UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
April 14, 2000
(Date of Report)
Roundy's, Inc.
(Exact name of registrant as specified in its charter)
Wisconsin 002-94984 39-0854535
(State or other (Commission File IRS Employer
jurisdiction of Number) ID Number)
incorporation)
23000 Roundy Drive
Pewaukee, Wisconsin 53072
(Address of principal executive offices)
(262) 953-7999
(Registrant's telephone number, including area code)
<PAGE>
Item 2. Acquisition or Disposition of Assets
(a) The Acquisition. On March 31, 2000, the
Registrant, Roundy's, Inc. (the "Company") consummated
the acquisition (the "Acquisition") of: (i) all of the
outstanding stock of Mega Marts, Inc. ("Mega") from the
shareholders of Mega for a purchase price of approximately
$123.9 million subject to post-closing adjustments; and
(ii) certain of the assets of NDC, Inc. ("NDC"),
consisting of a retail grocery store known as the "Tri-
City Pick 'n Save" ("TCPS"), for a purchase price of
approximately $11.2 million, subject to post-closing
adjustments. The respective post-closing adjustments
will be based upon the balance sheet of Mega
and upon a valuation of certain of the TCPS assets as
of closing, and are not expected to be material in
either case. A copy of the Stock Purchase Agreement
dated March 31, 2000, by and among the Company and the
record and beneficial owners of all of the issued and
outstanding shares of capital stock of Mega is filed as
Exhibit 2.2 to this Report, and a copy of the Asset
Purchase Agreement dated March 31, 2000 by and among
the Company, Mega and NDC is filed as Exhibit 2.3 to
this Report. The Company financed the Acquisition
utilizing the proceeds of the Credit Agreement
described in (c) below, and issued approximately
$39 million in promissory notes to certain of the
shareholders of Mega.
The Acquisition was negotiated at arms' length between
the respective officers of the Company, Mega and NDC.
None of such officers were affiliated with the other
party, its affiliates, its directors, officers and
their associates.
(b) Businesses Acquired. Prior to March 31, 2000, Mega had
been in the business of owning and operating 16 retail
grocery stores, and NDC operated one retail grocery
store. The Company is engaged in a similar business
and intends to continue to operate the Mega business
and the retail grocery store acquired from NDC by
consolidating these businesses into the Company's
operations.
<PAGE>
(c) The Credit Agreement. On March 31, 2000, the
Company entered into a Credit Agreement in the maximum
aggregate amount of $250,000,000 with various lenders,
with Bank One, Wisconsin acting as agent (the "Credit
Agreement"). The Credit Agreement provides for
$170,000,000 of revolving loans and $80,000,000 of term
loans. Following are the material components of the
application of the proceeds of the Credit Agreement
which were drawn on March 31, 2000 (the total amount
drawn was approximately $175.5 million):
(i) approximately $15.0 million was used to pay
indebtedness of Mega; (ii) approximately
$96.2 million was paid to the shareholders of Mega and
to NDC, Inc.; (iii) approximately $63.0 million was
used to retire long-term indebtedness of the Company;
and (iv) the remaining approximately $1.3 million was
used to pay other expenses, primarily transaction
costs. A copy of the Credit Agreement is filed as
Exhibit 4.6 to this Report. In connection with the
Credit Agreement, the Company entered into a rate
management transaction (interest rate swap agreement)
with Harris Trust and Savings Bank pursuant to which
the Company is permitted to exchange approximately
$60.0 million of variable-rate indebtedness for a like
amount of fixed-rate indebtedness.
Item 5. Other Events
On February 2, 2000, the Company consummated the
acquisition of substantially all of the assets of Ultra
Mart, Inc. ("Ultra"), an operator of seven retail
grocery stores, for a purchase price of approximately
$37.7 million.
<PAGE>
Item 7. Financial Statements and Exhibits
(a) Financial Statements of the Business Acquired.
The following combined audited financial statements of
Mega Marts and TCPS ("Mega/TCPS"), Inc. are
set forth as Exhibit 99.1 to this report:
1. Report of Independent Public Accountants
2. Combined Balance Sheets as of January 1, 2000 and
January 2, 1999
3. Combined Statements of Operations for the three
years ended January 1, 2000
4. Combined Statements of Stockholders' Equity for
the three years ended January 1, 2000
5. Combined Statements of Cash Flows for the three
years ended January 1, 2000
6. Notes to Combined Audited Financial Statements
NOTE: The acquisition of the assets of Ultra is
individually insignificant and financial statements of
the acquired business are not required to be filed with
this report.
(b) Pro Forma Financial Information
The Unaudited Pro Forma Combined Condensed
Statement of Operations of the Company for the year ended
January 1, 2000, and Unaudited Pro Forma Combined Condensed
Balance Sheet of the Company as of January 1, 2000
(collectively, the "Pro Forma Financial Statements") are
presented herewith as Exhibit 99.2. The Pro Forma Financial
Statements give effect to the Acquisition and the Credit
Agreement (both defined in Item 2(a) of this Report).
<PAGE>
The Pro Forma Financial Statements have been prepared
to illustrate the estimated effect of the Acquisition and
the Credit Agreement (and the application of the proceeds of
the Credit Agreement to finance the Acquisition as well as
for other purposes). The Pro Forma Financial Statements are
based on certain estimates and assumptions made by the
management of the Company as to the combined operations of
the Company and Mega/TCPS which the Company believes to be
reasonable. The Pro Forma Financial Statements do not
purport to be indicative of the results of operations or
financial position of the Company and Mega/TCPS that
actually would have been obtained had the Acquisition been
completed as of the assumed dates, or to project the results
of operations or financial position of the Company for any
future date or period.
The Pro Forma Balance Sheet gives pro forma effect to
the Acquisition as if it had occurred on January 1, 2000.
The Pro Forma Statement of Operations gives pro forma effect
to the Acquisition as if it had occurred on January 2, 1999.
In each case, effect is given to the consummation of the
Credit Agreement as if the Credit Agreement had been
consummated immediately prior to consummation of the
Acquisition.
The Pro Forma Statement of Operations has been prepared
assuming retention of all of the Company's and Mega/TCPS's
sales.
The Acquisition will be accounted for by the purchase
method of accounting. Under purchase accounting, the total
purchase price will be allocated to the tangible and
intangible assets and liabilities assumed based upon their
respective fair values as of the closing of the Acquisition
based on valuations and studies which are not yet available.
A preliminary allocation of the purchase price has been made
to major categories of assets and liabilities in the
accompanying Pro Forma Financial Statements based on
available information. The actual allocation of purchase
price and resulting effect on income from operations may
differ significantly from the pro forma amounts included
herein. These pro forma adjustments represent management's
preliminary determination of purchase accounting adjustments
and are based upon available information and certain
assumptions that management believes to be reasonable. A
balance sheet will be prepared with respect to Mega/TCPS's
balance sheet as of the date of such closing, on which the
post-closing purchase price adjustment will be based.
Management does not expect that differences between the
preliminary and final purchase price allocation will have a
material impact on the Company's financial position and/or
results of operations.
<PAGE>
(c) Exhibits.
See the Exhibit Index, following the signature to this
Report, which Exhibit Index is incorporated herein by
reference.
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.
Roundy's, Inc.
(Registrant)
By: /s/ ROBERT D. RANUS
---------------
Name: Robert D. Ranus
Title: Vice President and Chief Financial Officer
Date: April 14, 2000
<PAGE>
ROUNDY'S, INC.
EXHIBIT INDEX
TO CURRENT REPORT ON FORM 8-K
Exhibit Description
- ------ ------------
2.2 * Stock Purchase Agreement dated March 31,
2000, by and among Roundy's, Inc. and the record and
beneficial owners of all of the issued and outstanding
shares of capital stock of Mega Marts, Inc. [FILED
HEREWITH]
2.3 * Asset Purchase Agreement dated March 31,
2000, by and among Roundy's, Inc., NDC, Inc. and Mega
Marts, Inc.
[FILED HEREWITH]
4.6 $170,000,000 Revolving Loans, $80,000,000
Term Loans Credit Agreement among Roundy's, Inc., The
Lenders, Bank One, Wisconsin, As Agent, Harris Trust
and Savings Bank and National City Bank as Co-
Syndication Agents, and Banc One Capital markets, Inc.
as Lead Arranger and Sole Book Runner, dated as of
March 31, 2000
[FILED HEREWITH]
10.10 Asset Purchase Agreement by and between the
Registrant and Ultra Mart, Inc. dated December 23, 1999
[Incorporated herein by reference to Exhibit 2.1 to the
Registrant's Annual Report on Form 10-K for fiscal year
ended January 1, 2000, filed with the Commission on
March 21, 2000, Commission File No. 002-94984]
10.11 Employment Contract between the Resitrant and Gary L.
Fryda dated March 31, 2000 [FILED HERWITH]
99.1 Combined Financial Statements of Mega
Marts, Inc./Tri City Pick'n Save at and for the three years
ended January 1, 2000, January 2, 1999 and January 3, 1998
[FILED HEREWITH]
99.2 Unaudited Pro Forma Combined Condensed Financial
Statements of the Company at and for the year ended
January 1, 2000
[FILED HEREWITH]
* Pursuant to Regulation S-K, Item 601(b)(2), included as part
of Exhibits 2.2 and 2.3 is a list of omitted schedules and
exhibits together with an agreement to furnish copies of any
such omitted schedule or exhibit to the Commission upon request.
Date: April 14, 2000
Exhibit 2.2
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is entered into this 31st day
of March, 2000, by and among (i) Roundy's, Inc., a Wisconsin
corporation (the "Buyer"); (ii) the David A. Ulrich Living Trust,
Agatha T. Ulrich, David A. Ulrich, Jr., David A. Ulrich Grantor
Retained Annuity Trust No.2, Gary L. Fryda and John M. Rupcich
(collectively the "Principal Shareholders") and (iii) the Brent
A. Rupcich Trust, the Franco J. Rupcich Trust, the Nicholas J.
Rupcich Trust, Kathleen McGarry, Thomas Ulrich, Sr., Marilyn
Ulrich Graves, John M. Rupcich, III, Christel Rupcich Holdway,
and April Rupcich Sutherland, as the record and beneficial owners
of all of the issued and outstanding shares of capital stock of
Mega Marts, Inc., a Wisconsin corporation (the "Company") the
Principal Shareholders and the persons described in clause (iii)
being referred to collectively as the "Shareholders."
WHEREAS, the Shareholders are the beneficial and record
owners of the number of shares of the common stock, par value
$.01 per share, of the Company (the "Common Stock") as set forth
on Section 3.3 of the Disclosure Schedule (defined hereinafter);
WHEREAS, the shares of Common Stock described in the first
"Whereas" clause constitute, in the aggregate, 100% of the issued
and outstanding shares of the capital stock of the Company
(collectively the "Subject Shares"); and
WHEREAS, the Shareholders are willing to sell, and the Buyer
is willing to purchase, all but not less than all of the Subject
Shares on the terms and conditions hereinafter set forth;
WHEREAS, several of the Shareholders also comprise the
stockholders of NDC, Inc. ("NDC"), which simultaneously has
entered into an agreement contemplating the sale of certain of
its assets relating to and used in the conduct of its "Tri-City"
store to the Buyer or to an affiliate of the Buyer (the "NDC
Asset Purchase Agreement").
NOW, THEREFORE, in consideration of the premises and the
promises and covenants herein contained, the parties hereto agree
as follows:
ARTICLE I Purchase and Sale of the Shares
The Shareholders hereby agree to sell, convey, transfer and
deliver to the Buyer at the Closing (as hereinafter defined in
Section 2.4), and the Buyer hereby agrees to purchase from the
Shareholders at the Closing, all (but not less than all) of the
Subject Shares, free and clear of all claims, pledges, security
interests, liens, mortgages, equities, rights of first refusal,
options, contractual commitments, conditional sales contracts,
reservations, restrictions, charges or encumbrances of any nature
whatsoever (collectively, the "Encumbrances"), all on the terms
and conditions set forth in this Agreement.
ARTICLE II Purchase Consideration; Closing
2.1 Purchase Consideration. Subject to the terms and
conditions of this Agreement, the aggregate price to be paid by
the Buyer for the Subject Shares (the "Purchase Price") shall be
One Hundred Twenty Three Million Dollars ($123,000,000), plus or
minus the difference between the Closing Date Net Book Value (as
hereinafter defined) and $39,705,781 (the "Pro Forma Net Book
Value"). The Purchase Price will be payable in the manner
provided in Section 2.2 below.
2.2 Payment of Purchase Price.
(a) Closing Payment. Buyer shall pay to the Shareholders
on the Closing Date the aggregate amount of Eighty Four Million
Dollars ($84,000,000) (the "Closing Payment"), plus or minus the
Estimated Net Book Value Adjustment (as hereinafter defined in
Section 2.3(a)). The Closing Payment shall be made by a single
wire transfer of immediately available funds to a single account
to be designated by the Shareholders, which transfer shall be
deemed for all purposes to constitute delivery of the Closing
Payment to all of the Shareholders. The Closing Payment shall be
allocated among the Shareholders in the manner set forth on
Section 2.2 of the Disclosure Schedule attached hereto and
incorporated herein by reference (the "Disclosure Schedule").
(b) Promissory Notes. The remainder of the Purchase Price
in the amount of Thirty Nine Million Dollars ($39,000,000) shall
be paid in the form of non-negotiable subordinated promissory
notes (the "Notes") issued by Buyer in favor of the Shareholders
in the proportions set forth in Section 2.2 of the Disclosure
Schedule, substantially in the form of Exhibit A attached hereto
and incorporated herein. The Notes shall be subordinated to the
Buyer's senior funded debt ("Senior Debt") pursuant to a
subordination agreement to be entered into by the holders of the
Notes with Buyer's senior lenders in the form of Exhibit B hereto
(the "Subordination Agreement").
2.3 Net Book Value Adjustment. The Purchase Price shall
be adjusted (the "Net Book Value Adjustment") in accordance with
this Section 2.3.
(a) Estimated Net Book Value. Prior to the Closing, the
parties jointly will prepare an estimate of the Closing Date Net
Book Value (as defined in Section 2.3(c)) of the Company, which
estimate will be based on the interim financial statements of the
Company as of the month end next preceding the Closing Date (the
"Estimated Net Book Value"). The difference (positive or
negative) between the Estimated Net Book Value and the Pro Forma
Net Book Value is referred to herein as the "Estimated Net Book
Value Adjustment."
(b) Closing Balance Sheet and Closing Date Net Book Value
Certificate. Within sixty (60) days after the Closing Date, the
Shareholders shall deliver to the Buyer: (i) a balance sheet
(together with appropriate supporting schedules and work papers)
of the Company as of the Closing Date (the "Closing Balance
Sheet"), audited by Ernst & Young (the "Company's Accountants"),
prepared from the books and records of the Company in accordance
with generally accepted accounting principles ("GAAP") applied on
a basis consistent with the "Financial Statements" (as
hereinafter defined), and (ii) a statement of the Closing Date
Net Book Value (as determined pursuant to Section 2.3(c)) of the
Company as of the Closing Date, accompanied by a certificate of
the Shareholders' Agents to the effect that such statement has
been prepared in accordance with the terms of this Agreement and
GAAP applied on a basis consistent with that used in preparation
of the Financial Statements (the "Closing Date Net Book Value
Certificate").
