SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 15, 1998
UNITED GROCERS, INC.
(Exact name of registrant as specified in its charter)
Oregon
(State or other jurisdiction of incorporation)
2-60487 93-0301970
- ------------------------ ------------------------
(Commission File Number) (IRS Employer
Identification No.)
6433 S.E. Lake Road, Milwaukie, Oregon 97222
--------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (503) 833-1000
----------------
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On May 15, 1998, United Grocers, Inc., an Oregon corporation (the
"Company") completed the sale of all of the assets of United Grocers' Cash &
Carry operating division ("UGCC") to Smart & Final Inc., a Delaware corporation
(an unrelated third party), for a negotiated price of $60 million. In addition,
the Company entered into a Supply Agreement with Smart & Final Inc. UGCC
consisted of 40 wholesale grocery warehouse outlets and operated on a
cash-and-carry basis, open only to institutional customers for the sale of
produce, dry grocery, fresh and smoked meats, deli, frozen meats and foods and
other related food products in Washington, Oregon, Idaho and Northern
California. On May 19, 1998, the Company filed a Form 12b-25 containing a press
release which stated that the Company had completed the sale to Smart & Final
Inc. The Company filed its Form 10-Q for the period ended July 3, 1998 on August
21, 1998 (after filing a Form 12b-25 notification of late filing) and stated
that the sale was completed as of May 15, 1998 for a purchase price of $42.5
million in cash and a $17.5 million 5-year unsecured note.
A copy of the Asset Purchase Agreement was filed as Exhibit 10.A to the
Company's Form 10-Q for the period ended July 3, 1998 and a copy of the Supply
Agreement is filed as Exhibit 10.B to this Form 8-K. The foregoing description
is qualified in its entirety by reference to the full text of the Asset Purchase
Agreement and Supply Agreement.
A Form 8-K was not filed in May 1998 for the following reasons:
o The Company's lenders were carefully monitoring all operations and
expenditures of the Company. New management was unavailable or unable
to investigate and gather information since it was restructuring debt
agreements and negotiating the sale of several subsidiaries.
o The Company was in the process of determining alternatives for
obtaining a suspension from the duty to file periodic reports with the
Securities and Exchange Commission.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of business acquired: Not applicable.
(b) Pro forma financial information: The following pro forma financial
information of the Company is filed on the pages listed below:
Unaudited Pro Forma Condensed Balance Sheet as of April 3, 1998 F-2
Unaudited Pro Forma Condensed Statement of Operations for the
six-month period ended April 3, 1998 F-3
Unaudited Pro Forma Condensed Statement of Operations for the
year ended October 3, 1997 F-4
2
<PAGE>
(c) Exhibits:
Exhibit Number Exhibit
-------------- -------
10.A Asset Purchase Agreement dated as of May 15,
1998 between United Grocers, Inc. and Smart &
Final Inc. (filed as Exhibit 10.A to the
Company's Form 10-Q for the period ended July
3, 1998).
10.B Supply Agreement dated as of May 15, 1998
between United Grocers and Smart & Final
Inc.**
**Exhibits to this Exhibit are omitted. A list of omitted exhibits is provided
in the Exhibit and the Registrant agrees to furnish supplementally to the
Commission a copy of any omitted exhibit upon request.
2
<PAGE>
SIGNATURES
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 hereunto duly authorized.
UNITED GROCERS, INC.
--------------------
(Registrant)
Date: August 13, 1999
-------------------------------------
Terrance W. Olsen
Chief Executive Officer and President
3
<PAGE>
PRO FORMA FINANCIAL INFORMATION - Item 7(b)
The following unaudited Pro Forma Condensed Balance Sheet as of April
3, 1998 and unaudited Pro Forma Condensed Consolidated Statements of Operations
for the six-month period ended April 3, 1998 and the fiscal year ended October
3, 1997, are based on the historical consolidated financial statements of the
Company adjusted to give effect to the disposition of the Company's Cash & Carry
division and as restated for adjustments that became known in connection with
the audit of the Company's fiscal 1997 financial statements. The Pro Forma
Condensed Consolidated Statements of Operations were prepared assuming the above
disposition occurred as of the beginning of the periods presented and the Pro
Forma Condensed Balance Sheet was prepared assuming that the disposition
occurred as of April 3, 1998.
The Pro Forma Financial Information does not purport to present what
the Company's results of operations or financial position would have been had
the disposition occurred as of the beginning of the respective periods or April
3, 1998, as the case may be, or to project the Company's results of operations
or financial position for any future periods or date, nor does it give effect to
any matters other than those described in the notes thereto.
F-1
<PAGE>
<TABLE>
United Grocers, Inc.
Unaudited Pro Forma Condensed Balance Sheet
April 3, 1998
(in thousands)
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ----------
ASSETS
<S> <C> <C> <C>
Current:
Cash and cash equivalents $ 12,326 $ (24)(A) $ 12,302
Investments maintained for insurance reserves 48,265 48,265
Accounts and notes receivable, net 72,019 (2,993)(A) 69,026
Inventories 84,451 (22,271)(A) 62,180
Other current assets 6,677 (71)(A) 6,606
Deferred income taxes 10,123 (10,000)(C) 123
---------- ----------- ----------
Total current assets 233,861 (35,359) 198,502
---------- ----------- ----------
Non-current assets:
Notes receivable 15,513 17,500 (B) 33,013
Investment in affiliated companies 6,971 6,971
Other receivables and investments 4,059 4,059
Deferred income taxes 553 553
Property, plant and equipment, net 53,987 (4,702)(A) 49,285
Other assets, net 15,814 (1,960)(A) 13,854
---------- ----------- ----------
Total non-current assets 96,897 10,838 107,735
---------- ----------- ----------
TOTAL $ 330,758 $ (24,521) $ 306,237
========== =========== ==========
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Notes payable, current portion $ 50,265 $ (37,986)(B) $ 12,279
Accounts payable 77,192 (6,000)(A) 71,192
Insurance reserves supported by investments 26,611 26,611
Compensation and taxes payable 8,151 8,151
Other accrued expenses 7,328 1,786 (C) 9,114
Other current liabilities 1,805 1,805
---------- ----------- ----------
Total current liabilities 171,352 (42,200) 129,152
Notes payable, net of current portion 135,868 135,868
Other liabilities 10,611 10,611
---------- ----------- ----------
Total liabilities 317,831 (42,200) 275,631
Redeemable members' equity 1,120 1,120
-
Members' equity 11,807 17,679 (B) 29,486
---------- ----------- ----------
TOTAL $ 330,758 $ (24,521) $ 306,237
========== =========== ==========
F-2a
<PAGE>
<FN>
United Grocers, Inc. (United) sold the assets and liabilities of its Cash &
Carry division on May 15, 1998. Net proceeds from the sale totaled approximately
$55.5 million, resulting in a pre-tax gain of approximately $29.0 million. The
net sales proceeds include a $17.5 million note from the buyer. The pro forma
condensed balance sheet reflects the sale as if it had occurred on April 3,
1998. The pro forma adjustments are as follows:
(A) Removal of the historical assets and liabilities of the Cash & Carry
division from the consolidated balance sheet of United. Net book value of
the Cash & Carry assets and liabilities as of April 3, 1998 is as follows:
Cash and cash equivalents $ 24
Accounts and notes receivable, net 2,993
Inventories 22,271
Other current assets 71
Property, plant and equipment, net 4,702
Other assets, net 1,960
Accounts payable (6,000)
----------
$ 26,021
==========
(B) Receipt of proceeds and recording of gain on sale:
Proceeds:
Cash (used to reduce current notes payable) $ 37,986
Note receivable 17,500
----------
55,486
less net book value of assets sold 26,021
----------
Gain on sale of Cash & Carry division, before income taxes 29,465
Estimated tax effect of gain (at 40%) 11,786 (C)
----------
Net gain on sale of Cash & Carry division $ 17,679
==========
(C) Record tax effect of gain on sale of Cash & Carry division:
Estimated reduction of deferred tax asset $ 10,000
Creation of current tax liability 1,786
----------
$ 11,786
==========
</FN>
</TABLE>
F-2b
<PAGE>
<TABLE>
United Grocers, Inc.
