<PAGE>
UNITED GROCERS, INC., AND SUBSIDIARIES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the Quarterly period ended March 31, 1995
Commission File Number 2-60487
United Grocers, Inc.
(Exact name of registrant as specified in its charter)
Oregon 93-0301970
(State or other jurisdiction of (IRS Employer identification No.)
incorporation or organization)
6433 S.E. Lake Road
Post Office Box 22187, Milwaukie, Oregon 97269
(address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (503) 833-1000
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 the number of shares outstanding for each of the issuer's classes of
common stock, as of the latest practicable date. 627,764 shares of common
stock, $5 par value as of May 10, 1995.
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
The following unaudited consolidated financial statements of United
Grocers, Inc., and subsidiaries for the periods ended March 31, 1995 and April
1, 1994, include all adjustments which management considers necessary for a
fair presentation of the results for the interim periods. All adjustments to
prior period figures are for the purpose of making the results comparable and
are of a normal recurring nature. Any changes in accounting methods not of a
normal recurring nature are separately disclosed.
In the last quarter of 1993-94 the Company adopted FASB #113 (Accounting
for Reinsurance Contracts). This change on the balance sheet had the effect
of grossing up amounts related to reinsurance rather than netting them. There
was no effect to the income statement.
In the second quarter of 1994-95 the Company adopted FASB #115
(Accounting for Certain Investments in Debt and Equity Securities). This
change on the balance sheet had the effect of increasing current assets and
equity by $116,006. There was no effect to the income statement.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries, Grocers Insurance Group, Inc., Grocers
Insurance Agency, Inc., UGIC, Ltd., Grocers Insurance Company (formerly United
Employers Insurance Co.), United Workplace Consultants, Inc., U.G. Resources,
Inc., United Resources, Inc., BAT Enterprises, Inc., Western Passage Express,
Inc., United Store Development, Ltd., Premier Consulting, Inc. (formerly
Employee Management Services, Inc.), Western Security Services, Inc.,
Affiliated General Agency, Inc., Rich and Rhine, Inc. and Northwest Process,
Inc. All intercompany balances and transactions have been eliminated upon
consolidation.
<PAGE>
UNITED GROCERS, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1995 and SEPTEMBER 30, 1994
<TABLE>
<CAPTION>
(Unaudited) (Audited)
ASSETS 3/31/95 09/30/94
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 15,232,403 $ 12,984,028
Investments maintained for
insurance reserves 41,223,537 36,939,578
Accounts and notes receivable 56,556,390 60,290,461
Inventories 79,143,822 74,307,422
Other current assets 5,973,714 5,367,295
Deferred income taxes 2,942,855 2,811,914
------------ ------------
Total current assets 201,072,721 192,700,698
------------ ------------
NON-CURRENT ASSETS:
Notes receivable 29,748,664 33,155,543
Investment in affiliated companies 7,872,484 7,832,484
Other receivables and investments 8,607,306 6,899,133
Other non-current assets 10,809,990 7,730,575
------------ ------------
Total non-current assets 57,038,445 55,617,735
------------ ------------
PROPERTY, PLANT AND EQUIPMENT -
(Net of accumulated depreciation) 61,732,413 58,517,120
------------ ------------
TOTAL $319,843,579 $306,835,553
============ ============
</TABLE>
<PAGE>
UNITED GROCERS, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1995 and SEPTEMBER 30, 1994
(continued)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
LIABILITIES AND MEMBERS' EQUITY 3/31/95 09/30/94
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES:
Notes payable - bank $ 35,600,751 $ 31,020,667
Accounts payable 60,392,331 64,629,410
Insurance reserves supported by
investments 35,317,038 32,038,408
Compensation and taxes payable 3,535,054 2,952,534
Other accrued expenses 4,471,385 3,159,900
Members' patronage payable 1,482,000 6,865,736
Current installments on
long-term liabilities 6,636,106 6,776,197
------------ ------------
Total current liabilities 147,434,665 147,442,852
------------ ------------
LONG-TERM LIABILITIES 126,961,218 114,669,266
------------ ------------
DEFERRED INCOME TAXES 3,871,793 3,744,109
------------ ------------
DEFERRED INCOME 531,802 554,469
------------ ------------
MEMBERS' EQUITY (Members' Equity is
subject to redemption due to the
occurrence of certain events, e.g.,
termination of membership):
Common stock (Authorized, 10,000,000
shares at $5.00 par value;issued
and outstanding, 628,504 shares at
March 31, 1995 and 619,881 shares
at September 30, 1994) Shares owned
by a member in excess of 4,000 are subject
to repurchase. See Note below) 3,228,293 3,256,080
Additional paid-in capital 22,750,183 22,472,564
Retained earnings 14,949,019 14,696,213
Valuation reserve per FASB 115 116,606 ---
------------ ------------
Total members' equity 41,044,101 40,424,857
------------ ------------
TOTAL $319,843,579 $306,835,553
============ ============
</TABLE>
Common stock note: 19,704 shares are subject to repurchase at March 31, 1995
and 22,409 at September 30, 1994 in the amounts of $1,172,388 and $1,277,213,
respectively. At March 31, 1995 and September 30, 1994 there were 1,781 and
2,869 shares, respectively, held for possible redemption in the amounts of
$105,970 and $163,533 respectively.
<PAGE>
UNITED GROCERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(Unaudited)
QUARTER ENDED SIX MONTHS ENDED
03/31/95 04/01/94 03/31/95 04/01/94
-------- -------- -------- --------
<C> <C> <C> <C>
Net sales and operations 248,139,207 226,615,462 491,427,941 456,015,284
------------ ------------ ------------ ------------
Costs and expenses:
Cost of sales 211,608,245 192,796,346 419,101,556 387,992,138
Operating expenses 25,922,869 23,327,467 50,211,578 47,256,878
Selling and administrative
expenses 2,449,193 2,255,207 4,819,468 4,694,747
Depreciation 1,516,264 1,413,585 2,903,442 2,716,714
Interest:
Interest expense 3,483,151 2,231,965 5,942,904 4,362,330
Interest income ( 1,388,158) ( 523,778) ( 2,254,636) ( 1,662,413)
------------ ------------ ------------ ------------
Interest expense, net 2,094,993 1,708,187 3,688,268 2,699,917
------------ ------------ ------------ ------------
Total cost and expenses 243,591,564 221,500,792 480,724,312 445,360,394
------------ ------------ ------------ ------------
Income before members' allowances,
patronage dividends and income
taxes 4,547,643 5,114,670 10,703,629 10,654,890
Members' allowances ( 3,564,092) ( 3,474,703) ( 7,430,293) ( 7,021,062)
Members' patronage dividends ( 500,000) ( 900,000) ( 1,900,000) ( 2,200,000)
------------ ------------ ------------ ------------
Income before income taxes 483,551 793,967 1,373,336 1,433,828
Provision for income taxes ( 175,858) ( 231,100) ( 549,334) ( 476,500)
------------ ------------ ------------ ------------
Net Income $ 307,693 $ 508,867 824,002 957,328
============ ============ ============ ============
</TABLE>
<PAGE>
UNITED GROCERS, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------- ----------------
MARCH 31 APRIL 1
CASH FLOWS FROM OPERATING ACTIVITIES: 1995 1994
------------ ------------
<S> <C> <C>
Net income $ 824,002 $ 957,328
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation 2,903,442 2,716,714
Provision for doubtful accounts
and notes 1,012,965 1,012,190
Patronage dividends payable in
common stock 933,936 1,514,177
(Gain)loss on sale of assets ( 51,344) 65,279
Deferred income taxes ( 3,257) -0-
Decrease (increase) in non-cash
current assets:
Accounts and notes receivable 3,734,071 ( 7,635,622)
Inventories ( 4,836,400) 7,587,360
Other current assets ( 1,730,757) ( 1,780,350)
Increase (decrease) in non-cash
current liabilities:
Accounts payable and insurance
reserves ( 958,449) ( 1,784,644)
Compensation and taxes payable 559,853 ( 241,807)
Other accrued expenses 1,311,485 2 603,532
Members' patronage and other
refunds ( 5,383,736) ( 5,784,927)
Decrease (increase) in non-current
other assets ( 3,663,250) ( 495,791)
------------ ------------
Net cash provided by (used in)
operating activities ( 5,347,439) ( 1,266,561)
-------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Loans to members ( 7,712,978) ( 14,199,135)
Collections on loans to members 2,031,071 8,184,508
Proceeds from sale (buyback) of member loans 8,075,821 ( 2,557,064)
Sale of investments 3,986,891 597,493
Redemption of investments 3,808,311 847,366
Purchase of investments (11,951,212) ( 5,125,805)
Sale of property/plant/equipment 169,546 146,756
Purchase-property/plant/equipment ( 6,288,281) ( 4,322,022)
------------ ------------
Net cash provided by (used in)
investing activities ( 7,880,831) ( 16,427,903)
------------ ------------
<PAGE>
UNITED GROCERS, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Continued)
(Unaudited)
<CAPTION>
SIX MONTHS ENDED
---------------- ----------------
MARCH 31 APRIL 1
1995 1994
------------ ------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock 71,400 525,243
Repurchase of common stock ( 1,326,700) ( 1,856,201)
Proceeds of long-term liabilities:
Revolving bank lines of credit 369,400,000 398,700,000
Mortgages and notes 3,536,128 700,579
Redeemable notes and certificates 7,476,300 8,740,300
Repayment of long-term liabilities:
Revolving bank lines of credit (353,641,758) (385,071,328)
Mortgages and notes ( 1,324,052) ( 1,330,946)
Redeemable notes and certificates ( 8,714,673) ( 10,521,846)
------------ ------------
Net cash provided by (used in)
financing activities 15,476,645 9,885,801
------------ ------------
Net increase (decrease) in cash and
cash equivalents 2,248,375 ( 7,808,663)
Cash and cash equivalents, beginning of year 12,984,028 18,807,473
------------ ------------
Cash and cash equivalents, end of quarter $ 15,232,403 $ 10,998,810
============ ============
</TABLE>
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Six months ended March 31, 1995 compared to six months ended April 1, 1994
RESULTS OF OPERATIONS
OVERVIEW
In 1995, net sales and operations increased 7.8% to $491.4 million. This
compares to a 5.9% increase in 1994 to $456.0 million. Net income before
member allowances, patronage dividends, and income taxes totalled $10.7
million (2.2% of sales) compared to $10.7 million (2.3% of sales).