(c) Definition of Closing Date Net Book Value. For
purposes of this Agreement, the term "Closing Date Net Book
Value" shall mean the book value of the Company's assets less its
liabilities, as set forth on the Closing Balance Sheet,
determined as of the Closing Date in a manner consistent with
that used in the preparation of the Financial Statements, and in
any event in accordance with GAAP, but subject to the following:
(i) inventory will be valued at its cost to the
Company consistent with the Company's historical methods for
calculating inventory values described in Section 2.3(b) of the
Disclosure Schedule, based on a physical inventory at each of the
Company's retail stores, to be taken by Badger Inventory
Services, Inc., on a date mutually agreed upon by Buyer and the
Company, at or as near as practicable to the Closing Date but in
no event more than 21 days prior to the Closing Date (the cost of
the physical inventory to be borne by the Company and accrued as
a liability on the Closing Balance Sheet);
(ii) the Closing Date Net Book Value shall be reduced
by the amount of any payments made, costs incurred or amounts
accrued by the Company as described in Section 6.4(a)(ii),
Section 7.8 or Section 11.3;
(iii) the Closing Date Net Book Value will reflect
an accrual for employee vacation and holiday pay, the amount
thereof to be determined in accordance with GAAP, provided that
in making such determination for purposes of this subsection
(iii) accrued employee vacation and holiday pay will include that
which each employee has earned but not used as of the Closing
Date, as well as a pro-rata portion of that which each employee
has accrued through the Closing Date, even though the employee
may not be entitled thereto unless he or she would have remained
employed by the Company for some additional time after the
Closing Date, and the gross amount so determined will be reduced
by the amount of accrued vacation pay that employees will be
assumed to forfeit, at a forfeiture rate consistent with the
Company's past experience; and
(iv) accounts receivable will be valued at their
estimated net collectible balance in a manner consistent with the
Company's historical practice
(d) Buyer's Review. As soon as practicable after its
receipt of the Closing Balance Sheet and the Closing Date Net
Book Value Certificate, but in any event not more than forty-five
(45) days thereafter, the Buyer shall: (i) cause Deloitte &
Touche, the Buyer's independent certified public accountants
("Buyer's Accountants"), to review the Closing Balance Sheet and
the Closing Date Net Book Value Certificate and (ii) deliver to
the Shareholders' Agents (as hereinafter defined) either a notice
of acceptance of the Closing Date Net Book Value Certificate (a
"Notice of Acceptance") or a notice of dispute relating to the
Closing Date Net Book Value Certificate setting forth in
reasonable detail the basis for such dispute (a "Dispute
Notice").
(e) Access. After the Closing Date, the Buyer shall allow
Shareholders' Agents, Company's Accountants and their respective
representatives, during normal business hours, to have reasonable
access to, and to examine and make copies of, all books and
records of the Company, including but not limited to the books,
records, schedules, work papers and audit programs of the Buyer
and the Buyer's Accountants and to have reasonable access to and
assistance from the Company's employees to the extent such
documents and access are necessary to prepare the Closing Date
Net Book Value in accordance with Section 2.3(b) and to respond
to any Dispute Notice delivered by the Buyer pursuant to Section
2.3(d).
(f) Dispute Resolution. In the event the Buyer delivers a
Dispute Notice, such dispute shall be resolved in accordance with
the procedures set forth below.
(i) Mutual Agreement. The Buyer and the Shareholder's
Agent shall endeavor, through good faith negotiations, to resolve
any such dispute on terms mutually acceptable to them. The
Buyer's Accountants, on behalf of the Buyer, and the Company's
Accountants, on behalf of the Shareholders (such accountants
being hereinafter collectively referred to as the "Parties'
Accountants"), may participate in such negotiations to the extent
requested by the parties.
(ii) Neutral Accountants. If such dispute or
controversy is not resolved by the mutual agreement of the
parties or the Parties' Accountants within thirty (30) days after
the Shareholders' Agents' receipt of the Dispute Notice, the
Buyer and the Shareholders' Agents jointly shall appoint, within
fifteen (15) days thereafter, a national accounting firm other
than one of the Parties' Accountants (and, provided further, that
if the parties cannot agree on the selection of such a national
accounting firm, they shall select such national accounting firm
by lot from among the "Big-Five" accounting firms other than the
Parties' Accountants) (the firm so appointed being referred to as
the "Neutral Accountants"), to resolve such dispute or
controversy. The Neutral Accountants shall be instructed to use
their best efforts to make their determination as to such dispute
or controversy within thirty (30) days after their appointment.
The Neutral Accountants shall act as arbitrators, and their
determination shall be final, binding and conclusive as between
the Buyer and the Shareholders absent fraud or manifest error.
(iii) Fees. The respective fees and disbursements
of the Parties' Accountants shall be borne by the party which
retained them. The fees and disbursements of the Neutral
Accountants shall be apportioned equally between the Buyer on the
one hand and the Shareholders on the other hand. The
Shareholders shall pay a percentage of such fees and expenses
equal to A/(A+B) and the Buyer shall pay a percentage of such
fees and expenses equal to B/(A+B), where A is equal to the
absolute value of the difference (in dollars) between the Closing
Date Net Book Value as finally determined by the Neutral
Accountants and the Closing Date Net Book Value as reflected in
the Dispute Notice prepared and delivered by the Buyer in
accordance with Section 2.3(d)(ii) (after adjustment, if any,
following negotiations between Shareholders' Agents and the Buyer
pursuant to Section 2.3(f)(i)), and where B is equal to the
absolute value of the difference (in dollars) between Closing
Date Net Book Value as finally determined by the Neutral
Accountants and the Closing Date Net Book Value as reflected in
the statement of the Closing Date Net Book Value prepared and
delivered by the Shareholders' Agents in accordance with Section
2.3(b) (after adjustment, if any, following negotiations between
Shareholders' Agents and the Buyer pursuant to Section
2.3(f)(i)).
(g) Final Net Book Value Adjustment. If the Closing Date
Net Book Value is greater than the Estimated Net Book Value,
Buyer shall pay to the Shareholders, in accordance with their
respective proportions of the Purchase Price set forth in Section
2.2 of the Disclosure Schedule, the amount of such excess, with
interest at the rate of seven and one-quarter percent (7.25%) per
annum from and after the Closing Date to the date of payment. If
the Closing Date Net Book Value is less than the Estimated Net
Book Value, the Shareholders shall pay to Buyers the amount of
such deficiency, with interest at a rate of seven and one-quarter
percent (7.25%) per annum from and after the Closing Date to the
date of payment, in accordance with the "Percent of P-C
Adjustment" set forth opposite their respective names in Section
2.2 of the Disclosure Schedule. Any payment required of the
Buyer or the Shareholders, as the case may be, pursuant to this
Section 2.3(f) shall be made within fifteen (15) days of the
delivery of the Notice of Acceptance or, in the event of delivery
of a Dispute Notice, within fifteen (15) days of a final
determination thereof as described in Section 2.3(e), by wire
transfer of immediately available funds (i) if to the Buyer, to
such account as is designated by the Buyer, and (ii) if to the
Shareholders, to the account referred to in Section 2.2(a)
hereof, which transfer shall be deemed for all purposes to
constitute delivery to all of the Shareholders.
2.4 Time and Place of Closing. The closing of the
transactions contemplated hereby (the "Closing") shall take place
at the offices of Whyte Hirschboeck Dudek S.C., Suite 2100, 111
East Wisconsin Avenue, Milwaukee, Wisconsin, 53202, on March 31,
2000 at 9:00 A.M., or on such other date or at such other
location as the parties shall mutually agree in writing (the
"Closing Date"), and shall be effective for all purposes as of
11:59 P.M. on April 1, 2000 (the "Effective Date").
2.5 Deliveries.
(a) Deliveries by the Shareholders. The Shareholders shall
deliver or cause to be delivered to the Buyer at the Closing the
following:
(i) certificates representing all of the Subject
Shares, free of any restrictive legends (other than those
relating to the Securities Act of 1933 or any stockholders
agreement to which a Shareholder is a party that will be
terminated at Closing as described in subparagraph (xii) below)
and duly endorsed or accompanied by duly executed stock powers;
(ii) certificates, dated as of the Closing Date and
executed by each of the Principal Shareholders and the Chief
Financial Officer of the Company (in his or her capacity as
such), respectively, to the effect that (A) each of the
representations and warranties of the Principal Shareholders made
under Article III hereof is true and correct in all material
respects on the Closing Date as though made on such date and
(B) the Shareholders and the Company have performed and complied
in all material respects with all covenants, conditions and
obligations under this Agreement which are required to be
performed or complied with by them on or prior to the Closing
Date;
(iii) a certified copy of the Articles of
Incorporation and Bylaws of the Company;
(iv) all minute books, stock books, stock transfer
records, corporate seals and other corporate and shareholder
records of the Company and each Subsidiary (as hereinafter
defined);
(v) letters of resignation, dated as of the Closing
Date, of all of the directors and officers of the Company and the
Subsidiaries;
(vi) written opinions of Foley & Lardner and of Godfrey
& Kahn, S.C., counsel for the Shareholders, dated the Closing
Date, substantially in the form of Exhibits C-1 and C-2 hereto;
(vii) acknowledgments by the Shareholders of their
receipt of the Closing Payment;
(viii) executed counterparts of the following
agreements:
(A) Noncompetition Agreements entered into
between the Buyer and Mr. John Rupcich, Mr. Gary Fryda and Mr.
David Ulrich, Jr., respectively, substantially in the form of
Exhibit D hereto;
(B) the Subordination Agreement entered into by
and between the Shareholders and the Buyer's senior lender, as
described in Section 2.2(b) above;
(C) Amended and Restated NDC Leases (as defined
in Section 7.11 below) entered into by and between NDC as lessor
and the Company as lessee (and with Buyer as guarantor of the
obligations of the Company), for the NDC Leased Real Property (as
defined in Section 3.11(c) hereof), substantially in the form of
and on the terms set out on Exhibit E hereto;
(D) title commitments for the Owned Real Property
(as defined in Section 3.11(a) hereof) and leasehold title
insurance commitments for the Leased Real Property, as described
in Section 7.8 hereof;
(E) Landlord Consents and Estoppel Certificates;
as described in Section 7.9 hereof;
(F) Sublessee Estoppel Certificates, as described
in Section 7.10 hereof;
(G) Subordination, Nondisturbance and Attornment
Agreements, as described in Section 7.12 hereof; and
(H) Tri-City Bank Agreement (as hereinafter
defined in Section 8.6) entered into by and between the Buyer and
Tri-City National Bank ("Tri-City"), substantially in the form of
Exhibit F hereto.
(ix) evidence, reasonably satisfactory to the Buyer, as
to termination as of:
(A) the Closing Date of guarantees of the
indebtedness of NDC for which the Company is currently liable;
and
(B) the interest rate swap agreement between the
Company and Bank One.
(x) a certificate (executed in duplicate) of each of
the Shareholders in a form acceptable to the Buyer certifying
that such Shareholder is not a "foreign person" within the
meaning of Section 1445 of the Internal Revenue Code of 1986, as
amended;
(xi) certificates of status issued by the Wisconsin
Department of Financial Institutions dated within twenty (20)
business days of the Closing Date certifying that the Company and
each Subsidiary is a domestic corporation organized under the
laws of the State of Wisconsin and has filed its annual report
required under the Wisconsin Business Corporation Law ("WBCL");
(xii) evidence, reasonably satisfactory to the
Buyer, as to the termination of all stockholder agreements,
voting trust agreements, nominee arrangements, options, warrants,
rights or other privileges with respect to any shares of the
Company's capital stock;
(xiii) all executed written consents of third
parties to the sale of the Subject Shares to the Buyer hereunder
which may be required pursuant to any agreement or arrangement to
which the Company, any Subsidiary or any Shareholder is a party;
and
(xiv) an agreement among Buyer, the Company and the
Shareholders, in form and substance satisfactory to them and
their respective counsel, whereby all agreements (including the
"Pick `N Save" trademark license and supply agreements) entered
into between the parties (or their affiliates) prior to the date
hereof (the "Existing Agreements") are terminated and the parties
mutually release each other from and against any and all claims,
demands, causes of action, liabilities, costs, expenses, or
obligations (other than those arising out of this Agreement) that
any party may have against any other arising out of or relating
to the Existing Agreements or the business relationships existing
between the parties (the "Termination and Release Agreement").
(b) Deliveries by the Buyer. The Buyer shall deliver to
the Shareholders at the Closing the following:
(i) payment of the Purchase Price in accordance with
the provisions of this Article II;
(ii) the Notes;
(iii) certificates, dated as of the Closing Date
and executed by proper officers of the Buyer to the effect that:
(A) each of the representations and warranties of the Buyer made
under Article IV hereof is true and correct in all material
respects on the Closing Date as though such representations and
warranties were made on such date and (B) the Buyer has performed
and complied in all material respects with all covenants and
obligations under this Agreement which are to be performed or
complied with by it on or prior to the Closing Date;
(iv) the written opinion of Whyte Hirschboeck Dudek
S.C., counsel for the Buyer, dated the Closing Date,
substantially in the form of Exhibit G hereto;
(v) a copy, certified as of the Closing ate by a
proper officer of the Buyer, of the resolutions of the Boards of
Directors of the Buyer authorizing the execution, delivery and
performance of this Agreement by the Buyer;
(vi) executed counterparts of each of the agreements
specified in Section 2.5(a)(viii) above to which the Buyer is a
party;
(vii) in the event that an affiliate of Buyer (and
not Buyer) is the Lessee under any of the Amended and Restated
NDC Leases described in Section 2.5(a)(vii)(C) above, an
unconditional guarantee of such leases by the Buyer in form
reasonably acceptable to NDC's lender; and
(viii) the executed Termination and Release
Agreement.
ARTICLE IIIARepresentations and Warranties of the Shareholders
Each of the Shareholders severally makes the representations
and warranties set forth in this Article IIIA, each of which is
true and correct as of the date hereof and will be true as of the
Closing Date.
3A.1 Authority of the Shareholders; No Violations.
(a) The Shareholder has full right, power, legal capacity
and authority to sell, transfer and deliver to the Buyer the full
legal and beneficial ownership in the Subject Shares to be sold
by such Shareholder pursuant to this Agreement and to consummate
the transactions contemplated herein and in any documents to be
delivered in connection herewith ("Seller Ancillary Documents")
to which such Shareholder is a party.