Unaudited Pro Forma Condensed Statement of Operations For the six month period
ended April 3, 1998 (in thousands)
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ----------
<S> <C> <C> <C>
Net sales and operations $ 600,539 $ (34,354)(A) $ 566,185
---------- ----------- ----------
Costs and expenses:
Cost of sales 521,516 (21,325)(A) 500,191
Operating expenses 57,076 (10,165)(A) 46,911
Selling and administrative expenses 11,918 11,918
Depreciation and amortization 5,130 (403)(A) 4,727
---------- ----------- ----------
595,640 (31,893) 563,747
---------- ----------- ----------
Other income (expense):
Interest expense (7,632) 1,571 (B) (6,061)
Interest income 698 569 (C) 1,267
Gain (loss) on write-down or disposition of assets, net 335 (266)(A) 69
---------- ----------- ----------
(6,599) 1,874 (4,725)
---------- ----------- ----------
Loss from continuing operations before members'
allowances and income taxes (1,700) (587) (2,287)
Members' allowances (4,600) (4,600)
---------- ----------- ----------
Loss from continuing operations before income taxes (6,300) (587) (6,887)
Income tax benefit 2,520 235 (D) 2,755
---------- ----------- ----------
Loss from continuing operations $ (3,780) $ (352) $ (4,132)
========== =========== ==========
<FN>
United Grocers, Inc. (United) sold the assets and liabilities of its Cash &
Carry division on May 15, 1998. Net proceeds from the sale totaled approximately
$55.5 million, resulting in a pre-tax gain of approximately $29.0 million. The
net sales proceeds include a $17.5 million note from the buyer. The pro forma
condensed statement of operations reflects the sale as if it had occurred on
October 3, 1997. The pro forma adjustments are as follows:
(A) Removal of the historical revenues and expenses of the Cash & Carry division
from the consolidated statement of operations of United, net of the addition of
estimated revenue and expenses associated with five year supply agreement
entered into between purchaser and United. Under the supply agreement, United is
obligated to supply and purchaser is obligated to purchase at least 95% of the
future purchases of the Cash & Carry operations for the five years following the
sale.
(B) Estimated effect on interest expense of the reduction in debt from the cash
proceeds of the sale.
(C) Interest income from the note receivable from the seller in connection with
the disposition.
(D) Estimated income tax effect of pro forma adjustments, assuming effective
combined state and federal rate of 40%.
</FN>
</TABLE>
F-3
<PAGE>
<TABLE>
United Grocers, Inc.
Unaudited Pro Forma Condensed Statement of Operations For the year ended October 3, 1997 (in thousands)
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ----------
<S> <C> <C> <C>
Net sales and operations $1,306,602 $ (82,851)(A) $1,223,751
---------- ----------- ----------
Costs and expenses:
Cost of sales 1,133,690 (55,528)(A) 1,078,162
Operating expenses 129,494 (20,739)(A) 108,755
Selling and administrative expenses 22,425 22,425
Depreciation and amortization 11,483 (1,115)(A) 10,368
---------- ----------- ----------
1,297,092 (77,382) 1,219,710
---------- ----------- ----------
Other income (expense):
Interest expense (16,307) 3,140 (B) (13,167)
Interest income 733 1,138 (C) 1,871
Gain (loss) on write-down or disposition of assets, net (5,214) 17 (A) (5,197)
---------- ----------- ----------
(20,788) 4,295 (16,493)
---------- ----------- ----------
Loss from continuing operations before members'
allowances, income taxes and cumulative effect of
a change in accounting principle (11,278) (1,174) (12,452)
Members' allowances (10,349) (10,349)
---------- ----------- ----------
Loss from continuing operations before income taxes
and cumulative effect of a change in accounting
principle (21,627) (1,174) (22,801)
Income tax benefit 10,466 470 (D) 10,936
---------- ----------- ----------
Loss from continuing operations before cumulative
effect of a change in accounting principle $ (11,161) $ (704) $ (11,865)
========== =========== ==========
<FN>
United Grocers, Inc. (United) sold the assets and liabilities of its Cash &
Carry division on May 15, 1998. Net proceeds from the sale totaled approximately
$55.5 million, resulting in a pre-tax gain of approximately $29.0 million. The
net sales proceeds include a $17.5 million note from the buyer. The pro forma
condensed statement of operations reflects the sale as if it had occurred on
September 29, 1996. The pro forma adjustments are as follows:
(A) Removal of the historical revenues and expenses of the Cash & Carry division
from the consolidated statement of operations of United, net of the addition of
estimated revenue and expenses associated with five year supply agreement
entered into between purchaser and United. Under the supply agreement, United is
obligated to supply and purchaser is obligated to purchase at least 95% of the
future purchases of the Cash & Carry operations for the five years following the
sale.
