herewith, which sets forth their agreement with respect to the amount of interest, fees, and other payments with respect to the Assigned Pro-Rata Share which are to be retained by the Assignor. The Assignor and the Assignee hereby agree that if either receives any payment of interest, principal, fees or any other amount under the Loan Agreement, their respective Notes and other Loan Documents which is for the account of the other, it shall hold the same in trust for such party to the extent of such party's interest therein and shall promptly pay the same to such party. 6. Principal, Interest, Fees, etc. Any principal that would be ------------------------------ payable and any interest, fees and other amounts that would accrue from and after the Effective Date to or for the account of the Assignor pursuant to the Loan Agreement and the Notes shall be payable to or for the account of the Assignor and the Assignee, in accordance with their respective interests as adjusted pursuant to this Agreement. 7. Notes. The Assignor and the Assignee shall make appropriate ----- arrangements with the Borrower concurrently with the execution and delivery hereof so that a replacement Note is issued to the Assignor and a new Note is issued to the Assignee, in each case in principal amounts reflecting their Commitment or their outstanding Advances (as adjusted pursuant to this Agreement). 8. Further Assurances. Concurrently with the execution of this ------------------ Agreement, Assignor shall execute two counterpart original Requests for Registration, in the form of Exhibit A to this Agreement, to be forwarded to Agent. The Assignor and the Assignee further agree to execute and deliver such other instruments, and take such other action, as either party may reasonably request in connection with the transactions contemplated by this Agreement, and Assignor specifically agrees to cause the delivery of (i) two original counterparts of this Agreement and (ii) the Requests for Registration, to Agent for the purpose of registration of Assignee as a "Bank" pursuant to Section 11.8 of the Syndicated Loan Agreement (as incorporated by ---- reference in the Loan Agreement pursuant to Section 12.4 thereof). ---- 9. Governing Law. This Agreement shall be deemed to be a ------------- contractual obligation under, and shall be governed by and construed and interpreted in accordance with, the laws of the State of California. For any dispute arising in connection with this Agreement, the Assignee hereby irrevocably submits to the jurisdiction of the courts of the State of California. 10. Notices. All communications among the parties or notices in ------- connection herewith shall be in writing, hand delivered or sent by registered airmail, postage prepaid, or by telex, telegram or cable, addressed to the appropriate party at its address set forth on the signature pages hereof. All such communications and notices shall be effective upon receipt. 11. Binding Effect. This Agreement shall be binding upon and -------------- inure to the benefit of the parties and their respective successors and assigns; provided, however, that Assignee shall not assign its rights or obligations without the prior written consent of the Assignor and any purported assignment, absent such consent, shall be void. 12. Interpretation. The headings of the various sections hereof -------------- are for convenience of reference only and shall not affect the meaning or construction of any provision hereof. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their respective officials, officers or agents thereunto duly authorized as of the date first above written. "Assignor" _________________________________ By:______________________________ Title:___________________________ Address:_________________________ _________________________ _________________________ Attn:___________________ ___________________ Telephone: _____________ Telecopier:_____________ "Assignee" __________________________________ By:_______________________________ Title:____________________________ Address:__________________________ __________________________ __________________________ Attn:____________________ ____________________ Telephone:_______________ Telecopier:______________ Exhibit A to Commitment Assignment and Acceptance Agreement REQUEST FOR REGISTRATION ------------------------ TO: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent, and THE VONS COMPANIES, INC. THIS REQUEST FOR REGISTRATION OF ASSIGNEE is made as of the date of the enclosed Commitment Assignment and Acceptance Agreement with reference to that certain Term Loan Agreement, dated as of December 13, 1993 among The Vons Companies, Inc., the Banks therein named and Bank of America National Trust and Savings Association, as Agent for itself and for the Banks (as amended as of the date hereof, the "Loan Agreement") Assignor and Assignee hereby request that Agent register Assignee as a Bank pursuant to Section 11.8 of the Syndicated Loan Agreement (as ---- incorporated by reference in the Loan Agreement pursuant to Section 12.4 ---- thereof) effective as of the Effective Date described in the enclosed Commitment Assignment and Acceptance and, in connection with this request certify to Agent that: A. Assignee is an "Eligible Assignee" within the meaning of that term set forth in the Loan Agreement; and B. Schedule A to the enclosed Commitment Assignment and Acceptance Agreement sets forth the correct Commitment and the Assigned Pro- Rata Share of the Assignee. Enclosed with this Request are: (i) two counterpart originals of the Commitment Assignment and Acceptance; (ii) the original Note of Borrower in favor of Assignor in the principal amount of $______________; and (iii) Assignee's check payable to Agent for the $3000 recordation fee required by Section 11.8(d) of the Syndicated Loan ------- Agreement (as incorporated by reference in the Loan Agreement pursuant to Section 12.4 thereof). ---- Assignor and Assignee hereby jointly request that Agent cause Borrower to issue replacement Notes, dated as of the Closing Date, pursuant to Section 11.8 of the Syndicated Loan Agreement (as incorporated by reference ---- in the Loan Agreement pursuant to Section 12.4 thereof) in favor of ---- Assignor in the principal amount of the remainder of its Pro-Rata Share of the Commitment and in favor of the Assignee in the amount of the Assigned Pro- Rata Share. IN WITNESS WHEREOF, Assignor and Assignee have executed this Request for Registration by their duly authorized officers as of this ___ day of _____________, 19__. "Assignor" __________________________________ By:_______________________________ (Printed/Typed Name of Officer) "Assignee" __________________________________ By:_______________________________ (Printed/Typed Name of Officer) CONSENT OF AGENT AND BORROWER ----------------------------- TO: The Assignor and Assignee referred to in the above Request for Registration When countersigned by both Borrower and Agent below, this document shall certify that: 1. If the consent of Borrower is required to such assignment, Borrower has consented, pursuant to the terms of the Loan Documents, to the assignment by Assignor to Assignee of the Assigned Pro-Rata Share. 2. Agent has registered Assignee as a Bank under the Loan Agreement, effective as of the Effective Date described above, with a Pro-Rata Share of the Commitment corresponding to the Assigned Pro-Rata Share and has adjusted the registered Pro-Rata Share of the Commitment of Assignor to reflect the assignment of the Assigned Pro-Rata Share. Approved: THE VONS COMPANIES BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent By: _________________________ By: _________________________ By: _________________________ By: _________________________ [Exhibit B] COMPLIANCE CERTIFICATE ---------------------- TO: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, AS AGENT, AND TO THE BANKS Reference is made to the Term Loan Agreement dated as of December 13, 1993, among THE VONS COMPANIES, INC., as Borrower, the Banks therein named and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent (the "Loan Agreement"). Terms defined in the Loan Agreement and not otherwise defined in this Compliance Certificate (this "Certificate") are used in this Certificate as defined in the Loan Agreement. This Certificate is delivered in accordance with Section 8.2 of the Loan Agreement and relates to the --- financial statements of Borrower and its Subsidiaries for the Fiscal ______________ ended ____________, 19__ (the "Financial Statements"), which are delivered concurrently herewith. I, ____________________, hereby certify that I am the __________________ and a Senior Officer of Borrower and that: 1. Financial Covenants Computations. Borrower and its -------------------------------- Subsidiaries are in compliance with their Obligations to the Banks pursuant to Sections 6.13 through 6.16 of the Syndicated Loan Agreement (as incorporated ---- ---- by reference in the Term Loan Agreement pursuant to Article 7 of the Term Loan --------- Agreement), as set forth in the "Computation of the Loan Agreement Covenants for Fiscal [Quarter] [Year] ended _______________, 19__" attached hereto and incorporated herein by this reference. 2. Review of Activities; Defaults. A review of the activities ------------------------------ of Borrower and its Subsidiaries during the fiscal period covered by the Financial Statements has been made under my supervision with a view to determining whether, during such fiscal period, Borrower and its Subsidiaries performed and observed all of their respective Obligations under the Loan Documents. Except with respect to the Defaults, if any, specified and described, as to their nature and status below, to the best of my knowledge, during the fiscal period covered by the Financial Statements, Borrower and its Subsidiaries performed and observed each covenant and condition applicable to them: ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ 3. Material Adverse Effect. Except with respect to the event(s) ----------------------- or circumstance(s) constituting a Material Adverse Effect, if any, specified and explained in reasonable detail as to their nature and status below, to the best of my knowledge, no event or circumstance constituting a Material Adverse Effect has occurred since the date of the most recent Compliance Certificate previously delivered under Section 8.2 of the Loan Agreement: --- ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ IN WITNESS WHEREOF, I have signed this Certificate on behalf of Borrower this ____ day of _______________, 19___. THE VONS COMPANIES, INC. By:__________________________ Title:_______________________ COMPUTATION OF LOAN AGREEMENT COVENANTS --------------------------------------- FOR FISCAL [YEAR][QUARTER] ENDED 19 ------------------------------------------------ 6.13 LEVERAGE RATIO - ------------------- MAXIMUM LEVERAGE RATIO: ________________ LEVERAGE RATIO IS: ________________ Calculated as follows: CONSOLIDATED TOTAL LIABILITIES: $_______________ divided by SHAREHOLDERS' EQUITY $_______________ 6.14 MINIMUM SHAREHOLDERS' EQUITY - --------------------------------- MINIMUM SHAREHOLDERS' EQUITY: $_______________ Minimum Shareholders' Equity calculated as follows: $375,000,000 plus - ---- Consolidated Net Income for each Fiscal Quarter ending after June 16, 1991 (without reduction for any loss during any Fiscal Quarter) $______________________ MINIMUM SHAREHOLDERS' EQUITY: $_______________ SHAREHOLDERS' EQUITY IS: $_______________
6.15 FIXED CHARGE COVERAGE RATIO - -------------------------------- MINIMUM FIXED CHARGE COVERAGE RATIO: ____________ FIXED CHARGE COVERAGE RATIO IS: ____________ Calculated as follows:
OPERATING CASH FLOW:
Latest Fiscal Previous Three Total of Four Quarter Fiscal Quarters Latest Quarters ------------- --------------- --------------- Consolidated Income Before Extraordinary Items plus Fixed Charges - ---- plus Provision for - ---- Income Taxes plus Charges against - ---- Income for LIFO Adjustments plus Depreciation and - ---- Amortization of Property and Capital Leases plus Amortization of - ---- excess cost over net assets acquired and other assets minus Credits to Income - ----- for LIFO Adjustments minus Income of any - ----- Subsidiaries which cannot make Distributions to Borrower OPERATING CASH FLOW: $____________ $______________ $____________ divided by - ---------- CASH FIXED CHARGES Latest Fiscal Previous Three Total of Four Quarter Fiscal Quarters Latest Quarters ------------- --------------- --------------- Fixed Charges Interest Expense-Net plus Rents Paid\Payable - ---- Net minus Amortization - ----- of Debt discount and deferred financing charges minus other non-cash - ----- Fixed Charges Total Cash Fixed Charges $____________ $______________ $_____________
6.16 CAPITAL EXPENDITURES - ------------------------- PERMITTED CAPITAL EXPENDITURES: $________________ CAPITAL EXPENDITURES ARE: $________________ Permitted Capital Expenditures are calculated as follows: Maximum Capital Expenditure Amount (net of carryover) $________________ Carry over from immediately preceding Fiscal Year $________________ Maximum permitted Capital Expenditures are $________________ NOTE: The pages appended, if any, constitute a further explanation of the manner in which the foregoing computations relate to the Financial Statements to the extent not readily apparent. (Check if pages are appended) _____.
[EXHIBIT C] NOTE ---- $[Pro-Rata share of $150,000,000] __________, 19__ Los Angeles, California FOR VALUE RECEIVED, the undersigned promises to pay to the order of ______________________________ (the "Bank"), the principal amount of _______________________________ DOLLARS ($______________), or such lesser aggregate amount of Advances as may be made by the Bank in accordance with its Pro Rata Share of the Commitment under the Loan Agreement hereinafter described, payable as hereinafter set forth. The undersigned promises to pay interest on the principal amount hereof remaining unpaid from time to time from the date hereof until the date of payment in full, payable as hereinafter set forth. Reference is made to the Term Loan Agreement dated as of December 13, 1993, among the undersigned, as Borrower, the Banks that are parties thereto, and Bank of America National Trust and Savings Association, as the Agent (the "Loan Agreement"). Terms defined in the Loan Agreement and not otherwise defined herein are used herein with the meanings defined for those terms in the Loan Agreement. Any holder hereof is entitled to all of the rights, benefits and privileges provided for in the Loan Agreement as originally executed or as it may from time to time be supplemented, modified or amended. The Loan Agreement, among other things, contains provisions for reduction of the Commitment and for acceleration of the maturity hereof upon the happening of certain stated events upon the terms and conditions therein specified. The principal indebtedness evidenced by this Note shall be payable as provided in the Loan Agreement and in any event on the Maturity Date. Interest shall be payable on the outstanding daily unpaid principal amount of each Loan from the date thereof until payment in full and shall accrue and be payable at the rates set forth in the Loan Agreement both before and after default and before and after maturity and judgment, with interest on overdue interest to bear interest at the Default Rate to the fullest extent permitted by applicable Law. The amount of each payment hereunder shall be made to the Agent at the Agent's Office, for the account of the Bank, in lawful money of the United States of America and in immediately available funds not later than 10:00 a.m., Los Angeles time, on the day of payment (which must be a Banking Day). All payments received after 10:00 a.m., Los Angeles time, on any Banking Day, shall be deemed received on the next succeeding Banking Day. This Bank shall use its best efforts to keep a record of Advances made by it and payments of principal with respect to this Note, and such record shall be presumptive evidence of the principal amount owing under this Note. The undersigned hereby promises to pay all costs and expenses of any holder hereof in collecting the undersigned's obligations hereunder or in enforcing any of holder's rights hereunder, including attorneys' fees and dis- bursements, whether or not an action is filed in connection therewith. The undersigned hereby waives presentment, demand for payment, dishonor, notice of dishonor, protest, notice of protest and any other notice or formality to the fullest extent permitted by applicable Laws. This Note shall be delivered to and accepted by the Bank, or by the Agent on its behalf, in the State of California, and shall be governed by, and construed and enforced in accordance with, the Laws thereof. THE VONS COMPANIES, INC., a Michigan corporation By: ____________________________________ Its: ___________________________________ By: ____________________________________ Its: ___________________________________ ADVANCES AND PAYMENTS OF PRINCIPAL (Reference Rate Loans) ______________________________________________________________________________
Amount of Unpaid Amount of Interest Principal Principal Notation Date Advance Period Paid Balance Made by ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________
ADVANCES AND PAYMENTS OF PRINCIPAL (CD Rate Loans) ______________________________________________________________________________
Amount of Unpaid Amount of Interest Principal Principal Notation Date Advance Period Paid Balance Made by ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________
ADVANCES AND PAYMENTS OF PRINCIPAL (Eurodollar Rate Loans) ______________________________________________________________________________
Amount of Unpaid Amount of Interest Principal Principal Notation Date Advance Period Paid Balance Made by ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________ ______________________________________________________________________________
[This page appears on The Vons Companies, Inc, letterhead] [EXHIBIT D] Terrence J. Wallock Senior Vice President Chief Legal and Security Officer and Secreatary December 8, 1993 Bank of America National Trust and Savings Association, as Agent 555 South Flower Street Eleventh Floor Los Angeles, CA 90071 Ladies and Gentlemen: I serve as General Counsel of The Vons Companies, Inc., a Michigan corporation ("Borrower") and have acted in such capacity in connection with the Term Loan Agreement ("Agreement") dated as of December 13, 1993, among Borrower and the Banks, and the Loan Documents. This opinion is rendered to you pursuant to Section 9.1(a)(5) of the Agreement. Capitalized terms used herein and not otherwise defined shall have the meanings given them in the Agreement. In rendering this opinion, I have reviewed, and relied upon, originals, or copies identified to my satisfaction as being true copies, of the following: 1. The Agreement; 2. The Loan Documents delivered at the Closing (including the Notes); 3. The Articles of Incorporation and Bylaws of Borrower, as amended to date, and the minutes of the actions of the Board of Directors of Borrower authorizing the transactions contemplated thereby; and 4. Each certificate by an officer of Borrower delivered on this date to the Agent or the Banks pursuant to the Agreement. In addition, I have discussed this Agreement, the Loan Documents and relevant matters with responsible officers of Borrower, and have reviewed such other documents, instruments and certificates and have made such examination as to matters of fact and law as I have deemed necessary or appropriate in order to render this opinion to you. In rendering this opinion, I have assumed: (a) That the Loan Documents have been duly executed and delivered by the parties thereto other than the Borrower; (b) That enforcement of the Loan Documents will be undertaken in good faith and Bank of America National Trust and Savings Association, as Agent December 8, 1993 Page 2 in a commercially reasonable manner; and (c) That, other than with respect to the Loan Documents, all signatures are genuine, all documents submitted to me as originals are authentic originals, and all documents submitted to us as copies conform to the originals. Based on the foregoing, and relying thereon, and subject to the limitations expressed below, I am of the opinion that, as of the Closing Date: A. Borrower has been duly incorporated and is a validly existing corporation in good standing under the laws of the State of Michigan, with full corporate power and authority to own and occupy its properties and conduct its businesses as presently conducted, and Borrower is registered or qualified to conduct business and is in good standing in each jurisdiction in which the conduct of its business or the ownership or leasing of its properties makes such qualification necessary (except where the failure to be so duly qualified and in good standing does not constitute a Material Adverse Effect). B. Borrower holds all franchises, licenses, permits and other governmental authorizations required for the conduct of its business, and such franchises, licenses, permits and other governmental authorizations are in full force and effect other than such franchises, licenses, permits and other governmental authorizations as to which the failure so to maintain or obtain would not constitute a Material Adverse Effect. C. All outstanding shares of capital stock of Borrower have been duly authorized and validly issued, are fully paid and nonassessable and are free of preemptive rights. D. To my best knowledge there is no legal or governmental proceeding pending or threatened or contemplated to which Borrower is a party or of which the business or property of Borrower is the subject which, singularly or in the aggregate, if determined adversely to Borrower, would constitute a Material Adverse Effect. E. Borrower is not (i) in violation of its charter or bylaws, or other equivalent instruments, (ii) to my best knowledge, in default in any respect in the performance of any obligation, agreement or condition contained in any loan, bond, debenture, note or any other evidence or indebtedness or any indenture, mortgage, deed of trust, or any other agreement or instrument, known to me, to which Borrower is a Party or by which it is bound, or to which any of the property or assets of Borrower is subject, which default would constitute a Material Adverse Effect. F. Borrower has full corporate power and authority to enter into and perform the obligations of Borrower under the Loan Documents. G. The execution, delivery, and performance by Borrower of the Loan Documents have been duly authorized by all necessary corporate action of Borrower, and do not and will not: Bank of America National Trust and Savings Association, as Agent December 8, 1993 Page 3 (i) require any consent or approval not heretofore obtained of any stockholder, partner, security holder or, to the best of my knowledge, creditor of Borrower; (ii) violate or conflict with any provision of Borrower's articles of incorporation or bylaws; (iii) result in or require the creation or imposition of any Lien or Right of Others upon or with respect to any property now owned or leased or hereafter acquired by Borrower, which creation or imposition would constitute a Material Adverse Effect; (iv) violate any Requirement of Law (including, without limitation, Regulation U of the Board of Governors of the Federal Reserve System) known to me presently in effect having applicability to Borrower; or (v) result in a breach of or constitute a default under, or cause or permit the acceleration of any obligation owed under, any indenture or loan agreement or credit agreement or any other Contractual Obligation known to me to which such party or any of its Property is bound or affected, which breach, default, or acceleration would constitute a Material Adverse Effect. H. No authorization, consent, approval, order, license or permit from, or filing, registration, or qualification with, or exemption of any of the foregoing from, any Governmental Agency is or will be required to authorize or permit the execution and delivery by Borrower of the Loan Documents except as has already been obtained or made. I. Each Loan Document has been duly authorized, executed and delivered by Borrower and constitutes a legal, valid and binding agreement of Borrower, enforceable against Borrower in accordance with its terms, except to the extent that (i) the enforceability thereof may be subject to Debtor Relief Laws now or hereafter in effect, relating to creditors' rights generally, (ii) the enforceability thereof may be subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and to the discretion of the court before which any proceeding may be brought, and (iii) all Loan Documents may be subject to or limited by the unenforceability under certain circumstances of provisions purporting to place venue for any litigation of any disputes or controversies within a court of a county or to waive the right to trial by jury. J. The names, form of legal entity and jurisdictions of incorporation of the Subsidiaries of Borrower set forth in Schedule 4.4 to the Agreement are as set forth therein; K. Borrower is not subject to regulation under the Public Utility Holding Company Act of 1935, as amended, or the Investment Company Act of 1940. L. Borrower has no Significant Subsidiaries. Bank of America National Trust and Savings Association, as Agent December 8, 1993 Page 4 This opinion is limited to the laws of the State of California, the Michigan Business Corporation Action, the General Corporation Law of the State of Delaware, and the federal laws of the United States, and I express no opinion and can assume no responsibility as to the applicability of the laws of any other jurisdiction. This opinion is rendered to you pursuant to Section 9.1(a)(5) of the Agreement, is intended solely for your benefit and that of the Banks, and may not be relied on without my prior written consent by any other person other than an assignee or successor in interest of any Bank or a person acquiring a participation from any Bank. Very truly yours, /s/ Terrence Joseph Wallock Terrence J. Wallock TJW:cb [EXHIBIT E] REQUEST FOR LOAN ---------------- 1. This Request for Loan is executed and delivered by Borrower to Bank of America National Trust and Savings Association, as the "Agent", pursuant to Section 3.1(c) of that certain Term Loan Agreement (the "Loan ------ Agreement") dated as of December 13, 1993, entered into by and among THE VONS COMPANIES, INC., a Michigan corporation, the Banks therein named and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Agent for itself and for the Banks. Terms defined in the Loan Agreement and not otherwise defined herein are used herein as defined in the Loan Agreement. 