(b) If the Shareholder is a trust, estate, or entity other
than a natural person or corporation (the "Entity"), the
representatives, trustees or other fiduciaries who have signed
this Agreement (and any relevant Seller Ancillary Document) on
behalf of such Entity are the duly appointed and acting
representatives, trustees, or fiduciaries of such Entity as of
the date hereof (and will be such as of the Closing Date). The
representatives, trustees, or other fiduciaries of such Entity
have all the power and authority necessary to own and dispose of
the Subject Shares held by such Entity. No beneficiary or other
party with any beneficial interest in the Entity has heretofore
in any way assigned, transferred or encumbered, or permitted the
assignment, transfer or other encumbrance of, the Subject Shares
(or any interest therein) held by such Entity. The execution and
delivery of this Agreement and any relevant Seller Ancillary
Document by such representatives, trustees, or other fiduciaries,
and the performance by such representatives, trustees, or other
fiduciaries of their obligations hereunder have been duly and
validly authorized and approved by all actions required under
applicable law relating to the Entity and under the terms of the
relevant will, trust or other instruments. Such representatives,
trustees, and fiduciaries have full power and authority under the
terms of the applicable instruments and under any document
relating to or applicable to such Entity to execute and deliver
this Agreement and any relevant Seller Ancillary Document on
behalf of such Entity and to perform their respective obligations
hereunder and thereunder. Neither the execution of this
Agreement or any relevant Seller Ancillary Document, consummation
of the transactions contemplated hereby or thereby nor compliance
with or fulfillment of the terms and conditions hereof or thereof
will violate or conflict with any provision of the applicable
instruments or any other document relating to the Entity.
(c) This Agreement has been duly and validly executed and
delivered by the Shareholder and is the legal, valid and binding
obligation of the Shareholder enforceable in accordance with its
terms, except that the enforceability of this Agreement is
subject to bankruptcy, insolvency, reorganization and similar
laws of general applicability relating to or affecting creditors'
rights and limitations on the availability of the remedy of
specific performance and other equitable relief. No action,
consent or approval by or filing with any federal, state, munici
pal, foreign or other court or governmental or administrative
body or agency or any other regulatory or self-regulatory body is
required in connection with the execution and delivery by the
Shareholder of this Agreement or the Seller Ancillary Documents
or the consummation by such Shareholder of the transactions
contemplated hereby and thereby, other than the HSR Filings (as
defined in Section 7.3). No claim, action, suit, proceeding,
arbitration, investigation or inquiry before any federal, state,
municipal, foreign or other court or governmental or administra
tive body or agency, any securities or commodities exchange,
other regulatory body or any private arbitration tribunal is now
pending or, to the Knowledge of the Shareholder, threatened,
against or relating to such Shareholder which would adversely
affect the ability of such Shareholder to consummate the sale of
the Subject Shares or the other transactions contemplated by this
Agreement or the Seller Ancillary Documents. Neither the
execution and delivery of this Agreement by the Shareholder, nor
the consummation of the transactions contemplated hereby, will
breach, violate or constitute an event of default (or an event
which with the lapse of time or the giving of notice or both
would constitute an event of default) under, give rise to any
right of termination, cancellation, modification or acceleration
under, or require any consent or the giving of any notice under,
any contract or instrument to which such Shareholder is a party
or by which such Shareholder or any of such Shareholder's
properties or assets (including the Subject Shares) may be bound.
3A.2 Title to the Subject Shares. The Shareholder is the
beneficial and record owner of the number of Subject Shares set
forth opposite the name of such Shareholder in Section 3A.2 of
the Disclosure Schedule and at the Closing such Shareholder will
deliver to the Buyer good and marketable title to such shares,
free and clear of any Encumbrances (except for the rights of the
Buyer arising under this Agreement).
ARTICLE III Representations and Warranties of the Principal
Shareholders
Each of the Principal Shareholders severally makes the
representations and warranties set forth in this Article III,
each of which is true and correct as of the date hereof and will
be true as of the Closing Date.
3.1 Corporate Organization. The Company is a corporation
duly organized and validly existing under the laws of the State
of Wisconsin. The Company is current in all filings necessary to
maintain its corporate existence under Wisconsin law and no
proceedings have been filed or are pending for its dissolution or
winding up. The Company has all requisite corporate power and
authority to own, lease and operate the properties and assets it
now owns, leases or operates and to carry on its business as
presently conducted or presently proposed to be conducted. The
Company is duly qualified to do business as a foreign corporation
in Illinois and is not required to be so qualified as a foreign
corporation in any other jurisdiction. The Company has, upon or
prior to execution of this Agreement, delivered to the Buyer
complete and correct copies of its Articles of Incorporation, as
amended to date (certified by the Wisconsin Department of
Financial Institutions as of a recent date), and its By-Laws, as
amended to date. Neither the Articles of Incorporation nor the
By-Laws of the Company have been amended since the dates of
certification thereof, nor has any action been taken for the
purpose of effecting any amendment of such instruments.
3.2 No Violations. Except as set forth in Section 3.2 of
the Disclosure Schedule, the execution, delivery and performance
of this Agreement by the Shareholders and the consummation of the
transactions contemplated hereby will not: (i) violate or
conflict with any provision of the charter documents of the
Company or any Subsidiary (as defined in Section 3.5 hereof);
(ii) breach, violate or (whether immediately or with the lapse of
time or the giving of notice or both) constitute an event of
default under or an event which would give rise to any right of
termination, cancellation, modification, acceleration or
foreclosure under, or require any consent of or the giving of any
notice to any third party under, any note, bond, indenture,
credit facility, mortgage, security agreement, lease, license,
franchise, permit or other agreement, instrument or obligation
(except for such other agreements or instruments the breach of
which would not give rise to any material liability or obligation
on the part of Buyer or the Company or otherwise give rise to a
Material Adverse Effect, and which do not relate to, involve or
purport to govern or restrict the transfer of the Subject Shares
or any other capital stock of or equity interest in the Company)
to which the Company or any Subsidiary is a party, or by which
the Company or any Subsidiary or any of their properties or
assets may be bound, or give rise to the creation of any
Encumbrance upon the Subject Shares or upon the properties or
assets of the Company or any Subsidiary; (iii) violate or
conflict with any law, statute, rule, regulation, ordinance,
code, judgment, order, writ, injunction, decree or other
requirement of any court or of any governmental body or agency
thereof applicable to the Company or any Subsidiary or by which
any of their properties or assets may be bound; or (iv) require
any registration or filing by the Company, the Subsidiaries or
the Shareholders with, or any permit, license, exemption,
consent, authorization or approval of, or the giving of any
notice by the Company, any Subsidiary or any of the Shareholders
to, any governmental or regulatory body, agency or authority,
other than the HSR Filings and applications, approvals, or
consents relating to the transfer of any "Licenses" (as defined
in Section 3.13 below).
3.3 [Intentionally Left Blank]
3.4 Capitalization of the Company. The authorized, issued
and outstanding shares of all classes of capital stock of the
Company, and the record and beneficial ownership thereof, is set
forth in Section 3.4 of the Disclosure Schedule. The Subject
Shares constitute 100% of the issued and outstanding shares of
the capital stock of the Company on a fully diluted basis (i.e.,
after giving effect to the exercise of all options, warrants or
similar rights to acquire shares of stock) and there are no other
shares of any class of capital stock authorized, issued or
outstanding as of the date hereof. All of the Subject Shares
were duly and validly authorized and issued and are fully paid
and nonassessable, except as provided in Section 180.0622(2)(b)
of the Wisconsin Statutes. Except as disclosed in Section 3.4 of
the Disclosure Schedule, there are no agreements, arrangements or
understandings (including, without limitation, options or rights
of first refusal), to which any Shareholder, the Company or any
Subsidiary is a party, or by which any Shareholder, the Company
or any Subsidiary is bound relating to the ownership, acquisition
or disposition of the Subject Shares or any interest therein, and
there are no agreements, arrangements or understandings to which
any Shareholder, the Company or any Subsidiary is a party or by
which they are bound relating to the repurchase or redemption of
any shares of the Company's capital stock. There are no
outstanding options, warrants or other rights to subscribe for or
purchase, or securities convertible into or exchangeable for,
shares of the Company's capital stock, there are no agreements,
arrangements or understandings to which the Company or any
Subsidiary is a party or by which they are bound pursuant to
which the Company is or may be required to issue or sell
additional shares of the Company's capital stock, and no person
other than the Shareholders owns or holds any legal, equitable or
beneficial interest in or right to any shares of the Company's
capital stock or other equity interest in the Company of any
nature whatsoever.
3.5 Subsidiaries and Affiliates . Section 3.5 of the
Disclosure Schedule sets forth the name, jurisdiction of
incorporation, capitalization, ownership, officers and directors
of each corporation or other entity in which the Company has any
direct or indirect equity interest or other ownership interest
("Subsidiary") and the jurisdictions, if any, in which each
Subsidiary is qualified or licensed to do business as a foreign
corporation. Section 3.5 of the Disclosure Schedule also
describes briefly the business of and assets (including
intangible assets) owned by each Subsidiary. All of the
outstanding shares of capital stock of each Subsidiary owned by
the Company are free and clear of any Encumbrance, and are
validly issued, fully paid and nonassessable. The Company owns
100% of the issued and outstanding shares of all classes of
capital stock of each Subsidiary. There are no options,
warrants, conversion privileges or any other rights, agreements,
arrangements or understandings (including, without limitation,
rights of first refusal) with respect to any shares of capital
stock of any Subsidiary. Each Subsidiary (i) is a corporation
duly organized and validly existing under the laws of its state
of incorporation, (ii) is current in all filings necessary to
maintain its corporate existence under such law and no
proceedings have been filed or are pending for its dissolution or
winding up, (iii) has all requisite corporate power and authority
to own, lease and operate the properties and assets it now owns,
leases or operates and to carry on its business as presently
conducted or presently proposed to be conducted, and (iv) is not
required to be qualified to transact business as a foreign
corporation in any jurisdiction other than the jurisdictions
listed in Section 3.5 of the Disclosure Schedule. The Company
has, upon or prior to the execution of this Agreement, delivered
to the Buyer complete and correct copies of the Articles of
Incorporation, as amended to date (certified by the secretary of
state of the state of incorporation) and By-Laws, as amended to
date (certified by the Secretary of the Company as of a recent
date) of each Subsidiary. Neither the Articles of Incorporation
nor the By-laws of any Subsidiary have been amended since the
dates of certification thereof, nor has any action been taken for
the purpose of effecting any amendment of such instruments.
3.6 Financial Statements . The Company has heretofore
delivered to Buyer copies of the audited financial statements of
the Company for the fiscal years ended December 28, 1996, January
3, 1998 and January 2, 1999, and unaudited interim financial
statements for the period ended October 2, 1999. The aforesaid
financial statements, including all notes thereto, are herein
referred to collectively as the "Financial Statements." The
Financial Statements (i) have been prepared from and are
consistent with the books and records of the Company, (ii) have
been prepared in accordance with GAAP consistently applied during
the periods covered thereby, and (iii) fairly and accurately
present the financial condition, results of operations and cash
flows of the Company as at the dates, and for the periods, stated
therein; provided, that the unaudited interim financial
statements do no reflect customary year end adjustments and
accruals and lack footnote disclosure and other presentation
items.
3.7 Absence of Undisclosed Liabilities . To the knowledge
of the Principal Shareholders, the Company and the Subsidiaries
do not have any liabilities (whether known, unknown, absolute,
accrued, contingent or otherwise), except (i) to the extent
reflected or reserved against in the Financial Statements,
(ii) for obligations incurred pursuant to contracts entered into
in the ordinary course of business and identified in an
appropriate section of the Disclosure Schedule hereto to the
extent required by this Agreement to be identified in the
Disclosure Schedule hereto, (iii) for liabilities incurred in the
ordinary course of business since the date of the most recent of
the Financial Statements, all of which liabilities are properly
reflected in the books and records of the Company or the
applicable Subsidiary and will be reflected on the Closing
Balance Sheet, and (iv) for other liabilities set forth in
Section 3.7 of the Disclosure Schedule.
3.8 Absence of Certain Changes or Events . Except as set
forth in Section 3.8 of the Disclosure Schedule, since January 2,
1999, the Company and the Subsidiaries have carried on their
businesses in the ordinary course and consistent with past
practice. Except as set forth in Section 3.8 of the Disclosure
Schedule, or as expressly contemplated by this Agreement, since
October 2, 1999, the Company and the Subsidiaries have not:
(a) incurred any obligation or liability for borrowed
money (other than advances under existing credit facilities in
the ordinary course of business and consistent with past
practice), nor guaranteed, or agreed to act as surety,
indemnitor, co-signer or accommodation party for, any
indebtedness, liability or obligation of any third party, except
for liability due to endorsement of checks in the normal course
of collection;
(b) suffered any damage, destruction or loss, whether
or not covered by insurance, affecting their properties, assets
or business, exceeding $25,000 individually or $100,000 in the
aggregate;
(c) mortgaged, pledged or subjected to any lien,
charge or other encumbrance any of their assets, tangible or
intangible, except in the ordinary course of business and
consistent with past practice;
(d) sold or transferred any of their assets, except in
the ordinary course of business and consistent with past
practice, or canceled or compromised any material debts or waived
any claims or rights of a material nature;
(e) leased, licensed or granted to any person or
entity any rights in any of their assets or properties outside
the ordinary course of business and inconsistent with past
practice;
(f) experienced any material adverse change in their
financial condition, results of operations, cash flows, assets,
liabilities, business or operations taken as a whole;
(g) made any change in any accounting principle or
practice or in their method of applying any such principle or
practice;
(h) issued any additional shares of capital stock or
any options, warrants or other rights to purchase, or any
securities convertible into or exchangeable for, shares of their
capital stock;
(i) declared or paid any dividends on or made any
other distributions (however characterized) in respect of shares
of their capital stock;
(j) repurchased or redeemed any shares of their
capital stock;
(k) organized any new subsidiary, acquired any capital
stock or other equity security of any corporation or acquired any
equity or other ownership interest in any business;
(l) made any capital expenditure or capital
expenditure commitment in excess of $25,000.00 in any one
instance or $100,000.00 in the aggregate;
(m) entered into any agreement or commitment to do any
of the foregoing.
3.9 Legal Proceedings. Except as set forth in Section 3.9
of the Disclosure Schedule and except for claims, suits, actions
or proceedings alleging personal injury or property damage where
the amount claimed or reasonably estimated to be at issue in each
case is less than $25,000.00 and the Company's insurance carrier
has assumed the defense thereof without reservation of rights,
there are no suits, actions, proceedings (including, without
limitation, arbitral and administrative proceedings), or claims
(including without limitation, worker's compensation claims)
pending or, to the Knowledge of the Shareholders, any
governmental investigations or audits pending, nor to the
Knowledge of the Shareholders, are any of the foregoing
threatened, against the Company or any Subsidiary or their
properties, assets or business (nor are any of the foregoing
pending or, to the Knowledge of the Shareholders, threatened
against, relating to or involving any of the Shareholders,
officers, directors, employees or agents of the Company or any
Subsidiary in connection with the businesses of the Company or
the Subsidiaries). There are no such suits, actions,
proceedings, or claims pending, or, to the Knowledge of the
Shareholders, any governmental investigations or audits pending,
nor, to the Knowledge of the Shareholders, are any of the
foregoing threatened, challenging the validity or propriety of,
or otherwise relating to or involving, this Agreement or the
transactions contemplated hereby. There is no judgment, order,
writ, injunction, decree or award (whether issued by a court, an
arbitrator, a governmental body or agency thereof or otherwise)
to which the Company or any Subsidiary is a party, or involving
the properties, assets or businesses of the Company or any
Subsidiary, which is unsatisfied or which requires continuing
compliance therewith by the Company or said Subsidiary.