During 1995, the increase in net sales and operations was due primarily
to higher unit volume in the distribution segment, increased written premiums
in the insurance segment, offset by lower volume from the retail store
operations. Profitability improved due to the increase in unit volume, as well
as lower retail store losses. Offsetting these improvements were increased
property and casualty losses, and higher interest expense due to increased
borrowing rates.
In January, the Company purchased the assets of Rich and Rhine, Inc., a
convenience store distributor, for $3.4 million, and goodwill of $1.5 million.
Also, in January, the Company purchased the assets of Commissary Cash &
Carry, Inc., a grocery wholesaler, for $1.8 million, and non-compete agreement
for $1.0 million.
NET SALES AND OPERATIONS
Warehouse and Cash & Carry distribution segment sales increased 4.0% to
$445.7 million. Warehouse sales increased 1.7 %. Cash & Carry sales
increased 13.5% due to higher unit volumes (8.5%) and sales at new units
(5.0%).
Insurance segment net premiums, commissions and fees increased 9.8% in
1995 to $11.3 million, primarily due to increases in written premiums and
commissions offset by increased reinsurance premiums ceded.
COSTS AND EXPENSES
In 1995, total costs and expenses increased $35.4 million to $480.7
million (97.8% of sales). This compares to $445.4 million (97.7% of sales) in
1994. The components of costs and expenses are outlined below:
Costs and Expenses as a Percent of Net Sales and Operations:
For the Six months ended:
3/31/95 4/01/94
------- -------
Cost of Sales 85.2 85.1
Operating expenses 10.2 10.4
Selling and administrative
expenses 1.0 1.1
Depreciation and amortization 0.6 0.6
Interest expense, net 0.8 0.5
---- ----
Total 97.8 97.7
Cost of sales as a percent of net sales and operations increased to 85.2%
in 1995 from 85.1% in 1994 primarily due to increased loss and loss adjustment
expenses.
Operating expenses as a percent of net sales and operations decreased
0.2% to 10.2% in 1995 due to decreased operating expenses in the retail store
operations.
<PAGE>
MEMBER ALLOWANCES AND PATRONAGE DIVIDENDS
In 1995, member allowances and patronage dividends were $9.3 million
(1.9% of sales). This compares to $9.2 million (2.0% of sales) in 1994. The
increase is due to higher volume rebates.
NET INCOME AND INCOME TAXES
Net income after member allowances, patronage dividends, and before taxes
was $1.4 million (0.3% of sales) in 1995 compared to $1.4 million (0.3% of
sales) in 1994. Net income after taxes was $0.8 million (0.2% of sales)
compared to $1.0 million (0.2% of sales) in 1994.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS FROM OPERATING ACTIVITIES
In 1995, the Company used $5.3 million in cash in its operations, an
increase of $4.1 million in cash used compared to 1994. Merchandise
inventories increased primarily due to increased volume. Other non-current
assets increased $3.7 million reflecting increases investments in software
assets, the purchase of goodwill in the Rich and Rhine acquisition, and the
purchase of a non compete agreement in connection with the acquisition of the
Commissary Cash & Carry assets ($1.0 million).
At the beginning of the prior fiscal year, the Company adopted FASB #113
(Accounting for Reinsurance Contracts). The adoption of this change had the
effect of increasing accounts receivable by $2.4 million, other current assets
by $1.5 million and accounts payable by $3.9 million.
CASH FLOWS FROM INVESTING ACTIVITIES
In 1995, the Company used $7.9 million in cash in investing activities.
This compares to the $16.4 million in cash used by investing activities in
1994. In 1995, the Company provided $8.1 million in cash from the sale of
member loans compared to the use of cash of $2.6 million from buying back
member loans in 1994.
CASH FLOWS FROM FINANCING ACTIVITIES
In 1995, the Company's financing activities provided $15.5 million in
cash compared to $11.0 million in 1994. Cash was primarily provided through
the utilization of the Company's bank credit lines. Proceeds of mortgages and
notes increased $3.5 million primarily due to long term debt associated with
the Rich and Rhine and Commissary Cash & Carry acquisitions ($2.5 million),
and the issuance of $1.0 million in new residual stock redemption notes.
<PAGE>
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
10.1. Agreement for Sale and Purchase of Business Assets between the
Company and Commissary Cash & Carry, Inc., a Washington corporation
10.2. Agreement for Sale and Purchase of Business Assets between the
Company and Rich and Rhine, Inc., an Oregon corporation
(b) No reports on Form 8-K were filed during the quarter for
which this report is filed.
Pursuant to the requirements 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.
Date: May 11, 1995 UNITED GROCERS, INC.
(Registrant)
By /s/ John W. White
John W. White
Vice President
(Principal Accounting Officer)
<PAGE>
<PAGE>
AGREEMENT FOR SALE AND PURCHASE
OF BUSINESS ASSETS
DATE: December 7, 1994
PARTIES: COMMISSARY CASH & CARRY, INC., ("Seller")
a Washington corporation
1155 NW Ballard Way
Seattle, Washington
DENNIS HAMPER ("Principal
9047 22nd Ave. N.W. Selling Shareholder")
Seattle, Washington 98117
GREG HAMPER ("Principal
2519 N.W. North Beach Drive Selling Shareholder")
Seattle, Washington 98117
UNITED GROCERS, INC., ("Buyer")
an Oregon corporation
PO Box 22187
Portland OR 97269-2187
RECITALS:
A. Seller operates a business primarily engaged in the operation of cash
and carry food service stores. Seller's principal place of business is 1155
NW Ballard Way, Seattle, Washington. Seller owns equipment, inventories,
accounts, leasehold interests, and miscellaneous assets used in connection
with the operation of its business.
B. Buyer desires to acquire substantially all the assets used or useful,
or intended to be used, in the operation of Seller's business, and Seller
desires to sell such assets to Buyer.
AGREEMENT:
SECTION 1. ASSETS PURCHASED; LIABILITIES ASSUMED
1.1 Assets Purchased. Seller agrees to sell to Buyer and Buyer
agrees to purchase from Seller, on the terms and conditions set forth in this
Agreement, the following assets ("Assets"):
(a) All equipment, accounts receivable, furniture, and
fixtures listed on attached Exhibit "A," together with any replacements or
additions to the equipment, etc., made prior to the closing date ("Closing
Date" or "Closing").
(b) All saleable and merchantable inventories of supplies
and merchandise owned by Seller, together with any replacements or additions
to the inventories made prior to the Closing Date, but excluding inventory
disposed of in the ordinary course of Seller's business and items that are out
of date or within five (5) days of said date.
(c) All equipment leases, real property leases,
distributorship agreements, and other contracts listed on Exhibit "B." Seller
agrees to obtain from lessor a consent to the assignment and an acknowledgment
of full performance by Seller of all of said obligations to be paid and/or
performed by Seller under said leases up to the date of Closing.
(d) Leasehold improvements installed by Seller on the
premises that are the subject of the lease agreements identified on Exhibit
"B."
(e) All of Seller's rights under sales orders and contracts
of sale for merchandise inventory to which Seller is a party and all of
Seller's rights under purchase orders and contracts for the purchase of
merchandise to which Seller is a party, including those entered into in the
ordinary course of business prior to the Closing Date.
(f) Seller's name.
1.2 Liabilities Assumed. Buyer shall accept the assignment and
assume responsibility for all unfilled orders from customers of Seller
assigned to Buyer pursuant to Section 1.1(e) shall assume responsibility of
payment for purchase orders for inventory items that have been placed by
Seller before the Closing Date, but that will not be delivered until after the
Closing Date, and shall assume and perform all of Seller's obligations arising
subsequent to the Closing Date under the leases, distributorship agreements,
and other contracts listed on Exhibit "B."
SECTION 2. EXCLUDED ASSETS
Excluded from this sale and purchase are Seller's accounts receivable,
except for those listed on Exhibit "A," cash, notes receivable, and any other
assets of the business not specified in Section 1.1.
SECTION 3. PURCHASE PRICE FOR ASSETS OTHER THAN INVENTORIES
The purchase price ("Purchase Price") for the Assets, excluding
inventories, shall be $456,101.43, allocated as follows:
Accounts Receivable $301,526.63
Leasehold Improvements $ 21,972.80
Equipment, Contracts and Leases,
and Other Personal
Property $132,602.00
TOTAL $456,101.43
SECTION 4. PURCHASE PRICE FOR INVENTORIES
Immediately before Closing, Seller will cause to be taken a closing
inventory of merchandise. The inventory shall be taken by Linnea Inventory
Service or such another independent inventory service selected by mutual
agreement of the parties. The parties shall share the cost of such service
equally, and each party may audit the inventory as the parties reasonably
desire. The inventory counting shall be completed prior to the transfer of
possession or else such transfer shall be delayed until the inventory counting
is, in fact, completed. If either party wrongfully causes a delay, that party
shall be responsible for any damages arising therefrom. Any dispute between
the parties concerning the counting and/or pricing of the inventory shall be
referred to an independent party to be selected by mutual agreement. The
decision of such third party shall be conclusive on and binding upon the Buyer
and Seller.
The Purchase Price for Seller's inventory of merchandise and supplies,
excluding obsolete and out of date inventory, shall be computed at retail less
17.8 percent, except for cigarettes which shall be valued at Seller's cost.
By reason of the above inventory valuation formula, Seller shall make no
changes or modifications in its inventory pricing program without the consent
of Buyer.
SECTION 5. PAYMENT OF PURCHASE PRICE
The Purchase Price for the Assets and the inventories shall be paid as
follows:
5.1 By wire transfer or cashiers' check to Seller at Closing.
SECTION 6. ADJUSTMENTS
The operation of Seller's business and related income and expenses up to
the close of business on the day before the Closing Date shall be for the
account of Seller and thereafter for the account of Buyer. Expenses,
including, but not limited to, utilities, personal property taxes, rents, and
real property taxes, with respect to Assets transferred herein, shall be pro-
rated between Seller and Buyer as of the close of business on the Closing
Date, the proration to be made and paid, insofar as reasonably possible, on
the Closing Date, with settlement of any remaining items to be made within 45
days following the Closing Date.