2. Borrower hereby requests that the Banks make a Loan for the account of Borrower (Account No. __________) pursuant to the Loan Agreement as follows: (a) Amount of Loan: $________________. (b) Date of Loan: _______________, 19___. (c) Type of Loan (check one box only): ____ /___/ Reference Rate Loan. ____ /___/ CD Rate Loan with ____-day CD Period. ____ /___/ Eurodollar Rate Loan with ____-month Eurodollar Period. 3. In connection with the Loan requested herein, Borrower hereby represents, warrants, and certifies to the Banks that: a. If the requested Loan is the initial Loan being made on the Closing Date, then each of the representations and warranties made by Borrower in Article 5 of the Loan Agreement is true and correct. --------- b. In the case of each other Loan, as of the date of the Loan requested herein, each of the representations and warranties made by Borrower in Sections 5.13 and 5.18 are true and correct in all material ---- ---- respects on and as of the date of this Loan as though made on and as of the date of this Loan, and there has not occurred an Event of Default that is continuing as of the date of this Loan. 4. This Request for Loan is executed on __________, 19__, by a Responsible Official of Borrower, on behalf of Borrower. The undersigned, in such capacity, hereby certifies each and every matter contained herein to be true and correct. BORROWER: THE VONS COMPANIES, INC., a Michigan corporation By ____________________________ Title_______________________ [EXHIBIT F] SUBSIDIARY GUARANTY ------------------- This SUBSIDIARY GUARANTY (this "Guaranty"), dated as of ________________, 199___, is made by ________________, a ________________ corporation (collectively with each other Significant Subsidiary which may hereafter execute an instrument of joinder with respect to this Subsidiary Guaranty "Guarantors"), in favor of the "Banks" that are parties to the Loan Agreement hereinafter referred to and in favor of BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a national banking association, in its capacity as Agent for itself and the Banks under such Loan Agreement (the "Agent," the Agent and the Banks at times referred to collectively herein as "Lender"), with reference to the following facts: RECITALS -------- A. Pursuant to the Loan Agreement of even date herewith entered into between Lender and THE VONS COMPANIES, INC., a Michigan corporation ("Borrower"), Lender is making certain credit facilities available to Borrower. B. As a condition to the availability of such credit facilities, Guarantors are required to enter into this Guaranty in their capacity as wholly-owned Subsidiaries of Borrower and to guaranty the Guarantied Obligations as hereinafter provided. C. Guarantors expect to realize direct and indirect benefits as the result of the availability of the aforementioned credit facilities, and as the result of the execution of this Guaranty. AGREEMENT --------- NOW, THEREFORE, in order to induce Lender to extend the aforementioned credit facilities, and for other good and valuable consideration, the receipt and adequacy of which hereby is acknowledged, Guarantors hereby represent, warrant, covenant, agree and guaranty as follows: 1. Definitions. "Loan Agreement" means that certain Term Loan ----------- -------------- Agreement dated as of December 13, 1993, between Lender and Borrower. This Guaranty is the Subsidiary Guaranty referred to in the Loan Agreement and is one of the Loan Documents. Terms defined in the Loan Agreement and not otherwise defined in this Guaranty shall have the meanings given those terms in the Loan Agreement when used herein and such definitions are incorporated herein as though set forth in full. In addition, as used herein, the following terms shall have the meanings respectively set forth after each: "Guarantied Obligations" means all obligations of Borrower ---------------------- under the Loan Documents, whether due or to become due, matured or unmatured, liquidated or unliquidated, or contingent or noncontingent, including --------- obligations of performance as well as obligations of payment, and including --------- interest that accrues after the commencement of any bankruptcy or insolvency proceeding by or against Borrower, Guarantor or any other Person. 2. Guaranty of Guarantied Obligations. For valuable ---------------------------------- consideration, Guarantors hereby irrevocably, unconditionally, jointly and severally guaranty and promise to pay and perform on demand the Guarantied Obligations and each and every one of them, including, without limitation, --------- all amendments, modifications, supplements, renewals or extensions of any of them, whether such amendments, modifications, supplements, renewals or extensions are evidenced by new or additional instruments, documents or agreements or change the rate of interest on any Guarantied Obligation or the security therefor, or otherwise. 3. Nature of Guaranty. This Guaranty is irrevocable and ------------------ continuing in nature and relates to any Guarantied Obligations now existing or hereafter arising. This Guaranty is a guaranty of prompt and punctual payment and performance and is not merely a guaranty of collection. 4. Relationship to Other Agreements. Nothing herein shall in -------------------------------- any way modify or limit the effect of terms or conditions set forth in any other document, instrument or agreement executed by any Guarantor or in connection with the Guarantied Obligations, but each and every term and condition hereof shall be in addition thereto. All provisions contained in the Loan Agreement or any other Loan Document that apply to Loan Documents generally are fully applicable to this Guaranty and are incorporated herein by this reference. 5. Subordination of Indebtedness of Borrower to a Guarantor -------------------------------------------------------- to the Guarantied Obligations. Each Guarantor agrees that: - ----------------------------- (a) Any indebtedness of Borrower now or hereafter owed to any Guarantor hereby is subordinated to the Guarantied Obligations. (b) If the Agent so requests, any such indebtedness of Borrower now or hereafter owed to any Guarantor shall be collected, enforced and received by such Guarantor as trustee for Lender and shall be paid over to the Agent in kind on account of the Guarantied Obligations, but without reducing or affecting in any manner the obligations of such Guarantor under the other provisions of this Guaranty. (c) Should such Guarantor fail to collect or enforce any such indebtedness of Borrower now or hereafter owed to such Guarantor and pay the proceeds thereof to the Agent, the Agent as such Guarantor's attorney-in-fact may do such acts and sign such documents in such Guarantor's name as the Agent considers necessary or desirable to effect such collection, enforcement and/or payment. 6. Statute of Limitations and Other Laws. Until the Guarantied ------------------------------------- Obligations shall have been paid and performed in full, all of the rights, privileges, powers and remedies granted to Lender hereunder shall continue to exist and may be exercised by Lender at any time and from time to time irrespective of the fact that any of the Guarantied Obligations may have become barred by any statute of limitations. Each Guarantor expressly waives the benefit of any and all statutes of limitation, and any and all laws providing for exemption of property from execution or for valuation and appraisal upon foreclosure, to the maximum extent permitted by applicable law. 7. Waivers and Consents. Each Guarantor acknowledges that the -------------------- obligations undertaken herein involve the guaranty of obligations of Persons other than such Guarantor and, in full recognition of that fact, consents and agrees that Lender may, at any time and from time to time, without notice or demand, and without affecting the enforceability or continuing effectiveness hereof: (a) supplement, modify, amend, extend, renew, accelerate or otherwise change the time for payment or the terms of the Guarantied Obligations or any part thereof, including any increase or decrease of the rate(s) of interest --------- thereon; (b) supplement, modify, amend or waive, or enter into or give any agreement, approval or consent with respect to, the Guarantied Obligations or any part thereof, or any of the Loan Documents or any additional security or guaranties, or any condition, covenant, default, remedy, right, representation or term thereof or thereunder; (c) accept new or additional instruments, documents or agreements in exchange for or relative to any of the Loan Documents or the Guarantied Obligations or any part thereof; (d) accept partial payments on the Guarantied Obligations; (e) receive and hold additional security or guaranties for the Guarantied Obligations or any part thereof; (f) release, reconvey, terminate, waive, abandon, fail to perfect, subordinate, exchange, substitute, transfer and/or enforce any security or guaranties, and apply any security and direct the order or manner of sale thereof as Lender in its sole and absolute discretion may determine; (g) release any Person from any personal liability with respect to the Guarantied Obligations or any part thereof; (h) settle, release on terms satisfactory to Lender or by operation of applicable laws or otherwise liquidate or enforce any Guarantied Obligations and any security or guaranty therefor in any manner, consent to the transfer of any security and bid and purchase at any sale; and/or (i) consent to the merger, change or any other restructuring or termination of the corporate existence of Borrower, any Guarantor or any other Person, and correspondingly restructure the Guarantied Obligations, and any such merger, change, restructuring or termination shall not affect the liability of any Guarantor or the continuing effectiveness hereof, or the enforceability hereof with respect to all or any part of the Guarantied Obligations. Upon the occurrence and during the continuance of any Event of Default, Lender may enforce this Guaranty independently of any other remedy or security Lender at any time may have or hold in connection with the Guarantied Obligations, and it shall not be necessary for Lender to marshal assets in favor of Borrower, any Guarantor or any other Person or to proceed upon or against and/or exhaust any security or remedy before proceeding to enforce this Guaranty. Each Guarantor expressly waives any right to require Lender to marshal assets in favor of Borrower, any Guarantor or any other Person or to proceed against Borrower, any Guarantor or any collateral provided by any Person, and agrees that Lender may proceed against Borrower, any Guarantor and/or any collateral in such order as it shall determine in its sole and absolute discretion. Lender may file a separate action or actions against Borrower and/or any Guarantor without respect to whether action is brought or prosecuted with respect to any security or against any other Person, or whether any-other Person is joined in any such action or actions. Each Guarantor agrees that Lender and Borrower and any affiliate of Borrower may deal with each other in connection with the Guarantied Obligations or otherwise, or alter any contracts or agreements now or hereafter existing between any of them, in any manner whatsoever, all without in any way altering or affecting the security of this Guaranty. Lender's rights hereunder shall be reinstated and revived, and the enforceability of this Guaranty shall continue, with respect to any amount at any time paid on account of the Guarantied Obligations which thereafter shall be required to be restored or returned by Lender upon the bankruptcy, insolvency or reorganization of Borrower or any other Person, or otherwise, all as though such amount had not been paid. The rights of Lender created or granted herein and the enforceability of this Guaranty with respect to each Guarantor at all times shall remain effective to guaranty the full amount of all the Guarantied Obligations even though the Guarantied Obligations, or any part thereof, or any security or guaranty therefor, may be or hereafter may become invalid or otherwise unenforceable as against Borrower or any other guarantor or surety and whether or not Borrower shall have any personal liability with respect thereto. Each Guarantor expressly waives any and all defenses now or hereafter arising or asserted by reason of (a) any disability or other defense of Borrower with respect to the Guarantied Obligations, (b) the unenforceability or invalidity of any security or guaranty for the Guarantied Obligations or the lack of perfection or continuing perfection or failure of priority of any security for the Guarantied Obligations, (c) the cessation for any cause whatsoever of the liability of Borrower (other than by reason of the full payment and performance of all Guarantied Obligations), (d) any failure of Lender to marshal assets in favor of Borrower or any other Person, (e) any failure of Lender to give notice of sale or other disposition of any collateral to Borrower, any Guarantor or any other Person or any defect in any notice that may be given in connection with any sale or disposition of any collateral, (f) any failure of Lender to comply with applicable laws in connection with the sale or other disposition of any collateral or other security for any Guarantied Obligation, including, without limitation, any --------- failure of Lender to conduct a commercially reasonable sale or other disposition of any collateral or other security for any Guarantied Obligation, (g) any act or omission of Lender or others that directly or indirectly results in or aids the discharge or release of Borrower or the Guarantied Obligations or any security or guaranty therefor by operation of law or otherwise, (h) any law which provides that the obligation of a surety or guarantor must neither be larger in amount nor in other respects more burdensome than that of the principal or which reduces a surety's or guarantor's obligation in proportion to the principal obligation, (i) any failure of Lender to file or enforce a claim in any bankruptcy or other proceeding with respect to any Person, (j) the election by Lender, in any bankruptcy proceeding of any Person, of the application or non-application of Section 1111(b)(2) of the United States Bankruptcy Code, (k) any extension of credit or the grant of any lien under Section 364 of the United States Bankruptcy Code, (l) any use of cash collateral under Section 363 of the United States Bankruptcy Code, (m) any agreement or stipulation with respect to the provision of adequate protection in any bankruptcy proceeding of any Person, (n) the avoidance of any lien in favor of Lender for any reason, (o) any bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, liquidation or dissolution proceeding commenced by or against any Person, including any discharge of, or bar or stay against collecting, all or --------- any of the Guarantied Obligations (or any interest thereon) in or as a result of any such proceeding, or (p) any action taken by Lender that is authorized by this Section 7 or any other provision of any Loan Document. Each Guarantor - expressly waives all setoffs and counterclaims and all presentments, demands for payment or performance, notices of nonpayment or nonperformance, protests, notices of protest, notices of dishonor and all other notices or demands of any kind or nature whatsoever with respect to the Guarantied Obligations, and all notices of acceptance of this Guaranty or of the existence, creation or incurring of new or additional Guarantied Obligations. 8. Condition of Borrower. Each Guarantor represents and --------------------- warrants to Lender that it has established adequate means of obtaining financial and other information pertaining to the businesses, operations and condition (financial and otherwise) of Borrower and its properties on a continuing basis, and that such Guarantor now is and hereafter will be completely familiar with the businesses, operations and condition (financial and otherwise) of Borrower and its properties. Each Guarantor hereby expressly waives and relinquishes any duty on the part of Lender (should any such duty exist) to disclose to any Guarantor any matter, fact or thing related to the businesses, operations or condition (financial or otherwise) of Borrower or its properties, whether now known or hereafter known by Lender during the life of this Guaranty. With respect to any of the Guarantied Obligations, Lender need not inquire into the powers of Borrower or the officers or employees acting or purporting to act on its behalf, and all Guarantied Obligations made or created in good faith reliance upon the professed exercise of such powers shall be guarantied hereby. 9. Liens on Real Property. In the event that all or any part ---------------------- of the Guarantied Obligations at any time are secured by any one or more deeds of trust or mortgages or other instruments creating or granting liens on any interests in real property, each Guarantor authorizes Lender, upon the occurrence of and during the continuance of any Event of Default, at its sole option, without notice or demand and without affecting any Guarantied Obligations of any Guarantor, the enforceability of this Guaranty, or the validity or enforceability of any liens of Lender on any collateral, to foreclose any or all of such deeds of trust or mortgages or other instruments by judicial or nonjudicial sale. Each Guarantor expressly waives any defenses to the enforcement of this Guaranty or any rights of Lender created or granted hereby or to the recovery by Lender against Borrower, any Guarantor or any other Person liable therefor of any deficiency after a judicial or nonjudicial foreclosure or sale, even though such a foreclosure or sale may impair the subrogation rights of any Guarantor or may preclude any Guarantor from obtaining reimbursement or contribution from Borrower. Each Guarantor expressly waives any defenses or benefits that may be derived from California Code of Civil Procedure Section 580a, 580b, 580d or 726, or comparable provisions of the laws of any other jurisdiction, and all other suretyship defenses it otherwise might or would have under California law or other applicable law. Each Guarantor expressly waives any right to receive notice of any judicial or nonjudicial foreclosure or sale of any real property or interest therein subject to any such deeds of trust or mortgages or other instruments and any Guarantor's or any other Person's failure to receive any such notice shall not impair or affect Guarantor's Obligations or the enforceability of this Guaranty or any rights of Lender created or granted hereby. 10. Waiver of Rights of Subrogation. Notwithstanding anything ------------------------------- to the contrary elsewhere contained herein, each Guarantor hereby expressly waives with respect to Borrower and its successors and assigns and any other Person, any and all rights at Law or in equity to subrogation, reimbursement, exoneration, contribution, setoff, share in any collateral or any other rights that could accrue to a surety against a principal, to a guarantor against a maker or obligor, to an accommodation party against the party accommodated, or to a holder or transferee against a maker, and which that Guarantor may have or hereafter acquire against Borrower or any other Person in connection with or as a result of that Guarantor's execution, delivery and\or performance of this Guaranty. In furtherance of the foregoing, each Guarantor agrees that any payment by that Guarantor to Lender pursuant to this Guaranty shall be deemed a contribution to the capital of Borrower and no such payment shall make that Guarantor a creditor of Borrower. Each Guarantor hereby acknowledges and agrees that the foregoing waivers are intended to benefit Borrower and Lender and shall not limit or otherwise affect any Guarantor's liability hereunder or the enforceability hereof. 11. Understandings With Respect to Waivers and Consents. --------------------------------------------------- Each Guarantor warrants and agrees that each of the waivers and consents set forth herein are made after consultation with legal counsel and with full knowledge of their significance and consequences, with the understanding that events giving rise to any defense or right waived may diminish, destroy or otherwise adversely affect rights which such Guarantor otherwise may have against Borrower, Lender or others, or against any collateral, and that, under the circumstances, the waivers and consents herein given are reasonable and not contrary to public policy or law. If any of the waivers or consents herein are determined to be unenforceable under applicable law, such waivers and consents shall be effective to the maximum extent permitted by law. 12. Costs and Expenses. Each Guarantor agrees to pay to ------------------ Lender all costs and expenses (including, without limitation, reasonable --------- attorneys' fees and disbursements) incurred by Lender in the enforcement or attempted enforcement of this Guaranty, whether or not an action is filed in connection therewith, and in connection with any waiver or amendment of any term or provision hereof. All advances, charges, costs and expenses, including reasonable attorneys' fees and disbursements, incurred or paid by - --------- Lender in exercising any right, privilege, power or remedy conferred by this Guaranty, or in the enforcement or attempted enforcement thereof, shall be subject hereto and shall become a part of the Guarantied Obligations and shall be paid to Lender by each Guarantor, immediately upon demand, together with interest thereon at the rate(s) provided for under the Loan Agreement. 