(B) Estimated effect on interest expense of the reduction in debt from the cash
proceeds of the sale.
(C) Interest income from the note receivable from the seller in connection with
the disposition.
(D) Estimated income tax effect of pro forma adjustments, assuming effective
combined state and federal rate of 40%.
</FN>
</TABLE>
F-4
Exhibit 10B.
SUPPLY AGREEMENT
This Supply Agreement ("Agreement") is made and entered into
as of this fifteenth day of May, 1998 by and between United Grocers, Inc., an
Oregon business corporation ("Supplier"), and Smart & Final Inc., a Delaware
corporation ("Company").
RECITALS
--------
A. Supplier and Company have entered into that certain Asset Purchase
Agreement ("the Purchase Agreement") dated as of May 15, 1998, whereby Supplier
has agreed to sell certain assets to Company.
B. The assets to be purchased by Company include the leasehold and fee
interests held by Supplier in certain properties located in California, Idaho,
Oregon and Washington and more particularly described in the Purchase Agreement,
and herein collectively referred to as the "Properties". For purposes of this
Agreement, those Properties located in California (except for the Properties
located in Redding and Eureka, California) are hereinafter referred to as the
"California Excluded Properties"; the Properties located in Redding and Eureka,
California are herein referred to as the "California Included Properties".
C. Pursuant to the terms of the Purchase Agreement, Supplier has agreed
to supply various food products, dry goods and support services to Company in
connection with the Properties, all pursuant to the terms of this Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants set forth below, the parties agree as follows:
1. Products. Company presently purchases approximately 13% of its
products through Direct Store Deliveries ("DSD") and approximately 87% of its
products are supplied by Supplier through its distribution center. Company will
continue to use Supplier as its primary supplier, buying no less than 95% of
those products ("Products") described on Exhibit "A" which historically have
been provided by Supplier (the "Company's Minimum Purchase Requirement"). The
dollar amount of Company's Minimum Purchase Requirement will vary depending on
the level of Company's overall business and Company's relative sales growth of
DSD and non-DSD products. Company's Minimum Purchase Requirement will apply to
all Company stores initially and will exclude Products purchased by the Excluded
Stores once they commence to be supplied through other sources. Company shall
place orders for Products with Supplier by on-line transmission, according to a
schedule and protocol to be mutually agreed to by the parties following
execution of this Agreement (but in all essential respects no less than the
levels of service that have historically been provided to those warehouses
stores heretofore operated by Supplier as United Grocer Cash & Carry Stores (the
"Cash & Carry Stores")). Supplier agrees that, during the Term, the Service
Level for those 215 items designated on Exhibit B (the "Always-In Merchandise")
ordered by Company hereunder will be maintained at a minimum of 98.5% and, for
all other merchandise currently supplied by Supplier to the Cash & Carry Stores
("All Other Merchandise"), at
1 - Supply Agreement
<PAGE>
96.0% (herein the "Service Levels"). Supplier will provide Company, throughout
the term of this Agreement, a monthly Service Level Reconciliation Report
showing, with respect to all orders submitted and with respect to which Products
were shipped during that month, (a) the aggregate dollar amount, calculated by
reference to Supplier's landed net cost as of the date of the various orders
submitted during that month by Company (the "Gross Order Amount"), (b) the
aggregate dollar amount (based upon Supplier's landed net cost as of the date of
the corresponding orders) of all Products, during the agreed-upon delivery
windows, shipped or available for pick-up, as the case may be, pursuant to
orders submitted during that month (the "Actual Delivered Amount"), and (c) the
aggregate dollar amount reflected in the Gross Order Amount attributable to
Products that have been discontinued, that were unauthorized, or that were
unavailable or out-of-stock (including "vendor's scratches", vendor out-of-stock
and vendor out-of-pack) (the "Order Reduction Amount"). The Service Level for a
given period shall be calculated as the relationship of (i) the Actual Delivered
Amount to (ii) the Gross Ordered Amount less the Order Reduction Amount (which
resulting difference is herein referred to as the "Net Ordered Amount"). Service
Level percentages will not be adversely affected by any error by Company in
booking advertising and feature items, including sales levels of feature items
in excess of projections made by Company. If the Service Level for any month
falls below the level required hereby (a "Service Level Breach"), Company shall
give notice to Supplier and Supplier shall use its best efforts to immediately
restore the required Service Level. In the event that the average Service Level,
calculated for any given calendar quarter during the term hereof, falls below
ninety percent (90%) (a "Major Service Level Breach"), then, without prejudice
to any other rights or remedies available to Company, Company, at its option,
and upon 30 days' notice to Supplier, may terminate this Agreement.
Notwithstanding the foregoing provisions, Supplier will not be in breach hereof,
and no Service Level Breach or Major Service Level Breach will be deemed to have
occurred, if Supplier's failure to maintain the requisite Service Level as
provided herein is a result of or otherwise occurs contemporaneously with (A) a
material default by Company under this Agreement, (B) picketing or other labor
disputes at the Cash & Carry Warehouses or at any Supplier facility, (C) an
event of force majeure as described in Section 15 below, (D) failure by Company
to provide to Supplier on a timely basis, as appropriate the Ad/Display
Requirements and/or the New Product Projections as contemplated by Section
17(a). Notwithstanding the foregoing, each party agrees to notify the other
party promptly if it disputes the action of the other party with respect to an
actual or alleged Service Level Breach or Major Service Level Breach. The
parties agree to use their best efforts to resolve any disputes through good
faith negotiation within fifteen (15) days of such notice. If any such dispute
is not so resolved within said fifteen (15) day period, the parties shall submit
the dispute to binding arbitration as provided in Section 27. Supplier agrees to
continue to service Company's special order requirements at such historic levels
of service as are set forth on Exhibit C that Supplier provided to the Cash &
Carry Stores for such special orders. Supplier also shall continue to order, and
Supplier shall continue to warehouse, all Products including, but not limited
to, retail dry grocery, produce, fresh and smoked meats, deli and frozen meats
and foods, at Supplier's landed net cost during the term of this Agreement, on
such basis as Supplier, in its discretion, determines is reasonably necessary to
service its obligations hereunder.
2 - Supply Agreement
<PAGE>
2. Pricing.
-------
(a) The invoice price shall reflect "Supplier's landed net cost" for
such Product as of the date of invoice, plus the "Per Invoice Fee" (as defined
below).