3.10 Taxes .
(a) Except as set forth in Section 3.10(a) of the
Disclosure Schedule, all returns and reports relating to Taxes
(as hereinafter defined) which are required to be filed with
respect to the Company and the Subsidiaries on or before the date
hereof or which will be required to be filed on or before the
Closing Date have been, or will be, duly and timely filed and all
such returns and reports are, or will be, complete and correct in
all material respects. Except as set forth in Section 3.10(a) of
the Disclosure Schedule, all Taxes imposed or that may in the
future be imposed on or with respect to the Company or any
Subsidiary for or relating to taxable periods prior to and
through the Closing Date or relating to the activities of the
Company prior to and through the Closing Date, whether or not
they have been assessed prior to the Closing Date, have been
paid, will be paid prior to the Closing Date, or, if not assessed
or due and payable as of the Closing Date, will be accrued for on
the Closing Balance Sheet and taken into account in the
determination of the Company's Closing Date Net Book Value.
Except as set forth in Section 3.10(a) of the Disclosure
Schedule, there are no actions or proceedings currently pending
or, to the Knowledge of the Shareholders, threatened against the
Company or any Subsidiary by any governmental authority for the
assessment or collection of Taxes, no claim for the assessment or
collection of Taxes has been asserted or, to the Knowledge of the
Shareholders, threatened, against the Company or any Subsidiary,
and there are no matters under discussion by the Company or any
of the Shareholders with any governmental authority regarding
claims for the assessment or collection of Taxes against the
Company or any Subsidiary. There are no agreements, waivers, or
applications by the Company or any Subsidiary for an extension of
time for the assessment or payment of any Taxes. There are no
Tax liens on any of the assets of the Company or any Subsidiary
(other than any lien for current Taxes not yet due and payable).
Except as set forth in Section 3.10(a) of the Disclosure
Schedule, no issue has arisen in any examination of the Company
or any of the Subsidiaries by any taxing authority that, if
raised with respect to the same or substantially similar facts
arising in any other Tax period not so examined, would result in
a deficiency for such other period, if upheld.
(b) For purposes of this Agreement, the terms "Tax"
and "Taxes" shall mean and include any and all foreign, national,
federal, state, local, or other taxes, charges, duties, fees,
levies or other assessments, payments-in-lieu of taxes, social
security obligations, deficiencies, fees, export or import
duties, or other governmental charges, including, without
limitation, income, excise, property, sales, use, gross receipts,
recording, insurance, value added, profits, license, withholding,
payroll, employment, net worth, capital gains, transfer, stamp,
social security, environmental, occupation and franchise taxes,
any installment payment for taxes and contributions or other
amounts determined with respect to compensation paid to
directors, officers, employees or independent contractors, from
time to time imposed by or required to be paid to any
governmental authority (and including any additions to tax
thereon, penalties for failure to pay any Tax or make any deposit
or file any return or report, and interest on any of the
foregoing).
(c) None of the Shareholders is a foreign person,
within the meaning of Section 1445 of the Code.
(d) Except as set forth in Section 3.10(a) of the
Disclosure Schedule, the Company and each of the Subsidiaries
timely has withheld proper and accurate amounts from its
employees, customers, shareholders and others from whom it is or
was required to withhold Taxes in compliance with all applicable
Laws, and has paid such withheld amounts on a timely basis to the
appropriate taxing authorities.
3.11 Title to Properties and Related Matters .
(a) Owned Real Property. Section 3.11(a) of the
Disclosure Schedule contains a complete and correct list of all
real property owned by the Company or any Subsidiary (the "Owned
Real Property"). Except as set forth in Section 3.11(a) of the
Disclosure Schedule, no ownership interest in any Owned Real
Property or other real property reflected in the most recent
Financial Statement has been disposed of, and no real property
has been acquired by the Company or any Subsidiary since the date
of the most recent Financial Statement. With respect to all such
Owned Real Property, the Company or the applicable Subsidiary, as
the case may be, has good and marketable title in fee simple
thereto, including all structures, plants, improvements, systems
and fixtures thereon, free and clear of all Encumbrances
whatsoever, except (i) as specifically disclosed in Section
3.11(a) of the Disclosure Schedule, (ii) liens for Taxes not yet
delinquent or due and payable, and (iii) easements, rights-of-way
and similar covenants and restrictions of record and municipal
and zoning ordinances and building use restrictions filed of
record which do not in any material way impair the use of such
property in the manner currently used or impair the Company's or
the applicable Subsidiary's good and marketable title to such
Owned Real Property. Except as set forth in Section 3.11(a) of
the Disclosure Schedule, none of the structures, plants,
buildings, improvements or systems located on any Owned Real
Property encroaches on any real property owned by others. Except
as set forth in Section 3.11(a) of the Disclosure Schedule, none
of the Owned Real Property nor any portion thereof is subject to
any sublease, license, or other agreement, arrangement or
understanding for its use or occupancy by any person other than
the Company or a Subsidiary.
(b) Jondex Leased Real Property. Section 3.11(b) of
the Disclosure Schedule sets forth a list of all real property
subleases between Jondex Corp. ("Jondex") or the Buyer as
sublessor and the Company as sublessee. Except as set forth in
Section 3.11(b) of the Disclosure Schedule, (i) all lease
payments due to the date hereof on each such sublease have been
paid and, to the Knowledge of the Principal Shareholders, the
Company is not in default under any material term of any such
sublease, and no event has occurred which constitutes, or with
the passage of time or the giving of notice or both would
constitute, a default by the Company under such sublease. The
Company has good and marketable title to all structures, plants,
leasehold improvements, systems, fixtures and other property
located on or about any of the Jondex Leased Real Property which
are owned by the Company, free and clear of any Encumbrances (but
subject to the interest of Jondex or the Buyer and the landlords
under the underlying prime leases). Except as set forth in
Section 3.11(b) of the Disclosure Schedule, none of the Jondex
Leased Real Property nor any portion thereof is subject to any
sublease, license, or other agreement, arrangement or
understanding for its use or occupancy by any person other than
the Company or a Subsidiary.
(c) NDC Leased Real Property and Other Leased Real
Property. Section 3.11(c) of the Disclosure Schedule sets forth
a complete and correct list of all real property leases and
subleases to which the Company or any Subsidiary is a party, as
tenant (excluding subleases of property subleased by the Company
from Jondex or Buyer and included within the definition of Jondex
Leased Real Property, above) and either NDC is lessor (the "NDC
Leased Real Property") or a party other than NDC is lessor (the
"Other Leased Real Property"), together with a brief description
of the property leased, identifying the owner and any sublessors
of the property, and identifying the date and term of the lease
or sublease (and in the case of any sublease, the underlying
prime lease) and any renewal or purchase options (including, in
the case of any sublease, those applicable under the underlying
prime lease). The Company has previously made available to the
Buyer complete and correct copies of each lease or sublease (and
in the case of any sublease, the underlying prime lease) and any
amendments thereto listed in Section 3.11(c) of the Disclosure
Schedule. Except as set forth in Section 3.11(c) of the
Disclosure Schedule, (i) each such lease or sublease (and in the
case of any sublease, to the Knowledge of the Principal
Shareholders, the underlying prime lease) is in full force and
effect; (ii) all lease payments due to date on any such lease or
sublease (and in the case of any sublease, to the Knowledge of
the Principal Shareholders, the underlying prime lease) have been
paid, and neither the Company nor any Subsidiary nor, to the
Knowledge of the Principal Shareholders, any other party is in
default under any such lease or sublease (or, in the case of any
sublease, the underlying prime lease), and no event has occurred
which constitutes, or with the lapse of time or the giving of
notice or both would constitute, a default by the Company, the
applicable Subsidiary or, to the Knowledge of the Principal
Shareholders, any other party under such lease or sublease; and
(iii) there are no material disputes or disagreements between the
Company, the applicable Subsidiary and to the Knowledge of the
Principal Shareholders, any other party with respect to any such
lease or sublease (or, in the case of any sublease, the
underlying prime lease). The Company or the applicable
Subsidiary has good and marketable title to all structures,
plants, leasehold improvements, systems, fixtures and other
property located on or about any of the NDC Leased Real Property
or Other Leased Real Property which are owned by the Company or
the applicable Subsidiary, free and clear of any Encumbrances
(but subject to the interests of landlords under any applicable
leases). Except as set forth in Section 3.11(c) of the
Disclosure Schedule, none of the NDC Leased Real Property or
Other Leased Real Property nor any portion thereof is subject to
any sublease, license, or other agreement, arrangement or
understanding for its use or occupancy by any person other than
the Company or a Subsidiary.
(d) Real Property Representations. Except as noted,
the following representations and warranties in this Section
3.11(d) apply to the Owned Real Property, the NDC Leased Real
Property and the Other Leased Real Property (the "Real
Property"). Except as set forth in Section 3.11(d) of the
Disclosure Schedule, no work has been performed on or with
respect to or in connection with any of the Real Property or
Jondex Leased Real Property that would cause such Real Property
or Jondex Leased Real Property to become subject to any
mechanics', materialmen's, workmen's, repairmen's, carriers' or
similar liens aggregating in excess of $25,000. The structures,
plants, improvements, systems and fixtures (excluding storage
tanks or other impoundment vessels, whether above or below
ground) located on each such parcel of Real Property and Jondex
Leased Real Property conform with all Federal, state and local
statutes and laws and all ordinances, rules, regulations and
similar governmental and regulatory requirements applicable to
their current uses (except as set forth in Section 3.11(d) of the
Disclosure Schedule, and except for Environmental Laws which are
addressed exclusively in Section 3.28) and are in good operating
condition and repair, ordinary wear and tear excepted. Each such
parcel of Real Property, in view of the purposes for which it is
currently used, conforms with all covenants or restrictions of
record and each such parcel conforms with all applicable building
codes and zoning requirements; to the Knowledge of the Principal
Shareholders, current, valid certificates of occupancy (or
equivalent governmental approvals) have been issued for each item
of Real Property to the extent required by law; and the Principal
Shareholders have no Knowledge of any proposed material change in
any such governmental or regulatory requirements or in any such
zoning requirements. Except as set forth in Section 3.11(d) of
the Disclosure Schedule, all existing electrical, plumbing, fire
sprinkler, lighting, air conditioning, heating, ventilation,
elevator and other mechanical systems located in or about the
Real Property are in good operating condition and repair,
ordinary wear and tear excepted. The maintenance and operation
of such items located in or about the Real Property or the Jondex
Leased Real Property is and has been conducted in substantial
compliance with the terms and conditions of all leases or
subleases to which the Company or any Subsidiary is a party. The
Company or the applicable Subsidiary has all easements, rights-of-
way and similar rights necessary to conduct its business as
presently conducted and to use the items of Real Property as
currently used, including, without limitation, easements and
licenses for pipelines, power lines, water lines, roadways and
other access. All such easements and rights are valid, binding
and in full force and effect, any amounts due and payable thereon
to date have been paid or have been fully accrued for in the
books and records of the Company or the applicable Subsidiary
neither the Company, the applicable Subsidiary nor, to the
Knowledge of the Principal Shareholders, any other party thereto
is in default thereunder, and there exists no event or condition
affecting the Company, the applicable Subsidiary or any other
party thereto, which, with the passage of time or notice or both,
would constitute a material default thereunder. No such easement
or right will be breached by, nor will any party thereto be given
a right of termination as a result of, the transactions
contemplated by this Agreement.
(e) Personal Property. Except as set forth in Section
3.11(e) of the Disclosure Schedule, the Company and each
Subsidiary has good and marketable title to all items of
equipment, machinery, vehicles, furniture, fixtures and other
tangible personal property currently owned or used by the Company
and each Subsidiary (and reflected on the Financial Statements or
acquired after the date thereof, other than personal property
sold or otherwise disposed of in the ordinary course of business
and consistent with past practice), free and clear of any
Encumbrances. All such items of personal property are in good
operating condition and repair, ordinary wear and tear excepted,
are physically located at or about the Company's owned or leased
premises, and are owned outright by the Company or the applicable
Subsidiary, or validly leased by the Company. No such item of
personal property is subject to any sublease, license or other
agreement, arrangement or understanding for its use by any person
other than the Company or the applicable Subsidiary. The
maintenance and operation thereof has complied with all
applicable laws, regulations, ordinances, contractual commitments
and obligations. Except as set forth in Section 3.11(e) of the
Disclosure Schedule or as disclosed in the Financial Statements,
no item of tangible personal property with a fair market value
exceeding $50,000 owned or used by the Company or any Subsidiary
is subject to any conditional sale agreement, installment sale
agreement or title retention or security agreement or arrangement
of any kind; as to each item of personal property subject to any
such agreement or arrangement, Section 3.11(e) of the Disclosure
Schedule sets forth a brief description of the property in
question and the underlying obligation.
(f) Personal Property Leases. Section 3.11(f) of the
Disclosure Schedule sets forth a complete and correct list and
summary description of all personal property leases to which the
Company or any Subsidiary is a party (either as landlord or
tenant) wherein the property leased has a fair market value
exceeding $25,000 or the total annual rental payments in any year
exceed $10,000 ("Material Personal Property Leases"). With
respect to each Material Personal Property Lease, Section 3.11(f)
of the Disclosure Schedule also provides a brief description of
the property leased, identifying the date and term of the lease,
the amount and timing of lease payments and any renewal or
purchase options. The Company has previously made available to
the Buyer complete and correct copies of each Material Personal
Property Lease (and any amendments thereto). Except as set forth
in Section 3.11(f) of the Disclosure Schedule, (i) each such
lease is in full force and effect; (ii) all lease payments due to
date on any such lease have been paid, and neither the Company,
nor the applicable Subsidiary, nor, to the Knowledge of the
Shareholders, any other party is in default under any such lease,
and no event has occurred which constitutes, or with the lapse of
time or the giving of notice or both would constitute, a default
by the Company, the applicable Subsidiary or any other party
under such lease; and (iii) there are no material disputes or
disagreements between the Company, the applicable Subsidiary and
any other party with respect to any such lease.
3.12 Computer Software . All computer software used by the
Company or installed on any computers owned or used by the
Company is either (i) owned by the Company or (ii) used pursuant
to valid and effective licenses from the owners thereof. The
Company is not in material breach or default under any of such
licenses, and has not received any notice suggesting or alleging
that any such material breach or default has occurred or that the
Company is using or has used any computer software without an
appropriate license therefor.
3.13 Licenses, Permits, Authorizations and Consents .
Section 3.13 of the Disclosure Schedule sets forth all material
approvals, authorizations, consents, licenses, orders and permits
of all governmental and regulatory authorities, whether foreign,
federal, state or local (collectively, "Licenses") held by or
granted to the Company and each Subsidiary, identified by store
location. Each of the Licenses is in full force and effect. The
Company has complied with all of the terms, conditions and
requirements imposed by each of the Licenses, except where the
failure so to comply would not have a Material Adverse Effect.