SECTION 7. OTHER AGREEMENTS
At Closing, the parties shall execute the following additional
agreements:
7.1 The lease assignment agreement between Buyer and Principal
Selling Shareholder (hereinafter collectively referred to as "Selling
Shareholder"), attached as Exhibit "C," pertaining to all the cash and carry
warehouse locations from which Seller operates its business.
7.2 The noncompetition agreements between Buyer and Selling
Shareholder, attached as Exhibits "D-1" and "D-2."
SECTION 8. SELLER'S REPRESENTATIONS AND WARRANTIES
Seller represents and warrants to Buyer as follows:
8.1 Corporate Existence. Seller is now and on the Closing Date
will be a corporation duly organized and validly existing under the laws of
the state of Washington. Seller has all requisite corporate power and
authority to own, operate, and/or lease the Assets, as the case may be, and to
carry on its business as now being conducted.
8.2 Authorization. The execution, delivery, and performance of
this Agreement have been duly authorized and approved by the board of
directors and shareholders of Seller, and this Agreement constitutes a valid
and binding Agreement of Seller in accordance with its terms.
8.3 Financial Statements. Seller has delivered to Buyer year-end
financial statements for Seller's fiscal years ended June 30, 1992, June 30,
1993, and June 30, 1994, and will deliver to Buyer financial statements for
all additional interim periods ending before the Closing Date. The financial
statements that have been or will be delivered are in accordance with the
books and records of Seller and are true, correct, and complete; fairly
present the financial conditions of Seller at the dates of such financial
statements and the results of its operations for the periods then ended; and
were prepared in accordance with accounting principles applied on a basis
consistent with prior accounting periods. Except as described in this
Agreement, since the close of Seller's last fiscal year and the date, there
has been no material adverse change in the financial condition of Seller.
8.4 Title to Assets. Seller holds good and marketable title to
the Assets, free and clear of restrictions on or conditions to transfer or
assignment, and free and clear of liens, pledges, charges, or encumbrances.
8.5 Brokers and Finders. Seller has not employed any broker or
finder in connection with the transactions contemplated by this Agreement, or
taken action that would give rise to a valid claim against any party for a
brokerage commission, finder's fee, or other like payment.
8.6 Transfer Not Subject to Encumbrances or Third-Party Approval.
The execution and delivery of this Agreement by Seller and the consummation of
the contemplated transactions, will not result in the creation or imposition
of any valid lien, charge, or encumbrance on any of the Assets, and will not
require the authorization, consent, or approval of any third party, including
any governmental subdivision or regulatory agency.
8.7 Labor Agreements and Disputes. Seller is neither a party to,
nor otherwise subject to, any collective bargaining or other agreement
governing the wages, hours, and terms of employment of Seller's employees.
Seller is not aware of any labor dispute or labor trouble involving employees
of Seller, nor has there been any such dispute or trouble during the five (5)
years preceding the date of this Agreement.
8.8 Employee Matters.
(a) Prior to Closing, Seller will deliver to Buyer a list of
the names of all persons on the payroll of Seller, together with a statement
of amounts paid to each during Seller's most recent fiscal year and amounts
paid for services from the beginning of the current fiscal year to the Closing
Date. Seller will also provide Buyer with a schedule of all employee bonus
arrangements and a schedule of other material compensation or personnel
benefits or policies in effect.
(b) Seller will terminate all of its employees and will pay
each employee all compensation then due, including, but not limited to, wages,
commissions earned up to the time of termination, which shall be as of the
close of business the day before the Closing Date, vacation, sick time,
including overtime pay, or any other form of compensation due to said
employees on their termination. Seller will pay all withholding taxes and
payroll obligations that have accrued as of the date of termination.
(c) Buyer shall not be precluded nor have any obligation
under this Agreement of sale or any other agreement to employ Seller's
terminated employees in connection with Buyer's future operations. Buyer will
not assume any labor agreement in effect or binding on Seller regarding
persons employed by Seller in connection with Seller's operation of the
property. Seller shall defend and hold Buyer harmless for all grievances or
claims, as further described below, of any nature arising out of such labor
agreement or the employment relationship between Seller and its employees.
It is expressly understood that neither Buyer nor Seller has
the right to control, direct or influence the labor relations policies or
activities of the other; and that neither shall be considered to be the labor
relations agent or representative of the other; and that neither shall be
responsible for the acts of the other's agents, employees, or representatives
which affect either party's respective employees, specifically including
Seller's employees at the property who shall be terminated by Seller prior to
Closing.
At all times subsequent to Closing, Buyer shall have the sole
and exclusive authority and responsibility to operate and manage the Assets
and to employ and direct its own work force, and the sole and exclusive
responsibility to comply with all laws governing the employment relationship.
At all times prior to Closing, Seller will have the sole and exclusive
authority and responsibility to operate and manage the property and to employ
and direct its own work force, the sole and exclusive responsibility to comply
with all laws governing the employment relationship, and the sole and
exclusive responsibility to observe the terms of any collective bargaining
agreement(s) covering its employees.
Seller shall be solely liable for, and shall independently
undertake to defend, any and all unfair labor practice charges, grievances,
judicial actions, or other employee or union claims based on conduct alleged
to have been committed by its employees, agents, or supervisors at any time,
Buyer shall be solely liable for, and shall independently undertake to defend,
any and all unfair labor practice charges, grievances, judicial actions, or
other employee or union claims based on conduct alleged to have been committed
by its employees, agents or supervisors at any time. However, each party will
cooperate in good faith with the other in the investigation and defense of any
unfair labor practice charge, grievance, judicial action or other employee or
union claim which may be filed against any one of them, jointly or separately.
8.9 Noncancellable Contracts. At the time of Closing, there will
be no material leases, employment contracts, contracts for services or
maintenance, or other similar contracts existing or relating to or connected
with the operation of Seller's business not cancelable within 30 days, except
those Agreements listed on Exhibit "B."
8.10 Discrimination, Environmental Protections, Occupational
Safety and Other Statutes and Regulations.
(a) To the best of Seller's knowledge, Seller is presently
and has at all times in the past been in compliance with all rules,
regulations and orders of each federal, state, municipal, or other
governmental department, commission, board, bureau, agency, or instrumentality
with jurisdiction over Seller or Seller's operations on or off Seller's
premises, including, but not limited to, all environmental and safety laws,
rules and regulations with respect to Seller's real and personal property
(including the Premises) and with respect to the proper disposition, on or off
Seller's premises, of all hazardous wastes and controlled substances.
(b) None of the local, state or federal governments have
alleged that Seller is not in compliance with any law, rule, regulation or
order; none of the federal Environmental Protection Agency, the Washington
agency or agencies having jurisdiction over environmental matters, any other
state environmental agency, or the Occupational Safety and Health
Administration is engaged in an investigation of Seller with regard to its
operations on or off of Seller's business premises or the condition of
Seller's business premises.
8.11 Litigation. Seller has no knowledge of any claim,
litigation, proceeding, or investigation pending or threatened against Seller
that might result in any material adverse change in the business or condition
of the Assets being conveyed under this Agreement.
8.12 Accuracy of Representations and Warranties. None of the
representations or warranties of Seller contain or will contain any untrue
statement of a material fact or omit or will omit or misstate a material fact
necessary in order to make statements in this Agreement not misleading.
Seller knows of no fact that has resulted, or that in the reasonable judgment
of Seller will result, in a material change in the business, operations, or
assets of Seller that has not been set forth in this Agreement or otherwise
disclosed to Buyer.
8.13 Leases. Seller represents and warrants that the leases
transferred to Buyer pursuant to this Agreement are in full force and effect
and have not been modified or altered and that Seller has performed all
obligations to be performed thereunder and no default exists nor event or
condition exists, that, with the passage of time and the giving of notice,
would constitute a default thereunder.
SECTION 9. REPRESENTATIONS OF BUYER
Buyer represents and warrants as follows:
9.1 Corporate Existence. Buyer is a corporation duly organized
and validly existing under the laws of the state of Oregon. Buyer has all
requisite corporate power and authority to enter into this Agreement and
perform its obligations hereunder.
9.2 Authorization. The execution, delivery, and performance of
this Agreement have been duly authorized and approved by the board of
directors and shareholders of Buyer, and this Agreement constitutes a valid
and binding Agreement of Buyer in accordance with its terms.
9.3 Brokers and Finders. Buyer has not employed any broker or
finder in connection with the transactions contemplated by this Agreement and
has taken no action that would give rise to a valid claim against any party
for a brokerage commission, finder's fee, or other like payment.
9.4 Accuracy of Representations and Warranties. None of the
representations or warranties of Buyer contain or will contain any untrue
statement of a material fact or omit or will omit or misstate a material fact
necessary in order to make the statements contained herein not misleading.
SECTION 10. COVENANTS OF SELLER
10.1 Seller's Operation of Business Prior to Closing. Seller
agrees that between the date of this Agreement and the Closing Date, Seller
will:
(a) Continue to operate the business that is the subject of
this Agreement in the usual and ordinary course and in substantial conformity
with all applicable laws, ordinances, regulations, rules, or orders, and will
use its best efforts to preserve its business organization and preserve the
continued operation of its business with its customers, suppliers, and others
having business relations with Seller.
(b) Not assign, sell, lease, or otherwise transfer or
dispose of any of the Assets used in the performance of its business, whether
now owned or hereafter acquired, except in the normal and ordinary course of
business and in connection with its normal operation.
(c) Maintain all its Assets other than inventories in their
present condition, reasonable wear and tear and ordinary usage excepted, and
maintain the inventories at levels normally maintained.
10.2 Access to Premises and Information. At reasonable times
before the Closing Date, Seller will provide Buyer and its representatives
with reasonable access during business hours to the Assets, titles, contracts,
and records of Seller and furnish such additional information concerning
Seller's business as Buyer, from time to time, may reasonably request.
10.3 Employee Matters.
(a) Before Closing, Seller will deliver to Buyer a list of
the names of all persons on the payroll of Seller, together with a statement
of amounts paid to each during Seller's most recent fiscal year and amounts
paid for services from the beginning of the current fiscal year to the Closing
Date. Seller will also provide Buyer with a schedule of all employee bonus
arrangements and a schedule of other material compensation or personnel
benefits or policies in effect.