13. Construction of This Guaranty. This Guaranty is intended ----------------------------- to give rise to absolute and unconditional obligations on the part of each -------------------------- Guarantor; hence, in any construction hereof, notwithstanding any provision ----------------------------- of any Loan Document to the contrary, this Guaranty shall be construed - ------------------------------------ strictly in favor of Lender in order to accomplish its stated purpose. 14. Liability. The liability of each Guarantor hereunder is --------- independent of any other guaranties at any time in effect with respect to all or any part of the Guarantied Obligations, and each Guarantor's liability hereunder may be enforced regardless of the existence of any such guaranties. Any termination by or release of any guarantor in whole or in part (whether it be another Guarantor under this instrument or not) shall not affect the continuing liability of any Guarantor hereunder, and no notice of any such termination or release shall be required. The execution hereof by each Guarantor is not founded upon an expectation or understanding that there will be any other guarantor of the Guarantied Obligations. 15. Termination of Guaranty. The liability of each Guarantor ----------------------- under this Guaranty shall terminate (i) concurrently with the sale or other disposition of that Guarantor to a Person which is not an Affiliate of Borrower pursuant to a transaction which does not violate Section 6.2 of the Syndicated Loan Agreement (as incorporated by reference into the Loan Agreement pursuant to Article 7 thereof) or (ii) concurrently with the delivery to the Agent of a Certificate of a Senior Officer of Borrower to the effect that that Guarantor is no longer a Significant Subsidiary by reason of a diminution in the value of the assets of that Guarantor. IN WITNESS WHEREOF, each Guarantor has executed this Guaranty by its duly authorized officers as of the date first written above. ________________________________ a ________________ corporation By:______________________________ Title:___________________________ By:______________________________ Title:__________________________ EX-4 5 EXHIBIT 10.12 Exhibit 10.12 AMENDMENT 1994-1 THE VONS COMPANIES, INC. ------------------------ PENSION PLAN ------------ WHEREAS, The Vons Companies, Inc. (the "Company") maintains The Vons Companies, Inc. Pension Plan (the "Plan"), WHEREAS, Section 8.1 of the Plan provides that the Plan may be amended by resolution of the Board of Directors of the Company; WHEREAS, by resolution date December 1, 1993 the Board of Directors has authorized officers of the Company to execute an amendment to the Plan to accomplish the foregoing changes in the definition of "Compensation" under the Plan. NOW, THEREFORE, BE IT RESOLVED, that The Vons Companies, Inc. Pension Plan is amended effective April 15, 1994 as follows: Section 1.2 of the Plan the definition of "Compensation" shall be changed as follows: "Annual Compensation" shall mean the cash income paid to a Participant during a calendar year by the Company or an Affiliated Company for services rendered and/or labor performed by him as an Employee. Such cash income shall include wages, salary, overtime, short and long-term incentive plan payments and commission payments plus any tax deferred savings contributed to a plan qualifying under Section 401(k) of the Code as salary reduction contributions or to a cafeteria plan under Section 125 of the Code. However, Annual Compensation shall not include any unpaid deferred compensation payments, reimbursable moving expenses, stock options, Company contributions under this Plan or any group insurance or other benefit plan, such as any other retirement plan or capital accumulation plan maintained by the Company for the benefit of such Participant, also any imputed income resulting from a Company- provided non-cash benefit or perquisite or any other distributions which receive special tax benefits. Notwithstanding the foregoing, for Plan Years beginning on or after January 1, 1989, the maximum amount of an Employee's Compensation which shall be taken into account under the Plan for any Plan Year shall be $200,000 adjusted at the same time and in the same manner as under Section 415(d) of the Code. For purposes of the $200,000 limitation referred to above, the Compensation of any Participant who is either a 5% owner (as defined in Section 416(i)(1) of the Code), or one of the ten most highly paid highly compensated employees as defined in Section 414(q) of the Code during the Plan Year ("First Participant") shall be aggregated with the Compensation of any Participant who has not attained age 19 and is a lineal descendant of the First Participant and any Participant who is the spouse of the First Participant. In any case in which such aggregation would produce Compensation in excess of the $200,000 limitation, the amount of the First Participant's Compensation that is considered under the Plan shall be reduced until the $200,000 limitation is met. AMENDMENT 1994-1 THE VONS COMPANIES, INC. PENSION PLAN Pursuant to the Authority granted in Section 8.1 of The Vons Companies, Inc. Pension Plan (the "Plan), The Vons Companies, Inc. hereby amends the Plan, as set forth in the accompanying Amendment 1994-1. IN WITNESS WHEREOF, a duly authorized officer of the Company hereby adopts this Amendment 1994-1. THE VONS COMPANIES, INC. Dated: March 23, 1994 By:/s/ Terrence Joseph Wallock ------------------- ------------------------------------- Terrence J. Wallock Its: Executive V.P., General Counsel & Secretary EX-5 6 EXHIBIT 10.13 Exhibit 10.13 TERMINATION AGREEMENT --------------------- This Termination Agreement (this "Termination Agreement") is dated as of December 15, 1993 and is by and between Warehouse Investment Partners, a -- California general partnership ("WIP"), its partners (the "WIP Partners") and The Vons Companies, Inc., a Michigan corporation ("Vons Michigan"). Reference is made to that certain Real Estate Purchase Agreement and Escrow Instructions dated as of December 18, 1986 by and between WIP and The Vons Companies, Inc., a Delaware corporation ("Vons Delaware"), as such agreement and instructions may have been amended or modified, either in writing or orally (the "Agreement"). Vons Michigan (collectively, with Vons Delaware, "Vons") has succeeded to Vons Delaware's rights and obligations under the Agreement. Pursuant to the Agreement, among other things, Vons Delaware was obligated (subject to certain conditions to sell WIP Vons Delaware's leasehold interest (the "Interests") in (a) the Totowa Property under the Totowa Lease (as those terms are defined in the Agreement) and (b) the Trenton Property under the Trenton Lease (as those terms are defined in the Agreement). In consideration of the payment to WIP of $2,250,000, as herein provided, the parties hereto wish (a) to terminate all further obligations and liabilities of Vons under the Agreement including without limitation any obligation of Vons to transfer to WIP the Interests, (b) to terminate the Agreement and (c) to release Vons from any claims or liabilities which WIP or any of the WIP Partners may possess against Vons with respect to the Agreement. Now therefore, in consideration of the foregoing and the mutual promises and covenants contained herein, the parties hereto agree as follows: 1. Concurrently herewith (a) Vons is delivering to WIP the amount of $2,250,000, receipt of which is hereby acknowledged by WIP, and WIP and the WIP Partners are delivering to Vons a release executed by WIP and the WIP Partners in the form of Exhibit "A" hereto, which Exhibit is hereby incorporated herein by this reference. 2. The Agreement is hereby terminated, and neither party will have any further obligation to the other thereunder of any nature whatsoever. 3. WIP and Vons hereby cancel and terminate any escrows with respect to the Totowa Lease and/or the Trenton Lease, including without limitation Escrow No. 1456011-BH at First American Title Insurance Company in Santa Ana, California and any escrow in New Jersey at any affiliate of First American Title Insurance Company. This Termination Agreement shall serve as notice and instructions to all such escrow companies to terminate such escrows and to return to the party depositing the same any document or other property or sums theretofore deposited by such party in such escrows. Any fees payable to such escrow companies shall be the responsibility of Vons. 4. Wip and the WIP Partners, on the one hand, and Vons, on the other hand, hereby represent and warrant to the other as follows: (a) The warranting party has all requisite power and authority to enter into and carry out its obligations under this Termination Agreement (and, in the case of WIP and the WIP Partners, Exhibit "A" hereto). The person executing and delivering this Termination Agreement on behalf of the warranting party (and, in the case of WIP and the WIP Partners, Exhibit "A" hereto) has been duly authorized to so act by all requisite action on the part of such party. (b) The execution, delivery and performance of this Termination Agreement (and, in the case of WIP and the WIP Partners, Exhibit "A" hereto) by the person executing the same on behalf of the warranting party have been duly and validly authorized and this Termination Agreement (and, in the case of WIP and the WIP Partners, Exhibit "A" hereto) constitutes a legal, valid and binding obligation of the representing party, enforceable in accordance with its terms. (c) The warranting party has not assigned, sold or otherwise transferred or disposed of any of its rights under the Agreement, including without limitation in the case of WIP any of its rights to purchase the Interests. 5. WIP and the WIP Partners hereby represent and warrant to Vons that the WIP Partners who have executed this Agreement and Exhibit "A" hereto are all of the partners, general or otherwise, of WIP. 6. This Termination Agreement (and Exhibit "A" hereto) shall be deemed to be the complete and entire agreement between the parties hereto with respect to the subject matter hereof and supersede any and all prior negotiations, correspondence, understandings or other agreements or statements between the parties and/or their representatives. 7. This Termination Agreement shall be governed by and construed in accordance with the laws of the State of California. 8. Should an action be instituted by any of the parties hereto in any court of law or equity pertaining to the enforcement of any of the provisions of this Termination Agreement, the prevailing party shall be entitled to recover, in addition to any judgment or decree rendered therein, all court costs and reasonable attorneys' fees and expenses. 9. This Termination Agreement shall not be modified except by an instrument in writing signed by the parties hereto. 10. From time to time, at the request of the requesting party, and without further consideration and without increasing any party's obligations hereunder, each party hereto agrees to and shall execute and deliver such further instruments and take such other action as the requesting party may reasonably request in order to effectuate the transactions set forth herein, including without limitation, the execution by WIP has no interest in the Totowa Lease, the Totowa Property, the Trenton Lease na/or the Trenton Property. In witness whereof, the parties have executed this Termination Agreement as of the date first written above. WAREHOUSE INVESTORS PARTNERS, a California general partnership By /s/ F. Duda ----------------------------------------- General Partner THE WIP PARTNERS FLD Interests By /s/ F. Duda ----------------------------------------- Fritz L. Duda, Trustee /s/ Roger E. Stangeland ------------------------------------------- Roger E. Stangeland, as joint tenant with Lilah M. Stangeland /s/ Lilah M. Stangeland ------------------------------------------- Lilah M. Stangeland, as joint tenant with Roger E. Stangeland /s/ William Y. Tauscher ------------------------------------------- William Y. Tauscher /s/ Donald J. Howard ------------------------------------------- Donald J. Howard, as joint tenant with Corinne Howard /s/ Corinne Howard ------------------------------------------- Corinne Howard, as joint tenant with Donald J. Howard Fountiene K. Prince Trust By /s/ F. Duda ----------------------------------------- Fritz L. Duda, Trustee Fritz L. Duda Trust By /s/ F. Duda ----------------------------------------- Fritz L. Duda, Trustee /s/ Harold Beral ------------------------------------------- Harold Beral PTJ Capital Corporation, a Texas corporation By /s/ Peter T. Joseph ----------------------------------------- THE VONS COMPANIES, INC., a Michigan corporation By /s/ Terrence Joseph Wallock ----------------------------------------- EXHIBIT "A" GENERAL RELEASE --------------- This General Release (this "Release") is given as of this 15th day of ---- December, 1993, by Warehouse Investment Partners, a California general partnership, for itself and on behalf of all of its present and former partners and present and former affiliated, subsidiary and/or parent companies, or corporations, and all of their present and former partners, officers, directors, agents, employees, representatives and shareholders and by the partners of Warehouse Investment Partners executing this Release (collectively referred to as "WIP") in favor of The Vons Companies, Inc., a Michigan corporation, for itself and on behalf of all of its present and former affiliated, subsidiary and/or parent companies or corporations, and all of their present and former officers, directors, agents, employees, representatives and shareholders. Reference is made to that certain Termination Agreement, dated as of the date hereof, by and between Warehouse Investment Partners, the Warehouse Investment Partners executing this Release and The Von Companies, Inc. (the "Termination Agreement), to which this Release is annexed as Exhibit "A" thereto. For good and valuable consideration, receipt of which is hereby acknowledged, including without limitation the consideration referred to in the Termination Agreement, and to induce Vons to enter into the Termination Agreement, WIP and the WIP Partners (as that term is defined in the Termination AGreement) hereby agree as follows: 1. WIP and each of the WIP Partners hereby releases and forever discharges Vons and each and every pat and present parent, subsidiary, affiliated, stockholder, officer, director, agent, servant, employee and representative of Vons from any, every, and all claims, causes of action, suits, debts, liens, contracts, obligation, agreements, promises, liabilities, demands, losses, costs or expenses of any kind, character or nature whatsoever known or unknown, fixed or contingent, which WIP or any of the WIP Partners has, may now have, or may hereafter have against said persons, or nay of them, by reason of any matter cause, or thing whatsoever from the beginning of time to the date of this Release, arising out of or based upon any activity or omission whatsoever by said persons, or any of them, in connection with or related to the Agreement (as that term is defined in the Termination Agreement). 2. WIP and the WIP Partners acknowledge that they have been advised by legal counsel with respect to its rights and obligations under this Release and that they are familiar with the provisions of California Civil Code Section 1542, which reads as follows: A general release does not extent to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him might have materially affected his settlement with the debtor. WIP and each of the WIP Partners hereby acknowledge that it may have sustained damages, expenses, and losses which are presently unknown or not suspected and that such damages, expenses, and losses, if any, may give rise to additional claims for damages, expenses and losses in the future which are not now anticipated by it. Nevertheless, WIP and each of the WIP Partners hereby acknowledges that this Release has been negotiated and agreed upon in light of this realization and, being fully aware of the situation, hereby expressly waives any and all rights that it may have under California Civil Code Section 1542, as well as under any state or federal statute or common law principle of similar effect. 3. WIP and each of the WIP Partners hereby represents and warrants that there has been no assignment, sale, or other transfer or disposition of any interest in any of the claims hereinabove released and discharged. 4. WIP and each of the WIP Partners hereby understands that if any fact with respect to any matter covered by this Release is found to be true, it expressly accepts and assumes the risk of such possible differences in facts and agrees that this Release shall be, and remain, in effect notwithstanding such differences in fact. 5. This Release shall (a) bind and be enforceable against any and all successors an assigns of WIP and the WIP Partners and (b) inure to the benefit of, and be enforceable by, any and all successors and assigns of Vons. 6. This Release shall be construed and enforced pursuant to the laws of the State of California. 7. This Release (together with the Termination Agreement) constitutes the entire agreement between WIP, the WIP Partners and Vons with respect to the Agreement, and it is expressly understood and agreed that this Release may not be altered, amended, modified, or otherwise changed in any respect or particular whatsoever except by a writing expressly referring to this Release and duly executed by an authorized representative of WIP, the WIP Partners and Vons. WAREHOUSE INVESTORS PARTNERS, a California general partnership By /s/ F. Duda ----------------------------------------- THE WIP PARTNERS FLD Interests By /s/ F. Duda ----------------------------------------- Fritz L. Duda, Trustee /s/ Roger E. Stangeland ------------------------------------------- Roger E. Stangeland, as joint tenant with Lilah M. Stangeland /s/ Lilah M. Stangeland ------------------------------------------- Lilah M. Stangeland, as joint tenant with Roger E. Stangeland /s/ William Y. Tauscher ------------------------------------------- William Y. Tauscher /s/ Donald J. Howard ------------------------------------------- Donald J. Howard, as joint tenant with Corinne Howard /s/ Corinne Howard ------------------------------------------- Corinne Howard, as joint tenant with Donald J. Howard Fountiene K. Prince Trust By /s/ F. Duda ----------------------------------------- Fritz L. Duda, Trustee Fritz L. Duda Trust By /s/ F. Duda ----------------------------------------- Fritz L. Duda, Trustee /s/ Harold Beral ------------------------------------------- Harold Beral PTJ Capital Corporation, a Texas corporation By /s/ Peter T. Joseph ----------------------------------------- EX-6 7 EXHIBIT 13 Exhibit 13 The Vons Companies, Inc. and Subsidiaries - ----------------------------------------- Five-Year Selected Financial Data - ----------------------------------------- The following five-year selected financial data should be read in conjunction with the Consolidated Financial Statements. The results of operations acquired from Williams Bros. are included from January 28, 1992. During 1992, the Company changed its method of accounting for income taxes to comply with the provisions of Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes." The change in accounting method has been applied retroactively to June 28, 1987 by restating prior years' consolidated financial statements. During 1992, the Company implemented the provisions of Statement of Financial Accounting Standards No. 106 "Employers' Accounting For Postretirement Benefits Other Than Pensions" effective January 3, 1993.
As of and As of and for the 52 for the 53 As of and for the 52 Weeks Ended (in millions of Weeks Ended Weeks Ended ---------------------------------------- dollars except January 2, January 3, December 29, December 30, December 31, share data) 1994 1993 1991 1990 1989 ------------ ----------- ------------ ------------ ------------ Summary of Operations: Sales $ 5,074.5 $ 5,595.5 $ 5,350.2 $ 5,333.9 $ 5,220.7 Operating income 135.8 219.1 197.1 181.0 72.9 Interest expense, net 66.0 71.5 86.4 97.6 99.6 Income (loss) before income tax provision 69.8 147.6 110.7 83.4 (26.7) Income (loss) before extraordinary item and cumulative effect of change in accounting for retiree medical benefits 33.0 82.1 66.4 42.6 (7.0) Income (loss) before cumulative effect of change in accounting for retiree medical benefits 31.6 69.3 60.1 42.6 (7.0) Net income (loss) 31.6 53.8 60.1 42.6 (7.0) Income (loss) applicable to common shareholders 31.6 53.8 60.1 42.6 (7.0) Income (loss) per common share before extraordinary item and cumulative effect of change in accounting for retiree medical benefits .76 1.89 1.60 1.10 (.18) Income (loss) per common share before cumulative effect of change in accounting for retiree medical benefits .73 1.60 1.45 1.10 (.18) Net income (loss) per common share .73 1.24 1.45 1.10 (.18) Dividends paid on common stock - - - - - Financial Position: Working capital (deficit) (69.3) (74.9) (64.2) (91.4) (68.2) Total assets 2,249.5 2,066.0 1,863.2 1,799.5 1,746.4 Long-term debt: Capital lease obligations 62.7 56.4 42.3 46.1 49.8 Senior debt 497.2 389.2 272.2 290.6 364.0 Subordinated debt, net 322.1 342.5 376.8 437.9 425.0 Common shareholders' equity 524.9 493.2 437.7 255.7 212.6 Shareholders' equity per common share 12.11 11.38 10.12 6.60 5.49 Other Data: Weighted average common shares during year, including common share equivalents 43,501,000 43,512,000 41,583,000 38,819,000 38,723,000 Outstanding common shares at year end 43,342,000 43,335,000 43,246,000 38,748,000 38,725,000
The Vons Companies, Inc. and Subsidiaries - ----------------------------------------- Management's Discussion and Analysis of Financial Condition and Results of Operations - ----------------------------------------- Results of Operations During 1992, the Company changed its method of accounting for income taxes to comply with the provisions of Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes." The change in accounting method has been applied retroactively to June 28, 1987 by restating prior years' consolidated financial statements. During 1992, the Company implemented the provisions of Statement of Financial Accounting Standards No. 106 "Employers' Accounting for Postretirement Benefits Other Than Pensions" effective January 3, 1993. The following table sets forth the consolidated statements of operations data (in millions of dollars and as a percentage of sales except share data):