Neither the Company, the Subsidiaries, nor the Shareholders have
received any notice of, and the Shareholders have no Knowledge
of, any intention on the part of any appropriate authority to
cancel, revoke or modify, or any inquiries, proceedings or
investigations the purpose or possible outcome of which is the
cancellation, revocation or modification of any such permit,
license, exemption, consent, authorization or approval, except as
set forth in Section 3.13 of the Disclosure Schedule. The
Licenses set forth in Section 3.13 of the Disclosure Schedule
include all Licenses which are required for the ownership of the
Company's or the applicable Subsidiary's assets or the conduct of
its business as it is presently conducted, except for Licenses
the absence of which would not have a Material Adverse Effect.
Licenses required under Environmental Laws are addressed
exclusively in Section 3.28.
3.14 Patents, Trademarks, Etc. Section 3.14 of the
Disclosure Schedule sets forth a complete and correct list of all
patents, patent applications, material unpatented inventions,
trademarks and service marks, logos, trademark and service mark
registrations (and applications therefor), trade or business
names and copyrights owned by and registered in the name of the
Company or any Subsidiary, or used by the Company or any
Subsidiary in the conduct of their businesses (other than those
licensed to the Company by Buyer or its affiliates)
(collectively, the "Intangible Rights"). Except as set forth on
Section 3.14 of the Disclosure Schedule, the Company or the
applicable Subsidiary has the right to use all of the Intangible
Rights, including, but not limited to the names "Mega Marts" and
"Mega Food Center," in its business as and where the same is
currently conducted and the use of such Intangible Rights in the
conduct of the Company's or the applicable Subsidiary's business
as and where the same is currently conducted does not conflict
with the rights of others in any manner. Except as set forth in
Section 3.14 of the Disclosure Schedule, there are no licenses,
agreements or commitments outstanding or effective granting any
other person any right to use, operate under, license or
sublicense the Intangible Rights. Neither the Shareholders nor
the Company have received any notice or claim that any of the
Intangible Rights infringes upon or conflicts with the rights of
any other person. Except as set forth in Section 3.14 of the
Disclosure Schedule, to the Knowledge of the Shareholders, there
is no infringement or violation by any other person of the
Company's or any Subsidiary's rights in any of the Intangible
Rights.
3.15 Contracts.
(a) Except as set forth in Section 3.15(a) of the
Disclosure Schedule (or in Sections 3.11(b), 3.11(c), 3.11(f),
3.14, 3.16(a), or 3.20 of the Disclosure Schedule), and except
for contracts, arrangements or understandings that would have
been required to be identified on any of the foregoing sections
of the Disclosure Schedule but for the fact that they were
excepted from disclosure pursuant to the terms of the applicable
Section of this Agreement, and except for agreements between the
Company and Buyer or its affiliates, neither the Company nor any
Subsidiary is a party to, or subject to:
(i) any contract, arrangement or understanding,
or series of related contracts, arrangements or understandings,
other than Purchase Orders (as hereinafter defined), which
involves annual expenditures or receipts by the Company or the
applicable Subsidiary of more than $25,000;
(ii) any Material Personal Property Lease;
(iii) any lease of real property;
(iv) any license agreement other than software
licenses described in clause (i) of the first sentence of Section
3.12 hereof;
(v) any contract, arrangement or understanding
not made in the ordinary course of business and consistent with
past practice involving annual payments not exceeding $5,000 in
each case;
(vi) any note, bond, indenture, credit
facility, mortgage, security agreement or other instrument or
document relating to or evidencing indebtedness for money
borrowed or a security interest or mortgage in the assets of the
Company or any Subsidiary;
(vii) any warranty, indemnity or guaranty
issued by the Company;
(viii) any contract, arrangement or
understanding granting to any person the right to use any
material item of property or property right of the Company or any
Subsidiary;
(ix) any contract, arrangement or understanding
restricting the right of the Company or any Subsidiary to engage
in any business activity or compete with any business; or
(x) any outstanding offer or commitment to enter
into any contract or arrangement of the nature described in
subsections (i) through (ix) of this Section 3.15(a).
For purposes of this Agreement "Purchase Orders" shall mean
those purchase orders of the Company or Subsidiary and other
contracts and commitments issued or entered into by the Company
or Subsidiary to or with its suppliers and vendors for the
purchase of goods, products and supplies in the ordinary course
of business and on the Company's or Subsidiary's standard terms
and conditions.
(b) The Company previously has delivered to the
Buyer complete and correct copies of each written contract (and
any amendments thereto), listed on Section 3.15(a) or identified
in Sections 3.11(b), 3.11(c), 3.11(f), 3.14 or 3.16 of the
Disclosure Schedule, and Section 3.15(a) of the Disclosure
Schedule contains a complete and correct description of each oral
contract to which the Company and each Subsidiary is a party or
bound which is required to be disclosed on Section 3.15(a) of the
Disclosure Schedule. Except as set forth in Section 3.15(c) of
the Disclosure Schedule, (i) each such contract is in full force
and effect; (ii) neither the Company nor (to the Knowledge of the
Shareholders) any other party is in material default under any
such contract, and no event has occurred which constitutes, or
with the lapse of time or the giving of notice or both would
constitute, a default by the Company, the applicable Subsidiary
or (to the Knowledge of the Shareholders) by any other party
under such contract; and (iii) there are no material disputes or
disagreements between the Company, the applicable Subsidiary and
any other party with respect to any such contract.
3.16 Employees.
(a) The Company previously has delivered to the Buyer
a schedule setting forth the names of all current salaried
employees of the Company and each Subsidiary and their current
salary rates. Except as set forth in Section 3.16(a) of the
Disclosure Schedule, the Company or the applicable Subsidiary has
accrued on its books and records all obligations for salaries,
vacations, benefits and other compensation with respect to its
employees and any of its Former Employees (as hereinafter
defined), to the extent required by GAAP, including, but not
limited to, severance, bonuses, incentive and deferred
compensation. Except as disclosed in Section 3.16(a) of the
Disclosure Schedule, the Company and the Subsidiaries do not
currently offer, nor have they ever offered, retiree health or
insurance benefits to employees or Former Employees (as
hereinafter defined), and the Company and the Subsidiaries have
no liabilities (contingent or otherwise) with respect thereto.
Complete and correct copies of all material written agreements
with or concerning any employee (or any Former Employee),
including, without limitation, union and collective bargaining
agreements, and all employment policies, employee handbooks, and
the like, and all amendments and supplements thereto, have
previously been delivered to the Buyer, and a list of all such
agreements, handbooks and policies is set forth in Section
3.16(a) of the Disclosure Schedule. Except as set forth in
Section 3.16(a) of the Disclosure Schedule and except pursuant to
the terms of any contract or agreement to which the Company or
any Subsidiary is a party and which is listed in any Section of
the Disclosure Schedule, since the latest Financial Statement,
the Company and the Subsidiaries have not (i) except in the
ordinary course of business and consistent with past practice,
increased the salary or other compensation payable or to become
payable to or for the benefit of any of the employees,
(ii) provided any of the employees with any increased security or
tenure of employment, (iii) increased the amounts payable to any
of the employees upon the termination of any such person's
employment or (iv) amended any Benefit Plan (as hereafter
defined) to provide improved benefits granted to or for the
benefit of any of the employees under any Benefit Plan (as
hereinafter defined).
(b) Since January 1, 1995 and, to the Knowledge of the
Principal Shareholders, prior to that date, the Company and each
Subsidiary have complied at all times with all laws, statutes,
rules and regulations applicable with respect to employees or
employment practices in every one of the jurisdictions in which
they operate and/or do business. In particular, the Company and
each Subsidiary have complied with all laws and statutes, and all
rules and regulations applicable to and/or aiming at
discriminatory practices (including, without limitation,
discrimination based on race, age or gender), labor standards and
working conditions, occupational health and safety, payment of
minimum wages and overtime rates, worker's compensation, the
withholding and payment of Taxes or any other kind of
governmental charge from any kind of compensation, or otherwise
relating to the conduct of employers with respect to employees or
potential employees, and there have been no claims made or, to
the Knowledge of the Shareholders, threatened thereunder against
the Company or any Subsidiary arising out of, relating to or
alleging any violation of any of the foregoing, which claims, if
resolved adversely to the Company or the applicable Subsidiary,
would have a Material Adverse Effect. The Company and each
Subsidiary have complied with the employment eligibility
verification form requirements under the Immigration and
Naturalization Act, as amended ("INA"), in recruiting, hiring,
reviewing and documenting prospective employees for employment
eligibility verification purposes and the Company and each
Subsidiary has complied with the paperwork provisions and anti-
discrimination provisions of the INA, except, in either case,
where the failure so to comply would not have a Material Adverse
Effect. The Company and each Subsidiary have obtained and
maintained the employee records and I-9 forms in proper order as
required by law. Except as set forth in Section 3.16(b) of the
Disclosure Schedule, and except for routine grievances none of
which, if resolved adversely to the Company, would, individually
or in the aggregate, have a Material Adverse Effect, there are no
material controversies, strikes, work stoppages, picketing or
disputes pending or, to the Knowledge of the Shareholders,
threatened between the Company or any Subsidiary and any
employees or Former Employees (as hereinafter defined); no
organizational effort by any labor union or other collective
bargaining unit is pending or, to the Knowledge of the
Shareholders, threatened with respect to any employees; and no
consent of or any other action by or negotiation with any labor
union or other collective bargaining unit is required in
connection with or to consummate the transactions contemplated by
this Agreement, except as set forth in Section 3.16(b) of the
Disclosure Schedule.
3.17 Benefit Plans.
(a) For purposes hereof, the term "Benefit Plan" shall
mean each and every defined benefit and defined contribution
plan, employee stock ownership plan, consulting or employment
agreement, executive compensation plan, bonus plan, incentive
compensation plan or arrangement, deferred compensation agreement
or arrangement, agreement with respect to temporary employees,
vacation pay, sickness, disability or death benefit plan (whether
provided through insurance, on a funded or unfunded basis or
otherwise), employee stock option or stock purchase plan,
severance pay plan, arrangement or practice, employee relations
policy, practice or arrangement, retiree medical or life
insurance benefits, and each other employee benefit plan, program
or arrangement, which at any time has been maintained or
contributed to by the Company or any Subsidiary for the benefit
of or relating to any of the employees or to any former employee
of the Company or any Subsidiary ("Former Employee") or his/her
dependents, survivors or beneficiaries, whether written or oral,
but not including any multi-employer benefit plans within the
meaning of Section 3(37) of ERISA (a "Multi-Employer Plan").
Section 3.17(a) of the Disclosure Schedule contains a complete
and correct list of all current Benefit Plans.
(b) Except as set forth on Schedule 3.17(b) of the
Disclosure Schedule, each Benefit Plan which is an "employee
pension benefit plan" (as defined in Section 3(2) of ERISA),
meets the requirements of Section 401(a) of the Code; the trust,
if any, forming part of such plan is exempt from U.S. federal
income tax under Section 501(a) of the Code; a favorable
determination letter has been issued by the Internal Revenue
Service (the "IRS") with respect to each plan and trust and each
material amendment thereto; and nothing has occurred since the
date of such determination letter that would adversely affect the
qualification of such plan. No Benefit Plan is a "voluntary
employees beneficiary association" (within the meaning of Section
501(c)(9) of the Code) and there are no current "welfare benefit
funds" relating to Employees or Former Employees within the
meaning of Section 419 of the Code other than as set forth in
Section 3.17(b) of the Disclosure Schedule. No event or
condition exists which respect to any Benefit Plan that could
subject the Company or any Subsidiary to any material Tax under
Section 4980B of the Code (or under its predecessor statute,
Section 162(k) of the Code). With respect to each Benefit Plan
listed on Schedule 3.17(a), the Company has heretofore delivered
to the Buyer complete and correct copies of the following
documents, where applicable: (i) the most recent annual report
(Form 5500 series), together with schedules, as required, filed
with the IRS, and any financial statements and opinions required
by Section 103(a)(3) of ERISA, (ii) the most recent determination
letter issued by the IRS, (iii) the most recent summary plan
description and all modifications, as well as all other
descriptions distributed to employees or set forth in any manuals
or other documents, (iv) the text of the Benefit Plan and of any
trust, insurance or annuity contracts maintained in connection
therewith, (v) the most recent independent appraisal in the case
of an employee stock ownership plan, and (vi) the most recent
actuarial report, if any, relating to the Benefit Plan.
(c) Except as set forth on Schedule 3.17(c) of the
Disclosure Schedule, neither the Company nor any corporation or
other trade or business under common control with the Company or
any Subsidiary (as determined pursuant to Section 414(b) or (c)
of the Code) (a "Common Control Entity") has maintained or
contributed to or in any way directly or indirectly has any
liability (whether contingent or otherwise) with respect to any
Multi-Employer Plan. The Company and the Subsidiaries have not
completely or partially withdrawn from any Multi-Employer Plan
and, except as set forth in Section 3.17(c) of the Disclosure
Schedule, the Company and the Subsidiaries would have no
withdrawal liability under Title IV of ERISA if they were to
withdraw as of the date hereof from any multi-employer plan to
which the Company or any Subsidiary has contributed. To the
Knowledge of the Principal Shareholders, no proceedings by the
Pension Benefit Guaranty Corporation (the "PBGC") to terminate
any Benefit Plan have been instituted or threatened. To the
Knowledge of the Principal Shareholders: no event has occurred or
condition exists which constitutes grounds for the PBGC to
terminate any Benefit Plan; neither the Company, the Subsidiaries
nor any Common Control Entity is a party to or has any liability
under any agreement imposing secondary liability on it as a
seller of the assets of a business in accordance with Section
4204 of ERISA or under any other provision of Title IV of ERISA
or other agreement; no contingent or other liability with respect
to which the Company or any Subsidiary has, had or could have any
liability exists under Title IV of ERISA to the PBGC or to any
Benefit Plan. No assets of the Company or any Subsidiary are
subject to a lien under Sections 4064 or 4068 of ERISA. Except
as set forth in Section 3.17(c) of the Disclosure Schedule, the
Company and the Subsidiaries do not currently maintain or
contribute to any plan subject to Title IV of ERISA or Section
412 of the Code (other than Multi-Employer Plans), and, except as
set forth in Section 3.17(c) of the Disclosure Schedule, each
such plan previously maintained or contributed to by the Company
and the Subsidiaries has been terminated in accordance with the
provisions of the Code and ERISA and the Company and the
Subsidiaries do not have any actual or contingent liability
associated with any such terminated plan, including, but not
limited to, any future obligations or liability associated with
(i) the solvency or ability to provide benefits of any insurance
company providing annuity payments under such terminated plan,
(ii) claims by participants resulting from any alleged breach of
fiduciary duty in connection with the termination of any such
terminated plan, or (iii) the disqualification of any such
terminated plan. All contributions and payments required to be
made to or with respect to each Benefit Plan (including
contributions to union-sponsored pension or health and welfare
plans) with respect to the service of employees or other
individuals with or related to the Company or the Subsidiaries
prior to the date hereof have been made or have been accrued for
in the Financial Statements, or, for periods after the most
recent of the Financial Statements and through the Closing Date,
will be accrued in the books and records of the Company or the
applicable Subsidiary, and will be accrued and reflected as
liabilities on the Closing Balance Sheet and, except to the
extent so accrued, the Company and the Subsidiaries shall have no
liability to or with respect to any Benefit Plan relating to such
prior period.