(b) Before the Closing Date, Seller will not, without
Buyer's prior written consent, enter into any material agreement with its
employees, increase the rate of compensation or bonus payable to or to become
payable to any employee, or effect any changes in the management, personnel
policies, or employee benefits, except in accordance with existing employment
practices.
(c) Seller will undertake all action necessary or
appropriate to permit Buyer, if Buyer so desires, to take over Seller's
pension and profit-sharing plan as a successor employer, and will cooperate
with Buyer with respect to this undertaking.
(d) As of the Closing Date, Seller will terminate all of its
employees not having employment agreements transferable to Buyer and will pay
each employee all wages, commissions, and accrued vacation pay earned up to
the time of termination, including overtime pay.
10.4 Change of Name. On or before the Closing Date, Seller will
take all action necessary or appropriate to permit Buyer to legally commence
use of Seller's name on the Closing Date.
10.5 Conditions and Best Efforts. Seller will use its best
efforts to effectuate the transactions contemplated by this Agreement and to
fulfill all the conditions of the obligations of Seller under this Agreement,
and will do all acts and things as may be required to carry out its
obligations under this Agreement and to consummate and complete this
Agreement. Seller will cause to be amended its Articles of Incorporation
changing its corporate name and thereby authorizing Buyer to acquire the same.
SECTION 11. COVENANTS OF BUYER
11.1 Conditions and Best Efforts. Buyer will use its best efforts
to effectuate the transactions contemplated by this Agreement and to fulfill
all the conditions of Buyer's obligations under this Agreement, and shall do
all acts and things as may be required to carry out Buyer's obligations and to
consummate this Agreement.
11.2 Confidential Information. If for any reason the sale of
Assets is not closed, Buyer will not disclose to third parties any
confidential information received from Seller in the course of investigating,
negotiating, and performing the transactions contemplated by this Agreement.
SECTION 12. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
The obligation of Buyer to purchase the Assets is subject to the
fulfillment, before or at the Closing Date, of each of the following
conditions, any one or portion of which may be waived in writing by Buyer:
12.1 Representations, Warranties, and Covenants of Seller. All
representations and warranties made in this Agreement by Seller shall be true
as of the Closing Date, as fully as though such representations and warranties
had been made on and as of the Closing Date, and, as of the Closing Date,
Seller shall not have violated or shall not have failed to perform in accor-
dance with any covenant contained in this Agreement.
12.2 Licenses and Permits. Buyer shall have obtained all licenses
and permits from public authorities necessary to authorize the ownership and
operation of the business of Seller.
12.3 Consents. Buyer shall have obtained the consent of the
companies identified on Exhibit "B" to permit Buyer to act as a distributor of
the products of such companies on substantially the same basis as such
products have been distributed by Seller. Buyer's waiver of this consent
requirement with respect to any distributorship agreement shall be deemed to
exclude that agreement from the Assets to be conveyed to Buyer.
12.4 Conditions of the Business. There shall have been no
material adverse change in the manner of operation of Seller's business before
the Closing Date.
12.5 Opinion of Counsel for Seller. Seller shall have furnished
Buyer with an opinion of counsel for Seller in form and substance reasonably
satisfactory to Buyer's counsel to the effect that (1) the representations and
warranties contained in Sections 8.1 and 8.2 are true; and (2) the instruments
of conveyance and transfer to be delivered to Buyer at Closing are effective
to vest in Buyer all of Seller's right, title, and interest in and to the
Assets.
12.6 No Suits or Actions. At the Closing Date no suit, action, or
other proceeding shall have been threatened or instituted to restrain, enjoin,
or otherwise prevent the consummation of this Agreement or the contemplated
transactions.
SECTION 13. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER AND SELLING
SHAREHOLDER
The obligations of Seller and Selling Shareholder to consummate the
transactions contemplated by this Agreement are subject to the fulfillment,
before or at the Closing Date, of each of the following conditions, any one or
a portion of which may be waived in writing by Seller:
13.1 Representation, Warranties, and Covenants of Buyer. All
representations and warranties made in this Agreement by Buyer shall be true
as of the Closing Date, as fully as though such representations and warranties
had been made on and as of the Closing Date, and Buyer shall not have violated
or shall not have failed to perform in accordance with any covenant contained
in this Agreement.
SECTION 14. RISK OF LOSS
The risk of loss, damage, or destruction to any of the equipment,
inventory, or other personal property to be conveyed to Buyer under this
Agreement shall be borne by Seller to the time of Closing. In the event of
such loss, damage, or destruction, Seller, to the extent reasonable, shall
replace the lost property or repair or cause to repair the damaged property to
its condition before the damage. If replacement, repairs, or restorations are
not completed before Closing, then the Purchase Price shall be adjusted by an
amount agreed upon by Buyer and Seller that will be required to complete the
replacement, repair, or restoration following Closing. If Buyer and Seller
are unable to agree, then either party hereto may, at its sole option and
notwithstanding any other provision of this Agreement, upon notice to the
other, may rescind this Agreement and declare it to be of no further force and
effect, in which event there shall be no Closing of this Agreement and all the
terms and provisions of this Agreement shall be deemed null and void. If,
before Closing, any of the real properties that are the subject of the leases
mentioned in Section 7.1 are damaged or destroyed, then Buyer may rescind this
Agreement in the manner provided above, unless arrangements for repair
satisfactory to all parties involved are made prior to Closing.
SECTION 15. INDEMNIFICATION AND SURVIVAL
15.1 Survival of Representations and Warranties. All
representations and warranties made in this Agreement shall survive the
Closing of this Agreement, except that any party to whom a representation or
warranty has been made in this Agreement shall be deemed to have waived any
misrepresentation or breach of representation or warranty of which such party
had knowledge before Closing. Any party learning of a misrepresentation or
breach of representation or warranty under this Agreement shall immediately
give written notice thereof to all other parties to this Agreement. The
representations and warranties in this Agreement shall terminate five (5)
years from the Closing Date, and such representations or warranties shall
thereafter be without force or effect, except any claim with respect to which
notice has been given to the party to be charged prior to such expiration
date.
15.2 Seller's Indemnification.
(a) Seller hereby agrees to indemnify and hold Buyer, its
successors, and assigns harmless from and against:
1. Any and all claims, liabilities, and obligations of
every kind and description, contingent or otherwise, arising out of or related
to the operation of Seller's business prior to the close of business on the
day before the Closing Date, except for claims, liabilities, and obligations
of Seller expressly assumed by Buyer under this Agreement or paid by insurance
maintained by Seller or Buyer.
2. Any and all damage or deficiency resulting from any
material misrepresentation, breach of warranty or covenant, or nonfulfillment
of any agreement on the part of Seller under this Agreement.
(b) Seller's indemnity obligations under Section 15.2(a)
shall be subject to the following:
1. If any claim is asserted against Buyer that would
give rise to a claim by Buyer against Seller for indemnification under the
provisions of this paragraph, then Buyer shall promptly give written notice to
Seller concerning such claim and Seller shall, at no expense to Buyer, defend
the claim.
15.3 Buyer's Indemnification. Buyer agrees to defend, indemnify,
and hold harmless Seller from and against:
(a) Any and all claims, liabilities, and obligations of
every kind and description arising out of or related to the operation of the
business following Closing or arising out of Buyer's failure to perform
obligations of Seller assumed by Buyer pursuant to this Agreement.
(b) Any and all damage or deficiency resulting from any
material misrepresentation, breach of warranty or covenant, or nonfulfillment
of any agreement on the part of Buyer under this Agreement.
SECTION 16. CLOSING
16.1 Time and Place. This Agreement shall be closed at the
offices of Buyer at 6433 SE Lake Road, Portland, Oregon, on the 9th day of
January, 1995, or at such other time as the parties may agree in writing. If
Closing has not occurred on or before January 3, 1995, then either party may
elect to terminate this Agreement. If, however, the Closing has not occurred
because of a breach of contract by one or more parties, the breaching party or
parties shall remain liable for breach of contract.
16.2 Obligations of Seller and Selling Shareholder at the Closing.
At the Closing and coincidentally with the performance by Buyer of its
obligations described in Section 16.3, Seller and Selling Shareholder shall
deliver to Buyer the following:
(a) Bills of sale, assignments, consents to assignment,
properly endorsed certificates of title, and other instruments of transfer, in
form and substance reasonably satisfactory to counsel for Buyer, necessary to
transfer and convey all of the Assets to Buyer.
(b) The noncompetition agreement described in Section 7.2.
(c) The lease assignments described, together with consents
to assignments by lessors.
(d) The opinion of Seller's counsel described in Section
12.6.
(e) A cashier's check or a certified check for prorated
items owing to Buyer.
(f) Possession of the business facilities to be conveyed
pursuant to this Agreement.
(g) Such other certificates and documents as may be called
for by the provisions of this Agreement.
16.3 Obligations of Buyer at the Closing. At the Closing and
coincidentally with the performance by Seller and Selling Shareholder of their
obligations described in Section 16.2, Buyer shall deliver to Seller the
following:
(a) A cashier's check or wire transfer in the amount
specified in Section 5.
(b) A cashier's check or a certified check for prorated
items owed to Seller, if any.
(c) Such other certificates and documents as may be called
for by the provisions of this Agreement.
<PAGE>
SECTION 17. RIGHTS AND OBLIGATIONS SUBSEQUENT TO CLOSING
17.1 Books and Records. This sale does not include the books of
account and records of Seller's business. However, possession and custody of
such books and records, except for Seller's general ledger, may be retained by
Buyer at the place of business Buyer is acquiring from Seller under this
Agreement for a period of 12 months. During this period, Seller or its agents
shall have access to such books and records and may make copies thereof.
Buyer will exercise reasonable care in the safekeeping of such records.
Seller shall retain its general ledger but shall make it available for
inspection by Buyer from time to time upon reasonable request.
17.2 Seller's Right to Pay. In the event Buyer fails to make any
payment of taxes, assessments, insurance premiums, or other charges that Buyer
is required to pay to third parties under this Agreement, Seller shall have
the right, but not the obligation, to pay the same. Buyer will reimburse
Seller for any such payment immediately upon Seller's demand. Any such
payment by Seller shall not constitute a waiver by Seller of any remedy
available by reason of Buyer's default for failure to make the payments.