(b) As used herein, "Supplier's landed net cost" with respect to any
item of merchandise sold or inventory maintained pursuant hereto shall mean the
actual invoiced cost to Supplier for such item of merchandise, including
cross-docking costs, the out-of-pocket cost of transportation, handling and
insurance in connection with the shipment and warehousing of such item of
merchandise to the U.G. warehouse, less all applicable discounts, rebates and
allowances actually allowed (including, without limitation, those allowed by or
with respect to purchases of All Kitchen, Western Family and tobacco products)
to U.G. in connection therewith, but excluding all applicable state and federal
excise taxes on cigarettes and tobacco products; provided further that,
notwithstanding anything to the contrary set forth herein, discounts and
allowances granted by Supplier's vendors for a specified duration shall be
reallowed to Company with respect to orders submitted during that duration only;
and provided further that, notwithstanding anything to the contrary herein set
forth, in no event shall Supplier's landed net cost be reduced by, nor shall
Supplier be required to reallow or pass through to Company, any dividend or
other distribution, or any allocation (or similar benefit arising out of
Company's ownership interest in Western Family) declared, paid, awarded or given
to Supplier from or by Western Family. In calculating Supplier's landed net cost
of an item, any fractional cents shall be rounded up or down to the nearest
cent.
(c) Supplier will provide Company, within ten (10) days following the
end of each calendar quarter throughout the term of this Agreement, a quarterly
product mix report (the "Product Mix Report"), showing the invoiced amount and
applicable percentage of all Product shipped during that quarter by those
Product classifications shown on Exhibit D, attached hereto and by this
reference incorporated herein in its entirety. In addition, within ten (10) days
following the end of each calendar quarter throughout the term of this
Agreement, Company shall furnish to Supplier a statement, certified by an
executive officer of Company, as to whether the Company, during the entirety of
that calendar quarter, satisfied all of its inventory and merchandise
requirements for all Products through Supplier, and if not, that the Company met
or exceeded the Company's Minimum Purchase Requirement (the "Company
Certification").
(d) As used herein, the "Per Invoice Fee" shall be calculated with
respect to each invoice in an amount equal to the appropriate fee percentage
(the "Fee Percentage") of the landed net cost of Products shipped pursuant to
that invoice (excluding any DSD purchases instigated by Company). Initially, the
Fee Percentage for Products purchased for shipment to all Properties shall be
six and three-eighths percent (6.375%); from and after the California
Change-Over Date (as defined in Section 6 below), the Fee Percentage for
Products purchased for shipment to all Properties other than the California
Included Properties shall be six and three-eighths percent (6.375%), and the Fee
3 - Supply Agreement
<PAGE>
Percentage for Products purchased for shipment to the California Included
Properties shall be six and three-quarters percent (6.75%); provided, however,
that all applicable state and federal excise taxes on cigarettes and tobacco
products will be excluded from the Per Invoice Fee; and provided further that,
if Company at any time should fail to purchase from Supplier, on a relative
basis with respect to all Products so purchased, measured semi-annually, a mix
of Product classifications, such that the percentage attributable to any one
such Product classification falls outside the range of percentage tolerances set
forth on Exhibit D (such an event herein being referred to as a "Re-evaluation
Event"), then, during that ten (10) day period following the delivery and
receipt by each of the parties of the Product Mix Report and Company
Certification for the end of the semi-annual period during which that
Re-evaluation Event occurred, each of the parties shall endeavor to negotiate in
good faith an adjustment to the Fee Percentage, in order that the adjusted Fee
Percentage approximates, as nearly as possible, the anticipated benefit to
Company and the anticipated costs to Supplier, on a per item basis, as was
reflected in the assumptions forming the basis for the initial Fee Percentage,
which was designed to produce Per Invoice Fees, on an annual basis, equal to
$9,088,007 against $142,556,984 of Supplier's landed net cost of Products
shipped and invoiced during that year. If the parties are unable to agree upon
an adjustment to the Fee Percentage, then the Per Invoice Fee shall be
calculated by application of the Per Classification Fee Percentages (as defined
below). Once the adjusted Fee Percentage is agreed to by the parties, or, if not
agreed to, once the Per Classification Fee Percentages apply, then the adjusted
Fee Percentage or the application of the Per Classification Fee Percentages, as
the case may be, shall apply and relate back to the calculation of all Per
Invoice Fees paid or payable since the beginning of the semi-annual period
during which the Re-evaluation Event occurred that gave rise to the adjustment
or change, and the parties shall pay or refund, as the case may be, within three
(3) days following such readjustment or change, all amounts necessary to
reconcile the parties' respective accounts.
As soon as is reasonably practicable following the execution of this
Agreement, the parties shall meet, confer, review cost information and such
other information as may be necessary, appropriate or advisable to devise a
separate fee percentage for the various classifications of Products being or to
be supplied to Company by Supplier hereunder. If the parties are unable to agree
on the fee percentage for the separate Product classifications, then the parties
will attempt to resolve the matter by a formal non-binding mediation with an
independent neutral mediator selected to by the parties. Once the parties agree
upon the appropriate fees percentages applicable to the various classifications
of Products, those resulting fee percentages shall become a part of this
Agreement by addendum, and shall herein be referred to as the "Per
Classification Fee Percentages."
For the full term of the Supply Agreement the only change in the
overall Fee Percentage of 6.375% will be determined by changes in Product Mix.
When product mix percentages fall outside the range of percentages to tolerances
set forth on Exhibit D, a new fee will be determined based on the revised
product mix with each classification mix multiplied by the individual
classification fee percentages initially agreed upon by the
4 - Supply Agreement
<PAGE>
parties. The individual classification fee percentages will remain constant for
the full term of the Supply Agreement.