Fifty-Two Weeks Fifty-Three Weeks Fifty-Two Weeks Ended Ended Ended January 2, 1994 January 3, 1993 December 29, 1991 ----------------- ----------------- ----------------- Sales $5,074.5 100.0% $5,595.5 100.0% $5,350.2 100.0% Costs and expenses: Cost of sales, buying and occupancy 3,801.4 74.9 4,200.3 75.1 4,059.4 75.9 Selling and administrative expenses 1,065.4 21.0 1,161.2 20.8 1,079.4 20.2 Amortization of excess cost over net assets acquired 15.0 .3 14.9 .2 14.3 .2 Restructuring charge 56.9 1.1 - - - - Operating income 135.8 2.7 219.1 3.9 197.1 3.7 Interest expense, net 66.0 1.3 71.5 1.3 86.4 1.6 Income before income tax provision 69.8 1.4 147.6 2.6 110.7 2.1 Income tax provision 36.8 .7 65.5 1.1 44.3 .9 Income before extraordinary item and cumulative effect of change in accounting for retiree medical benefits 33.0 .7 82.1 1.5 66.4 1.2 Extraordinary item (1.4) (.1) (12.8) (.2) (6.3) (.1) Cumulative effect of change in accounting for retiree medical benefits - - (15.5) (.3) - - Net income 31.6 .6 53.8 1.0 60.1 1.1 Income per common share: Income before extraordinary item and cumulative effect of change in accounting for retiree medical benefits .76 1.89 1.60 Extraordinary item (.03) (.29) (.15) Cumulative effect of change in accounting for retiree medical benefits - (.36) - Net income .73 1.24 1.45
Comparison of Fifty-Two Weeks Ended January 2, 1994 with Fifty- Three Weeks Ended January 3, 1993 Sales Sales for 1993 were $5,074.5 million, a decrease of $521.0 million, or 9.3%, from 1992. Sales in 1992 reflected an additional week. On a comparable 52-week basis, same store sales decreased 9.0% from 1992 sales. Same store sales have been adversely impacted by the continuing weak overall economic environment in Southern California, ongoing competitive new store and remodel activity, pricing and promotional changes by certain competitors and adverse publicity associated with the Foodmaker food poisoning epidemic and related events. In 1993, the Company opened 12 new stores, closed 12 stores and completed 59 store remodel projects. Costs and Expenses Costs and expenses for 1993 were $4,938.7 million, a decrease of $437.7 million, or 8.1%, from 1992. Cost of sales, buying and occupancy expenses as a percentage of sales declined by 0.2 percentage points to 74.9% in 1993. Cost of sales, buying and occupancy expenses benefited from the Company's favorable purchasing opportunities, the pass through of market-wide cost increases in the form of higher prices, and other improvements in margins where allowed by competitive conditions. In addition, this improvement reflected the benefits of the Company's ongoing remodel and new store programs, which incorporate a larger number of higher margin departments in affected stores, as well as the benefits of capital spending for other merchandising projects designed to enhance gross margin. This improvement was offset by increased occupancy costs, primarily higher depreciation expense related to the capital expenditure program. Selling and administrative expenses as a percentage of sales increased by 0.2 percentage points to 21.0% in 1993. This increase was due primarily to market-wide negotiated union wage increases and higher blended wage rates and costs associated with a soft sales environment, offset by increased sales per labor hour. In response to the weak economic environment in the regions it serves, and other factors having a negative impact on sales, the Company commenced a cost containment and strategic restructuring program. The $56.9 million, or $.77 per share, restructuring charge recorded in the third quarter of 1993 primarily reflects expenses relating to the accelerated closure of underperforming facilities, including approximately 11 stores, and a reduction in administrative staff. In addition, the Company has reorganized its store district operations in 1993 to be leaner and more efficient and is pursuing other potentially significant initiatives designed to increase efficiency and lower its cost structure over time. In total, approximately 300 employees will have been impacted. This program is expected to produce significant expense reductions. As the expense savings are realized, the Company intends to reinvest them in the business in the form of improved product pricing and promotions and better customer service. This is a long-term plan intended to lower the Company's cost structure, which ultimately will improve the Company's ability to achieve strong, sustainable earnings growth over the long run. Operating Income Operating income was $135.8 million, a decrease of $83.3 million, or 38.0%, from 1992. Operating margin decreased to 2.7% in 1993 from 3.9% in 1992, primarily due to the restructuring charge and decreased sales. Operating income before depreciation and amortization of property, amortization of goodwill and other assets, LIFO charge and restructuring charge ("FIFO EBITDA") was $305.8 million, or 6.0% of sales, in 1993 compared with $321.1 million, or 5.7% of sales, in 1992. Interest Expense Net interest expense for 1993 was $66.0 million, a decrease of $5.5 million, or 7.7%, from 1992. In spite of higher average revolving debt borrowings, interest expense decreased due to lower weighted average interest cost on revolving debt and repurchases of higher interest cost subordinated debt. The ratio of FIFO EBITDA to total interest expense increased to 4.6 times in 1993 versus 4.5 times in 1992. Income Tax Provision The income tax provision in 1993 was $36.8 million, or a 52.7% effective tax rate. The income tax provision in 1992 was $65.5 million, or a 44.4% effective tax rate. The 1993 increase in the effective tax rate was due to a decrease in income before income tax provision which was not offset by a comparable decrease in amortization of excess cost over net assets acquired, the majority of which is not deductible for tax purposes. The 1993 effective tax rate was also impacted by an increase in the Federal statutory tax rate from 34% to 35% and a $2.0 million deferred tax provision which increased the prior year deferred income tax balance to the new Federal statutory tax rate. Income Income before extraordinary item and cumulative effect of change in accounting for 1993 was $33.0 million, a decrease of $49.1 million, or 59.8%, from 1992. Income before extraordinary item and cumulative effect of change in accounting in 1993 was $.76 per share compared with $1.89 per share in 1992. These decreases were due to the $56.9 million charge associated with the Company's restructuring program and a decline in sales. Net income for 1993 reflected an extraordinary after tax charge of $1.4 million, or $.03 per share, arising from debt refinancing. Net income for 1992 included an extraordinary after tax charge of $12.8 million, or $.29 per share, arising from debt refinancing and an after tax charge of $15.5 million, or $.36 per share, reflecting the cumulative effect of the change in accounting for retiree medical benefits. Net income for 1993 was $31.6 million, or $.73 per share, compared with net income of $53.8 million, or $1.24 per share, in 1992. Comparison of Fifty-Three Weeks Ended January 3, 1993 with Fifty- Two Weeks Ended December 29, 1991 Sales Sales for 1992 were $5,595.5 million, an increase of $245.3 million, or 4.6%, over 1991. The sales increase reflected the additional week in 1992 as well as the January 28, 1992 acquisition of the Williams Bros. stores and the Company's remodel and new store programs. On a comparable 52-week basis, same store sales decreased 2.0% from 1991 sales. Same stores sales have been adversely impacted by the recessionary environment in Southern California, new store openings and remodels by competitors and lower overall levels of inflation. In 1992, the Company opened eight new stores, acquired 18 Williams Bros. stores, closed one store and completed 68 store remodel projects. Costs and Expenses Costs and expenses for 1992 were $5,376.4 million, an increase of $223.3 million, or 4.3%, over 1991. Cost of sales, buying and occupancy expenses as a percentage of sales declined by 0.8 percentage points to 75.1% in 1992. This improvement reflected the benefits of the Company's ongoing remodel and new store programs, which incorporate a larger number of higher margin departments in affected stores, as well as the benefits of capital spending for other merchandising projects designed to enhance gross margin. In addition, cost of sales, buying and occupancy expenses benefited from the Company's favorable purchasing opportunities, the continuing ability to pass through market-wide cost increases in the form of higher prices, and other improvements in margins where allowed by competitive conditions. This improvement was partially offset by increased occupancy costs, primarily higher depreciation expense related to the capital expenditure program. Selling and administrative expenses as a percentage of sales increased by 0.6 percentage points to 20.8% in 1992. This increase was due primarily to market-wide negotiated union wage increases and higher blended wage rates and costs associated with a soft sales environment, partially offset by increased sales per labor hour. Expenses were also adversely impacted by higher workers' compensation costs associated primarily with the new California law which took effect in 1990. The increase in selling and administrative expenses was partially offset by more effective control over other store expenses. Operating Income Operating income was $219.1 million, an increase of $22.0 million, or 11.2%, over 1991. Operating margin increased to 3.9% in 1992 from 3.7% in 1991. The effect of lower same store sales and increased selling and administrative expenses were more than fully offset by improved gross margin. FIFO EBITDA was $321.1 million, or 5.7% of sales, in 1992 compared with $280.7 million, or 5.2% of sales, in 1991. Interest Expense Net interest expense for 1992 was $71.5 million, a decrease of $14.9 million, or 17.2%, from 1991. In spite of higher average revolving debt borrowings, interest expense decreased due to a lower weighted average interest cost on revolving debt and repurchases of higher interest cost subordinated debt. The ratio of FIFO EBITDA to total interest expense increased to 4.5 times in 1992 versus 3.2 times in 1991. Income Tax Provision The income tax provision in 1992 was $65.5 million, or a 44.4% effective tax rate. The 1992 effective tax rate is higher than the incremental tax rate of 40.1% due primarily to amortization of excess cost over net assets acquired of which the majority is not deductible for tax purposes. The income tax provision in 1991 was $44.3 million, or a 40.0% effective tax rate, reflecting the benefit of certain tax credits. Income Income before extraordinary item and cumulative effect of change in accounting for 1992 was $82.1 million, an increase of $15.7 million, or 23.6%, over 1991. Income before extraordinary item and cumulative effect of change in accounting in 1992 was $1.89 per share compared with $1.60 per share in 1991, reflecting an improvement in operating income and interest cost savings, partially offset by a higher effective tax rate. Net income for 1992 reflected an extraordinary after tax charge of $12.8 million, or $.29 per share, arising from debt refinancing and an after tax charge of $15.5 million, or $.36 per share, reflecting the cumulative effect of the change in accounting for retiree medical benefits. Net income for 1991 included an extraordinary after tax charge of $6.3 million, or $.15 per share, arising from debt refinancing. Net income for 1992 was $53.8 million, or $1.24 per share, compared with net income of $60.1 million, or $1.45 per share, in 1991. Liquidity and Capital Resources The Company's primary sources of liquidity are cash flows from operations and available credit under its Revolving Credit Facility. Management believes that these sources adequately provide for its working capital, capital expenditure and debt service needs. Net cash provided by operating activities was $185.6 million in 1993 compared with $268.7 million in 1992. This decrease was due primarily to changes in assets and liabilities generally reflecting the timing of disbursements. The ratio of current assets to current liabilities was 0.87 to 1 at January 2, 1994, compared with 0.86 to 1 at January 3, 1993. Net cash used for investing activities was $262.2 million in 1993 compared with $266.5 million in 1992. Cash capital expenditures for 1993 totaled $268.9 million, consisting of $253.7 million for new stores and store projects and the buy out of certain operating leases and $15.2 million for manufacturing, distribution and other support facilities. Total capital expenditures in 1993, including the present value of commitments under operating leases, were $274.4 million. The Company anticipates that total 1994 capital expenditures will be approximately $215 million, of which $182 million will be cash capital expenditures and $33 million will represent the present value of commitments under operating leases. These capital expenditure levels contemplate the opening of ten to 15 new stores and the completion of ten to 15 store remodel projects. The capital expenditure program has substantial flexibility and is subject to revision based on various factors, including, but not limited to, business conditions, changing time constraints, cash flow requirements and competitive factors. It is anticipated that 1994 cash capital expenditures will be funded out of cash provided by operations, the Revolving Credit Facility, and/or through operating leases, although no assurance can be given that such sources will be sufficient. In the near term, if Vons were to reduce substantially or postpone its capital expenditure program, there would be no substantial impact on current operations and it is likely that more cash would be available for debt servicing. In the long term, if this program were substantially reduced, in the Company's opinion, its operating business and ultimately its cash flow would be adversely impacted. Net cash provided by financing activities was $76.8 million in 1993 compared with net cash used for financing activities of $0.6 million in 1992. The level of borrowings under the Company's revolving debt is dependent primarily upon cash flows from operations, the timing of disbursements, long-term borrowing activity and capital expenditure requirements. In 1993 and 1992, the Company repurchased and/or redeemed $27.1 million and $289.7 million, respectively, of subordinated debt. The 1993 revolving debt balance was also impacted by the completion of a $150 million term loan. The 1992 revolving debt balance was also impacted by the issuance of $250 million of subordinated debt and the expenditure of $49.1 million for the Williams Bros. acquisition. At January 2, 1994, revolving debt borrowings totaled $217.7 million and the Company had available unused credit of $175.5 million. The weighted average interest cost for 1993 on the Company's revolving debt was 4.0%. At January 2, 1994, the corresponding bank prime rate was 6.0%. Impact of Changing Prices Vons' primary costs, inventory and labor, are affected by a number of factors that are beyond the Company's control including availability and price of merchandise, the competitive climate and general and regional economic conditions. As is typical of the supermarket industry, the Company has generally been able to maintain margins by adjusting its retail prices, but competitive conditions may from time to time render it unable to do so while maintaining its market share. The Vons Companies, Inc. and Subsidiaries - ----------------------------------------- Consolidated Statements of Operations
Fiscal Year Ended ----------------------------------------- All amounts except share data January 2, January 3, December 29, in millions of dollars 1994 1993 1991 ------------- ------------ ------------ Sales $ 5,074.5 $ 5,595.5 $ 5,350.2 ------------- ------------ ------------ Costs and expenses: Cost of sales, buying and occupancy 3,801.4 4,200.3 4,059.4 Selling and administrative expenses 1,065.4 1,161.2 1,079.4 Amortization of excess cost over net assets acquired 15.0 14.9 14.3 Restructuring charge 56.9 - - ------------- ------------ ------------ 4,938.7 5,376.4 5,153.1 ------------- ------------ ------------ Operating income 135.8 219.1 197.1 Interest expense, net 66.0 71.5 86.4 ------------- ------------ ------------ Income before income tax provision 69.8 147.6 110.7 Income tax provision 36.8 65.5 44.3 ------------- ------------ ------------ Income before extraordinary item and cumulative effect of change in accounting for retiree medical benefits 33.0 82.1 66.4 Extraordinary item - debt refinancing, net of tax benefit of $1.0 million, $8.6 million and $4.3 million, respectively (1.4) (12.8) (6.3) ------------- ------------ ------------ Income before cumulative effect of change in accounting for retiree medical benefits 31.6 69.3 60.1 Cumulative effect of change in accounting for retiree medical benefits, net of tax benefit of $10.2 million - (15.5) - ------------- ------------ ------------ Net income $ 31.6 $ 53.8 $ 60.1 ------------- ------------ ------------ ------------- ------------ ------------ Income per common share: Income before extraordinary item and cumulative effect of change in accounting for retiree medical benefits $ .76 $ 1.89 $ 1.60 Extraordinary item (.03) (.29) (.15) Cumulative effect of change in accounting for retiree medical benefits - (.36) - ------------- ------------ ------------ Net income $ .73 $ 1.24 $ 1.45 ------------- ------------ ------------ ------------- ------------ ------------ Weighted average common shares and common share equivalents 43,501,000 43,512,000 41,583,000 ------------- ------------ ------------ ------------- ------------ ------------ Dividends paid on common stock None None None ------------- ------------ ------------ ------------- ------------ ------------ See accompanying notes to these consolidated financial statements.
The Vons Companies, Inc. and Subsidiaries - ----------------------------------------- Consolidated Balance Sheets
January 2, January 3, All amounts except share data in millions of dollars 1994 1993 ------------ ------------ Assets Current assets: Cash $ 8.5 $ 8.3 Accounts receivable 36.3 41.7 Inventories 383.5 371.7 Other 45.1 43.0 ------------ ------------ Total current assets 473.4 464.7 Properties and equipment, net 1,215.6 1,032.2 Excess of cost over net assets acquired, net of accumulated amortization of $88.6 million and $73.6 million, respectively 512.9 527.9 Other 47.6 41.2 ------------ ------------ Total Assets $ 2,249.5 $ 2,066.0 ------------ ------------ ------------ ------------ Liabilities and Shareholders' Equity Current liabilities: Current maturities of capital lease obligations and long-term debt $ 8.6 $ 7.1 Accounts payable 314.5 299.7 Accrued liabilities 219.6 232.8 ------------ ------------ Total current liabilities 542.7 539.6 Accrued self-insurance 102.3 95.6 Deferred income taxes 111.2 93.3 Other noncurrent liabilities 86.4 56.2 Capital lease obligations 62.7 56.4 Senior debt 497.2 389.2 Subordinated debt, net 322.1 342.5 ------------ ------------ Total liabilities 1,724.6 1,572.8 ------------ ------------ Shareholders' equity: Preferred stock - $.01 par value; authorized 20,000,000 shares; issued and outstanding - none - - Common stock - $.10 par value; authorized 100,000,000 shares; issued and outstanding - January 2, 1994: 43,342,000 shares; January 3, 1993: 43,335,000 shares 4.3 4.3 Paid-in capital 339.5 339.4 Retained earnings 181.2 149.6 Notes receivable for stock (.1) (.1) ------------ ------------ Total shareholders' equity 524.9 493.2 ------------ ------------ Total Liabilities and Shareholders' Equity $ 2,249.5 $ 2,066.0 ------------ ------------ ------------ ------------ See accompanying notes to these consolidated financial statements.
The Vons Companies, Inc. and Subsidiaries - ----------------------------------------- Consolidated Statements of Cash Flows
Fiscal Year Ended -------------------------------------------------- January 2, January 3, December 29, All amounts in millions of dollars 1994 1993 1991 ------------ ------------ ------------ Cash flows from operating activities: Net income $ 31.6 $ 53.8 $ 60.1 Adjustments to reconcile net income to net cash provided by operating activities: Debt refinancing 1.4 12.8 6.3 Cumulative effect of change in accounting for retiree medical benefits - 15.5 - Restructuring charge 56.9 - - Depreciation and amortization of property and capital leases 90.9 75.7 64.6 Amortization of excess cost over net assets acquired and other assets 18.6 19.8 18.4 Amortization of debt discount and deferred financing costs 6.2 6.4 7.6 LIFO charge 3.6 6.5 .6 Deferred income taxes 15.9 (.3) 8.2 Change in assets and liabilities, net of effect of acquisition: (Increase) decrease in accounts receivable 5.4 (5.2) (1.8) (Increase) decrease in inventories at FIFO costs (15.4) 10.2 (11.8) (Increase) decrease in other current assets (.1) (2.4) 1.7 (Increase) decrease in noncurrent assets (11.5) 2.1 (4.2) Increase (decrease) in accounts payable 14.3 25.0 (25.2) Increase (decrease) in accrued liabilities (31.8) 36.0 (.1) Increase (decrease) in noncurrent liabilities (.4) 12.8 (9.0) ------------ ------------ ------------ Net cash provided by operating activities 185.6 268.7 115.4 ------------ ------------ ------------ Cash flows from investing activities: Addition of property, plant and equipment (268.9) (217.6) (156.8) Disposal of property, plant and equipment 6.7 .2 3.6 Acquisition of Williams Bros. Markets, Inc. supermarket business - (49.1) - ------------ ------------ ------------ Net cash used by investing activities (262.2) (266.5) (153.2) ------------ ------------ ------------ Cash flows from financing activities: Net borrowings (payments) on revolving debt (37.0) 114.0 (16.2) Proceeds from issuance of senior subordinated notes - 250.0 - Proceeds from Term Loan Facility 150.0 - - Issuance of common stock, net of costs incurred - - 121.5 Repurchases of senior subordinated and subordinated debentures (27.1) (304.0) (69.6) Increase (decrease) in net outstanding drafts .5 (43.5) 9.2 Payments on other debt and capital lease obligations (9.3) (9.2) (5.6) Other (.3) (7.9) (1.2) ------------ ------------ ------------ Net cash provided (used) by financing activities 76.8 (.6) 38.1 ------------ ------------ ------------ Net cash increase .2 1.6 .3 Cash at beginning of year 8.3 6.7 6.4 ------------ ------------ ------------ Cash at end of year $ 8.5 $ 8.3 $ 6.7 ------------ ------------ ------------ ------------ ------------ ------------ Supplemental disclosures of cash flow information: Cash paid during the year for: Interest $ 60.0 $ 73.3 $ 82.3 ------------ ------------ ------------- ------------ ------------ ------------- Income taxes $ 26.1 $ 49.9 $ 29.0 ------------ ------------ ------------- ------------ ------------ ------------- Supplemental disclosure of non-cash investing and financing activity: Capital leases $ 13.3 $ 18.1 $ - ------------ ------------ ------------- ------------ ------------ ------------- See accompanying notes to these consolidated financial statements.
The Vons Companies, Inc. and Subsidiaries - ----------------------------------------- Consolidated Statements of Shareholders' Equity
Number of Common Paid-In Retained All amounts in millions Shares Stock Capital Earnings Notes Total ------ ------ ------- --------- ------ ------ Balance at December 30, 1990 38.7 $ 3.9 $ 216.3 $ 35.7 $ (.2) $255.7 Net income - - - 60.1 - 60.1 Stock options exercised - - .2 - - .2 Issuance of common stock, net of costs incurred 4.5 .4 121.1 - - 121.5 Receipt of payment on notes receivable - - - - .2 .2 ------ ------ ------- --------- ------ ------ Balance at December 29, 1991 43.2 4.3 337.6 95.8 - 437.7 Net income - - - 53.8 - 53.8 Stock options exercised .1 - 1.8 - - 1.8 Issuance of notes receivable - - - - (.1) (.1) ------ ------ ------- --------- ------ ------ Balance at January 3, 1993 43.3 4.3 339.4 149.6 (.1) 493.2 Net income - - - 31.6 - 31.6 Stock options exercised - - .1 - - .1 ------ ------ ------- --------- ------ ------ Balance at January 2, 1994 43.3 $ 4.3 $ 339.5 $ 181.2 $ (.1) $524.9 ------ ------ ------- --------- ------ ------ ------ ------ ------- --------- ------ ------ See accompanying notes to these consolidated financial statements.