SECTION 18. DEFAULT
18.1 Remedies. If Buyer fails to perform any of the terms,
covenants, conditions, or obligations of this Agreement, time of payment and
performance being of the essence, then Seller, subject to the requirements of
the notice provided in Section 18.2, shall have the right to exercise any
remedies available at law to the Seller.
18.2 Notice of Default. Buyer shall not be deemed in default for
failure to perform the terms, covenants, and conditions of this Agreement,
until notice of the default has been given to Buyer and Buyer has failed to
remedy the default within ten (10) days after the notice.
SECTION 19. TERMINATION OF AGREEMENT
19.1 By Mutual Consent. This Agreement may be terminated by
mutual written consent of Buyer and Seller.
19.2 Breach of Representations and Warranties; Failure of
Conditions. Buyer may elect by notice to Seller, and Seller may elect by
notice to Buyer, to terminate this Agreement if:
(a) The terminating party shall have discovered a material
error, misstatement, or omission in the representations and warranties made in
this Agreement by the other party which shall not have been cured by such
other party within 20 days after written notice to such other party specifying
in detail such asserted error, misstatement, or omission, or by the Closing
Date, whichever first occurs.
SECTION 20. MISCELLANEOUS
20.1 Notices. Any notice or other communication required or
permitted to be given under this Agreement, shall be in writing and shall be
mailed by certified mail, return receipt requested, postage prepaid, addressed
to the parties as follows:
Seller: Commissary Cash & Carry, Inc.
9047 22nd Avenue NW
Seattle WA 98117
Attention: Dennis Hamper
With a copy to:
Greg Lawless
2401 N.W. 65th
P.O. Box 70567
Seattle, Washington 98107
Buyer: United Grocers, Inc.
PO Box 22187
Portland OR 97269-2187
Attention: John W. White
With a copy to:
John H. Arenz
1200 SW Main Building
Portland OR 97205-2039
Any notice or other communication shall be deemed to be given at the
expiration of the five (5) days after the date of deposit in the United States
mail. The addresses to which notices or other communications shall be mailed
may be changed from time to time by giving written notice to the other party
as provided in this Section 20.1.
20.2 Attorney Fees. If any suit or action is filed by any party
to enforce this Agreement or otherwise with respect to the subject matter of
this Agreement, the prevailing party shall be entitled to recover reasonable
attorney fees incurred in preparation or in prosecution or defense of such
suit or action as fixed by the trial court, and if any appeal is taken from
the decision of the trial court, reasonable attorney fees as fixed by the
appellate court.
20.3 Sales, Use, Transfer Tax. Any and all sales, use, transfer,
or excise taxes due and payable incident to this transaction shall be divided
equally between Buyer and Seller; however, Buyer's obligations hereunder shall
be limited to $8,800.
20.4 Amendments. This Agreement may be amended only by an
instrument, in writing, executed by all the parties.
20.5 Headings. The headings used in this Agreement are solely for
convenience of reference, are not part of this Agreement, and are not to be
considered in construing or interpreting this Agreement.
20.6 Entire Agreement. This Agreement (including the exhibits)
sets forth the entire understanding of the parties with respect to the subject
matter of this Agreement and supersedes any and all prior understandings and
agreements, whether written or oral, between the parties with respect to such
subject matter.
20.7 Counterparts. This Agreement may be executed by the parties
in separate counterparts, each of which when executed and delivered shall be
an original, but all of which together shall constitute one and the same
instrument.
20.8 Severability. If any provision of this Agreement shall be
invalid or unenforceable in any respect for any reason, the validity and
enforceability of any such provision in any other respect and of the remaining
provisions of this Agreement shall not be in any way impaired.
20.9 Waiver. A provision of this Agreement may be waived only by
a written instrument executed by the party waiving compliance. No waiver of
any provision of this Agreement shall constitute a waiver of any other
provision, whether or not similar, nor shall any waiver constitute a
continuing waiver. Failure to enforce any provision of this Agreement shall
not operate as a waiver of such provision or any other provision.
20.10 Gender. Any indication of gender of a party in this
Agreement shall be modified, as required, to fit the gender of the party or
parties in question.
20.11 Further Assurances. From time to time, each of the parties
shall execute, acknowledge, and deliver any instruments or documents necessary
to carry out the purposes of this Agreement.
20.12 Time of Essence. Time is of the essence for each and every
provision of this Agreement.
20.13 No Third-Party Beneficiaries. Nothing in this Agreement,
express or implied, is intended to confer on any person, other than the
parties to this Agreement, any right or remedy of any nature whatsoever.
20.14 Expenses. Each party shall bear its own expenses in
connection with this Agreement and the transactions contemplated by this
Agreement.
20.15 Exhibits. The exhibits referenced in this Agreement are a
part of this Agreement, as if fully set forth in this Agreement.
20.16 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the state of Washington.
20.17 Venue. If any suit or action is filed by any party to
enforce this Agreement or otherwise with respect to the subject matter of this
Agreement, venue shall be in the federal or state courts in Seattle,
Washington.
20.18 Arbitration. Any controversy or claim arising out of or
relating to this Agreement, including, without limitation, the making,
performance, or interpretation of this Agreement, shall be settled by
arbitration in Seattle, Washington, in accordance with RCW 7.04.010, and
judgment on the arbitration award may be entered in any court having
jurisdiction over the subject matter of the controversy.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first herein written.
Seller: Commissary Cash & Carry, Inc.
By /s/Dennis Hamper
Title: President
Principal
Selling Shareholder: /s/ Dennis Hamper
Principal
Selling Shareholder: /s/Greg Hamper
Buyer: United Grocers, Inc.
By /s/ Alan Jones
Title: President
List of Exhibits:
"A" Assets Purchased
"B" Leasehold Improvements
"C" Lease Assignments and Consents to Assignments
"D-1" Noncompetition Agreement
"D-2" Noncompetition Agreement
<PAGE>
<PAGE>
EXHIBIT 10.2
AGREEMENT FOR SALE AND PURCHASE
OF BUSINESS ASSETS
DATE: December 22, 1994
PARTIES: RICH AND RHINE, INC., ("Seller")
an Oregon corporation
_________________________
_________________________
JOHN MULLAN ("Selling Shareholder")
_________________________
_________________________
JOYCE OWENS ("Selling Shareholder")
_________________________
_________________________
RON OWENS ("Selling Shareholder")
_________________________
_________________________
JOHN RICH ("Selling Shareholder")
_________________________
_________________________
UNITED GROCERS, INC., ("Buyer")
an Oregon corporation,
or its assigns,
PO Box 22187
Portland OR 97269-2187
RECITALS:
A. Seller operates a business primarily engaged in the sale, marketing
and distribution of tobacco products, candy and grocery items. Seller owns
all the equipment, inventories, accounts, leasehold interests, and other
miscellaneous assets used in connection with the operation of its business.
B. Buyer desires to acquire substantially all the assets used or useful,
or intended to be used, in the operation of Seller's business, and Seller
desires to sell such assets to Buyer.
C. Selling Shareholders (hereinafter collectively referred to as
"Selling Shareholder") agrees to authorize Seller to sell its assets upon the
terms and conditions hereinafter provided.
AGREEMENT:
SECTION 1. ASSETS PURCHASED; LIABILITIES ASSUMED
1.1 Assets Purchased. Seller agrees to sell to Buyer and Buyer
agrees to purchase from Seller, on the terms and conditions set forth in this
Agreement, the following assets ("Assets"):
(a) All equipment, the accounts receivable referenced in
Section 8 below, furniture, and fixtures listed on attached Exhibit "A,"
together with any replacements or additions to the equipment, made prior to
the closing date ("Closing Date" or "Closing").
(b) All inventories of supplies and merchandise owned by
Seller, together with any replacements or additions to the inventories made
prior to the Closing Date, but excluding inventory disposed of in the ordinary
course of Seller's business and items that are out of date or within ten (10)
days of the pull date.
(c) All equipment leases, real property leases,
distributorship agreements, and other contracts listed on Exhibit "B."
(d) All of Seller's rights under sales orders and contracts
of sale for merchandise inventory to which Seller is a party and all of
Seller's rights under purchase orders and contracts for the purchase of
merchandise to which Seller is a party, including those entered into in the
ordinary course of business prior to the Closing Date.
(e) Seller's name, telephone numbers and goodwill.
1.2 Liabilities Assumed. Buyer shall accept the assignment and
assume responsibility for all unfilled orders from customers of Seller
assigned to Buyer pursuant to Section 1.1(e), shall assume responsibility of
payment for purchase orders for inventory items that have been placed by
Seller before the Closing Date, but that will not be delivered until after the
Closing Date, and shall assume and perform all of Seller's obligations arising
subsequent to the Closing Date under the leases, other contracts listed on
Exhibit "B," or included in Section 1.1(e). The liabilities assumed under
Section 1.2 shall not include any state, federal or local taxes due or
becoming due from Seller's business activities.
SECTION 2. EXCLUDED ASSETS
Excluded from this sale and purchase are Seller's cash, notes receivable
and any other assets of the business not specified in Section 1.1.
SECTION 3. PURCHASE PRICE FOR ASSETS OTHER THAN INVENTORIES
The purchase price ("Purchase Price") for the Assets, excluding
inventories, shall be $3,260,050, allocated as follows:
Accounts Receivable (to be $1,118,785
established as of 12/31/94)
Equipment, Contracts and Leases,
and Other Personal
Property $ 400,000
Goodwill $1,741,265
TOTAL $3,260,050
SECTION 4. PURCHASE PRICE FOR INVENTORIES
Immediately before Closing, Seller and Buyer shall jointly take a closing
inventory of merchandise and supplies. Representatives of Seller and Buyer
shall independently and simultaneously conduct such closing inventory on a
rack-by-rack basis, using a portable computer and bar code scanner, or other
similar device. Following the inventory of each rack, any discrepancies
between the inventory count of Seller and Buyer shall promptly be reconciled.
The inventory counting shall be completed prior to Closing, or else such
Closing shall be delayed until the inventory counting is, in fact, completed.
If either party wrongfully causes a delay, that party shall be responsible for
any damages arising therefrom.