Except as set forth in Section 3.17(c) of the Disclosure
Schedule, the Company and the Subsidiaries do not provide, nor do
they have any obligation to provide, post-retirement medical,
life insurance or other benefits to employees or Former Employees
or their survivors, dependents and beneficiaries, except as may
be required by the Consolidated Omnibus Budget Reconciliation Act
of 1986 or similar state medical temporary benefits continuation
law. Except as set forth in Section 3.17(c) of the Disclosure
Schedule, the Company and the Subsidiaries will not incur any
liability under any severance agreement, deferred compensation
agreement, employment agreement or other compensation agreement
as a result of the consummation of the transactions contemplated
by this Agreement, nor will the terms or the Company's or any
Subsidiary's liability or obligations under any such agreement be
altered or increased as a result of such transactions.
(d) Except as set forth in Section 3.17(d) of the
Disclosure Schedule: none of the Benefit Plans has been subject
to a "reportable event," within the meaning of Section 4043 of
ERISA (whether or not waived); there have been no "prohibited
transactions", within the meaning of Section 4975 of the Code or
Part 4 of Subtitle B of Title I of ERISA; there have been no
breaches of fiduciary responsibility within the meaning of Part 4
of Subtitle B of Title I of ERISA; and none of the Benefit Plans
which are subject to Section 412 of the Code has incurred any
"accumulated funding deficiency" (whether or not waived) within
the meaning of Section 412 of the Code and no event or set of
conditions exist which could subject the Company to any material
Tax under Section 4971 of the Code or a lien under Section 412(n)
of the Code.
(e) Each Benefit Plan has been administered to date in
accordance with the applicable provisions of ERISA, the Code and
applicable law and with the terms and provisions of all
documents, contracts or agreements pursuant to which such Benefit
Plan is maintained. All reports and information required to be
filed with the Department of Labor, the IRS, the PBGC or plan
participants or beneficiaries with respect to any Benefit Plan
have been timely filed; there is no dispute, arbitration, claim,
suit or grievance pending or to the Knowledge of the
Shareholders, threatened, involving a Benefit Plan (other than
routine claims for benefits). To the Knowledge of the Principal
Shareholders, none of the Benefit Plans nor any fiduciary thereof
has been the direct or indirect subject of an order or
investigation or examination by a governmental or quasi-
governmental agency and there are no matters pending before the
IRS, the Department of Labor, the PBGC or any other domestic or
foreign governmental agency with respect to a Benefit Plan.
There have been no claims, or notice of claims, filed under any
fiduciary liability insurance policy covering any Benefit Plan.
The Company will incur no liability or obligation to make any
"parachute payment" (as that term is defined in Section
280G(b)(2) of the Code) to any of the employees prior to the
Closing or in connection with the transactions contemplated
hereby. No event or set of conditions exist which would subject
the Company or any Subsidiary to any material Tax under Sections
4972, 4974-76, 4979, 4980, 4999 or 5000 of the Code.
3.18 Compliance with Applicable Law. Except as set forth
in Section 3.18 of the Disclosure Schedule, the Company and the
Subsidiaries have complied with all applicable foreign or
domestic laws and statutes and all ordinances, codes, rules,
regulations, judgments, orders, injunctions, writs or decrees of
any Federal, state, local or foreign court or any governmental
body or agency thereof to which the Company or any Subsidiary may
be subject or which are applicable to the operations, businesses
or assets of the Company or any Subsidiary as such businesses are
currently conducted (except Environmental Laws, which are
addressed exclusively in Section 3.28). Neither the Company,
the Subsidiaries, nor the Shareholders have received any written
notice alleging any such violation, nor do the Shareholders have
any Knowledge of any inquiry, investigation or proceeding
relating thereto.
3.19 Ability to Conduct the Business. Except as may be
disclosed in Section 3.11(b), 3.11(c), 3.15(a)(ix) or 3.15(a)(x)
of the Disclosure Schedule, there is no agreement, arrangement or
understanding, nor any judgment, order, writ, injunction or
decree of any court or any governmental body or agency thereof
that could prevent the use by the Company or any Subsidiary of
any of their material properties and assets or the conduct by the
Company or any Subsidiary of their businesses in any material
respect.
3.20 Material Suppliers. Section 3.20 of the Disclosure
Schedule sets forth a complete and correct list of all written
supply contracts, arrangements and understandings (other than
Purchase Orders (as defined in Section 3.15(a)) and agreements
between the Company and Buyer or Buyer's affiliates) currently in
existence between the Company or any Subsidiary and any supplier
of merchandise to the Company or the applicable Subsidiary
wherein the aggregate volume of purchases from such supplier by
the Company and the Subsidiaries in any year exceeds or can be
expected to exceed $1,000,000.
3.21 Inventories. Except for inventory which has been
written down on the books of the Company or a Subsidiary to its
net realizable value, or is eligible to be returned to the
vendors thereof, the merchandise inventory of the Company (the
"Inventory") is of merchantable and salable quality and is not
damaged or beyond its applicable date code. The quantities of
Inventory on hand are such that they can reasonably be expected
(on the basis of the Company's past experience) either (i) to be
sold within the time period remaining prior to the expiration of
their applicable date codes, or (ii) to be able to be returned to
the vendors thereof. The Company's inventory is valued on the
basis of the lower of cost (determined on a LIFO basis) to the
Company or the applicable Subsidiary or fair market value, in the
manner described in the Financials Statements, and is accurately
and fairly reflected in the Financial Statements and in the books
and records of the Company.
3.22 Accounts Receivable. Except as disclosed in Section
3.22 of the Disclosure Schedule, all accounts receivable of the
Company and each Subsidiary, including, but not limited to all
coupon receivables (i) arose from bona fide sales of goods or
services or payments related to the same (such as advertising
coop or coupon redemption payments) in the ordinary course of
business and consistent with past practice, (ii) are owned by the
Company or the applicable Subsidiary free and clear of any
Encumbrances, and (iii) are accurately and fairly reflected on
the Financial Statements or, with respect to accounts receivable
of the Company or the applicable Subsidiary created after the
date thereof and through the Closing Date, are and will be
accurately and fairly reflected in the books and records of the
Company or the applicable Subsidiary. To the Knowledge of the
Principal Shareholders, the Company's accounts receivable can
reasonably be expected to be collected, in the ordinary course of
business and without offset or counterclaim, in the net aggregate
amount at which they will be reflected on the Closing Balance
Sheet.
3.23 Insurance. Section 3.23 of the Disclosure Schedule is
a complete and correct list of all insurance (including, without
limitation, worker's compensation insurance) policies carried by,
or covering, the Company and each Subsidiary with respect to
their businesses or employees. Complete and correct copies of
each such policy have previously been delivered to the Buyer.
All such policies are in full force and effect, and no written
notice of cancellation has been given with respect to any such
policy. All premiums due thereon have been paid in a timely
manner.
3.24 Bank Accounts; Powers of Attorney. Section 3.24 of
the Disclosure Schedule sets forth a complete and correct list
showing: all banks in which the Company and each Subsidiary
maintains a bank account or safe deposit box (collectively, "Bank
Accounts"), together with, as to each such Bank Account, the
account number, the names of all signatories thereof and the
authorized powers of each such signatory and, with respect to
each such safe deposit box, the number thereof and the names of
all persons having access thereto; and the names of all persons
holding powers of attorney from the Company and each Subsidiary
and a summary statement of the terms thereof.
3.25 Minute Books, etc. Except as set forth in Section
3.25 of the Disclosure Schedule, the minute books, stock
certificate books and stock ledgers of the Company and each
Subsidiary are complete and correct in all material respects and
fairly reflect all transactions in shares of the Company's or the
applicable Subsidiary's capital stock. The minute books of the
Company and each Subsidiary contain accurate and complete records
of all meetings or written consents to action of the Board of
Directors and shareholders of the Company or the applicable
Subsidiary and accurately reflect all material corporate actions
of the Company and the applicable Subsidiary which are required
by law to be passed upon by the Board of Directors (and all
committees thereof) or shareholders of the Company or the
applicable Subsidiary.
3.26 Books and Records. Except as set forth in
Section 3.26 of the Disclosure Schedule, all of the records,
data, information, databases, systems and controls maintained,
operated or used by the Company or the Subsidiaries in connection
with the conduct or administration of their businesses (including
all means of access thereto and therefrom) are located on the
premises of the Company or have been delivered to the Buyer and
are under the exclusive ownership and direct control of the
Company or the applicable Subsidiary.
3.27 Transactions with Related Parties. Section 3.27 of
the Disclosure Schedule contains an accurate and complete list
and description of all material agreements, arrangements and
understandings relating to the provision of services, use or
transfer of property or assets, or outstanding indebtedness,
which are currently in effect or which occurred at any time after
January 2, 1999 between the Company or any Subsidiary and any of
the following (each, a "Related Party"): (i) each person who is
now or at the time in question was a shareholder, director or
officer of the Company or any Subsidiary; (ii) the spouses,
children, grandchildren, siblings, parents, grandparents, uncles,
aunts, nieces, nephews or first cousins of any person described
in (i) (collectively, "near relatives"); (iii) any trust for the
benefit of any person described in (i) or any of their respective
near relatives; and (iv) any corporation, partnership, joint
venture or other entity owned or controlled by any person
described in (i) or any of their respective near relatives.
Except as set forth in Section 3.27 of the Disclosure Schedule,
there is now and on the Closing Date there will be no outstanding
indebtedness, liability or obligation owed by the Company to the
Shareholders, of any nature, with the exception of accrued wages,
salaries and related employee benefits due in the ordinary course
of business to those Shareholders who are also employees, for
services performed prior to the Closing Date.
3.28 Environmental Matters.
(a) No Hazardous Substances. Except as set forth in
Section 3.28(a) of the Disclosure Schedule, and except for
Hazardous Substances (as hereinafter defined in Section 3.28(c))
generated, stored, treated, manufactured, refined, handled,
produced, disposed of or used by the Company or the Subsidiaries
in the ordinary course of their businesses, in compliance with
the requirements of currently applicable laws, rules and
regulations or otherwise in a manner which would not give rise to
any liabilities or obligations under such laws, rules and
regulations (i) neither the Company nor any Subsidiary has caused
there to be, nor to the Knowledge of the Principal Shareholders
are there, any Hazardous Substances in, on or under any of the
Real Property (as hereinafter defined in Section 3.28(d)); (ii)
none of such Real Property has been designated, restricted or
investigated by any governmental authority as a result of the
actual or suspected presence, spillage, leakage, discharge or
other emission of Hazardous Substances; (iii) no Hazardous
Substances have been generated, used, stored, treated,
manufactured, refined, handled, produced or disposed of in, on or
under, and no Hazardous Substances have been transported,
released or disposed of at, from or to, any of such Real Property
by the Company or any Subsidiary or by any persons or agents
operating under the control, direction and supervision of the
Company or any Subsidiary, including, without limitation, all
employees, agents and contractors of the Company or any
Subsidiary; and (iv) the Company and the Subsidiaries have not
received any written or oral governmental notice, order, inquiry,
investigation, environmental audit or assessment or any lien,
encumbrance, decree, easement, covenant, restriction, servitude
or proceeding concerning, or arising by reason of, the actual or
suspected presence, spillage, leakage, discharge, disposal or
other emission of any Hazardous Substance in, on, under, around,
about or in the vicinity of, or the transportation of any
Hazardous Substance at, from or to, any of such Real Property.
Section 3.28(a) of the Disclosure Schedule contains a list of all
above ground or underground tanks used for the storage of
Hazardous Substances on or below the surface of any Real
Property;
(b) Compliance with Environmental Laws. Except as
disclosed in Section 3.28(b) of the Disclosure Schedule, and
except for conditions that are not attributable to any act or
omission of the Company or any Subsidiary and of which the
Principal Shareholders do not have Knowledge: (i) neither the
Company, the Subsidiaries nor any Real Property (including
storage tanks or other impoundment vessels, whether above or
below ground) are in material violation of, or subject to any
material liabilities as a result of any past or current
violations of, any existing federal, state or local law
(including common law), statute, ordinance, rule or regulation of
any federal, state or local governmental authority relating to
pollution or protection of the environment, including, without
limitation, statutes, laws, ordinances, rules and regulations
relating to the emission, generation, discharge, spillage,
leakage, storage, off-site dumping, release or threatened release
of Hazardous Substances into ambient air, surface water, ground
water or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Substances (collectively,
"Environmental Laws"); and (ii) no material expenditures are
required in connection with the operation of the Company's or the
Subsidiaries' businesses as presently conducted in order to
comply with any Environmental Laws. Except as disclosed in
Section 3.28(b) of the Disclosure Schedule, the Company, the
Subsidiaries and the Real Property have in all material respects
passed all inspections conducted by applicable governmental
authorities and regulatory bodies in connection with the matters
described in the preceding sentence. The Company has all
approvals, authorizations, consents, licenses, orders and permits
of all governmental and regulatory authorities required under any
Environmental Laws (collectively, "Environmental Permits"),
except for Environmental Permits the lack of which could not give
rise to any material obligation or liability on the part of the
Company or otherwise have any Material Adverse Effect, nor impair
the ability of the Company to conduct any material aspect of the
Company's business at any one or more of its locations. Each of
the Environmental Permits is in full force and effect. The
Company has complied with all of the terms, conditions and
requirements imposed by each of the Environmental Permits, except
where the failure so to comply would not have a Material Adverse
Effect. Neither the Company, the Subsidiaries, nor the
Shareholders have received any notice of, and the Shareholders
have no Knowledge of, any intention on the part of any
appropriate authority to cancel, revoke or modify, or any
inquiries, proceedings or investigations the purpose or possible
outcome of which is the cancellation, revocation or modification
of any such Environmental Permit. All cleanup, removal and other
remediation activities carried out by the Company or the
Subsidiaries or by agents of the Company or the Subsidiaries at
the Real Property have been conducted in material compliance with
all applicable Environmental Laws, and there is no basis for
liability on the part of the Company or any Subsidiary as a
result of such activities.