The Vons Companies, Inc. and Subsidiaries - ----------------------------------------- Notes to the Consolidated Financial Statements - ----------------------------------------- Note 1. Basis of Presentation At January 2, 1994, the Company operated 345 supermarkets and food and drug combination retail stores under the names Vons, Vons Food and Drug, Pavilions, Tianguis and EXPO. The Company also operates a fluid milk processing facility, an ice cream plant, a bakery, a delicatessen kitchen and distribution facilities for meat, grocery, produce and general merchandise. On January 28, 1992, the Company acquired the supermarket business of Williams Bros. Markets, Inc. which included 18 supermarkets. The Company's fiscal year is based on a 52-53 week fiscal year ending on the Sunday closest to December 31. Fiscal year 1993 included 52 weeks which ended on January 2, 1994. Fiscal year 1992 included 53 weeks which ended on January 3, 1993. Fiscal year 1991 included 52 weeks which ended on December 29, 1991. Note 2. Summary of Significant Accounting Policies Basis of Consolidation The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions are eliminated in consolidation. Inventories Inventories are stated at the lower of cost or market. The cost of substantially all inventories is determined using the last-in, first-out (LIFO) method. Properties and Depreciation Properties and equipment, including assets under capital leases, are recorded at cost and depreciated or amortized over forty years for buildings, up to ten years for fixtures and equipment and generally between ten and twenty years, but not to exceed the lease term, for leasehold improvements using principally the straight-line method for financial reporting purposes and accelerated methods for tax purposes. Major renewals and improvements are capitalized. Maintenance and repairs which do not improve or extend the life of the respective assets are charged to expense. Amortization of Intangible Assets The excess of cost over net assets acquired is amortized on a straight-line basis over forty years. The Company assesses the recoverability of the excess of cost over net assets acquired based on projected future operating results. Other noncurrent assets include an agreement not to compete acquired in connection with the acquisition of substantially all of the Southern California operations of Safeway Inc. ("Safeway") and an agreement not to compete acquired in connection with the acquisition of the Williams Bros. Markets, Inc. supermarket business. The agreements not to compete are amortized on a straight-line basis over five years. Income Tax Provision The income tax provision includes amounts related to current taxable income and deferred income taxes. A deferred income tax asset or liability is determined by applying currently enacted tax laws and rates to the expected reversals of the cumulative temporary differences between the carrying value of assets and liabilities for financial statement and income tax purposes. The deferred income tax provision is measured by the change in the net deferred income tax asset or liability during the year. The Company accounts for general business tax credits using the flow- through method. Income per Common Share Income per common share is based on the weighted average number of common shares outstanding during each year and includes common stock equivalents arising from stock options when the effect is dilutive. Disclosure About Fair Value of Financial Instruments The fair value of the Company's debt instruments is based on the quoted market prices for the same or similar issues or on the current rates offered to the Company for debt of the same remaining maturities. Reclassifications Certain reclassifications were made to prior years' balances for comparative purposes. Note 3. Inventories The excess of estimated current cost over LIFO carrying value of inventories was $25.1 million and $21.5 million at January 2, 1994 and January 3, 1993, respectively. Application of the LIFO method resulted in a charge to cost of sales of $3.6 million, $6.5 million and $0.6 million for 1993, 1992 and 1991, respectively. Note 4. Properties and Equipment The components of properties and equipment at January 2, 1994 and January 3, 1993 were as follows (in millions of dollars):
January 2, January 3, 1994 1993 ------------ ------------ Land $ 220.0 $ 171.8 Buildings 325.7 299.9 Leasehold improvements 302.3 265.1 Fixtures and equipment 658.2 514.9 ------------ ------------ 1,506.2 1,251.7 Less: accumulated depreciation and amortization (345.5) (268.0) ------------ ------------ Net property owned 1,160.7 983.7 ------------ ------------ Capital leases 76.4 67.2 Less: accumulated amortization (21.5) (18.7) ------------ ------------ Net capital leases 54.9 48.5 ------------ ------------ Properties and equipment, net $ 1,215.6 $ 1,032.2 ------------ ------------ ------------ ------------
Note 5. Accrued Current Liabilities The components of accrued current liabilities at January 2, 1994 and January 3, 1993 were as follows (in millions of dollars):
January 2, January 3, 1994 1993 ------------ ------------ Accrued payroll, benefits and related taxes $ 85.7 $ 98.9 Accrued self-insurance 47.2 52.4 Other 86.7 81.5 ------------ ------------ Accrued current liabilities $ 219.6 $ 232.8 ------------ ------------ ------------ ------------
Note 6. Senior and Subordinated Debt Senior and subordinated debt as of January 2, 1994 and January 3, 1993 were as follows (in millions of dollars):
January 2, January 3, 1994 1993 ------------ ------------ Senior debt: Revolving Credit Facility, interest at prime, certificate of deposit or Eurodollar rate plus designated amounts, due 1996 $ 217.7 $ 254.7 Term Loan Facility, interest at prime, certificate of deposit or Eurodollar rate plus designated amounts, due 1996 150.0 - Mortgage, 9.25%, secured by real property, due in monthly installments of $1.0 million including interest, due 1997 116.7 118.4 Mortgages, 6.00% to 12.25%, secured by real property, due in varying monthly installments with maturity dates from 1994 to 2009 16.1 17.1 Other contracts, 10.69% to 10.95%, secured by personal property, due in varying monthly installments - 2.2 ------------ ------------ Total 500.5 392.4 Less: current portion 3.3 3.2 ------------ ------------ Long-term portion $ 497.2 $ 389.2 ------------ ------------ ------------ ------------ Subordinated debt: Senior subordinated debentures, 6-5/8%, less unamortized discount of $15.4 million and $22.1 million at January 2, 1994 and January 3, 1993, respectively, based on an effective interest rate of 12.5%, interest due in semiannual installments $ 72.1 $ 92.5 Senior subordinated notes, 9-5/8%, interest due in semiannual installments 150.0 150.0 Senior subordinated notes, 8-3/8%, interest due in semiannual installments 100.0 100.0 ------------ ------------ Total $ 322.1 $ 342.5 ------------ ------------ ------------ ------------
In October 1991, the Company entered into a loan agreement with a group of banks for a $475 million revolving credit facility (the "Revolving Credit Facility"). The Revolving Credit Facility replaced the Company's $421 million Reducing Revolving Credit Facility (the "Revolving Loan"). During 1991, the Company recognized an extraordinary after tax charge of $2.9 million for unamortized bank fees associated with the Revolving Loan. The Revolving Credit Facility, which matures on January 31, 1996, is comprised of two separate lines: Line A - a $300 million revolving line; and Line B - a $175 million standby and commercial letters of credit line. At the Company's option, the lines may be used to support commercial paper borrowings, other unsecured bank borrowings and letters of credit outside the Revolving Credit Facility. Under certain conditions, commitments can be transferred in $5 million increments between the lines, provided Line B does not exceed $175 million. At January 2, 1994, borrowings under Line A were $217.7 million and letters of credit under Line B were $81.8 million. Available unused credit under the Revolving Credit Facility was $175.5 million at January 2, 1994. In December 1993, the Company entered into a loan agreement with a group of banks for a $150 million Senior Unsecured Term Loan Facility (the "Term Loan Facility"). The Term Loan Facility matures on January 31, 1996. During 1992, the Company purchased three interest rate cap contracts with two, three and five year maturity dates. All of the interest rate cap contracts became effective on January 1, 1993. The contracts hedge principal amounts of $250 million for 1993 and 1994, $200 million for 1995, and $100 million for 1996 and 1997 of interest rate exposure in excess of an approximate 8.75% effective borrowing rate under the Revolving Credit Facility against possible increases in short-term interest rates. The Company records interest expense or interest income related to interest rate cap contracts on a monthly basis. Weighted average interest costs, including commitment fees, for the Revolving Credit Facility and for the Term Loan Facility for 1993 were 4.0%. At January 2, 1994, the corresponding bank prime rate was 6.0%. Commitment fees under the Revolving Credit and Term Loan Facilities and Revolving Loan were $1.5 million, $1.5 million and $1.3 million for 1993, 1992 and 1991, respectively. The Company's $116.7 million mortgage loan requires monthly principal and interest payments of approximately $1 million with a one-time payment of approximately $111 million in July 1997. The indenture related to the 6-5/8% Senior Subordinated Debentures (the "6-5/8% Debt") provides for the mandatory redemption of $12.5 million principal amount on May 15, 1994 and $25 million principal amount on each May 15 thereafter through May 15, 1997, with the balance due on May 15, 1998. The 6-5/8% Debt may be redeemed at any time at 100% of principal amount plus accrued interest. The 6-5/8% Debt was issued at a discount which is being amortized over the related term of the indebtedness. During 1993, the Company early retired through repurchase $27.1 million of the 6-5/8% Debt for an aggregate purchase price of $27.1 million. This early retirement of debt resulted in an extraordinary after tax charge of $1.4 million in 1993. The Company has applied these repurchases, along with prior years' repurchases, to satisfy the mandatory redemptions in 1994 and 1995 described above. The indenture related to the 9-5/8% Senior Subordinated Notes (the "9-5/8% Debt") due April 1, 2002 provides for principal repayment at maturity. Interest on the 9-5/8% Debt, payable semiannually on April 1 and October 1, commenced October 1, 1992. The 9-5/8% Debt may be redeemed at the Company's option any time on or after April 1, 1997, at varying percentages above par of the principal amount plus accrued interest. The Company is not required to make mandatory redemption or sinking fund payments with respect to the 9-5/8% Debt prior to maturity. The indenture related to the 8-3/8% Senior Subordinated Notes (the "8-3/8% Debt") due October 1, 1999 provides for principal repayment at maturity. Interest on the 8-3/8% Debt, payable semiannually on October 1 and April 1, commenced April 1, 1993. The 8-3/8% Debt may be redeemed at the Company's option any time on or after October 1, 1997, at 100% of the principal amount plus accrued interest. The Company is not required to make mandatory redemption or sinking fund payments with respect to the 8-3/8% Debt prior to maturity. At January 2, 1994, the Company's debt instruments' carrying value approximated fair value. During 1992, the Company repurchased and/or redeemed $114.4 million of the 12-3/4% Senior Subordinated Discount Debentures (the "12-3/4% Debt"), $85.1 million of the 13% Subordinated Debentures (the "13% Debt"), $7.1 million of the 6-5/8% Debt and $83.1 million of the 12-7/8% Senior Subordinated Reset Notes (the "Reset Notes") for an aggregate purchase price of $304.0 million. These repurchases resulted in an extraordinary after tax charge of $12.8 million in 1992. During 1991, the Company repurchased $30.6 million of the 12-3/4% Debt, $14.9 million of the 13% Debt, $3.3 million of the 6-5/8% Debt and $16.9 million of the Reset Notes for an aggregate purchase price of $69.6 million. These repurchases resulted in an extraordinary after tax charge of $3.4 million in 1991. The Company's debt agreements contain various restrictions on the incurrence of additional indebtedness, payment or prepayment of senior subordinated and subordinated debt, investments, acquisitions, capital expenditures, dividends, common stock redemptions and purchases and dispositions of assets. The covenants also require the Company to meet certain shareholders' equity levels and maximum leverage and minimum fixed charge coverage ratios which vary each fiscal year. The Company is in compliance with these covenants as of January 2, 1994. Under its most restrictive debt agreement, the Company had $46.0 million available for dividends and distributions at January 2, 1994. Management of the Company does not expect to pay cash dividends in the foreseeable future. As of January 2, 1994, the principal payments required in future years were as follows (in millions of dollars):
January 2, 1994 ---------- 1994 $ 3.3 1995 3.1 1996 396.1 1997 137.0 1998 38.6 1999-2003 258.3 2004-2008 1.4 2009-2013 .2 ---------- Total principal payments 838.0 Less: current portion 3.3 ---------- Long-term portion $ 834.7 ---------- ----------
Note 7. Leases The Company currently leases certain of its stores, distribution facilities, vehicles and equipment for periods up to 45 years with various renewal options. The majority of such leases are noncancellable operating leases. Certain operating and capital leases require contingent rentals based upon a percentage of sales over a specified amount. Rental expense under operating leases was as follows (in millions of dollars):
Fiscal Year Ended ------------------------------------------ January 2, January 3, December 29, 1994 1993 1991 ------------ ------------ ------------ Minimum rentals $ 76.9 $ 73.2 $ 71.4 Contingent rentals 8.3 10.2 10.2 Sublease rentals received (4.2) (3.7) (3.4) ------------ ------------ ------------ Rental expense, net $ 81.0 $ 79.7 $ 78.2 ------------ ------------ ------------ ------------ ------------ ------------
Capital lease obligations, relating primarily to buildings, vary in amounts with interest rates ranging from 6.7% to 12.5%. Contingent rentals associated with capital leases were $2.0 million, $2.7 million and $2.8 million for 1993, 1992 and 1991, respectively. Future minimum lease payments under noncancellable operating and capital leases, together with the present value of the net minimum lease payments, at January 2, 1994, were as follows (in millions of dollars):
Operating Capital Leases Leases --------- ------- 1994 $ 64.2 $ 11.0 1995 56.9 10.7 1996 49.6 9.8 1997 47.2 9.2 1998 45.8 7.1 1999-2003 211.4 31.8 2004-2008 149.9 30.7 2009-2013 50.9 13.6 2014-2018 8.4 8.1 --------- ------- Total minimum lease commitments $ 684.3 132.0 --------- --------- Less: interest portion 64.0 ------- Present value of net minimum lease commitments 68.0 Less: current portion 5.3 ------- Long-term portion $ 62.7 ------- -------
Minimum sublease rentals to be received in the future under noncancellable operating and capital leases totaled $24.2 million at January 2, 1994. Effective September 1993, the Company became a partner of a California general partnership. This partnership has received the assignment of 46 retail leases for periods up to 20 years with various renewal options. It is the partnership's intent to sell its leasehold interest in all of these sites. The Company's percentage of the proceeds of such sales varies from 50% to 86.7% depending on the length of time each lease is held. Approximately five of the sites are intended to be leased to the Company. Future minimum lease payments of the partnership under noncancellable operating leases at January 2, 1994 were as follows (in millions of dollars):
January 2, 1994 ---------- 1994 $ 7.2 1995 7.0 1996 6.6 1997 6.3 1998 5.9 1999-2003 25.7 2004-2008 15.7 2009-2013 4.3 ---------- Total minimum lease commitments $ 78.7 ---------- ----------
Note 8. Employee Benefit Plans The Company sponsors a defined benefit pension plan for all nonunion employees. An employee's benefit is based on years of credited service and the employee's final average pay calculated on the highest five years of compensation during the last ten years of employment. The Company's funding policy is to contribute at least the minimum annual contribution required by Internal Revenue Service regulations. The following table sets forth the defined benefit pension plan's funded status and amounts recognized in the Company's consolidated balance sheets at January 2, 1994 and January 3, 1993 (in millions of dollars):
January 2, January 3, 1994 1993 ------------ ------------ Actuarial present value of benefit obligation: Accumulated benefit obligation, including vested benefit of $32.7 million at January 2, 1994 and $23.4 million at January 3, 1993 $ 35.0 $ 25.1 ------------ ------------ ------------ ------------ Projected benefit obligation for service rendered to date $ (52.9) $ (36.8) Plan assets at fair value, primarily listed stocks and U.S. bonds 44.9 39.1 ------------ ------------ Projected benefit obligation (in excess of) less than plan assets (8.0) 2.3 Unrecognized net loss from past experience different from that assumed, unrecognized prior service cost and effects of changes in assumptions 17.7 5.6 ------------ ------------ Pension asset included in other noncurrent assets $ 9.7 $ 7.9 ------------ ------------ ------------ ------------
The discount rate used in determining the actuarial present value of the projected benefit obligation was 7.5% at January 2, 1994 and 9.5% at January 3, 1993. The expected long-term rate of return on assets and rate of increase in compensation levels were 10.0% and 4.5%, respectively, at January 2, 1994 and 10.0% and 5.5%, respectively, at January 3, 1993. Net pension cost under the defined benefit pension plan for 1993, 1992 and 1991 included the following components (in millions of dollars):
Fiscal Year Ended -------------------------------------------- January 2, January 3, December 29, 1994 1992 1991 ------------ ------------ ------------ Service cost $ 2.5 $ 2.2 $ 1.8 Interest cost on projected benefit obligation 3.6 3.0 2.5 Actual return on plan assets (3.0) (1.9) (6.0) Net amortization and deferral (.7) (1.6) 3.4 ------------ ------------ ------------ Net pension cost $ 2.4 $ 1.7 $ 1.7 ------------ ------------ ------------ ------------ ------------ ------------
During 1992, the Company adopted a supplemental executive retirement plan which provides supplemental income payments for officers during retirement. Total pension expense for all plans was $3.6 million, $2.8 million and $1.7 million for 1993, 1992 and 1991, respectively. The Company's contributory profit sharing plan for nonunion employees qualifies under Section 401(k) of the Internal Revenue Code. Under the profit sharing plan, the Company's contribution is determined annually by the Chairman of the Board of Directors. Total expense related to the Company's profit sharing plan was $4.3 million, $7.9 million and $7.4 million for the 1993, 1992 and 1991 plan years, respectively. The Company sponsors a retiree medical plan covering substantially all nonunion employees who retire under certain age and service requirements. The retiree medical plan provides outpatient, inpatient and various other covered services. Participants in the retiree medical plan who retire after June 30, 1990 receive a benefit based upon years of service and a benefit value at the time of retirement. Each retiree's benefit account may be indexed each year to the social security cost of living, up to a maximum of 4.0%. Such benefits are funded from the Company's general assets. The Company has the right to modify or terminate the plan. The Company adopted Statement of Financial Accounting Standards No. 106 ("SFAS No. 106") "Employers' Accounting for Postretirement Benefits Other Than Pensions" effective January 3, 1993. SFAS No. 106 requires that the cost of these benefits be recognized in the consolidated financial statements over an employee's service period. The Company elected to immediately recognize in the first quarter of 1992 a transition obligation of $15.5 million, net of a deferred income tax benefit of $10.2 million in accordance with the provisions of SFAS No. 106. The accumulated benefit obligation for the retiree medical plan as of January 2, 1994 and January 3, 1993 was as follows (in millions of dollars):
January 2, January 3, 1994 1993 ------------ ------------ Accumulated retiree medical benefit obligation: Retirees $ 16.4 $ 13.9 Fully eligible active plan participants 4.0 3.3 Other active plan participants 12.5 10.6 Unrecognized net loss (3.0) - ------------ ------------ Accrued retiree medical benefit obligation $ 29.9 $ 27.8 ------------ ------------ ------------ ------------
For measurement purposes, a 9.0% increase in the cost of covered retiree medical benefits was assumed for 1993; the rate was assumed to decline gradually to 6.0% in 1996, and remain at that level thereafter. A 1.0% increase in the retiree medical cost trend rate would increase the retiree medical benefit obligation at January 2, 1994, by $1.0 million and the 1993 annual expense by $0.1 million. The weighted average discount rate used in determining the accumulated retiree medical benefit obligation was 7.5% and 9.5% at January 2, 1994 and January 3, 1993, respectively. The net retiree medical plan cost for 1993 and 1992 included the following components (in millions of dollars):
Fiscal Year Ended --------------------------- January 2, January 3, 1994 1993 ------------ ------------ Service cost $ .8 $ .8 Interest cost 2.4 2.4 ------------ ------------ Net retiree medical plan costs $ 3.2 $ 3.2 ------------ ------------ ------------ ------------
Nonunion retiree medical expense had previously been recorded under the cash method. Expense recognized during 1991 under the cash method was $1.3 million. The Company contributes to multi-employer pension plans and health and welfare plans administered by various trustees. Contributions to these plans are based upon negotiated wage contracts. The pension plans may be deemed to be defined benefit plans. Information relating to accumulated benefits and fund assets as they may be allocable to the Company at January 2, 1994, is not available. Total pension expense for the union plans was $30.3 million, $12.1 million and $9.1 million for 1993, 1992 and 1991, respectively. The health and welfare plans provide medical, dental and other benefits to certain employees covered by union contracts. Total health and welfare expense for the union plans was $107.1 million, $153.9 million and $149.0 million for 1993, 1992 and 1991, respectively. Note 9. Income Taxes During 1992, the Company changed its method of accounting for income taxes to comply with the provisions of Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes." This standard requires, among other things, recognition of future tax consequences, measured by enacted tax rates, attributable to temporary differences between financial statement and income tax bases of assets and liabilities. The change in accounting method has been applied retroactively to June 28, 1987 by restating prior years' consolidated financial statements. The provision for income taxes for 1993, 1992 and 1991 was comprised of the following amounts (in millions of dollars):
Fiscal Year Ended -------------------------------------------- January 2, January 3, December 29, 1994 1993 1991 ------------ ------------ ------------ Current: Federal $ 13.3 $ 49.3 $ 25.5 State 7.6 16.5 10.6 ------------ ------------ ------------ Total current income tax provision 20.9 65.8 36.1 ------------ ------------ ------------ Deferred: Federal 15.7 1.1 7.3 State .2 (1.4) .9 ------------ ------------ ------------ Total deferred income tax provision 15.9 (.3) 8.2 ------------ ------------ ------------ Total income tax provision $ 36.8 $ 65.5 $ 44.3 ------------ ------------ ------------ ------------ ------------ ------------
Reconciliation of the Federal statutory rate and effective rate for 1993, 1992 and 1991 was as follows (in millions of dollars):
Fiscal Year Ended ------------------------------------------ January 2, January 3, December 29, 1994 1993 1991 ------------ ------------ ------------ Federal statutory expected provision $ 24.4 $ 50.2 $ 37.6 Amortization of excess of cost over net assets acquired 5.1 5.1 4.9 State income taxes, net of Federal income tax benefit 5.1 10.0 7.6 General business tax credits - - (2.3) Alternative minimum tax (credit) - - (3.7) Effect to beginning of year deferred income tax balance for increase in Federal statutory tax rate 2.0 - - Other .2 .2 .2 ------------ ------------ ------------ Total income tax provision $ 36.8 $ 65.5 $ 44.3 ------------ ------------ ------------ ------------ ------------ ------------
Deferred income taxes consisted of future tax liabilities (assets) attributable to the following (in millions of dollars):