The Purchase Price for Seller's inventory of merchandise and supplies,
excluding obsolete and out of date inventory, shall be computed at Seller's
invoice cost less cash discounts, plus applicable product acquisition costs.
Applicable product acquisition costs shall be determined by the cost
assumptions utilized by Seller in its Uniform Cost Capitalization formula
under Section 263A of the Internal Code for its inventory. Buyer reserves the
right, however, to test and approve such assumptions for reasonableness prior
to accepting or being bound to such determination.
All supplies shall be valued at net invoiced cost as of December 31,
1994.
All nonmerchantable, damaged or out of date product (spoils) shall be
valued at credit value. Such credit value, if any, will be paid to Seller
upon Buyer's receipt of credit value from supplier. Buyer shall attempt to
obtain applicable credits, if available, in accordance with Buyer's present
business practice.
SECTION 5. PAYMENT OF PURCHASE PRICE
The Purchase Price for the Assets, exclusive of goodwill, shall be paid
at Closing by Buyer and shall be paid by cashier's check. The Purchase Price
for goodwill, subject to adjustments as hereinafter specified, shall be paid
$641,265 on January 10, 1996, and $1,100,000 payable on January 10, 1997.
Buyer's obligation to pay to Seller the foregoing amount for goodwill shall be
evidenced by a non-negotiable promissory note (the "Note") in the form
attached as Exhibit "C," to be made and delivered by Buyer at Closing.
SECTION 6. ADJUSTMENTS
The operation of Seller's business and related income and expenses up to
the close of business on the day before the Closing Date shall be for the
account of Seller and thereafter for the account of Buyer. Expenses,
including, but not limited to, utilities, personal property taxes, insurance,
rents, and real property taxes, shall be prorated between Seller and Buyer as
of the close of business on the Closing Date, the proration to be made and
paid, insofar as reasonably possible, on the Closing Date, with settlement of
any remaining items to be made within 45 days following the Closing Date.
SECTION 7. OTHER AGREEMENTS
At Closing, the parties shall execute the following additional
agreements:
7.1 The consent to lease assignment between Seller and Seller's
lessor, attached as Exhibit "D," pertaining to the warehouse location from
which Seller operates its business. The monthly rental rate under the Lease
for 13720 SW Whitaker Way ("Lease"), however, shall be increased to $5,000 per
month effective January 1, 1995. Seller shall be entitled to store its
business records at the warehouse for the term of the Lease and any extension
thereof.
7.2 The noncompetition/consulting agreements between Buyer and
Selling Shareholder, attached as Exhibit "E-1," "E-2," "E-3," and "E-4."
SECTION 8. ACCOUNTS RECEIVABLE
Upon execution of this Agreement, Seller will deliver to Buyer an aged
schedule of Seller's accounts receivable. At Closing, Seller will deliver
unto Buyer a list of accounts receivable to be purchased by Buyer. None of
the accounts receivable shall be more than 45 days old. The accounts
receivable are transferred pursuant to Seller's and Selling Shareholder's
representations hereinafter provided. Buyer shall promptly transmit to Seller
any checks or other payment it receives with respect to accounts receivable
reassigned to Seller under Section 9.5 below.
SECTION 9. SELLER'S AND SELLING SHAREHOLDER'S REPRESENTATIONS AND
WARRANTIES
Seller represents and warrants to Buyer as follows:
9.1 Corporate Existence. Seller is now and on the Closing Date
will be a corporation duly organized and validly existing under the laws of
the state of Oregon. Seller has all requisite corporate power and authority
to own, operate, and/or lease the Assets, as the case may be, and to carry on
its business as now being conducted.
9.2 Authorization. The execution, delivery, and performance of
this Agreement have been duly authorized and approved by the board of
directors and shareholders of Seller, and this Agreement constitutes a valid
and binding Agreement of Seller in accordance with its terms.
9.3 Financial Statements. Seller has delivered to Buyer year-end
financial statements for Seller's fiscal years ended December 31, 1991,
December 31, 1992, and December 31, 1993, and will deliver to Buyer financial
statements for all additional interim periods ending before the Closing Date.
The financial statements that have been or will be delivered are in accordance
with the books and records of Seller and fairly present the financial
conditions of Seller in all material respects at the dates of such financial
statements and the results of its operations for the periods then ended; and
were prepared in accordance with generally accepted accounting principles
applied on a basis consistent with prior accounting periods. Except as
described in this Agreement, since the close of Seller's last fiscal year and
the date, there has been no material adverse change in the financial condition
of Seller.
9.4 Title to Assets. Except as described in this Agreement,
Seller holds good and marketable title to the Assets, free and clear of
restrictions on or conditions to transfer or assignment, and free and clear of
liens, pledges, charges, or encumbrances.
9.5 Accounts Receivable. Seller hereby represents and warrants
that the accounts receivable being purchased by Buyer are valid and binding
obligations of the debtors listed on the accounts receivable schedule and that
there are no defenses, rights of setoff or claims alleged or asserted by
accounts receivable debtors against payment of the receivables debt. Seller
further represents and warrants that all accounts will be paid within 30 days
of their due date. In the event any such account is not so paid, Buyer may,
no later than February 1, 1995, reassign said account to Seller and Seller
will pay Buyer upon assignment, the face value of the account; provided,
however, that with respect to all such accounts receivable reassigned to
Seller, Buyer shall thereafter cease conducting any business with such account
receivable debtors. If Buyer fails to reassign Seller any account receivable,
Buyer shall be deemed to have irrevocably accepted such accounts receivable by
February 1, 1996. If Seller fails to pay Buyer the account balance then due,
plus interest as accrued pursuant to the account, the Buyer, in addition to
other remedies available, may assert its claim against any other sums due
Seller or Selling Shareholder under this Agreement or any ancillary
agreements.
9.6 Brokers and Finders. Seller has not employed any broker or
finder in connection with the transactions contemplated by this Agreement, or
taken action that would give rise to a valid claim against any party for a
brokerage commission, finder's fee, or other like payment, except as to its
consultant, Raymond Loe. Seller will pay any and all costs and expenses
attributable to Raymond Loe.
9.7 Transfer Not Subject to Encumbrances or Third-Party Approval.
The execution and delivery of this Agreement by Seller and Selling
Shareholder, and the consummation of the contemplated transactions, will not
result in the creation or imposition of any valid lien, charge, or encumbrance
on any of the Assets, and, except as the consent to assignment referenced in
Section 7.1, consent of other parties to the contracts referenced in Exhibit
"B," articles of amendment intended to be filed by Seller pursuant to Section
11.4, or any other third party consent referenced in this Agreement, will not
require the authorization, consent, or approval of any third party, including
any governmental subdivision or regulatory agency.
9.8 Labor Agreements and Disputes. Seller is neither a party to,
nor otherwise subject to, any collective bargaining or other agreement
governing the wages, hours, and terms of employment of Seller's employees.
Neither Seller nor Selling Shareholder is aware of any labor dispute or labor
trouble involving employees of Seller, nor has there been any such dispute or
trouble, during the five (5) years preceding the date of this Agreement.
9.9 Employee Matters
(a) Prior to Closing, Seller will deliver to Buyer a list of
the names of all persons on the payroll of Seller, together with a statement
of amounts paid to each during Seller's most recent fiscal year and amounts
paid for services from the beginning of the current fiscal year to the Closing
Date. Seller will also provide Buyer with a schedule of all employee bonus
arrangements and a schedule of other material compensation or personnel
benefits or policies in effect.
(b) Seller will terminate all of its employees and will pay
each employee all compensation then due, including, but not limited to, wages,
commissions earned up to the time of termination, which shall be as of the
close of business the day before the Closing Date, vacation, sick time,
including overtime pay, or any other form of compensation due to said
employees on their termination. Seller will pay all withholding taxes and
payroll obligations that have accrued as of the date of termination.
(c) Buyer shall not be precluded nor have an obligation
under this Agreement of sale or any other agreement to employ Seller's
terminated employees in connection with Buyer's future operations. Buyer will
not assume any labor agreement in effect or binding on Seller regarding
persons employed by Seller in connection with Seller's operation of the
property. Seller shall defend and hold Buyer harmless for all grievances or
claims, as further described below, of any nature arising out of such labor
agreement or the employment relationship between Seller and its employees.
It is expressly understood that neither Buyer nor Seller has
the right to control, direct or influence the labor relations policies or
activities of the other; and that neither shall be considered to be the labor
relations agent or representative of the other; and that neither shall be
responsible for the acts of the other's agents, employees, or representatives
which affect either party's respective employees, specifically including
Seller's employees at the property who shall be terminated by Seller prior to
Closing.
At all times subsequent to Closing, Buyer shall have the sole
and exclusive authority and responsibility to operate and manage the property
and to employ and direct its own work force, and the sole and exclusive
responsibility to comply with all laws governing the employment relationship.
At all times prior to Closing, Seller will have the sole and exclusive
authority and responsibility to operate and manage the property and to employ
and direct its own work force, the sole and exclusive responsibility to comply
with all laws governing the employment relationship, and the sole and
exclusive responsibility to observe the terms of any collective bargaining
agreement(s) covering its employees.
Seller shall be solely liable for, and shall independently
undertake to defend, any and all judicial actions, or other employee claims
based on conduct alleged to have been committed by its employees, agents, or
supervisors at any time prior to Closing. Buyer shall be solely liable for,
and shall independently undertake to defend, any and all judicial actions, or
other employee claims based on conduct alleged to have been committed by its
employees, agents or supervisors at any time from on or after Closing.
9.10 Noncancellable Contracts. At the time of Closing, there will
be no material leases, employment contracts, contracts for services or
maintenance, or other similar contracts existing or relating to or connected
with the operation of Seller's business not cancelable within 30 days, except
those Agreements listed on Exhibit "B."
9.11 Discrimination, Environmental Protections, Occupational
Safety and Other Statutes and Regulations.
(a) To the best of Seller's knowledge, Seller is presently
and has at all times in the past been in material compliance with all rules,
regulations and orders of each federal, state, municipal, or other
governmental department, commission, board, bureau, agency, or instrumentality
with jurisdiction over Seller or Seller's operations on or off Seller's
premises, including, but not limited to, all environmental and safety laws,
rules and regulations with respect to Seller's real and personal property
(including the Premises) and with respect to the proper disposition, on or off
Seller's premises, of all hazardous wastes and controlled substances.