(c) Definition of "Hazardous Substances". For
purposes of this Agreement, the term "Hazardous Substance" shall
mean any product, substance, chemical, contaminant, pollutant,
effluent, waste or other material which, or the presence, nature,
quantity and/or intensity of existence, use, manufacture,
disposal, transportation, emission, discharge, spill, release or
effect of which, either by itself or in combination with other
materials located on any of the Real Property, is defined or
listed in, regulated or monitored by, or otherwise classified
pursuant to, any statute, law, ordinance, rule or regulation
applicable to the Real Property as "hazardous substances,"
"hazardous materials," "hazardous wastes," "infectious wastes" or
"toxic substances." Hazardous Substances shall include, but not
be limited to, (i)(A) any "hazardous substance" as defined in the
Comprehensive Environmental Response, Compensation and Liability
Act, (B) any "regulated substance" as defined in the Solid Waste
Disposal Act or (C) any substance subject to regulation pursuant
to the Toxic Substances Control Act, as such laws are now in
effect or may be amended through the Closing Date and any rule,
regulation or administrative or judicial policy statement,
guideline, order or decision under such laws,
(ii) petroleum and refined petroleum products, (iii) asbestos and
asbestos-containing products, (iv) flammable explosives, (v)
radioactive materials, and (vi) radon.
(d) Definition of "Real Property". For purposes of
this Section 3.28, the term "Real Property" shall be deemed to
include all Real Property (as defined in Section 3.11(d)) at
which the operations of the Company or any Subsidiary are
currently conducted, together with all other locations (whether
leased or owned by the Company or the applicable Subsidiary) at
which the operations of the Company or any Subsidiary have
previously been conducted (to the extent that any prior
activities of the Company, the Subsidiary or their predecessors
in interest give rise to any liabilities, claims or obligations
(including, without limitation, any obligations to investigate,
cleanup or remediate) with respect to the matters described in
this Section 3.28).
(e) Exclusive Representation. This Section 3.28
contains the sole representations and warranties of the Principal
Shareholders with respect to any matters that relate to or are
governed by Environmental Laws.
3.29 Disclosure. No representation or warranty made by the
Shareholders in this Article III (including, without limitation,
any section of the Disclosure Schedule relating thereto), and no
section of the Disclosure Schedule, certificate or other written
document or instrument delivered or to be delivered by the
Company or the Shareholders, as applicable, pursuant to this
Agreement or in connection with the transactions contemplated
hereby, contains or will contain, any untrue statement of a
material fact or omits or will omit to state any material fact
necessary to make the statements contained therein not
misleading. The disclosure of any matter in any schedule to this
Agreement shall be deemed to be a disclosure for all purposes of
this Agreement to which such matter could reasonably be expected
to be pertinent.
3.30 Reliance. The representations and warranties of the
Shareholders made in Article III of this Agreement are made by
such Shareholders with the knowledge and expectation that the
Buyer is placing reliance thereon in entering into, and
performing its obligations under, this Agreement, and the same
shall not be affected or deemed waived in any respect whatsoever
by reason of any investigation heretofore or hereafter conducted
or knowledge gained by or on behalf of the Buyer (including,
without limitation, by any of its advisors, consultants or
representatives and any information contained in any Phase I or
Phase II or other environmental audit or investigation procured
by or on behalf of the Buyer or otherwise) prior to the Closing,
whether in contemplation of this Agreement or otherwise, or by
reason of the fact that the Buyer or any of such advisors,
consultants or representatives knew or should have known that any
such representation or warranty is or might be inaccurate, or
that any covenant or undertaking has been or might have been
breached, at or prior to the Closing, and no claims by the Buyer
with respect thereto shall be waived or otherwise affected as a
result of such knowledge on the part of the Buyer (or any of its
advisors, consultants or representatives) and none of the
Shareholders shall raise any such matter as a defense to any
claim by the Buyer for indemnification hereunder.
3.31. Disclosure Schedule. Any information which is
disclosed in the Disclosure Schedule or any other Schedule or
Exhibit hereto shall be deemed to be disclosed for all Sections
of this Agreement to which such disclosure is relevant. All
capitalized terms used in the Disclosure Schedule and not
otherwise defined therein shall have the same meanings as are
ascribed to such terms in this Agreement. The Disclosure
Schedule shall not vary, change or alter the literal meaning of
the representations and warranties of the Shareholders contained
in this Agreement, other than creating specific, limited
exceptions thereto which are directly responsive to the language
of the applicable warranties and representations contained in
this Agreement. The Shareholders shall be entitled to amend the
Disclosure Schedule prior to Closing; provided, however, (i) that
such amendments, if any, shall occur no late than the earlier of
Closing or two days after the matter causing the amendment comes
to the Knowledge of the Shareholders, and (ii) that such
amendments may be made only to the extent that the Buyer approves
of the same (such approval not to be withheld in bad faith).
ARTICLE IV Representations and Warranties of the Buyer
The Buyer makes the representations and warranties set forth
in this Article IV, each of which is true and correct as of the
date hereof and will be true as of the Closing Date:
4.1 Corporate Organization . The Buyer is a corporation
duly organized and validly existing under the laws of the State
of Wisconsin. The Buyer is current in all filings necessary to
maintain its corporate existence under Wisconsin law and no
proceedings have been filed or are pending for its dissolution or
winding up. The Buyer has all requisite corporate power and
authority to own, lease and operate the properties and assets it
now owns, leases or operates and to carry on its business as
presently conducted or presently proposed to be conducted.
4.2 Authorization . The Buyer has full corporate power and
authority to execute, deliver and perform this Agreement. The
execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly approved by
the Board of Directors of the Buyer, and no other corporate
action on the part of the Buyer is necessary to approve and
authorize the execution and delivery of this Agreement by Buyer
or the consummation of the transactions contemplated hereby. The
execution, issuance and delivery of the Notes have been duly
authorized by all necessary corporate action on the part of the
Buyer. This Agreement and the Notes have been duly executed and
delivered by the Buyer and constitute the valid and binding
agreement of the Buyer enforceable in accordance with their
respective terms, except that the enforceability of this
Agreement is subject to bankruptcy, insolvency, reorganization
and similar laws of general applicability relating to or
affecting creditors' rights and limitations on the availability
of the remedy of specific performance and other equitable
remedies.
4.3 Consents and Approvals; No Violations . Except as set
forth in Section 4.3 of the Disclosure Schedule, the execution
and delivery of this Agreement does not and the consummation of
the transactions contemplated hereby will not: (i) violate or
conflict with any provision of the charter documents of the
Buyer, (ii) breach, violate or constitute an event of default (or
an event which with the lapse of time or the giving of notice or
both would constitute an event of default) under, give rise to
any right of termination, cancellation, modification,
acceleration or foreclosure under, or require any consent or the
giving of any notice under, any note, bond, indenture, mortgage,
security agreement, lease, license, franchise, permit, agreement
or other instrument or obligation to which the Buyer is a party,
or by which the Buyer or any of its properties or assets may be
bound, or result in the creation of any Encumbrance or other
right of any third party of any kind whatsoever upon the
properties or assets of the Buyer pursuant to the terms of any
such instrument or obligation, (iii) violate or conflict with any
law, statute, ordinance, code, rule, regulation, judgment, order,
writ, injunction, decree or other instrument of any court or
governmental or regulatory body, administration, agency or
authority applicable to the Buyer or by which any of its
properties or assets may be bound or (iv) require any filing by
the Buyer with, or any permit, license, exemption, consent,
authorization or approval of, or the giving of any notice by the
Buyer to, any governmental or regulatory body, agency or
authority, other than the HSR Filings.
4.4 Investment Purpose. The Buyer is acquiring the Subject
Shares for investment for its own account and not with a view to
the sale or distribution of any part thereof and the Buyer has no
present intention of selling, granting participations in, or
otherwise distributing the Subject Shares (not including
collateral assignments, transfers to Affiliates of the Buyer or
pledges of the Subject Shares for financing purposes).
4.5 No Brokers or Finders. Neither the Buyer nor any of
its officers, directors or employees, on behalf of the Buyer, has
employed any broker or finder or incurred any other liability for
any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated hereby.
4.6 Financial Statements. Buyer has provided to the
Shareholders true and complete copies of the financial statements
of the Buyer consisting of (i) balance sheets of the Buyer as of
January 2, 1999 and January 3, 1998 and the related statements of
income and cash flows for the years then ended (including the
notes contained therein or annexed thereto), which financial
statements have been reported on, and are accompanied by, the
signed, unqualified opinions of Deloitte & Touche LLP,
independent auditors for the Buyer for such years and (ii) an
unaudited balance sheet of the Buyer as of January 1, 2000 (the
"Recent Balance Sheet"), and the related unaudited statements of
income for the year then ended (including the notes and schedules
contained therein or annexed thereto). All of the financial
statements referred to in (i) and (ii) above (including all notes
and schedules contained therein or annexed thereto) have been
prepared in accordance with generally accepted accounting
principles (except, in the case of unaudited statements, for the
absence of footnote disclosure) applied on a consistent basis,
have been prepared in accordance with the books and records of
the Buyer and fairly present, in accordance with generally
accepted accounting principles, the assets, liabilities and
financial position, the results of operations and cash flows of
the Buyer as of the dates and for the years indicated.
4.7 Claims, Legal Actions. There is no claim, legal
action, counterclaim, suit, arbitration, governmental
investigation or other legal, administrative or tax proceeding,
nor any order, decree or judgment in progress or pending, or to
the knowledge of the Buyer, threatened against or relating to the
Buyer that would have a Material Adverse Effect on the Buyer, or
on the transactions contemplated by this Agreement, nor does the
Buyer know of any basis for the same. There are no applications,
complaints or proceedings pending or, to the knowledge of the
Buyer, threatened before any federal, state or local agency
involving environmental issues relating to the Buyer under any
federal, state or local environmental law or regulation which, if
concluded adversely to Buyer, would have a Material Adverse
Effect on the Buyer. No order, writ, injunction or decree is in
effect or, to the knowledge of the Buyer, is threatened with
respect to the Buyer which would have a Material Adverse Effect
on the Buyer. To the knowledge of the Buyer, there is no basis
for any legal proceeding against the Buyer that, if adversely
determined, would have a Material Adverse Effect on the Buyer or
the Shareholders' interest in the Notes.
4.8 Disclosure. To the knowledge of the Buyer, no
representation or warranty by the Buyer in this Agreement, nor
any statement, certificate, schedule, document or exhibit hereto
furnished or to be furnished by or on behalf of the Buyer
pursuant to this Agreement or in connection with the transactions
contemplated hereby, contains or shall contain any untrue
statement of material fact or omits or shall omit a material fact
necessary to make the statements contained therein not
misleading.
ARTICLE V Conduct of Business Pending Closing
5.1 Conduct of the Business of the Company . The
Shareholders covenant and agree with the Buyer that, between the
date hereof and the Closing Date (except as otherwise agreed in
writing by the Buyer):
(a) the business of the Company and each
Subsidiary will be conducted diligently and only in the ordinary
course consistent with past practice;
(b) no change will be made in the Articles of
Incorporation, By-Laws or other charter documents of the Company
or any Subsidiary;
(c) subject to the limitations elsewhere in this
Agreement, the Shareholders and the Company shall use their
reasonable best efforts to preserve the assets, business and
goodwill of the Company and each Subsidiary, to keep available
the services of the present employees of the Company and each
Subsidiary and to preserve the goodwill of the Company's and each
Subsidiary's customers, suppliers and others having business
relationships with the Company and the Subsidiaries, provided
that the Company and the Subsidiaries shall not be authorized
(without the prior written consent of the Buyer) to make any
commitment on behalf of the Buyer;
(d) the Company and the Subsidiaries shall not
announce or institute any increase in the salary, commission or
other compensation (including bonuses) rates payable or to become
payable by the Company or any Subsidiary to any employee or agent
of the Company or any Subsidiary, or approve, adopt, amend or
modify any Benefit Plan or similar plan, agreement or
arrangement, except pursuant to the terms of any contract or
agreement to which the Company or the Subsidiaries are a party
and which is listed in any section of the Disclosure Schedule, or
pursuant to existing policies and practices of the Company and
the Subsidiaries as described in Section 6.1(d) of the Disclosure
Schedule;
(e) the Company and the Subsidiaries shall not enter
into any contract or commitment, or series of related contracts
or commitments (except for Purchase Orders), unless such contract
or commitment, or series of related contracts or commitments, (i)
arises in the ordinary course of business, and (ii) involves
expenditures or revenues of less than $25,000 in the aggregate;
(f) the Shareholders shall promptly advise the Buyer
in writing of the commencement or threat of any suit, proceeding
or investigation against, relating to or involving the Company or
any Subsidiary which, had it existed on the date of this
Agreement, would have been required to be disclosed on Section
3.9 of the Disclosure Schedule;
(g) the Shareholders shall promptly advise the Buyer
in writing of (i) any material adverse change in the assets,
liabilities, financial condition, business, operations or
prospects of the Company or any Subsidiary and (ii) any event,
condition or state of facts which will or may reasonably be
expected to result in the failure to satisfy any of the
conditions in Article VIII hereof;
(h) the Company shall not create or permit to become
effective any Encumbrance on the assets, tangible or intangible,
of the Company or any Subsidiary, except in the ordinary course
of business consistent with past practice;
(i) the Company and the Subsidiaries shall maintain
their current liability, casualty, property and other insurance
coverages in full force and effect without reduction in coverage;
(j) the Company and the Subsidiaries shall not issue
any additional shares of capital stock or any options, warrants
or other rights to purchase, or securities convertible into or
exchangeable for, shares of capital stock of the Company or any
Subsidiary;
(k) the Company and the Subsidiaries shall not declare
or pay any dividends on or make any other distributions (however
characterized) in respect of shares of their capital stock;
(l) the Company and the Subsidiaries shall not
repurchase or redeem any shares of their capital stock;
(m) the Company and the Subsidiaries shall not
organize any new subsidiary, acquire any capital stock or other
equity security of any corporation or acquire any equity or other
ownership interest in any business;
(n) the Company and the Subsidiaries shall not make
any change in the accounting principles or practices reflected in
the Financial Statements or in their methods of applying such
principles or practices; and
(o) the Company and the Subsidiaries shall not incur
any indebtedness, liability or obligation (whether absolute,
contingent or otherwise), except in the ordinary course of
business and consistent with past practice and not in any event
consisting of indebtedness for borrowed money (other than
advances under existing credit facilities in the ordinary course
of business and consistent with past practice), or guarantee, or
act as surety, indemnitor, co-signer or accommodation party for,
any indebtedness, liability or obligation of any third party,
except for liability due to endorsement of checks in the normal
course of collection;
(p) the Company and the Subsidiaries shall not make
any capital expenditure or commitment in excess of $25,000.00,
with the exception of the planned capital expenditures identified
on Section 5.1 of the Disclosure Schedule;
(q) the Company and the Subsidiaries shall not cancel
any debts or waive any claims or rights of value other than write-
offs of accounts receivable (including non-sufficient fund
checks) in the ordinary course of business;
(r) the Company and the Subsidiaries shall not sell,
transfer or otherwise dispose of any of their material properties
or assets (real, personal or mixed, tangible or intangible)
except in the ordinary course of business and consistent with
past practices, and in any event shall not dispose of or transfer
any shares of the stock of the Buyer;
(s) the Company and the Subsidiaries shall not dispose
of or permit to lapse any right to the use of any patent,
trademark or copyright (or application therefor), trade name,
service mark or brand name or permit to lapse any material
license, service mark or brand name permit or form of
authorization, or dispose of or disclose to any person any trade
secret, formula, process or know-how not theretofore a matter of
public knowledge;
(t) the Company and the Subsidiaries shall not pay,
loan or advance any amount to, or sell, transfer or lease any
properties or assets to, or enter into any agreement or
arrangement with, any Related Party, except for directors' fees
and compensation and expense advances and reimbursements to
officers and employees, in each case in the ordinary course of
business and consistent with past practices;
(u) except for the Revised Leases, the Company and the
Subsidiaries shall not enter into any lease (as lessor or lessee)
of real property or enter into any contract, arrangement, license
or lease of personal property;
(v) the Company and the Subsidiaries shall not change
any of their current banking relationships;
(w) the Company and the Subsidiaries shall not
terminate, amend or fail to perform any obligation under any
material contract, lease, commitment or license;
(x) the Company and the Subsidiaries shall comply in
all material respects with all laws applicable to them and their
properties, operations, business and employees and shall file all
required tax returns and other reports required by any
governmental agency or authority that are required to be filed on
or prior to the Closing Date;
(y) the Company and the Subsidiaries shall not enter
into any agreement or commitment to take any action prohibited
under this Section 5.1.