January 2, January 3, 1994 1993 ------------ ------------ Deferred tax liabilities: Excess of book over tax bases $ 140.0 $ 140.6 Excess of tax over book depreciation 72.3 54.9 ------------ ------------ Deferred tax liabilities 212.3 195.5 ------------ ------------ Deferred tax assets: Cash versus accrual basis (113.8) (106.7) Other, net (10.5) (16.7) ------------ ------------ Deferred tax assets (124.3) (123.4) ------------ ------------ Deferred income taxes, net $ 88.0 $ 72.1 ------------ ------------ ------------ ------------ /TABLE The tax returns for all of the Company's fiscal periods ended subsequent to and including January 3, 1988 are open for examination by the Internal Revenue Service (the "IRS") and/or various state tax authorities. Additionally, certain tax returns of entities acquired by the Company for earlier tax years are open for examination by the IRS. Management believes that any adjustments arising out of the examinations for which the Company would be liable would not have a material effect on the Company's consolidated financial position. In addition, the Company is indemnified against income tax liability for the acquired Safeway subsidiaries for all periods prior to August 29, 1988, the acquisition date. Note 10. Related Party Transactions The Company leases a distribution facility from a California general partnership whose general partners are Vons and a Texas general partnership, of which a director of the Company is a general partner. Vons and the Texas general partnership each have a 50% interest in the California general partnership. During 1993, 1992 and 1991, the Company paid rent of $1.9 million, $1.9 million and $1.9 million, respectively. A wholly-owned subsidiary of Safeway owns approximately 35% of the outstanding voting stock of the Company. Safeway and its affiliates sold certain inventory and other items to the Company for an aggregate amount during 1993, 1992 and 1991 of approximately $2.5 million, $5.7 million and $7.7 million, respectively. The Company sold certain inventory items to Safeway and its affiliates for an aggregate amount during 1993, 1992 and 1991 of approximately $2.4 million, $6.7 million and $6.7 million, respectively. Three directors of the Company are also directors of Safeway and a fourth director of the Company is both a director and an officer of Safeway. The Company leases eight properties from a partnership that is 80% owned by a subsidiary of Safeway and 20% owned by the principal stockholder of Safeway. The rentals under the leases were $0.7 million, $0.6 million and $0.8 million in 1993, 1992 and 1991, respectively. In addition, the Company is secondarily liable to this partnership under four leases for which the annual minimum rental is $0.2 million, all of which is currently being paid by assignees. Another California general partnership whose general partners include directors and management of the Company had the right to purchase several leaseholds of the Company. The Company paid the California general partnership $2.2 million in 1993 to cancel this purchase right. The Company paid $0.1 million during 1993 to a director of the Company to serve as the Company's advertising spokesman as well as other consulting services. The Company paid $0.1 million and $0.1 million during 1992 and 1991, respectively, to another director of the Company for consulting with respect to merchandising and operational matters. A director of the Company is affiliated with an entity which was engaged to provide buying services. These buying services were terminated in June 1992. During 1992 and 1991, the entity was paid approximately $0.3 million and $2.2 million, respectively, for buying services rendered. A director of the Company borrowed a total of $0.1 million from the Company for the purchase of 5,000 shares of the Company's common stock by notes dated January 3, 1992 and July 22, 1992. The notes are secured by a pledge of the 5,000 shares of common stock. Both notes accrue interest at the Federal mid term rate in effect under Internal Revenue Code Section 1274(d); compounded semiannually, and all payments of principal and interest are due and payable on December 31, 1997. Note 11. Contingencies The Company is a party to several pending legal proceedings and claims. Although the outcome of such proceedings and claims cannot be determined with certainty, management believes that their final outcome should not have a material adverse effect on the Company's consolidated financial position. As a result of the sales of certain assets, the Company is contingently liable to certain landlords and pension funds. At January 2, 1994, the Company is a guarantor of $1.2 million in industrial revenue bonds of a former business of a predecessor company. Note 12. Shareholders' Equity The Company has various stock option plans. Options under the 1987 Stock Option Plan are fully vested. Options under the 1990 Stock Option Plan either vest 20 percent at the date of grant and 20 percent per year thereafter or vest 25 percent one year from the date of grant and 25 percent per year thereafter. Options under the Directors' Stock Option Plan vest 25 percent six months from the date of grant and 25 percent on the anniversary of the date of grant thereafter. For all plans, the options expire ten years from the date of grant. Information regarding the Company's stock option plans is summarized below:
1987 1990 Directors' Stock Option Stock Option Stock Option Plan Plan Plan ------------ ------------ ------------ Shares authorized 175,227 4,000,000 225,000 ------------ ------------ ------------ ------------ ------------ ------------ Shares under option: Outstanding at December 30, 1990 90,919 655,450 - Granted - 565,600 - Exercised 9,275 7,313 - Forfeited 1,250 29,237 - ------------ ------------ ------------ Outstanding at December 29, 1991 80,394 1,184,500 - Granted - 575,015 71,693 Exercised 26,125 62,875 - Forfeited - 17,900 - ------------ ------------ ------------ Outstanding at January 3, 1993 54,269 1,678,740 71,693 Granted - 584,642 44,192 Exercised 5,750 1,000 - Forfeited - 218,985 16,842 ------------ ------------ ------------ Outstanding at January 2, 1994 48,519 2,043,397 99,043 ------------ ------------ ------------ ------------ ------------ ------------ Range of option prices per share: At December 29, 1991 $ 9.28 $ 2.50-26.50 $ - At January 3, 1993 $ 9.28 $ 2.50-27.55 $22.04-27.55 At January 2, 1994 $ 9.28 $ 2.50-27.55 $17.51-27.55 Options exercisable: At December 29, 1991 80,394 183,800 - At January 3, 1993 54,269 401,751 17,923 At January 2, 1994 48,519 765,054 37,022 Average price of options exercised: Year ended December 29, 1991 $ 9.28 $ 21.35 $ - Year ended January 3, 1993 $ 9.28 $ 3.36 $ - Year ended January 2, 1994 $ 9.28 $ 21.35 $ -
Effective June 6, 1991, the Company completed a primary and secondary common stock offering of 10,964,348 shares. The primary offering included 4,500,000 newly issued shares, providing proceeds to the Company of $122.2 million. Costs associated with the offering totaled $0.7 million. Effective January 1, 1991, the Company adopted the Employee Stock Purchase Plan (the "Stock Purchase Plan"). The Stock Purchase Plan allows employees to purchase the Company's stock through payroll deductions. The source of stock is weekly open market purchases by a third party administrator. Administrative and purchase commission costs associated with the Stock Purchase Plan are borne and paid by the Company according to the agreement with the third party administrator. Note 13. Restructuring Charge During the third quarter of 1993, the Company recorded a restructuring charge of $56.9 million, or $.77 per share, which reflects expenses associated with a program to accelerate the closing of underperforming facilities, including approximately 11 stores, execute a reduction in force and implement other programs intended to lower the Company's cost structure and enhance competitiveness. The restructuring charge includes $42.7 million for expenses relating to facility closures and $14.2 million for severance and other related expenses. Note 14. Quarterly Financial Data (Unaudited) The results of operations for 1993 and 1992 were as follows (in millions of dollars except share data):
First Second Third Fourth Quarter Quarter Quarter Quarter Fiscal Year 1993 (12 Weeks) (12 Weeks) (16 Weeks) (12 Weeks) ----------- ----------- ----------- ----------- Sales $ 1,194.2 $ 1,175.3 $ 1,534.5 $ 1,170.5 Gross profit (1) 302.4 297.2 376.5 297.0 Amortization of excess cost over net assets acquired 3.5 3.5 4.6 3.4 Restructuring charge - - 56.9 - Operating income (loss) 43.5 47.1 (4.4) 49.6 Interest expense, net 14.9 15.2 20.6 15.3 Income (loss) before extraordinary item 15.9 17.7 (19.5) 18.9 Extraordinary item - - (1.4) - Net income (loss) $ 15.9 $ 17.7 $ (20.9) $ 18.9 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Income (loss) per common share: Income (loss) before extraordinary item $ .37 $ .40 $ (.45) $ .44 Extraordinary item - - (.03) - ----------- ----------- ----------- ----------- Net income (loss) $ .37 $ .40 $ (.48) $ .44 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Weighted average common shares and common share equivalents 43,549,000 43,512,000 43,474,000 43,469,000 ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
First Second Third Fourth Quarter Quarter Quarter Quarter Fiscal Year 1992 (12 Weeks) (12 Weeks) (16 Weeks) (13 Weeks) ----------- ----------- ----------- ----------- Sales $ 1,268.2 $ 1,286.0 $ 1,681.7 $ 1,359.6 Gross profit (1) 314.2 315.0 415.7 350.3 Amortization of excess cost over net assets acquired 3.4 3.5 4.5 3.5 Operating income 44.6 49.8 60.1 64.6 Interest expense, net 17.7 18.9 20.0 14.9 Income before extraordinary item and cumulative effect of change in accounting 15.0 17.2 22.3 27.6 Extraordinary item (.5) (12.2) - (.1) Cumulative effect of change in accounting (15.5) - - - Net income (loss) $ (1.0) $ 5.0 $ 22.3 $ 27.5 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Income (loss) per common share: Income before extraordinary item and cumulative effect of change in accounting $ .35 $ .40 $ .51 $ .63 Extraordinary item (.01) (.28) - - Cumulative effect of change in accounting (.36) - - - ----------- ----------- ----------- ----------- Net income (loss) $ (.02) $ .12 $ .51 $ .63 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Weighted average common shares and common share equivalents 43,525,000 43,543,000 43,459,000 43,522,000 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- (1) Gross profit represents sales net of cost of sales, buying and occupancy costs.
The Vons Companies, Inc. and Subsidiaries - ----------------------------------------- Independent Auditors' Report - ----------------------------------------- The Board of Directors The Vons Companies, Inc.: We have audited the accompanying consolidated balance sheets of The Vons Companies, Inc. and subsidiaries as of January 2, 1994 and January 3, 1993 and the related consolidated statements of operations, shareholders' equity and cash flows for the fifty- two week period ended January 2, 1994, the fifty-three week period ended January 3, 1993 and the fifty-two week period ended December 29, 1991. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of The Vons Companies, Inc. and subsidiaries at January 2, 1994 and January 3, 1993 and the results of their operations and cash flows for the fifty-two week period ended January 2, 1994, the fifty-three week period ended January 3, 1993 and the fifty-two week period ended December 29, 1991, in conformity with generally accepted accounting principles. As discussed in Note 8 to the consolidated financial statements, the Company adopted the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" in the fifty-three week period ended January 3, 1993. /s/ KPMG Peat Marwick KPMG Peat Marwick Los Angeles, California February 15, 1994 EX-7 8 EXHIBIT 24 Exhibit 24 [This page appears on KPMG Peat Marwick letterhead] INDEPENDENT AUDITORS' CONSENT ----------------------------- The Board of Directors The Vons Companies, Inc: We consent to incorporation by reference in the Registration Statements (No. 33-42913, No. 33-39246, No. 33-41539, No. 33-55744 and No. 33-50957) on Form S-8 of The Vons Companies, Inc. of our reports dated February 15, 1994, relating to the consolidated balance sheets of The Vons Companies, Inc. and subsidiaries as of January 2, 1994 and January 3, 1993, and the related consolidated statements of operations, shareholders' equity, cash flows and related schedules for the fifty-two week period ended January 2, 1994, the fifty-three week period ended January 3, 1993 and the fifty-two week period ended December 29, 1991 which report appears in the Annual Report to Shareholders and is incorporated by reference in the January 2, 1994 annual report on Form 10-K of The Vons Companies, Inc. and our report dated February 15, 1994 on the related financial statement schedules which appears in January 2, 1994 annual report on Form 10-K. Our reports refer to the Company's adoption of the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" in the fifty-three week period ended January 3, 1993, as discussed in Note 8 to the consolidated financial statements. /s/ KPMG Peat Marwick Los Angeles, California March 29, 1994 EX-8 9 EXHIBIT 10.25 Exhibit 10.25 [This page appears on The Vons Companies, Inc. letterhead] Roger E. Stangeland Chairman and Chief Executive Officer December 2, 1993 Garrett R. Nelson 820 Green Ridge Drive La Canada, CA 91011 Dear Gary: This letter confirms the agreement between The Vons Companies, Inc. (the "Company") and you regarding your employment with the Company through March 31, 1995 and your separation thereafter. 1. Your resignation as Executive Vice President and Chief Development Officer of the Company will be effective November 30, 1993. On the latter of November 30, 1993 or the eighth day following your execution of this letter agreement, you shall receive the following checks, reduced by withholding taxes and other authorized deductions: $11,769 representing two-weeks salary in lieu of notice. $25,000 representing the cost of outplacement counseling, which you are hereby declining. $21,616 representing the cash equivalent of the profit sharing benefit (Company contribution plus match) for 1993. $29,423 representing 5 weeks of accrued but unused vacation. 2. Commencing December 1, 1993 and continuing through March 31, 1995, you shall remain an employee of the Company in the position of Special Advisor, Real Estate and Construction, working 12 days per month at an annual salary of $183,600, payable in the Company's normal bi-weekly payroll cycle. For any month in which you work in excess of 12 days with the prior approval of the Chief Financial and Administrative Officer of the Company ("CFO"), you will be paid an additional $1,500 per day (less appropriate withholding), payable on the payroll cycle immediately following such month. Naturally, you will be reimbursed for all travel and other expenses in accordance with Company policy. 3. As Special Advisor, Real Estate and Construction, you will report to and serve under the direction of the CFO of the Company. In such capacity you will (i) provide oversight to and supervision of the Company's real estate and construction departments, (ii) negotiate and administer the Builder's Emporium transaction, (iii) administer the Company's inner city program, including maintenance of important inner city relationships, (iv) handle remaining Meadowdale issues, including membership on the Board and/or Pension Committees of M- December 2, 1993 Page 2 Foods, if necessary, and (v) perform such other duties as shall be assigned from time to time to the extent you are available during your normal work week as defined above. While serving as Special Advisor, you will be free to engage in other consulting activities for compensation, provided that you are available to the Company for the minimum 12 days per month and that you provide no services (i) for any person or entity which may compete with the Company in any respect, including the securing of any real estate sites, or (ii) which would in any way be in conflict with the Company or would constitute a conflict of interest with the Company. While serving as Special Advisor, you may not become an employee of any other organization or person. 4. Through the remainder of your term of employment with the Company, you shall receive all health care benefits available to officers of the Company, with any current or future co-pays as provided in such plans. You will also continue to accrue service under the Company's Pension Plan and will retain the right to exercise all currently vested stock options which you have been granted. Your deferred compensation account will continue to accrue interest at the rate of 16% per annum through your termination date of March 31, 1995, and your Long Term Incentive Plan ("LTIP") awards for 1992 and 1993 will be vested at two years and one year, respectively, and paid out in accordance with such Plan. You will have transitional use of your Company automobile until January 28, 1994 at which time you will have such purchase rights as shall be available to all officers. You will be eligible for a 1993 bonus award, subject to the sole discretion of the Compensation Committee. There is no assurance that any such bonus will be paid to you. 5. Effective immediately you will no longer accrue any vacation benefits, nor will any previously granted but unvested stock options continue to vest, all such unvested options hereby being terminated. You will be eligible for no further stock option awards or to participate in any incentive compensation or bonus plans. You will have no further participation in the LTIP, except as provided in paragraph 4 above. 6. On March 31, 1995 ("Termination Date") your employment with the Company shall terminate, and you shall be eligible for no further payments or benefits except as specifically provided herein. On the Termination Date you will receive checks for the following, reduced where appropriate by withholding taxes and other authorized deductions: $482,655 representing your lump sum Supplemental Executive Retirement Plan ("SERP") benefit. $306,000 representing your enhanced lump sum SERP benefit. An amount equal to the balance in your deferred compensation account with accumulated accrued interest. You will also become eligible for retiree medical benefits commencing with the Termination Date and shall be credited with a total of $22,500 in your account thereunder. 7. On the Termination Date you hereby agree to return to the Company within the timE December 2, 1993 Page 3 frames allotted all Company property in your possession, including, but not limited to, any Company credit cards, keys, any information proprietary to the Company, all computer equipment and telephones. You shall thereafter continue to cooperate fully with the Company in its defense of or other participation in any administrative, judicial or other proceedings arising from any charge, complaint or other action which has been or may be filed. You shall not disclose any confidential information you acquired while an employee of the Company to any other person or use such information in any manner that is detrimental to the Company's interests. 8. On behalf of yourself and your heirs and assigns, you hereby release and forever discharge the "Releasees" hereunder, consisting of the Company, and each of its associates; owners; stockholders; affiliates; divisions; subsidiaries; predecessors; successors; heirs, assigns; agents; directors; officers; partners; employees; insurers; representatives and lawyers, and all persons or entities acting by, through, under or in concert with them, or any of them, of and from any and all manner of action or actions, cause or causes of actions, in law or in equity, suits, debts, liens, contracts, agreements, promises, liability, claims, demands, damages, loss, cost or expense, of any nature whatsoever, known or unknown, fixed or contingent (hereinafter called "Claims") which you now have or may hereafter have against the Releasees, or any of them, by reason of any matter, cause, or thing whatsoever from the beginning of time to the date hereof, including, without limiting the generality of the foregoing, any Claims arising out of, based upon, or relating to your hire, employment, remuneration or resignation by the Releasees, or any of them, including any Claims arising under Title VII of the Civil Rights Act of 1964, as amended; the Age Discrimination in Employment Act, as amended; the Equal Pay Act, as amended; the Fair Labor Standards Act, as amended; the Employee Retirement Income Security Act, as amended; the Older Workers Benefit Protection Act; the California Fair Employment and Housing Act, as amended; the California Labor Code; and/or any other local, state or federal law governing discrimination in employment and/or the payment of wages and benefits. You specifically agree to waive the benefit of the provisions of Section 1542 of the Civil Code of the State of California, which reads as follows: "A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which, if known by him, must have materially affected his settlement with the debtor." You acknowledge that you have read Civil Code Section 1542 and fully understand the same. 9. In accordance with the Older Workers Benefit Protection Act of 1990, you should be aware of the following: (a) You have the right to consult with an attorney before signing this agreement; (b) You have forty-five (45) days from the date hereof to consider this agreement; and December 2, 1993 Page 4 (c) You have seven (7) days after signing this agreement to revoke this agreement, and this agreement will not be effective until that revocation period has expired. 10. You have agreed that, except as may be required by law, neither you nor any member of your family, nor anyone employed by you, shall disclose to any individual or entity, other than your immediate family and your attorney or advisor reviewing this agreement, the compensation terms of this agreement or the circumstances of your separation from the Company. 11. The provisions of this agreement are severable. If any provision is held to be invalid or unenforceable, it shall not affect the validity or enforceability of any other provision. This letter sets forth the entire agreement between the parties and supercedes any and all prior oral or written agreements or understanding between them concerning the subject matter. This agreement may not be altered, amended or modified, except by a further written document signed by both parties. You represent that you have thoroughly read and considered all aspects of this agreement, that you understand all its provisions and that you are voluntarily entering into said agreement. If the above accurately reflects your understanding, please date and sign the enclosed copy of this letter in the places indicated below and return that copy to me on or before January 10, 1994. As noted above, this agreement will not become effective until seven (7) days after you sign this agreement. Very truly yours, /s/ Roger E. Stangeland Roger E. Stangeland Accepted and agreed to on this 2nd day of December , 1993. - ---------------- ------------------------- ---- /s/ Garrett R. Nelson - ---------------------------------------------------------- Garrett R. Nelson RES:cb Enclosure EX-9 10 EXHIBIT 10.26 Exhibit 10.26 [This page appears on The Vons Companies, Inc. letterhead] Roger E. Stangeland Chairman and Chief Executive Officer October 29, 1993 Mr. Dennis K. Eck 550 North Alta Vista Avenue Monrovia, CA 91016 Dear Dennis: This letter amends and supplements the Settlement Agreement and Mutual Release (the "Agreement") effective October 31, 1993, between you and the Company. 1. Home Relocation Allowance: In light of a prior commitment made to ------------------------- you concerning the possible inclusion of your Monrovia home in the Company relocation purchase in lieu of your Dana Point home, we have agreed that, in lieu of normal relocation benefits or any other relocation obligation, the Company will pay you $135,000 (less any required withholding), payable on the Effective Date under the Agreement. 2. Tax Treatment of Payment for Damages: Both you and the Company ------------------------------------ believe that, as payment for alleged personal injuries, the Company is not obligated to withhold taxes from the payment made pursuant to paragraph 10 of the Agreement, and it will not do so. We both recognize, however, that a taxing authority may challenge that tax treatment as a result of auditing either your or the Company's tax return. Accordingly, if, prior to October 31, 1998 any taxing authority asserts a tax deficiency against the Company for unpaid taxes, including interest and/or penalties, with respect to the payment for damages, the Company may withhold from the SERP Benefit payable under paragraph 7 of the Agreement the amounts asserted to be due from the Company by such tax authority, until the issue is finally resolved, including appeals. Any tax or penalty ultimately determined to be owed by the Company shall be deducted from the SERP Benefit so withheld, with any remainder paid to you at that time. If the foregoing is acceptable to you, please sign and date this letter in the space indicated. Very truly yours, /s/ Roger E. Stangeland Roger E. Stangeland ACCEPTED AND AGREED the 29th day of Oct, 1993 ---- --- /s/ Dennis K. Eck - --------------------------- Dennis K. Eck SETTLEMENT AGREEMENT AND MUTUAL RELEASE --------------------------------------- This Settlement Agreement and Mutual Release ("Agreement") is made by and between Dennis K. Eck ("Eck") and The Vons Companies, Inc. (the "Company"). It is the desire of the parties to this Agreement to resolve all issues relating to the employment of Eck by the Company pursuant to the provisions contained herein and to release one another from all claims or liabilities in connection therewith. In consideration of the mutual promises, convents and conditions hereinafter set forth and the payments provided herewith, Eck and the Company agree as follows: 1. Resignation: Eck hereby resigns as President, Chief Operating ----------- Officer and a member of the Board of Directors of the Company effective October 31, 1993, (the "Resignation Date"). On the Resignation Date, Eck shall receive payment for any accrued unused vacation time. Eck shall receive no incentive compensation award or bonus for 1993. 