(b) None of the local, state or federal governments have
notified Seller, orally or in writing, that Seller is not in compliance with
any law, rule, regulation or order; none of the federal Environmental
Protection Agency, the Oregon agency or agencies having jurisdiction over
environmental matters, any other state environmental agency, or the
Occupational Safety and Health Administration is engaged in an investigation
of Seller with regard to its operations on or off of Seller's business
premises or the condition of Seller's business premises.
9.12 Litigation. Seller has no knowledge of any claim,
litigation, proceeding, or investigation pending or threatened against Seller
that might result in any material adverse change in the business or condition
of the Assets being conveyed under this Agreement.
9.13 Accuracy of Representations and Warranties. None of the
representations or warranties of Seller contain or will contain any untrue
statement of a material fact or omit or will omit or misstate a material fact
necessary in order to make statements in this Agreement not misleading.
Except as to matters of public record or otherwise commonly known, Seller
knows of no fact that has resulted, or that in the reasonable judgment of
Seller will result, in a material change in the business, operations, or
assets of Seller that has not been set forth in this Agreement or otherwise
disclosed to Buyer.
9.14 Leases. Seller represents and warrants that the leases
transferred to Buyer pursuant to this Agreement are in full force and effect
and have not been modified or altered, except as set forth in Exhibit "D," and
that Seller has performed all obligations to be performed thereunder and no
default exists nor event or condition exists, that, with the passage of time
and the giving of notice, would constitute a default thereunder.
SECTION 10. REPRESENTATIONS OF BUYER.
Buyer represents and warrants as follows:
10.1 Corporate Existence. Buyer is a corporation duly organized
and validly existing under the laws of the state of Oregon. Buyer has all
requisite corporate power and authority to enter into this Agreement and
perform its obligations hereunder.
10.2 Authorization. The execution, delivery, and performance of
this Agreement have been duly authorized and approved by the board of
directors and shareholders of Buyer, and this Agreement constitutes a valid
and binding Agreement of Buyer in accordance with its terms.
10.3 Brokers and Finders. Buyer has not employed any broker or
finder in connection with the transactions contemplated by this Agreement and
has taken no action that would give rise to a valid claim against any party
for a brokerage commission, finder's fee, or other like payment.
10.4 Accuracy of Representations and Warranties. None of the
representations or warranties of Buyer contain or will contain any untrue
statement of a material fact or omit or will omit or misstate a material fact
necessary in order to make the statements contained herein not misleading.
SECTION 11. COVENANTS OF SELLER
11.1 Seller's Operation of Business Prior to Closing. Seller
agrees that between the date of this Agreement and the Closing Date, Seller
will:
(a) Continue to operate the business that is the subject of
this Agreement in the usual and ordinary course and in substantial conformity
with all applicable laws, ordinances, regulations, rules, or orders, and will
use its best efforts to preserve its business organization and preserve the
continued operation of its business with its customers, suppliers, and others
having business relations with Seller.
(b) Not assign, sell, lease, or otherwise transfer or
dispose of any of the Assets used in the performance of its business, whether
now owned or hereafter acquired, except in the normal and ordinary course of
business and in connection with its normal operation.
(c) Maintain all its Assets other than inventories in their
present condition, reasonable wear and tear and ordinary usage excepted, and
maintain the inventories at levels normally maintained.
11.2 Access to Premises and Information. At reasonable times
before the Closing Date, Seller will provide Buyer and its representatives
with reasonable access during business hours to the Assets, titles, contracts,
and records of Seller and furnish such additional information concerning
Seller's business as Buyer, from time to time, may reasonably request.
11.3 Employee Matters. Before the Closing Date, Seller will not,
without Buyer's prior written consent, enter into any material agreement with
its employees, increase the rate of compensation or bonus payable to or to
become payable to any employee, or effect any changes in the management,
personnel policies, or employee benefits, except in accordance with existing
employment practices.
11.4 Change of Name. On or before the Closing Date, Seller will
take all action necessary or appropriate to permit Buyer to legally commence
use of Seller's name on the Closing Date.
11.5 Conditions and Best Efforts. Seller will use its best
efforts to effectuate the transactions contemplated by this Agreement and to
fulfill all the conditions of the obligations of Seller under this Agreement,
and will do all acts and things as may be required to carry out its respective
obligations under this Agreement and to consummate and complete this
Agreement.
SECTION 12. COVENANTS OF BUYER
12.1 Conditions and Best Efforts. Buyer will use its best efforts
to effectuate the transactions contemplated by this Agreement and to fulfill
all the conditions of Buyer's obligations under this Agreement, and shall do
all acts and things as may be required to carry out Buyer's obligations and to
consummate this Agreement.
12.2 Confidential Information. If for any reason the sale of
Assets is not closed, Buyer will not disclose to third parties any
confidential information received from Seller or Selling Shareholder in the
course of investigating, negotiating, and performing the transactions
contemplated by this Agreement, and shall promptly return to Seller all
documents and material it has received from Seller. Buyer shall abide by the
terms and conditions of that certain Non-disclosure Agreement dated July 21,
1994.
SECTION 13. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
The obligation of Buyer to purchase the Assets is subject to the
fulfillment, before or at the Closing Date, of each of the following
conditions, any one or portion of which may be waived in writing by Buyer:
13.1 Representations, Warranties, and Covenants of Seller and
Selling Shareholder. All representations and warranties made in this
Agreement by Seller shall be true as of the Closing Date, as fully as though
such representations and warranties had been made on and as of the Closing
Date, and, as of the Closing Date, neither Seller nor Selling Shareholder
shall have violated or shall have failed to perform in accordance with any
covenant contained in this Agreement.
13.2 Licenses and Permits. Buyer shall have obtained all licenses
and permits from public authorities necessary to authorize the ownership and
operation of the business of Seller.
13.3 Consent to Assignment. Buyer shall have obtained a consent
to assignment of the Lease identified in Exhibit "B."
13.4 Conditions of the Business. There shall have been no
material adverse change in the manner of operation of, financial condition of
or Seller's sales volume of Seller's business before the Closing Date.
13.5 No Suits or Actions. At the Closing Date no suit, action, or
other proceeding shall have been threatened or instituted to restrain, enjoin,
or otherwise prevent the consummation of this Agreement or the contemplated
transactions.
SECTION 14. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER AND SELLING
SHAREHOLDER
The obligations of Seller and Selling Shareholder to consummate the
transactions contemplated by this Agreement are subject to the fulfillment,
before or at the Closing Date, of each of the following conditions, any one or
a portion of which may be waived in writing by Seller:
14.1 Representation, Warranties, and Covenants of Buyer. All
representations and warranties made in this Agreement by Buyer shall be true
as of the Closing Date, as fully as though such representations and warranties
had been made on and as of the Closing Date, and Buyer shall not have violated
or shall not have failed to perform in accordance with any covenant contained
in this Agreement.
SECTION 15. RISK OF LOSS
The risk of loss, damage, or destruction to any of the equipment,
inventory, or other personal property to be conveyed to Buyer under this
Agreement shall be borne by Seller to the time of Closing. In the event of
such loss, damage, or destruction, Seller, to the extent reasonable, shall
replace the lost property or repair or cause to repair the damaged property to
its condition before the damage. If replacement, repairs, or restorations are
not completed before Closing, then the Purchase Price shall be adjusted by an
amount agreed upon by Buyer and Seller that will be required to complete the
replacement, repair, or restoration following Closing. If Buyer and Seller
are unable to agree, then the issues with respect to a fair and equitable
adjustment of the Purchase Price shall be referred to arbitration as provided
in Section 21.17.
SECTION 16. INDEMNIFICATION AND SURVIVAL
16.1 Survival of Representations and Warranties. All
representations and warranties made in this Agreement shall survive the
Closing of this Agreement, except that any party to whom a representation or
warranty has been made in this Agreement shall be deemed to have waived any
misrepresentation or breach of representation or warranty of which such party
had knowledge before Closing. Any party learning of a misrepresentation or
breach of representation or warranty under this Agreement shall immediately
give written notice thereof to all other parties to this Agreement. The
representations and warranties in this Agreement shall terminate on
January 10, 1997, and such representations or warranties shall thereafter be
without force or effect, except any claim with respect to which notice has
been given to the party to be charged prior to such expiration date.
16.2 Seller's Indemnification
(a) Seller hereby agrees to indemnify and hold Buyer, its
successors, and assigns harmless from and against:
1. Any and all claims, liabilities, and obligations of
every kind and description, contingent or otherwise, arising out of or related
to the operation of Seller's business prior to the close of business on the
day before the Closing Date, except for claims, liabilities, and obligations
of Seller expressly assumed by Buyer under this Agreement or paid by insurance
maintained by Seller, Selling Shareholder, or Buyer.
2. Any and all damage or deficiency resulting from any
material misrepresentation, breach of warranty or covenant, or nonfulfillment
of any agreement on the part of Seller and Selling Shareholder under this
Agreement.
(b) Seller's indemnity obligations under Section 16.2(a)
shall be subject to the following:
1. If any claim is asserted against Buyer that would
give rise to a claim by Buyer against Seller for indemnification under the
provisions of this paragraph, then Buyer shall promptly give written notice to
Seller concerning such claim and Seller shall, at no expense to Buyer, defend
the claim.
16.3 Buyer's Indemnification. Buyer agrees to defend, indemnify,
and hold harmless Seller and Selling Shareholder from and against:
(a) Any and all claims, liabilities, and obligations of
every kind and description arising out of or related to the operation of the
business following Closing or arising out of Buyer's failure to perform
obligations of Seller assumed by Buyer pursuant to this Agreement.
(b) Any and all damage or deficiency resulting from any
material misrepresentation, breach of warranty or covenant, or nonfulfillment
of any agreement on the part of Buyer under this Agreement.
SECTION 17. CLOSING
17.1 Time and Place. This Agreement shall be closed at the
offices of Buyer at 6433 SE Lake Road, Portland, Oregon, on the 4th day of
January, 1995, or at such other time as the parties may agree in writing. If
Closing has not occurred on or before January 15, 1995, then either party may
elect to terminate this Agreement. If, however, the Closing has not occurred
because of a breach of contract by one or more parties, the breaching party or
parties shall remain liable for breach of contract.