3. Services. At those historic levels of service described in Exhibit C,
Supplier shall continue to provide to Company all of the functional support
services (such as financial accounting and operational services, information
systems and computer services and electronic polling procedures, in each case at
currently existing levels of service) now provided to the Cash & Carry Stores
and costs incurred for the benefit of the Cash & Carry Stores in the
distribution and sale of the Products and shall continue to maintain, at
currently existing levels of service, all appropriate human resource
administrative services provided by Supplier to the Cash & Carry Stores prior to
the sale of those stores, relating to employees engaged in the distribution and
sale of the Products, the costs of which are included in the Per Invoice Fees
described in Section 2 above. Such services are herein referred to as the "Basic
Services". Supplier agrees to coordinate all of the Basic Services with Company
and to use Supplier's reasonable efforts to adjust or revise such services to
conform to Company's reporting and accounting cycles, customs, practices,
controls and policies. To the extent that Company requests any new or additional
services or any conforming adjustments or revisions beyond either those historic
levels of service described in Exhibit C or the currently existing levels
(herein, a "Supplementary Service") then the parties shall negotiate in good
faith and first agree on the amount of consideration to be paid to Supplier to
provide such Supplementary Service; if the parties, despite their best efforts
and good faith negotiation, are unable to agree upon the amount of consideration
to be paid for the Supplementary Service, then the parties will attempt to
resolve the matter by a formal non-binding mediation with an independent neutral
mediator selected to by the parties; if following such mediation, the parties
remain unable to agree upon the consideration to be paid for the Supplementary
Service, then Supplier shall have no obligation to provide the Supplementary
Service, and Company shall be free to contract with such third party or parties
as Company, in its discretion, may determine to provide same; provided, however,
that if Company engages a third party to provide such Supplementary Service,
and, by either convenience or necessity, such third party complementarily
thereto provides services that comprise part of the Basic Services, then and to
the extent of Supplier's resulting avoided costs in providing the Basic Services
(but only if such avoided costs in each instance exceed $10,000), Company shall
receive an appropriate credit against amounts otherwise payable to Supplier
hereunder. It is agreed that Company will be the sole and exclusive employer of
employees at the Properties ("Company Employees") and that by providing human
resource services to Company, Supplier will not become an employer or a joint
employer of any Company Employee. Nothing in this Agreement is intended to
create a "joint employer" relationship between Company and Supplier. During the
term of this Agreement, representatives of Supplier shall meet quarterly with
representatives of Company to ensure coordination of the services provided by
Supplier to Company pursuant to the terms of this Agreement. In addition,
Company shall have the right at Company's expense and upon reasonable notice to
audit Supplier's books and records for the sole purpose of verifying payment
hereunder and Supplier shall provide Company and its representatives with access
to such of Supplier's systems, data, accounts, procedures, controls and
personnel, and shall provide copies of such of Supplier's reports, agreements,
statements and other documents generated by, prepared
5 - Supply Agreement
<PAGE>
for, or delivered to Supplier in connection with the services provided by
Supplier to Company under this Agreement for the limited and exclusive purpose
of verifying amounts payable under this Section 3.
4. Delivery. Supplier will deliver Products in accordance with that Initial
Delivery Schedule attached hereto as Exhibit E. From and after the date hereof,
Company and Supplier will confer and agree to delivery time windows consistent
with those used in calculating the fee schedule. Such delivery time windows and
delivery frequencies shall be established to accommodate, to the maximum extent
possible, both the ongoing need of Supplier to maximize operating/distribution
efficiencies and Company's on-going desire to maintain optimal operations, with
due --- consideration to the special requirements with respect to delivery of
fresh produce and delivery to small sales volume stores. To the extent
consistent with these parameters, the parties will endeavor to establish
delivery schedules as will enable Supplier, to the maximum extent practicable,
to deliver Products on the basis of full truck, combination loads. So long as
Supplier receives reasonably sufficient lead time from the time that Company
submits its order, Company reserves the right to cancel all or a portion of
Products that is not delivered on the date or to the delivery location specified
in the order. Any detention, storage, or delayed transportation charges levied
against Company by reason of the actions or omissions of Supplier, its agents,
employees, subcontractors or carriers (other than such actions or omissions
taken at the direction or with the approval or acquiescence of Company, or
actions or omissions caused in whole or in part by an event of force majeure)
shall at Company's option be billed back to Supplier. Additional deliveries
requested or created through actions or omission of Company, its agents,
employees or subcontractors shall create additional charges equal to the rates
used in the calculation of freight for Company merchandise. Supplier agrees to
remain liable for all damaged or non-conforming Products in accordance with
normal return and credit policies practiced by Supplier.
5. Title and Risk of Loss. Title to the Products shall remain with Supplier
until Company's tender of delivery thereof at Company's designated delivery
location of the Products. Risk of loss shall pass to Company upon tender of
delivery at Company's designated delivery location.
6. Term. This Agreement shall become effective upon signature by both
parties and shall continue in effect until May 15, 2003. Supplier's obligation
to sell Product for shipment to the California Excluded Properties shall
terminate upon that date six (6) months following the date of this Agreement, or
at such earlier date as Company, in its discretion and upon thirty (30) days'
prior written notice to Supplier, may elect. The date that Supplier's obligation
to sell Product for shipment to the California Excluded Properties terminates is
herein referred to as the "California Change-Over Date".
7. Authority. The relationship created between the parties by this
Agreement is solely that of seller of products and provider of services and
buyer of products and recipient of services, respectively.
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<PAGE>
8. Payment Terms.
a) Supplier shall deliver invoices to Company promptly upon each
shipment of Products F.O.B. Company's Portland, Oregon or Modesto or Tracy,
California Distribution Center Warehouse, on Supplier's standard invoices.
b) Company shall pay for Products delivered pursuant to this Agreement
by electronic funds transfer no later than ten (10) days after delivery. Payment
terms shall be subject to Supplier's normal late payment charges. Upon ten (10)
days' prior notice to Supplier, Company may set off against any amounts owing
under any invoices the amount of any unpaid liquidated damages then due under
Section 18 below; during said ten-day period, Company shall confer with Supplier
to discuss the proposed set-off, the basis for same, and Company and Supplier
shall endeavor during that ten-day period to resolve any differences with
respect thereto.
9. Resale Price/Repackaging. Supplier shall continue to operate the pricing
system for the Products, but Company shall be free to set its resale prices and
other conditions with its customers. In addition, Company shall have the right
to repackage and/or re-label any Product; provided, however, that Company shall
have no right or authority to, and Company shall not, repackage or re-label any
"private label" Products sold by Supplier to Company.
10. Insurance. Supplier shall maintain or cause to be maintained a policy
of comprehensive general liability insurance (including a broad form of vendor's
endorsement) naming Company as an additional insured and additional loss payee
for personal injury and property damage coverage, with limits of liability of
not less than a combined single limit of Three Million Dollars ($3,000,000). In
addition, Supplier shall (if transporting shipments from Company's warehouses or
distribution centers), maintain automobile liability insurance, including
non-owned and hired, with limits of not less than that required, above, for
commercial general public liability coverage and shall maintain a policy of
statutory workers' compensation insurance on its agents, employees and
contractors who enter upon Company's premises in accordance with the laws of the
states in which such premises are located. All insurance required shall be
underwritten by a duly licensed, financially responsible insurance carrier with
a Best's rating of not less than "B+" and shall be evidenced by Certificates of
Insurance, which Supplier shall promptly provide to Company confirming that the
insurance required has been obtained and is in full force and effect, and
requiring that Company be given at least thirty (30) days notice prior to any
cancellation.