2. Extension Period: Effective November 1, 1993, and continuing for ---------------- a period of two (2) years thereafter (the "Extension Period"), Eck shall remain an employee of the Company with the title of "Special Advisor to the Chairman", performing such advisory and consulting services as shall be designated from time to time by the Chairman in concert with the Executive Committee of the Board of Directors. It is anticipated that such duties shall consist of advice with respect to basic strategy and review of operating results of the business, as well as representing the Company as directed in industry and other matters, including membership on the boards of the ECR project and Advanced Promotion Technologies, Inc. Eck shall also assist the Company by performing due diligence as directed with respect to any contemplated acquisitions and will cooperate fully with respect to ongoing Company litigation, including depositions and testimony as needed. Eck shall not accrue any vacation pay during the Extension Period. 3. Salary During Extension Period: During the Extension Period, Eck ------------------------------ shall be paid a salary of One Hundred Thirty Thousand Dollars ($130,000) per year, payable in installments of Ten Thousand Dollars($10,000) in each fiscal period of the Company, plus reimbursement for any out of pocket expenses consistent with Company policy. In the event Eck obtains other employment during the Extension Period, any salary not yet paid shall be added to the amount otherwise payable under paragraph 7 hereof. 4. Insurance Benefits: The Company shall continue to provide Eck ------------------ with life, medical and disability insurance at the level provided to all officers, on the same basis as provided to all officers, until the earlier of (1) the date Eck obtains other employment or, (2) October 31, 1998. 5. Stock Options: Eck shall continue to vest under the Company's ------------- 1990 Stock Option and Restricted Stock Plan (the "Plan") with respect to the option granted in February 1990 to purchase One Hundred Fifty Thousand (150,000) shares of stock thereunder for Two Dollars and Fifty Cents($2.50) per share. No further awards shall be made to Eck under the Plan, and all other unvested stock options issued to Eck under the Plan shall be terminated and cancelled, notwithstanding the provisions of any stock option agreement issued pursuant to the Plan heretofore. 6. Retiree Medical Benefit: Eck shall be deemed fully vested under ----------------------- the Company's health plan for retired employees and eligible for benefits thereunder pursuant to the provisions of such plan as if he had remained employed by the Company until retirement on November 1, 1998. 7. SERP Benefits: The parties agree that the amount of Eck's SERP ------------- lump sum benefit accrued as of October 31, 1993, is $497,311. This amount shall be increased by $237,051 (to a total of $734,362) plus any unpaid salary for the Extension Period pursuant to paragraph 3 above (the total of such amounts hereinafter referred to as the "SERP Benefit"). Provided Eck shall not be in default hereunder, on Eck's fifty-fifth birthday, he shall be paid the SERP Benefit, without accrued interest and subject to any other obligations to, or agreements with, the Company by Eck. 8. No Other Benefits: Eck shall not be eligible for any employee ----------------- benefits other than those enumerated above. 9. Non Competition; Other Employment: During the Extension Period, --------------------------------- Eck will not compete with the Company in any respect, will not work or consult for anyone who competes with the Company, and will not deal with any employee or customer of the Company, except as authorized by the Chairman. In the event Eck shall obtain new employment as provided below, or engage in self- employment, with a business operating in a marketing area in which the Company did not operate prior to thereto, Eck may retain such position or self employment if the Company subsequently (through acquisition or otherwise) commences operation in such marketing area, notwithstanding the aforesaid non- competition restriction. If Eck violates the non-competition restrictions contained herein, he shall be in breach of this Agreement, and all benefits payable to him hereunder, including those contained in 3 through 7 above, shall cease and no longer be available to Eck, and the Company may pursue any other damages in law or equity, including injunctive relief. It is the intent of the parties that Eck, and the Company may pursue any other damages in law or equity, including injunctive relief. It is the intent of the parties that Eck may obtain employment elsewhere during the Extension Period so long as it is not with a business in competition with the Company. Following expiration of the Extension Period, Eck's employment with the Company shall be terminated, and he shall be entitled to no further payments or benefits from the Company except profit sharing, pension and SERP distributions as provided under such plans. 10. Settlement of Damage Claim: In addition to the foregoing, on the -------------------------- eighth day following execution hereof by Eck, the Company shall pay to Eck the amount of One Million Two Hundred Fifty Thousand Dollars ($1,250,000) in settlement of Eck's claim for emotional distress and other personal injuries allegedly sustained as a result of wrongful termination, employment discrimination, defamation or other legal causes of action. 11. Release by Eck: Except as to rights or claims as may arise from -------------- this Agreement, Eck releases and forever discharges the Company, including its present and former officers, directors, agents, employees, representatives or shareholders (including any entity employing, represented by or affiliated with any such present or former director, officer, agent, employee, representative or shareholder), parent companies, subsidiaries, affiliates, assigns and successors-in-interest, and all persons or entities acting by, through, under or in concert with them, or any of them, from any and all injuries, suits, charges, complaints, grievances, obligations, liabilities, losses, expenses, claims, demands, causes of action, damages, costs and all other legal responsibilities in any form whatsoever which he now has or may have in the future, in law or equity, including, but not limited to, all matters arising out of, connected with or incidental to Eck's employment with the Company, or to the dealings between the parties, including, without limitation, any contracts or purported contracts or employment or severance agreements or other such arrangements. This waiver and release includes the release of any rights, claims of action, demands, damages or costs arising under the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964, the California Fair Employment and Housing Act, and any other federal, state or local laws or regulations prohibiting employment discrimination and any claim for wrongful termination. 12. Release by the Company: Except as to such rights or claims as may ---------------------- arise from the Agreement, the Company releases and forever discharges Eck, and his executor, successors-in-interest, heirs and assigns from any and all injuries, suits, charges, complaints, grievances, obligations, liabilities, losses, expenses, claims, demands, causes of action, damages, costs and all other legal responsibilities in any form whatsoever which it now has or may have in the future arising out of, connected with or incidental to his employment by, or his service as director of, the Company, or to the dealings between the parties occurring prior to the execution of this Agreement. 13. Indemnification of Eck: In addition to the foregoing, the Company ---------------------- specifically agrees to indemnify, defend and hold Eck harmless from any and all claims or causes of action or complaints filed against him which arise out of or are connected with his employment by, or his service as director of, the Company, with the good faith discharge of his duties and as provided under California Labor Code Section 2802. Moreover, nothing contained in this Agreement shall prevent Eck from raising any defense to any such claims to the same extent that he would have been entitled to such defense as an employee of the Company. 14. Waiver of Civil Code Section 1542: Each Party to this Agreement --------------------------------- specifically waives the benefit of the provisions of Section 1542 of the Civil Code of the State of California, as follows: "A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor". Eck and the Company acknowledge that they have read Civil Code Section 1542 and fully understand same. 15. Representations By Eck: ---------------------- (a) Eck represents and warrants that he has not assigned or transferred to any other person, firm or corporation, in any manner, including by way of subrogation or operation of law or otherwise, any portion of any claim, right, demand, action or cause of action, that he now has, or might have in the future arising out of his employment with the company nor any recovery or settlement to which he may be entitled. (b) Eck represents and warrants that he has not filed and agrees not to file any action, claim or initiate any proceeding in any court or before an administrative agency asserting any claims that are specifically released herein or that arise from matters that are asserted herein. 16. Non Administration: Eck and the Company acknowledge that this ------------------ agreement constitutes a settlement and is not an admission of liability, but is in compromise of disputed claims. In consideration of this Agreement, Eck and the Company assume the risk of any damage which now may be latent, unexpected or which may hereafter appear, develop or occur for any reason, including, without limitation, attorneys' fees and costs incurred by either party in connection with matter. 17. Costs and Fees: In the event that either party breaches the terms -------------- of this Agreement, the non-breaching party shall be entitled to recover in any action arising out of such breach reasonable attorneys' fees, as well as any costs of investigation and filing fees that may be incurred therein. 18. Arbitration: Any dispute arising under or relating to this ----------- Agreement shall be conclusively resolved by arbitration in Los Angeles, California, in accordance with the rules of the American Arbitration Association and Title 9 of the California Code of Civil Procedure, including Section 1283.05 providing for discovery. The arbitration shall be before three (3) neutral arbitrators appointed by the American Arbitration Association, at least one (1) of whom shall be a litigation partner in a law firm having at least one hundred (100) lawyers nationally. 19. Confidentiality: The parties hereto understand and specifically --------------- agree that the terms of this Agreement, and any other document executed pursuant thereto, shall remain confidential and any disclosure of the terms and condition herein, except as to Eck's family, tax and personal advisors and counsel, and as to the Company, the Board of Directors, Compensation Committee, Legal Department and appropriate officers and advisors, shall be deemed a breach of this Agreement, except such disclosure as may be required of the Company to comply with the Securities Act or the Securities Exchange Act or any rules or regulations thereunder. 20. Publications: Eck shall not disparage or impugn the character of ------------ the Company, its employees or members of its Board of Directors nor engage in any actions damaging to the reputation of the Company. The Company agrees that neither its executive officers nor its Board of Directors will disparage or impugn the character of Eck or take any action to damage his reputation. The parties will mutually agree upon the wording of any press release announcing Eck's departure from or reassignment of duties with the Company. 21. Investigation; No Reliance: Each party has made such -------------------------- investigation of the facts pertaining to this settlement and the Agreement as it deems necessary, and each party does not rely upon any statement, representation or promise of any other party, or of any officer, agent, employee, representative, or any attorney for the other party, in executing this Agreement, or in making this settlement provided for herein, except as expressly stated in this Agreement. 22. Future Employment: Eck agrees that after the Extension Period he ----------------- will not at any time seek employment with the Company or any of its affiliates, subsidiaries or divisions. 23. Governing Law: This Agreement shall be deemed to have been ------------- executed within the State of California, and the rights and obligations of the parties hereunder shall be construed and enforced in accordance with, and governed by, the laws of the State of California. 24. Successors and Assigns: This Agreement is binding upon and shall ---------------------- inure to the benefit of the parties hereto, their respective agents, employees, representatives, officers, directors, division, parent companies, subsidiaries, affiliates, assigns, heirs, successors-in-interest and shareholders. 25. Severability: The provision of this agreement are severable. ------------ If any provision is held to be invalid or unenforceable, it shall not affect the validity or enforceability of any other provision. 26. Entire Agreement; Amendment: This agreement sets forth the entire --------------------------- agreement between the parties and supersedes any and all prior oral and written agreements or understanding between them concerning the subject matter. This agreement may not be altered, amended or modified, except by a further written document signed by both parties. 27. Construction: Each party has cooperated in the preparation of ------------ this Agreement. Hence, in any construction to be made of this Agreement, the same shall not be construed against any party. ECK ACKNOWLEDGES THAT HE HAS HAD AN OPPORTUNITY TO ASK QUESTIONS, SEEK COUNSEL, AND CAREFULLY CONSIDER ALL OF THE PROVISIONS OF THE AGREEMENT BEFORE SIGNING IT. ECK AGREES THAT HE HAS READ THIS AGREEMENT, UNDERSTANDS IT, AND IS VOLUNTARILY ENTERING INTO IT. ECK HAS TWENTY-ONE (21) DAYS FORM OCTOBER 23, 1993 (THROUGH NOVEMBER 19, 1993) TO EXECUTE THIS AGREEMENT. THIS AGREEMENT WILL NOT TAKE EFFECT FOR SEVEN (7) DAYS AFTER ECK SIGNS IT. Dated: Oct 29 , 1993 /s/ Dennis K. Eck ----------- ------------------------------- Dennis K. Eck THE VONS COMPANIES, INC. Dated: , 1993 By:/s/ Roger E. Stangeland ----------- ---------------------------- Roger E. Stangeland Chairman and Chief Executive Officer 10-29-93 EX-10 11 EXHIBIT 10.27 Exhibit 10.27 THE VONS COMPANIES, INC. 401(k) WRAP-AROUND PLAN (Effective October 18, 1993) THE VONS COMPANIES, INC. 401(k) WRAP-AROUND PLAN TABLE OF CONTENTS Page ARTICLE I TITLE AND PURPOSE.......................................... 1 ARTICLE II DEFINITIONS................................................ 2 2.1. Definitions................................................... 2 ARTICLE III PARTICIPATION.............................................. 7 ARTICLE IV DEFERRAL ELECTIONS......................................... 8 4.1. Annual Deferral Elections..................................... 8 4.2. Mid-Year Deferral Election.................................... 10 4.3. Irrevocable Election.......................................... 10 ARTICLE V ACCOUNTS AND INVESTMENT EQUIVALENTS........................ 11 5.1. Accounts...................................................... 11 5.2. Company Match................................................. 11 5.3. Discretionary Company Match................................... 11 5.4. Investment Equivalents........................................ 12 5.5. Establishment of Trust........................................ 13 ARTICLE VI VESTING.................................................... 15 ARTICLE VII BENEFITS................................................... 16 7.1. Amount of Benefits............................................ 16 7.2. Method of Payment............................................. 16 7.3. Hardship Distribution......................................... 16 7.4. Company's Right to Withhold................................... 18 ARTICLE VIII ADMINISTRATION............................................. 19 8.1. The Plan Committee............................................ 19 8.2. Committee Action.............................................. 19 8.3. Rights and Duties............................................. 20 8.4. Indemnity and Liability....................................... 22 8.5. Plan Interpretations Following a Change In Control....................................................... 22 8.6. Claims Procedure and Arbitration.............................. 23 ARTICLE IX AMENDMENT AND TERMINATION.................................. 28 9.1. Amendments.................................................... 28 9.2. Discontinuance of Plan........................................ 28 Page ARTICLE X MISCELLANEOUS.............................................. 30 10.1. Receipt or Release............................................ 30 10.2. Limitation on Participants' Rights............................ 30 10.3. Beneficiaries................................................. 31 10.4. Benefits Not Assignable; Obligations Binding Upon Successors....................................... 31 10.5. Forfeiture.................................................... 32 10.6. California Law Governs; Severability.......................... 32 10.7. Gender........................................................ 32 10.8. Headings Not Part of Plan..................................... 33 THE VONS COMPANIES, INC. 401(k) WRAP-AROUND PLAN (Effective October 18, 1993) ARTICLE I --------- TITLE AND PURPOSE ----------------- This Plan shall be known as "The Vons Companies, Inc. 401(k) Wrap- Around Plan" and shall become effective October 18, 1993. The purpose of this Plan is to provide a long-term performance incentive to employees of The Vons Companies, Inc. and a means of attracting and retaining employees of outstanding abilities. ARTICLE II ---------- DEFINITIONS ----------- 2.1. Definitions. Whenever the following terms are used in this ----------- Plan they shall have the meaning specified below unless the context clearly indicates to the contrary: Account shall mean the account maintained for each Participant to ------- reflect (i) the Compensation or Profit-related Flexdollar Contribution deferred by the Participant, (ii) the Company Match, (iii) the Discretionary Company Match and (iv) Investment Equivalents. Board of Directors shall mean the Board of Directors of the ------------------ Company. Change in Control shall mean: ----------------- (a) Any acquisition by another Person of voting stock of the Company if such person shall thereafter be the Beneficial Owner of 50% or more of such outstanding voting stock; (b) Any merger or consolidation of the Company with or into any other Person, as the result of which the holders of the Company's voting stock immediately prior to the transaction shall, on the basis of such holdings prior to such transaction, hold less than 50% of the total outstanding voting stock of the surviving corporation immediately upon completion of the transaction; (c) Any sale or exchange of all or substantially all of the property and assets of the Company; or (d) Any change in a majority of the Board occurring within a period of two years or less, such that a majority of the Board is comprised of individuals who are not Continuing Directors. For purposes of the foregoing, a "Continuing Director" shall be a director (i) who was in office at the commencement of such period of two years of (ii) who was elected subsequent to the commencement of any such period with the approval of not less than a majority of those directors referred to in clause (i) who are then in office. Any director meeting the qualifications of clause (ii) of the previous sentence shall, with respect to further determinations after the date of such director's initial election, be deemed to be a director meeting the qualifications of clause (i) of the previous sentence. For the purposes of this definition, "Person" shall have the meaning of such term under Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the "Act"); and the term "Beneficial Owner" shall have the meaning set forth in Rule 13d-3 under the Act. Notwithstanding the foregoing, a Change in Control shall not be deemed to have occurred under (1), (2) or (3) above if the acquirer, purchaser or 50% owner is an employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company. Code shall mean the Internal Revenue Code of 1986, as amended. ---- Company shall mean The Vons Companies, Inc. and any of its wholly- ------- owned subsidiaries. Company Match shall mean the additional amount credited to a ------------- Participant's Account as a result of the Participant's election to defer his Profit-related Flexdollar Contribution, as described in Section 5.2. Compensation shall mean the base salary, bonus and LTIP Payout ------------ which, but for the elections permitted under this Plan, would be payable to a Participant. Compensation Committee shall mean the Compensation Committee ---------------------- appointed by the Board of Directors. Discretionary Company Match shall mean the additional amount --------------------------- credited to a Participant's Account as a result of the Participant's election to defer his Compensation, as described in Section 5.3. Investment Equivalent shall mean the amount determined by the Plan --------------------- Committee for each Participant pursuant to Article V. LTIP Payout shall mean the amount payable to the Participant ----------- during a Plan Year from the Company's Long Term Incentive Plan. Participant shall mean a person who is eligible for this Plan and ----------- makes the deferrals described in Article IV. A person shall cease to be a Participant upon payment of his Account. Plan shall mean The Vons Companies, Inc. 401(k) Wrap-Around Plan. ---- Plan Committee shall mean the Management Compensation Committee of -------------- the Company, the members of which shall be appointed from time to time by the Compensation Committee in accordance with Article VIII. The Plan Committee may be comprised of Participants in this Plan. Plan Year shall mean the calendar year. --------- Profit-related Flexdollar Contribution shall mean the contribution -------------------------------------- allocated to the Participant under Section 3.1(b) of the Profit Sharing Plan. Profit Sharing Plan shall mean The Vons Companies, Inc. Personal ------------------- Choice Profit Sharing Plan. Trust shall mean the grantor trust established by the Company ----- under Section 5.5 from which the benefits of this Plan may (and, following a Change in Control, shall) be paid. Valuation Date shall mean the last day of each Plan Year. -------------- ARTICLE III ----------- PARTICIPATION ------------- Eligibility for participation in the Plan shall be limited to management and highly compensated employees of the Company (including officers and directors) whose (i) Compensation exceeds the limit under Section 401(a)(17) of the Code, or (ii) total Profit-related Flexdollar Contribution cannot be contributed to the Profit Sharing Plan because of the limit under Section 402(g) of the Code. Members of the Plan Committee who satisfy the above criteria are eligible to participate in the Plan. ARTICLE IV ---------- DEFERRAL ELECTIONS ------------------ 4.1. Annual Deferral Elections. In order to make the deferral ------------------------- elections permitted under this Section 4.1 for any Plan Year, a Participant must file a written application for participation with the Plan Committee on a form provided by the Plan Committee not later than the December 30th immediately preceding such Plan Year, stating the percentage of base salary, bonus award, LTIP Payout or Profit-related Flexdollar Contribution that the Participant elects to defer, and stating the date of payment desired, according to Section 7.1. Consistent with the preceding sentence, a Participant may elect to defer up to 100% of one or more of the following amounts for any Plan Year: (a) The portion of the Participant's base salary in excess of the Code Section 401(a)(17) limit in effect for such Plan Year; (b) Any bonus payable to the Participant during such Plan Year; provided, however, that if the Participant's base salary is less than the Code Section 401(a)(17) limit in effect for such Plan Year, the Participant can only elect to defer that portion of the bonus which exceeds an amount equal to the Code Section 401(a)(17) limit minus the Participant's base salary; (c) Any LTIP Payout to be made to the Participant during such Plan Year; and (d) The portion of the Participant's Profit-related Flexdollar Contribution which cannot be contributed to the Profit Sharing Plan because of the Code Section 402(g) limit in effect for such Plan Year. The Participant's base salary, bonus award, LTIP Payout or Profit-related Flexdollar Contribution shall be reduced by the amount stated in the Participant's election. Said amount shall be credited to the Participant's Account as of the earliest date such amount would otherwise be due and payable, except that with respect to the portion of a Participant's Profit- related Flexdollar Contribution deferred under this Plan, such amount shall be credited as of the December 31 of the Plan Year in which such amount is earned; provided, however, that the Investment Equivalents on such Profit- related Flexdollar Contribution deferred shall commence to be credited as of the following January 1. Notwithstanding the above, the application for participation with respect to the Plan Year commencing October 18, 1993 must be filed with the Plan Committee no later than October 31, 1993. A Participant's application with respect to the initial Plan Year shall be effective starting with the first payroll period commencing after the application is filed with the Plan Committee. 