17.2 Obligations of Seller and Selling Shareholder at the Closing.
At the Closing and coincidentally with the performance by Buyer of its
obligations described in Section 17.3, Seller and Selling Shareholder shall
deliver to Buyer the following:
(a) Bills of sale, assignments, consents to assignment,
properly endorsed certificates of title, and other instruments of transfer, in
form and substance reasonably satisfactory to counsel for Buyer, necessary to
transfer and convey all of the Assets to Buyer.
(b) The noncompetition/consulting agreement described in
Section 7.3.
(c) The lease assignments described.
(d) A cashier's check or a certified check for prorated
items owing to Buyer.
(e) Possession of the business facilities to be conveyed
pursuant to this Agreement.
(f) Such other certificates and documents as may be called
for by the provisions of this Agreement.
17.3 Obligations of Buyer at the Closing. At the Closing and
coincidentally with the performance by Seller and Selling Shareholder of their
obligations described in Section 17.2, Buyer shall deliver to Seller the
following:
(a) A cashier's check or a certified check or wire transfer
in the amount specified in Section 5.
(b) A cashier's check, certified check or wire transfer for
prorated items owed to Seller, if any.
(c) Such other certificates and documents as may be called
for by the provisions of this Agreement.
SECTION 18. RIGHTS AND OBLIGATIONS SUBSEQUENT TO CLOSING
18.1 Books and Records. This sale does not include the books of
account and records of Seller's business. However, possession and custody of
such books and records, except for Seller's general ledger, may be retained by
Buyer at the place of business Buyer is acquiring from Seller under this
Agreement for a period of 12 months. During this period, Seller or its agents
shall have access to such books and records and may make copies thereof.
Buyer will exercise reasonable care in the safekeeping of such records.
Seller shall retain its general ledger but shall make it available for
inspection by Buyer from time to time upon reasonable request.
18.2 Seller's Right to Pay. In the event Buyer fails to make any
payment of taxes, assessments, insurance premiums, or other charges that Buyer
is required to pay to third parties under this Agreement, Seller shall have
the right, but not the obligation, to pay the same. Buyer will reimburse
Seller for any such payment immediately upon Seller's demand. Any such
payment by Seller shall not constitute a waiver by Seller of any remedy
available by reason of Buyer's default for failure to make the payments.
SECTION 19. DEFAULT
19.1 Remedies. If either party hereto fails to perform any of the
terms, covenants, conditions, or obligations of this Agreement or the Note,
time of payment and performance being of the essence, then the nondefaulting
party, subject to the requirements of the notice provided in Section 19.2, may
have any or all of the following remedies:
(a) The right to declare the full unpaid balance of the Note
immediately due and payable.
(b) The right to exercise any other remedy available at law
or in equity to the nondefaulting party.
19.2 Notice of Default. The defaulting party shall not be deemed
in default for failure to perform the terms, covenants and conditions of this
Agreement, other than failure to make payments on the Note, until notice of
the default has been given to the defaulting party and the defaulting party
has failed to remedy the default within 15 days after the notice. If the
defaulting party fails to make any payment within 15 days of the date the same
becomes due under the Note, the defaulting party shall be deemed in default
and the nondefaulting party shall not be obligated to give notice to the
defaulting party of a declaration of default.
19.3 Cross-Default Provision. A default in this Agreement,
including a default in payment of the Note, shall constitute a default in the
Lease, as well as the other Agreements described in Section 7 or otherwise
required under this Agreement, and a default in any one or more of the
foregoing agreements shall constitute a default in this Agreement.
SECTION 20. TERMINATION OF AGREEMENT
20.1 By Mutual Consent. This Agreement may be terminated by
mutual written consent of Buyer and Seller.
20.2 Breach of Representations and Warranties; Failure of
Conditions. Buyer may elect by notice to Seller, and Seller may elect by
notice to Buyer, to terminate this Agreement if:
(a) The terminating party shall have discovered a material
error, misstatement, or omission in the representations and warranties made in
this Agreement by the other party which shall not have been cured by such
other party within 20 days after written notice to such other party specifying
in detail such asserted error, misstatement, or omission, or by the Closing
Date, whichever first occurs.
SECTION 21. MISCELLANEOUS
21.1 Notices. Any notice or other communication required or
permitted to be given under this Agreement, shall be in writing and shall be
mailed by certified mail, return receipt requested, postage prepaid, addressed
to the parties as follows:
Seller: Rich And Rhine, Inc.
/s/ Ron Owens
President
Selling
Shareholder: John Mullan
_____________________
_____________________
Joyce Owens
_____________________
_____________________
Ron Owens
_____________________
_____________________
John Rich
_____________________
_____________________
With a copy to:
Bert K. Fukumoto
520 SW Yamhill Street, #800
Portland OR 97204
Buyer: United Grocers, Inc.
PO Box 22187
Portland OR 97269-2187
Attention: _______________________
With a copy to:
John H. Arenz
1200 SW Main Building
Portland OR 97205-2039
Any notice or other communication shall be deemed to be given at the
expiration of the five (5) days after the date of deposit in the United States
mail. The addresses to which notices or other communications shall be mailed
may be changed from time to time by giving written notice to the other party
as provided in this Section 21.1.
21.2 Attorney Fees. If any suit or action is filed by any party
to enforce this Agreement or otherwise with respect to the subject matter of
this Agreement, the prevailing party shall be entitled to recover reasonable
attorney fees incurred in preparation or in prosecution or defense of such
suit or action as fixed by the trial court, and if any appeal is taken from
the decision of the trial court, reasonable attorney fees as fixed by the
appellate court.
21.3 Amendments. This Agreement may be amended only by an
instrument, in writing, executed by all the parties.
21.4 Headings. The headings used in this Agreement are solely for
convenience of reference, are not part of this Agreement, and are not to be
considered in construing or interpreting this Agreement.
21.5 Entire Agreement. This Agreement (including the exhibits)
sets forth the entire understanding of the parties with respect to the subject
matter of this Agreement and supersedes any and all prior understandings and
agreements, whether written or oral, between the parties with respect to such
subject matter.
21.6 Counterparts. This Agreement may be executed by the parties
in separate counterparts, each of which when executed and delivered shall be
an original, but all of which together shall constitute one and the same
instrument.
21.7 Severability. If any provision of this Agreement shall be
invalid or unenforceable in any respect for any reason, the validity and
enforceability of any such provision in any other respect and of the remaining
provisions of this Agreement shall not be in any way impaired.
21.8 Waiver. A provision of this Agreement may be waived only by
a written instrument executed by the party waiving compliance. No waiver of
any provision of this Agreement shall constitute a waiver of any other
provision, whether or not similar, nor shall any waiver constitute a
continuing waiver. Failure to enforce any provision of this Agreement shall
not operate as a waiver of such provision or any other provision.
21.9 Gender. Any indication of gender of a party in this
Agreement shall be modified, as required, to fit the gender of the party or
parties in question.
21.10 Further Assurances. From time to time, each of the parties
shall execute, acknowledge, and deliver any instruments or documents necessary
to carry out the purposes of this Agreement.
21.11 Time of Essence. Time is of the essence for each and every
provision of this Agreement.
21.12 No Third-Party Beneficiaries. Nothing in this Agreement,
express or implied, is intended to confer on any person, other than the
parties to this Agreement, any right or remedy of any nature whatsoever.
21.13 Expenses. Each party shall bear its own expenses in
connection with this Agreement and the transactions contemplated by this
Agreement.
21.14 Exhibits. The exhibits referenced in this Agreement are a
part of this Agreement, as if fully set forth in this Agreement.
21.15 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the state of Oregon.
21.16 Venue. This Agreement has been made entirely within the
state of Oregon. This Agreement shall be governed by and construed in
accordance with the laws of the state of Oregon. If any suit or action is
filed by any party to enforce this Agreement or otherwise with respect to the
subject matter of this Agreement, venue shall be in the federal or state
courts in Portland, Oregon.
21.17 Arbitration. Any controversy or claim arising out of or
relating to this Agreement, including, without limitation, the making,
performance, or interpretation of this Agreement, shall be settled by
arbitration in Portland, Oregon, in accordance with ORS 36.300-36.365, and
judgment on the arbitration award may be entered in any court having
jurisdiction over the subject matter of the controversy.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first herein written.
Seller: Rich and Rhine, Inc.
By /s/Ron Owens
Title: President
Selling Shareholder: /s/John Mullan
/s/Joyce Owens
/s/Ron Owens
/s/John Rich
Buyer: United Grocers, Inc., or its
assigns
By /s/Alan Jones
Title: President
List of Exhibits:
"A" Assets Purchased
"B" Leasehold Improvements
"C" Non-negotiable Promissory Note
"D" Lease Assignments
"E-1"
through
"E-4" Noncompetition/consulting Agreements
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information
extracted from the consolidated financial statements
of United Grocers, Inc., for the fiscal quarter ended
March 31, 1995 and is qualified in its entirety by
reference to such financial statements.
<MULTIPLIER> 1
<FISCAL-YEAR-END> SEP-29-1995
<PERIOD-START> DEC-31-1994
<PERIOD-END> MAR-31-1995
<PERIOD-TYPE> 3-MOS
<S> <C>
<CASH> 15,232,403
<SECURITIES> 41,223,538
<RECEIVABLES> 52,951,116
<ALLOWANCES> 2,189,995
<INVENTORY> 79,143,822
<CURRENT-ASSETS> 202,197,060
<PP&E> 107,208,883
<DEPRECIATION> 45,476,470
<TOTAL-ASSETS> 319,726,973
<CURRENT-LIABILITIES> 147,434,665
<BONDS> 126,961,218
0
0
<COMMON> 25,978,476
<OTHER-SE> 14,949,019
<TOTAL-LIABILITY-AND-EQUITY> 319,726,973
<SALES> 491,427,941
<TOTAL-REVENUES> 491,427,941
<CGS> 419,101,556
<TOTAL-COSTS> 50,211,578
<OTHER-EXPENSES> 4,819,468
<LOSS-PROVISION> 1,925,541
<INTEREST-EXPENSE> 5,942,904
<INCOME-PRETAX> 1,373,336
<INCOME-TAX> 549,334
<INCOME-CONTINUING> 516,309
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 516,309
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