11. Indemnity.
a) Each party (the "indemnitor") agrees fully and forever to indemnify,
defend and hold harmless the other party (the "indemnitee") from and against any
and all claims, demands, damages, losses, liabilities, actions, causes of
actions, suits, judgments, costs and expenses (including litigation costs and
reasonable attorneys' fees) arising out of, relating to, or connected with, (i)
any act or omission of the indemnitor taken (or omitted) in connection with
indemnitor's performance under this Agreement, (ii) any
7 - Supply Agreement
<PAGE>
breach of any covenant or obligation on the part of indemnitor to be paid,
performed or observed hereunder, or (iii) any breach of any warranty or
representation made or given by indemnitor hereunder. Nothing in the preceding
sentences gives the Company any right or claim against Supplier arising out of,
relating to, or connected with Supplier's performance or failure to perform any
human resource administrative service or any supplementary human resource
service at the direction of the Company under Section 3 above. In addition,
Buyer shall similarly indemnify, defend and hold Supplier harmless from and
against any demand, claim, suit, action, loss, damage, liability, judgment,
costs and expenses (including litigation costs and reasonable attorney fees)
arising out of, relating to, or connected with Supplier's performance or failure
to perform any Basic Service or Supplementary Service. Nothing herein is in any
way intended to abrogate or otherwise affect any right of Company to seek
indemnity from Supplier for any product liability with respect to Products sold
by Supplier to Company, whether such right arises at common law, by statute or
otherwise. .
12. Compliance. Supplier warrants only that the Products, when tendered for
delivery, will conform to such quantity and other specifications as may be set
forth on the corresponding order submitted by Company, and that such Products
are merchantable, as such term is used and understood under the Oregon Uniform
Commercial Code (ORS 72.3140). In addition, Supplier shall assign to Company, to
the extent assignable, all warranty rights Supplier may have from any vendor
and/or manufacturer with respect to any Products sold to Company hereunder. In
all other respects, as to the Products sold or to be sold hereunder, SUPPLIER
MAKES NO OTHER WARRANTY OR REPRESENTATION OF ANY KIND, WHETHER EXPRESSED OR
IMPLIED, INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTY OF FITNESS FOR A
PARTICULAR PURPOSE.
13. Office Space. Supplier shall provide Company with the office space
currently used as the administrative offices for Supplier's Cash and Carry
operations, or at another suitable location reasonably approved by Company and
Supplier, "rent free". In connection with the rental of such space, Company
shall bear responsibility for all telephone costs, and Supplier shall bear
responsibility for all electricity or other non-telephone utility charges
attributable to such office space. In occupying such office space, Company shall
comply with all applicable laws (including, without limitation, employment laws
and laws governing the procurement of worker's compensation insurance with
respect to those of Company's employees who will be working in and/or occupying
such office space), and shall maintain such types and levels insurance as is
consistent with sound business practice.
14. Distribution Center Warehouse. Supplier shall continue to provide
warehouse slots for shipping and delivery of Products purchased pursuant to the
terms of this Agreement at Supplier's distribution center located at 6433 S.E.
Lake Road, in Portland, Oregon, or at those distribution centers located in
Modesto or Tracy, California, during the term of this Agreement. Supplier shall
also provide the following minimum slots dedicated to Cash & Carry Stores'
operations during the term of this Agreement:
a) Dry - 1600;
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<PAGE>
b) Frozen - 400;
c) Frozen Meat - 124; and
d) Deli/Dairy/Cheese - 70.
Supplier agrees to provide additional warehouse slots for shipping and
delivery of Products purchased pursuant to the terms of this Agreement in
numbers and at charges to be agreed upon by Supplier and Company.
15. Force Majeure. Neither party shall be deemed to be in default hereunder
(except in respect of payment obligations) by reason of its delay in performance
of, or failure to perform, any of its obligations hereunder if such delay or
failure is caused by strikes or other labor disturbances, riots or other civil
disturbances, fire, accident, flood, interference by civil or military
authorities, shortages of labor, raw material, power fuel, water, means of
containers or transportation facilities or common lack of other necessities,
plant or traffic disturbances, delays in transportation, failure of suppliers,
compliance with any law, rule, regulation or governmental order that (x) becomes
effective after the date hereof and (y) is binding on the party whose
performance is affected thereby, and compliance therewith by such party is not
voluntary or optional, the establishment by producers or manufacturers of
Products of allocations or restrictions on quantities of Products available to a
party (in which case performance will be excused only to the extent of amounts
in excess of the other party's fair allocable share); and/or any other
circumstances beyond its reasonable control. If deliveries are delayed for more
than three (3) days due to any of these circumstances, then either party shall
be free to cancel the undelivered portion of any order in question without
incurring any liability towards the other party.
16. Termination.
a) Except as provided in Section 1 with respect to a Major Service
Level Breach (which shall be the sole basis for termination by reason of
Supplier's failure to meet the Service Level requirements), if either party
breaches any of the material provisions or conditions of this Agreement and
fails to discontinue and cure such breach within thirty (30) days after receipt
of written notice from the complaining party, the complaining party shall have
the right to terminate this Agreement without prejudice to any other remedy
either party may have against the other for breach or nonperformance of this
Agreement.
b) Notwithstanding paragraph (a) above, in the event of termination
of this Agreement prior to the end of the stated term, either party may require
the other to continue to honor the terms of this Agreement for up to six (6)
additional months to allow Company to arrange for suitable replacement supplies,
warehousing and service.
c) Upon the expiration or termination of this Agreement, Company
shall at its own cost (i) promptly return to Supplier all advertising material
and all other information received from Supplier, (ii) promptly cease to engage
in advertising or promotional activities concerning the Products, and (iii)
promptly cease to represent, in
9 - Supply Agreement
<PAGE>
any manner, that Company has been designated by Supplier to sell or promote the
Products.
17. Special Provisions.
a) Company shall provide notice to Supplier of Company's ad/display
quantity requirements ("Ad/Display Requirements") no later than 21 days prior to
shipment thereof as called for in the corresponding purchase order. In addition,
Company shall provide notice to Supplier of Company's projections, 21 days prior
to shipment thereof, for demand of any new Products ("New Product Projections").