4.2. Mid-Year Deferral Election. If permitted by the Plan -------------------------- Committee, in the event that a Participant first becomes eligible to participate in the Plan after the commencement of the Plan Year, the Participant may file a written application to defer the amounts described in Section 4.1(a), (b), (c) and (d) within 30 days after the date he first becomes eligible to participate in the Plan. Such application shall be effective with respect to the Participant's base salary, bonus, LTIP Payout or Profit-related Flexdollar Contribution payable after such application is filed with the Plan Committee. 4.3. Irrevocable Election. A deferral election made in -------------------- accordance with this Article IV with respect to any Plan Year shall become binding and irrevocable in all respects upon the commencement of the Plan Year to which such election applies, except in the event of a hardship, to the extent set forth in Section 7.3. ARTICLE V --------- ACCOUNTS AND INVESTMENT EQUIVALENTS ----------------------------------- 5.1. Accounts. The Plan Committee shall maintain an Account for -------- each Participant and shall credit such Account with (i) the amounts of base salary, bonus award, LTIP Payout and Profit-related Flexdollar Contribution deferred pursuant to Article IV, (ii) the Company Match calculated pursuant to Section 5.2, (iii) the Discretionary Company Match calculated pursuant to Section 5.3 and (iv) the Investment Equivalents calculated pursuant to Section 5.4. 5.2. Company Match. The Plan Committee shall credit each ------------- Participant's Account with an amount equal to 100% of the Profit-related Flexdollar Contribution deferred by the Participant. Such amount shall be credited to the Participant's Account at the same time that the deferred Profit-related Flexdollar Contribution is credited to his Account as described in Section 4.1. 5.3. Discretionary Company Match. The Plan Committee may credit --------------------------- a Participant's Account with an amount equal to some percentage, established by the Plan Committee in its sole discretion, of the base salary, bonus award or LTIP Payout deferred by the Participant. Such amount shall be credited to the Participant's Account as of the December 31 of the relevant Plan Year. 5.4. Investment Equivalents. The Investment Equivalent under the ---------------------- Plan for the deferrals, the Company Match and the Discretionary Company Match credited to the Plan for a particular Plan Year shall be the rate of return established by the Compensation Committee in consultation with the Plan Committee for that Plan Year. Such rate will be set at a value intended to approximate the Company's incremental cost of long term borrowing and each Participant's Account shall be credited with appropriate earnings based on such rate. Such amount shall be credited on each Valuation Date or at such other times as may be established by the Plan Committee. It is anticipated that the Compensation Committee shall establish a new rate of return annually, but the new rate of return shall apply only to the deferrals, Company Match and Discretionary Company Match made for the Plan Year for which the new rate of return is established. The Company has no obligation to invest amounts deferred under the Plan in any particular manner. All amounts under the Plan are subject to the creditors of the Company; the Participants and Beneficiaries shall have no rights superior to those of the unsecured creditors of the Company. 5.5. Establishment of Trust. The Company shall establish the ----------------------- Trust, or shall amend the trust established under the Company's 1992 Supplemental Executive Retirement Plan to include the benefits payable under this Plan; such trust shall then be considered the Trust. Prior to a Change in Control, the Company, in its sole discretion, may at any time and from time to time, make contributions of cash or other property to the Trust. Neither the Trustee nor any Participant or beneficiary shall have any right to compel such contributions. Upon a Change in Control, the Company shall immediately make irrevocable contributions to the Trust in the amounts credited to all Participants and beneficiaries' Accounts as of the date on which the Change in Control occurred. The provisions of the Plan shall govern the rights of Participants to receive distributions pursuant to the Plan. The provisions of the Trust shall govern the rights of the Company, the Participants and the creditors of the Company to the assets transferred to the Trust. The Company shall at all times remain liable to carry out its obligations under the Plan. The Company's obligations under the Plan may be satisfied with Trust assets distributed pursuant to the terms of the Trust. ARTICLE VI ---------- VESTING ------- The interest of a Participant in his benefits under the Plan (other than the benefits attributable to the Discretionary Company Match and the Investment Equivalents attributable thereto) shall be 100% vested at all times. The Discretionary Company Match, and the Investment Equivalents attributable thereto, if any, credited to a Participant's Account shall vest at such times as are provided for under the Profit Sharing Plan. ARTICLE VII ----------- BENEFITS -------- 7.1. Amount of Benefits. A Participant (or his beneficiary in ------------------ the case of his death) shall become entitled to payment of the vested portion of his Account upon (i) the Participant's termination of employment with the Company (whether due to retirement, death, disability, or other separation from service), or (ii) the date designated by the Participant at the time of making his deferral election, whichever occurs first. 7.2. Method of Payment. A Participant's benefits under the Plan ----------------- shall be paid in the form of a lump sum as soon as administratively feasible following the time of entitlement to a benefit specified in Section 7.1. 7.3. Hardship Distribution. The Plan Committee may, in its sole --------------------- discretion, upon written request of a Participant, make a lump sum payment to a Participant or beneficiary of part or all of the amounts such Participant or beneficiary is entitled to receive under this Plan to take account of and ameliorate a financial hardship affecting him or any of his dependents. A hardship shall be an event specified in Treasury Regulation Section 1.401(k)- 1(d)(2)(B), and such other serious financial hardships as determined by the Plan Committee. If a Participant receives a distribution pursuant to this Section 7.3, his deferrals shall be suspended for the remainder of the Plan Year, and he shall not be permitted to make a deferral election under Article IV for the following Plan Year. Furthermore, if a Participant suffers a hardship (as determined by the Plan Committee according to the above criteria), the Participant may suspend his deferrals for the remainder of the Plan Year without requesting a distribution. If the Participant requesting a distribution or suspension upon hardship is a member of the Plan Committee, he shall not participate in the decision of the Plan Committee. The amount of any such lump sum payment shall not exceed the lesser of: (a) the amount necessary to take account of and ameliorate such hardship or (b) the entire amount of such Participant's Account. The remaining portion of such Participant's Account, if any, shall be distributed in accordance with Sections 7.1 and 7.2. This Section shall not be construed to allow distribution under the Plan of amounts greater than those the Participant would have otherwise received, if no distribution under this Section had been made. 7.4. Company's Right to Withhold. The Company shall have the --------------------------- right to deduct from any payment any federal, state or local taxes required by law to be withheld with respect to such payments. ARTICLE VIII ------------ ADMINISTRATION -------------- 8.1. The Plan Committee. Any member of the Plan Committee may ------------------ resign by delivering a written resignation to the Compensation Committee. Members of the Plan Committee shall not receive any additional compensation for administration of the Plan. 8.2. Committee Action. The Plan Committee shall, for the purpose ---------------- of administering the Plan, choose a Secretary who may be, but is not required to be, a member of the Plan Committee, who shall keep minutes of the Plan Committee's proceedings and all records and documents pertaining to the Plan Committee's administration of the Plan. A member of the Plan Committee shall not vote or act upon any matter which relates solely to himself as a Participant in this Plan. The Secretary may execute any certificate or other written direction on behalf of the Plan Committee. Any act which this Plan authorizes or requires the Plan Committee to do may be done by a majority of its members. The action of such majority, expressed from time to time by a vote at a meeting or by unanimous written consent of Plan Committee members without a meeting, shall constitute the action of the Plan Committee. 8.3. Rights and Duties. Subject to the limitations of this Plan, ----------------- the Plan Committee shall be charged with the general administration of this Plan and the responsibility for carrying out its provisions, and shall have powers necessary to accomplish those purposes, including, but not by way of limitation, the following: (a) To construe, interpret and administer the Plan; (b) To consult with the Compensation Committee to determine the Investment Equivalents; (c) To make any other determinations required by this Plan which are not explicitly made the authority of another person or persons by this Plan; (d) To compute and certify the amount of benefits payable to Participants; (e) To authorize all payments pursuant to the Plan; (f) To determine the necessity for and the amount of any hardship distribution pursuant to Section 7.3 of this Plan; (g) To maintain all the necessary records for the administration of the Plan; (h) To make and publish rules for the administration, interpretation and regulation of the Plan; and (i) To communicate to each Participant annually, as soon as practicable after the close of each Plan Year, the value of his Account. All actions taken and all determinations made by the Plan Committee and the Plan Committee's calculation of benefits payable to Participants shall be conclusive. In performing its duties, the Plan Committee shall be entitled to rely on information, opinions, reports or statements prepared or presented by: (i) officers or employees of the Company whom the Plan Committee believes to be reliable and competent as to such matters; and (ii) counsel (who may be counsel to the Company), independent accountants and other persons as to matters which the Plan Committee believes to be within such persons' professional or expert competence. The Plan Committee shall be fully protected with respect to any action taken or omitted by it in good faith pursuant to the advice of such persons. 8.4. Indemnity and Liability. All expenses of the Plan Committee ----------------------- shall be paid by the Company and the Company shall furnish the Plan Committee with such clerical and other assistance as is necessary in the performance of its duties. No member of the Plan Committee shall be liable for any act or omission of any other member of the Plan Committee nor for any act or omission on his own part, excepting only his own willful misconduct or gross negligence. To the extent permitted by law, the Company shall indemnify and save harmless each member of the Plan Committee against any and all expenses and liabilities arising out of his membership on the Plan Committee, excepting only expenses and liabilities arising out of his own willful misconduct or gross negligence, as determined by the Board of Directors. 8.5. Plan Interpretations Following a Change In Control. -------------------------------------------------- Following a Change in Control, any provisions of this Plan which allow or purport to allow the Plan Committee, the Company or any fiduciary of the Plan discretionary authority or power to construe and interpret the terms of the Plan shall be void as applied to any dispute involving benefits which accrued under this Plan prior to the Change in Control. Accordingly, as to such disputes, an arbitrator or court shall, following a Change in Control, interpret the Plan on a de novo basis other than with respect to any ------- interpretations or rulings made by the Plan Committee prior to the Change in Control. 8.6. Claims Procedure and Arbitration. -------------------------------- (a) A Participant or beneficiary (collectively referred to as a "Claimant") may, if he or she desires, submit any claim for payment under this Plan or dispute regarding the interpretation of this Plan to arbitration. This right to select arbitration shall be solely that of the Claimant, and the Claimant may decide whether or not to arbitrate in his or her discretion. The "right to select arbitration" does not impose upon the Claimant a requirement to submit a dispute for arbitration. The Claimant may, in lieu of arbitration, pursue the claims procedure established by the Plan Committee, and upon exhaustion of such claims procedure, bring an action in an appropriate civil court. Furthermore, at any time during the claims procedure, and before the Claimant commences an action in a civil court, the Claimant may select arbitration. The claims procedure would thereafter be abandoned, and the dispute would be subject to the arbitration procedure set forth herein. The Claimant need not commence or exhaust the Plan's claim procedure in order to commence arbitration. The Claimant retains the right to select arbitration, even if a civil action (including, without limitation, an action for declaratory relief) is brought by the Company, or any other fiduciary of the Plan prior to the commencement of arbitration. If arbitration is selected by the Claimant after a civil action concerning the Claimant's dispute has been brought by a person other than the Claimant, then the Company, any Trustee of a grantor trust from which benefits may be payable ("Trustee") and the Claimant shall take such actions as are necessary or appropriate, including dismissal of the civil action, so that the arbitration can be timely heard. Once an arbitration is commenced, it may not be discontinued without the unanimous consent of all parties to the arbitration. During the lifetime of the Employee only he or she can use the arbitration procedure set forth in this section. (b) Any claim for arbitration may be submitted as follows: if the Claimant disagrees with an interpretation of this Plan by the Company, or any fiduciary of the Plan, or disagrees with the calculation of his or her benefit under the Plan, such claim may be filed in writing with an arbitrator of the Claimant's choice who is selected by the method described in the next four sentences. The first step of the selection shall consist of the Claimant submitting in writing a list of five potential arbitrators to the Company, and the Trustee. Each of the five arbitrators must be either (1) a member of the National Academy of Arbitrators located in the state of the Claimant's principal residence or (2) a retired California Superior Court or Appellate Court judge. Within one week after receipt of the list, the Trustee and the Company shall jointly select one of the five arbitrators as the arbitrator for the dispute in question. If the Trustee and Company fail to select an arbitrator in a timely manner (including failure to select an arbitrator by reason of disagreement between the Trustee and the Company as to the arbitrator to be selected), the Claimant shall then designate one of the five arbitrators as the arbitrator for the dispute in question. (c) The arbitration hearing shall be held within seven days (or as soon thereafter as possible) after the selection of the arbitrator. No continuance of said hearing shall be allowed without the mutual consent of the Claimant, the Trustee and the Company. Absence from or nonparticipation at the hearing by any party shall not prevent the issuance of an award. Hearing procedures which will expedite the hearing may be ordered at the arbitrator's discretion, and the arbitrator may close the hearing in his or her sole discretion when he or she decides he or she has heard sufficient evidence to satisfy issuance of an award. (d) The arbitrator's award shall be rendered as expeditiously as possible and in no event later than one week after the close of the hearing. In the event the arbitrator finds that the Claimant is entitled to the benefits he or she claimed, the arbitrator shall order the Company and/or the Trustee to pay such benefits, in the amounts and at such times as the arbitrator determines. The obligation of the Trustee to pay such benefits shall not, however, exceed the assets of the trust, and the Company shall be jointly and severally liable for any amount which the Trustee is ordered to pay. The award of the arbitrator shall be final and binding upon the parties. The Company shall thereupon pay the Claimant immediately the amount that the arbitrator orders to be paid in the manner described in the award. The award may be enforced in any appropriate court as soon as possible after its rendition. If an action is brought to confirm the award, no appeal shall be taken by any party from any decision rendered in such action. (e) If the arbitrator determines either that the Claimant is entitled to the claimed benefits or that the claim by the Claimant was made in good faith, the arbitrator shall direct the Company to pay to the Claimant and Company agrees to pay to the Claimant in accordance with such order, an amount equal to the Claimant's expenses in pursuing the claim, including attorneys' fees. ARTICLE IX ---------- AMENDMENT AND TERMINATION ------------------------- 9.1. Amendments. The Compensation Committee shall have the right ---------- to amend this Plan in whole or in part from time to time by resolutions, and to amend or cancel any amendments; provided, however, that no action under this section shall cancel or otherwise adversely affect in any way any Participant's rights with respect to amounts previously allocated to any Participant's Account. The Compensation Committee in consultation with the Plan Committee is specifically granted the power to change the Investment Equivalents to be credited to Accounts on an annual basis, but only with respect to the deferrals, Company Match and Discretionary Company Match made for the Plan Year for which such new rate of Investment Equivalent is established. Such amendments shall be stated in an instrument in writing, certified in the same manner and at the time therein set forth, and all Participants shall be bound thereby upon receipt of notice thereof. 9.2. Discontinuance of Plan. It is the expectation of the ---------------------- Company that this Plan shall be continued indefinitely, but continuance of this Plan is not assumed as a contractual obligation of the Company. In the event that the Board of Directors decides to discontinue and terminate this Plan, it shall notify the Plan Committee of its action in an instrument in writing, certified in the same manner as this Plan, and this Plan shall be terminated at the time therein set forth, and all Participants shall be bound thereby; provided, however, that no action under this section shall cancel or affect in any way any Participant's rights with respect to amounts previously allocated to any Participant's Account, except that if such termination or discontinuance occurs prior to a Change in Control, the Plan Committee in its sole discretion may elect to immediately pay benefits to all Participants in a lump sum. If such termination or discontinuance occurs following a Change in Control, then the payment of benefits from the Trust and this Plan shall be governed by the provisions of the Plan and the Trust prior to the termination or discontinuance. ARTICLE X --------- MISCELLANEOUS ------------- 10.1. Receipt or Release. Any payment to any Participant or ------------------ beneficiary in accordance with the provisions of this Plan shall, to the extent thereof, be in full satisfaction of all claims against the Plan Committee, the Compensation Committee and the Company, and, to the extent permitted by law, the Plan Committee may require such Participant, as a condition precedent to such payment, to execute a receipt and release to such effect. 10.2. Limitation on Participants' Rights. Participation in this ---------------------------------- Plan shall not give any Participant the right to be retained in the employ of the Company or any rights or interest other than as herein provided. The employment rights of any Participant or other Employee shall not be enlarged, guaranteed or affected by reason of any of the provisions of this Plan. The Company reserves the right to dismiss any Participant without any liability for any claim against the Company under this Plan, except for payment of vested benefits to the extent expressly provided herein. This Plan shall create only a contractual obligation on the part of the Company as to such amounts and shall not be construed as creating a trust or any fiduciary relationship. This Plan, in and of itself, has no assets and no assets or funds of the Company shall be set aside or otherwise segregated to satisfy the obligations created hereunder, other than in the Trust. Participants or Beneficiaries shall have only the rights of general unsecured creditors of the Company with respect to amounts credited and benefits payable, if any, on their Accounts. 10.3. Beneficiaries. A Participant may designate in writing, on ------------- forms prescribed by and filed with the Committee, a beneficiary or beneficiaries to receive any payments payable after his death and may at any time amend or revoke any such designation. If no beneficiary designation is in effect at the time of a Participant's death, payments hereunder shall be made to his personal representative. Any payments which would have been payable to any Participant if he had lived shall be paid to the Participant's designated Beneficiaries (or, in the absence of any such designation, to his personal representative) according to Section 7.2. 10.4. Benefits Not Assignable; Obligations Binding Upon ------------------------------------------------- Successors. Benefits of a Participant under this Plan shall not be - ----------- assignable or transferable and any purported transfer, assignment, pledge or other encumbrance or attachment of any payments or benefits under this plan, other than by operation of law or pursuant to Section 10.3, shall not be permitted or recognized. Obligations of the Company under this Plan shall be binding upon successors of the Company. 10.5. Forfeiture. Any payment or distribution to a Participant or ---------- beneficiary under the Plan shall be deemed made when mailed by normal first class mail to the last known mailing address of the Participant or beneficiary. Neither the Plan Committee, the Compensation Committee nor the Company shall have any duty to give notice that amounts are payable under the Plan to any person other than the Participant. 10.6. California Law Governs; Severability. The validity of this ------------------------------------ Plan or any of its provisions shall be construed, administered and governed in all respects under and by the laws of the State of California to the extent such laws are not preempted by federal law. If any provisions of this instrument shall be held by a court of competent jurisdiction to be invalid or unenforceable, the remaining provisions hereof shall continue to be fully effective. 10.7. Gender. The masculine pronoun and adjective shall be deemed ------ to include the feminine, unless a different meaning is plainly required by the context. 10.8. Headings Not Part of Plan. Headings and subheadings in this ------------------------- Plan are inserted for reference only and are not to be considered in the construction of the provisions hereof. IN WITNESS WHEREOF, the Company hereby adopts this Plan on this 11th day of October, 1993. - ---- THE VONS COMPANIES, INC. By: /s/ Terrence Joseph Wallock -------------------------------- Terrence. J. Wallock Its Senior Vice President --------------------------- Chief Legal & Security Officer & Secty -----END PRIVACY-ENHANCED MESSAGE-----