Failure to so provide the Ad/Display Requirements or New Product Projections
shall operate to excuse Supplier from liability or any other consequence called
for hereunder (and shall not be taken into account in calculating the Service
Level or otherwise in determining whether a Service Level Breach or a Major
Service Level Breach has occurred) to the extent the actual ad/display quantity
or new Product requirements with respect to which prior notice was not timely
provided to Supplier exceed Company's normal quantity requirements with respect
to the same Products.
b) In the event that Company discontinues to offer for sale at the
Cash & Carry Stores (or otherwise substantially reduces its projected demand
for) a Product sold by Supplier exclusively to Company and with respect to which
Supplier has or maintains inventory, then, Company shall promptly so notify
Supplier, and Company shall thereupon purchase and accept delivery all such
inventory (or, in the case of a reduced projected demand, all excess inventory)
from Supplier over a reasonable period of time.
c) Supplier shall have full control and authority over all
procurement responsibilities involved in connection with Supplier's performance
hereunder, including the procurement of all inventory of Products for ultimate
resale to Company pursuant to this Agreement, and Supplier shall employ, and
shall have and enjoy all rights and authority (and obligations) of an employer
with respect to all procurement personnel (including all rights with respect to
compensation, discipline and termination of such personnel); provided, however,
that, the procurement personnel selected by Supplier to service Supplier's
obligations hereunder shall be mutually and reasonably acceptable to Company;
provided further, that all costs (salary, benefits, employer shares of payroll
taxes, contributions, and the like) incurred by Supplier for that procurement
personnel servicing Company's account with Supplier shall be borne by Company,
and shall be reimbursed to Supplier no less frequently than on a quarterly
basis, upon presentation of an invoice showing in reasonable detail the
calculation of the amounts due. Supplier shall confer with Company with respect
to the selection and compensation of procurement personnel involved in servicing
Supplier's obligations hereunder, and shall, if so requested by Company, furnish
to Company relevant information in the possession of Supplier relating to the
qualifications and background of any applicant for such a procurement position
with Supplier (subject, however, to the privacy rights of such applicant).
18. Liquidated Damages for Breach of Service Level Obligations.
10 - Supply Agreement
<PAGE>
NOTWITHSTANDING ANYTHING CONTAINED IN THIS AGREEMENT TO THE CONTRARY,
IF, DURING ANY CALENDAR QUARTER THROUGHOUT THE TERM OF THIS AGREEMENT, SUPPLIER
COMMITS A SERVICE LEVEL BREACH, THEN COMPANY SHALL BE ENTITLED TO RECEIVE FROM
SUPPLIER AS LIQUIDATED DAMAGES AN AMOUNT EQUAL TO 3.75% MULTIPLIED BY THE
EXCESS, IF ANY, OF (A) THAT AMOUNT THAT WOULD HAVE BEEN THE ACTUAL DELIVERED
AMOUNT DURING THAT QUARTER HAD THE MINIMUM SERVICE LEVELS BEEN ACHIEVED, OVER
(B) THE ACTUAL DELIVERED AMOUNT FOR THAT CALENDAR QUARTER , WHICH RESULTING
AMOUNT SHALL BE SEPARATELY CALCULATED FOR ALWAYS-IN MERCHANDISE AND ALL OTHER
MERCHANDISE. THE PARTIES AGREE THAT THE COMPANY'S ACTUAL DAMAGES WOULD BE
DIFFICULT OR IMPOSSIBLE TO DETERMINE IF SUPPLIER BREACHES SUCH OBLIGATION, AND
THAT SUCH SUM IS THE BEST ESTIMATE OF THE AMOUNT OF DAMAGES COMPANY WOULD
SUFFER. THIS SUM SHALL BE THE AMOUNT THAT THE COMPANY IS ENTITLED TO RECEIVE AS
LIQUIDATED DAMAGES WITH RESPECT TO A SERVICE LEVEL BREACH (EXCEPT FOR THE RIGHT
TO TERMINATE FOR A MAJOR SERVICE LEVEL BREACH AS PROVIDED IN SECTION 1), AND
SHALL BE COMPANY'S SOLE REMEDY FOR A SERVICE LEVEL BREACH, BUT SHALL NOT LIMIT
IN ANY WAY WHATSOEVER ANY RIGHTS OR REMEDIES COMPANY MAY HAVE WITH RESPECT TO A
BREACH OF ANY OTHER OBLIGATION OF SUPPLIER UNDER THIS AGREEMENT. THE PARTIES
WITNESS THEIR AGREEMENT TO THIS LIQUIDATED DAMAGES PROVISION BY SEPARATELY
INITIALING THIS SECTION.
Supplier: ___________ Company: ____________
The Liquidated Damages provisions in this Agreement relate only to Service Level
Breaches arising under Section 1, and do not apply to any of the obligations
described in Section 3 of this Agreement.
19. Notices. Whenever the service or the giving of any document or consent
by or on behalf of any party hereto upon any other party is herein provided for,
or becomes necessary or convenient under the provisions of this Agreement or any
document related hereto, a valid and efficient service of such document shall be
effected by delivering the same in writing to such party in person, by Federal
Express or other reputable courier, by facsimile, or by sending the same by
registered or certified mail, return receipt requested, and shall be deemed
received upon personal delivery if delivered personally, by Federal Express or
other reputable courier or by facsimile, or four (4) business days after deposit
in the mail in the United States, postage prepaid, addressed to the person to
receive such notice or communication at the following address:
If to Supplier: United Grocers, Inc.
6433 SE Lake Road
Portland, Oregon 97222
Attention: Mr. Charles Carlbom
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<PAGE>
Phone: (503) 833-1003
Fax: (503) 833-1008
If to Company: Smart & Final Inc.
4700 South Boyle Avenue
Los Angeles, CA 90058
Attn: Donald G. Alvarado, Esq.
Phone: (213) 589-9726
Fax: (213) 589-0415
Each of the parties shall be entitled to specify a different address by giving
notice as aforesaid.
20. Entire Agreement. This Agreement, and the Exhibits attached hereto,
constitute the entire agreement between the parties hereto pertaining to the
subject matter hereof and supersede all prior agreements, understandings,
negotiations, and discussions, whether oral or written.
21. Amendment and Modification. No supplement, modification, waiver or
termination of this Agreement shall be binding unless executed in writing by the
party to be bound. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions (whether or not
similar), nor shall such waiver constitute a continuing waiver unless otherwise
expressly provided.
22. Headings. The headings of this Agreement are included for purposes of
reference and convenience only, and shall not define, construe or limit the
meaning of any provision of this Agreement.
23. Assignment. Neither party shall transfer, assign or delegate (other
than ordinary subcontracting incidental and customary to such party's
performance hereunder, and other than the assignment of accounts arising with
respect to the sale of Products or the performance of services hereunder as
collateral to a bank or other lender as security for a loan) its rights or
duties
12 - Supply Agreement
<PAGE>
hereunder without the prior written consent of the other party, which
consent shall not be unreasonably withheld or delayed. Without Company's prior
consent, Supplier shall be entitled to assign its rights and delegate its duties
under this Agreement to any entity which who acquires all or a major portion of
the business or operating assets of Supplier, provided that any such assignee
expressly assumes Supplier's duties and obligations under this Agreement and
that the net worth of such assignee equals or exceeds the net worth of Supplier
as of the closing date of the transaction contemplated by the Purchase
Agreement. Without Supplier's prior consent, Company shall be entitled to assign
its rights and delegate its duties under this Agreement to any entity which
controls, is controlled by or under common control with Company.
24. Governing Law; Venue. The validity, construction and interpretation of
this Agreement shall be governed by the internal laws of the State of Oregon
applicable to contracts made and to be performed wholly within that state.
25. Third Parties. Nothing in this Agreement, expressed or implied, is
intended to confer upon any person other than the parties hereto any rights or
remedies under or by reason of this Agreement.
26. Expenses; Attorneys' Fees. Each party shall bear the expenses
(including, without limitation, attorneys' fees) incurred by it in connection
with the negotiation, execution and delivery of this Agreement and the
agreements contemplated by this Agreement. In the event any party takes legal
action (including arbitration or mediation) to enforce any of the terms of this
Agreement, the party who is determined to be the prevailing party shall be
entitled to recover its reasonable expenses, including attorneys' fees for
pretrial investigation, at trial, and on appeal, incurred in such action.
27. Arbitration; Mediation. Any dispute claim or controversy concerning,
arising out of, or relating to this agreement (including, without limitation,
any such dispute, claim or controversy concerning, arising out of, or relating
to the making, performance or interpretation hereof) shall first be mediated by
the parties. If the dispute, claim or controversy is not settled by way of
mediation, then the parties shall submit the same to binding arbitration in
Portland, Oregon, in accordance with ORS 36.330-36.365, and judgment or decree
on the arbitration award or the decision of the arbitrator(s) may be entered in
any court of competent jurisdiction. The arbitrator(s) may award damages,
interest, attorneys' fees and litigation costs, and/or permanent injunctive
relief, but in no event shall the arbitrator have the authority to award
punitive or exemplary damages. The prevailing party, as determined by the
arbitrator(s), shall be entitled to recover all of its reasonable litigation
fees and costs. Notwithstanding the foregoing, a party may apply to a court of
competent jurisdiction for relief in the form of a temporary restraining order
or preliminary injunction, or other provisional remedy pending final
determination of a claim through arbitration in accordance with this paragraph.
If proper notice of any hearing has been given, the arbitrator will have full
power to proceed to take evidence or to perform any other acts necessary to
arbitrate the matter in the absence of any party who fails to appear. THE
PARTIES
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<PAGE>
UNDERSTAND, ACKNOWLEDGE AND AGREE THAT THEY ARE HEREBY WAIVING THEIR
RESPECTIVE RIGHT TO A JURY TRIAL BY AGREEING TO SUBMIT ANY AND ALL DISPUTES TO
FINAL AND BINDING ARBITRATION.
28. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which, together, shall constitute
one and the same instrument.
29. Severable Provisions. If any of the provisions of this Agreement are
determined to be illegal or otherwise unenforceable, in whole or in part, the
remaining provisions, and any partially unenforceable provisions to be the
extent enforceable, shall nevertheless be binding and enforceable.
30. Confidentiality. Each of Company and Supplier (as appropriate, the
"promisor") agrees to and will cause its respective authorized agents,
representatives, affiliates, employees, officers, directors, accountants,
counsel and other designated representatives (collectively, "Representatives")
to (i) treat and hold as confidential (and not disclose or provide access to any
person to) all records, books, contracts, instruments, computer data and other
data and information (collectively, "Information") concerning the other party
(the "promisee") in the promisor's possession or furnished by the promisee or
its Representatives pursuant to this Agreement, (ii) in the event that promisor
or its Representatives become legally compelled to disclose any such
Information, provide the promisee with prompt written notice of such requirement
so that the promisee may seek a protective order or other remedy or waive
compliance with this Section 30, and (iii) in the event that such protective
order or other remedy is not obtained, or the promisee waives compliance with
this Section 30, furnish only that portion of such Information which is legally
required to be provided and exercise promisor's best efforts to obtain
assurances that confidential treatment will be accorded such Information;
provided, however, that this sentence shall not apply to any Information that,
at the time of disclosure, is available publicly and was not disclosed in breach
of this Agreement by such party or its Representatives; and provided further,
however, that the provisions of clauses (i) and (ii) above shall not preclude a
party from disclosing Information to its Representatives or to its lenders or
their Representatives (provided that each such Representative shall be advised
of the confidential nature of such Information) or from disclosing Information
to or filing Information within any governmental authority or agency with
jurisdiction over such party. Each party agrees and acknowledges that remedies
at law for any breach of its obligations under this Section 30 are inadequate
and that in addition thereto the other party shall be entitled to seek equitable
relief, including injunction and specific performance, in the event of any such
breath, without the necessity of demonstrating the inadequacy of monetary
damages. The provisions of this
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<PAGE>
Section 30 shall not apply to the extent any
such Information is required to be disclosed by applicable law.
The parties have executed this Agreement as of the date and
year first above written.
UNITED GROCERS, INC.
an Oregon business corporation
("Supplier")
By: /s/ Charles E. Carlbom
--------------------------
Its: President and CEO
SMART & FINAL INC.
a Delaware corporation
("Company")
By: /s/ Martin A. Lynch
--------------------------
Its: Exec. VP & CFO
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<PAGE>
Omitted Exhibits:
Exhibit A - Product List
Exhibit B - "Always In: Products
Exhibit C - Historic Levels of Service
Exhibit D - Product Classification Product Mix Tolerances
Exhibit E - Initial Delivery Schedule/Windows