5.2 Access to Personnel, Properties, Books and Records .
From the date hereof until the Closing Date, the Shareholders
will, and will cause the Company to, cooperate fully with the
Buyer in the Buyer's investigation of the business, assets and
liabilities of the Company and each Subsidiary. Without limiting
the generality of the foregoing, the Shareholders will allow the
employees, attorneys, accountants, and other representatives of
the Buyer to meet with the management of the Company and each
Subsidiary and their representatives, to have full and complete
access to the books, records, properties, financial statements
and other documents and materials relating to the Company's and
the Subsidiaries' operations (including the right to make
extracts therefrom or copies thereof); provided that Buyer will
endeavor to conduct its examination at a location away from the
Company's premises to the extent it is practical to do so, and,
with respect to its investigation of said premises, such
investigation will occur at such times and in such a manner as
the Shareholders reasonably determine to be appropriate to
protect the confidentiality of the transactions contemplated by
this Agreement and avoid unreasonable disruption of the Company's
business operations. The information furnished by the Company or
the Shareholders or their representatives to the Buyer or its
representatives pursuant to this Section 5.2 shall be subject to
the provisions of the Confidentiality Agreement among the parties
hereto dated October 1, 1999.
5.3 Best Efforts . Subject to the terms and conditions
herein provided, each of the parties hereto agrees that it shall
use its best efforts to take, or cause to be taken, all actions,
and to do, or cause to be done, all things necessary, proper or
advisable to fulfill the conditions to the parties' obligations
hereunder and to consummate and make effective the transactions
contemplated by this Agreement.
ARTICLE VI Additional Covenants
6.1 Further Assurances . The Shareholders shall, at any
time and from time to time from and after the Closing Date, upon
the request and at the expense of the Buyer but without further
consideration, perform, execute, acknowledge, deliver and file,
or cause to be performed, executed, acknowledged, delivered and
filed, all such further acts, deeds, transfers, conveyances,
assignments or assurances as the Buyer may reasonably request in
order to ensure that the Buyer is vested with complete beneficial
ownership and control of the Subject Shares.
6.2 Transfer Taxes. The Shareholders shall be responsible
for, and shall pay or reimburse promptly when and if due, all
applicable sales, transfer, excise, use, documentary stamps or
any other similar taxes which may be imposed in any jurisdiction,
or by any authority, in connection with or arising from the sale
of the Subject Shares to the Buyer. The Shareholders shall
prepare and file all appropriate sales, transfer, excise, use,
documentary stamps and other tax returns and other documents and
shall make timely payment of any sales, transfer, excise, use and
other taxes due in any jurisdiction in connection with the
transactions contemplated hereunder.
6.3 Tax Matters.
(a) The Buyer will cause the Company and the
Subsidiaries to prepare and file appropriate Tax returns for all
periods ending prior to or on the Closing Date, to the extent
such returns have not been filed prior to the Closing Date. The
Shareholders agree to cooperate fully, as and to the extent
reasonably requested by the Buyer or its representatives, in
connection with the preparation and review of such Tax returns.
(b) Before filing any such returns with the IRS
or any other relevant Tax authority, the Buyer shall deliver a
copy of such returns to the Shareholders' Agents for the
Shareholders' review and approval, which shall not be
unreasonably withheld or delayed, provided that Buyer shall make
such revisions to such tax returns as are reasonably requested by
the Shareholders' Agent and consistent with applicable tax laws
and regulations and interpretations thereof.
(c) Any Tax refunds in excess of $10,000 in any
case that are received by the Buyer or the Company or any
Subsidiary, and any amounts credited against Tax to which the
Buyer or the Company or any Subsidiary becomes entitled, that
relate to Tax periods or portions thereof ending on or before the
Closing Date, other than amounts reflected on the Closing Balance
Sheet (whether as assets, as reductions of liabilities, as
components of the Company's deferred tax accounts, or otherwise),
shall be for the account of the Shareholders, and the Buyer shall
pay over to the Shareholders any such refund or the amount of any
such credit within thirty (30) days after its receipt of the
same.
(d) The Buyer, the Company and the Shareholders
shall cooperate fully, as and to the extent reasonably requested
by the other party, in connection with the filing of Tax Returns
pursuant to this Section and any audit, litigation or other
proceeding with respect to Taxes, subject to Section 10.4 below.
Such cooperation shall include the retention and (upon the other
party's request) the provision of records and information which
are reasonably relevant to any such audit, litigation or other
proceeding and making employees available on a mutually
convenient basis to provide additional information and
explanation of any material provided hereunder. The Buyer and
the Company agree to retain all books and records with respect to
Tax matters pertinent to the Company or any Subsidiary relating
to any taxable period beginning before the Closing Date until the
expiration of the statute of limitations (and any extensions
thereof) of the respective taxable periods, and to abide by all
record retention agreements entered into with any taxing
authority.
6.4 Employee Benefit Plans.
(a) 401(k) Plans.
(i) Immediately after the Closing Date, the Buyer
shall cause the Company to adopt the Mega Marts, Inc. Profit
Sharing 401(k) Plan (the "New Company Plan"). The New
Company Plan shall either be an amendment and restatement of
the existing Mega Marts, Inc. Hourly Employees Profit
Sharing and 401(k) Retirement Savings Plan (the "Hourly
Plan") or it shall be an entirely new plan into which the
Hourly Plan is subsequently merged. The New Company Plan
shall provide the employees of the Company after the Closing
Date eligibility, vesting and benefits on terms that are
substantially identical, as applied to the applicable
employees, as the Hourly Plan or the NDC, Inc. Profit
Sharing and 401(k) Retirement Savings Plan (the "NDC Plan").
(ii) Employees of the Company or NDC who become
employees of the Buyer on the Closing Date shall be covered
under the terms of the Buyer's tax qualified retirement plan
or plans ("Buyer's Retirement Plans") with respect to
accruals for compensation earned after the Closing Date.
(iii) For purposes of eligibility and vesting
under the New Company Plan and the Buyers' Retirement Plans,
years of service as of the Closing Date under the NDC Plan
and Hourly Plan shall be credited for any employee of NDC or
the Company immediately prior to the Closing Date.
(iv) As soon as practicable after the Closing
Date, Shareholders shall cause NDC to cause a plan-to-plan
transfer from the NDC Plan to the New Company Plan of the
assets and liabilities attributable to the Transferred
Employees. For purposes of this Section 6.4, "Transferred
Employees" shall mean those employees of the Company or of
NDC who either continue as employees of the Company on the
Closing Date or become employees of the Company or the Buyer
on the Closing Date.
(v) Buyer shall cause the New Company Plan to
provide a minimum discretionary allocation for the
Transferred Employees who are employed by the Company or the
Buyer on December 31, 2000 and who earn at least 1,000 hours
of service during such calendar year, including hours with
the Company, the Buyer, and NDC. The minimum allocation for
an eligible employee shall be a designated percentage of the
compensation earned from the Company or NDC from January 1,
2000 through the Closing Date. The designated percentage
for union employees shall be 4% and for nonunion employees
4.5%. Such aggregate amount related to Company employees
shall be accrued as a liability of the Company as of the
Closing Date for purposes of the Closing Balance Sheet and
the determination of the Closing Date Net Book Value.
(vi) As soon as practicable, but in no event
later than six (6) months, after the Closing Date, Buyer
shall cause the Company to submit to the IRS an application
for a determination letter that the New Company Plan
satisfies the tax-qualification requirements under Section
401(a) of the Code and that the trust that forms a part of
the New Company Plan is exempt from taxation under Section
501(a) of the Code.
(vii) The Shareholders, the Company and the Buyer
agree to cooperate (and the Shareholders agree to cause NDC
to cooperate) in the transfer of NDC Plan assets for the
accounts of the Transferred Employees to the New Company
Plan, so that such transfer shall comply with Sections
401(a)(12) and 414(1) of the Code and that thereafter each
Transferred Employee will have an account balance in the New
Company Plan equal to his or her account balance in the NDC
Plan immediately before the transfer of assets.
(b) Health Insurance Plans. Prior to the Closing Date
the Company will enter into a group health insurance contract
with the insurer that currently provides group health insurance
to the employees of the Company and NDC (the "Current Coverage"),
providing coverage to the Transferred Employees, effective as of
the Closing Date, that is substantially identical to the Current
Coverage, with no interruption in coverage and no exclusion for
prior existing conditions. The form and terms of such insurance
contract will be subject to Buyer's approval. Effective as of
the Closing Date, the Transferred Employees will cease to be
covered under the Current Coverage.
ARTICLE VIII Conditions to the Obligations of the Buyer
The obligations of the Buyer to consummate the transactions
contemplated hereunder shall be subject to the satisfaction of
each of the following conditions at or prior to the Closing,
unless waived by the Buyer in writing:
7.1 Representations and Warranties True . All of the
representations and warranties of the Shareholders contained in
this Agreement (including, without limitation, the Disclosure
Schedule hereto) shall be true and correct in all material
respects on the Closing Date as though such representations and
warranties were made on such date, and the Company and the
Shareholders shall have delivered separate certificates to that
effect at the Closing.
7.2 Performance . The Shareholders shall have performed
and complied in all material respects with, and shall have caused
the Company to comply in all material respects with, all
covenants and obligations under this Agreement which are required
to be performed or complied with by such parties on or prior to
the Closing Date.
7.3 Approvals, Permits, Etc. All consents,
authorizations, approvals, exemptions, licenses or permits of, or
registrations, qualifications, declarations or filings with, any
governmental body or agency thereof that are required in
connection with the sale and transfer of the Subject Shares to
the Buyer pursuant to this Agreement and the consummation of the
transactions contemplated hereby and are identified on Section
7.3 of the Disclosure Schedule, or for the operation of the
business of the Company following its acquisition by Buyer
hereunder, shall have been duly obtained or made in form and
substance reasonably satisfactory to the Buyer and its counsel
and shall be effective at and as of the Closing Date, including
without limitation, the filing of notices with the appropriate
authorities under the Hart-Scott-Rodino Antitrust Improvements
Act ("HSR Filings") and the expiration of the waiting periods
thereunder.
7.4 Delivery of Closing Documents . The Shareholders shall
have delivered to the Buyer the documents referred to in Section
2.5(a) hereof, in form and substance reasonably satisfactory to
the Buyer and its counsel.
7.5 Absence of Certain Events . No statute, rule or
regulation shall have been enacted or promulgated which would
make any of the transactions contemplated by this Agreement
illegal or would otherwise prevent the consummation thereof. No
order, decree, writ or injunction shall have been issued and
shall remain in effect, by any court or governmental body or
agency thereof which restrains, enjoins or otherwise prohibits
the consummation of the transactions contemplated hereby, and no
action, suit or proceeding before any court or governmental body
or agency thereof shall have been instituted by any person (or
instituted or threatened by any governmental body or agency
thereof), and no investigation by any governmental body or agency
thereof shall have been commenced, with respect to the
transactions contemplated hereby which in the written opinion of
Buyer's counsel would make it imprudent to proceed with the
transactions contemplated hereby.
7.6 No Material Adverse Change. There shall have been no
material adverse change in the financial condition, results of
operations, cash flows, assets, liabilities, business or
operations of the Company or any Subsidiary during the period
between January 2, 1999 and the Closing Date.
7.7 Consents . Any restrictions or limitations on or
rights of third parties in relation to the sale of the Subject
Shares to the Buyer that may be required pursuant to any
agreement to which the Company or any of the Shareholders are
parties or by which they are bound, shall have been duly waived
or released.
7.8 Evidence of Title to Real Property. The Company, at
its expense, shall have obtained and delivered to Buyer, not
later than ten (10) days prior to the Closing Date the following
documents confirming the Company's title to all of the Owned Real
Property, all of which shall be reasonably satisfactory to Buyer
and consistent with the title requirements of Section 3.11
hereof: (i) title commitments for the Owned Real Property which
shall be updated as of the Closing Date (or letter reports
covering the period after the date of the Company's most recent
title policy for such property through the Closing Date), and
(ii) surveys for the Owned Real Property and NDC Leased Property.
The Company, at its expense, also shall have obtained and
delivered to Buyer not later than ten (10) days prior to the
Closing Date, leasehold title insurance commitments confirming
the Company's leasehold interest in all of the NDC Leased Real
Property and the Other Leased Real Property (or letter reports
covering the period after the date of NDC's most recent title
policy for any NDC Leased Real Property parcel). Neither the
Company nor the Shareholders shall have any obligation to obtain,
or to pay premiums for, any title insurance policy for any of the
Real Property for which title insurance commitments are obtained
pursuant to this Section 7.8.
7.9 Landlord Consents and Estoppel Certificates. Buyer
shall have received certificates from the lessors of each parcel
of NDC Leased Real Property, the Other Leased Real Property and,
to the extent required by Buyer's senior Lenders, the Jondex
Leased Real Property (and in the case of parcels that are
subleased to the Company or to NDC, from the lessors under the
underlying prime leases), substantially in the form attached
hereto as Exhibit H, consenting to the transaction contemplated
by this Agreement, confirming that the lease (and in the case of
subleases, the underlying prime lease) of such property is in
force and effect, that no defaults exist thereunder, and
certifying to such other matters, reasonably required by Buyer or
its senior lenders, as are usual and customary in transactions of
this nature.
7.10. Sublessee Estoppel Certificates. Buyer shall have
received certificates from any sublessees, licensees, or other
occupants of the Owned Real Property, the NDC Leased Real
Property, the Jondex Leased Real Property and the Other Leased
Real Property described on Sections 3.11(b) and 3.11(c) of the
Disclosure Schedule, substantially in the form attached hereto as
Exhibit I, confirming that each such sublease, license, or other
agreement or arrangement pursuant to which such person occupies
such property is in full force and effect, that no defaults exist
thereunder, and certifying to such other matters relating thereto
as may reasonably be required by Buyer.
7.11 NDC Leases. Buyer or an affiliate of Buyer (which may
be the Company) and NDC, the owner of certain of the real estate
set forth on Section 7.11 of the Disclosure Schedule, shall have
entered into amended and restated leases of such real estate,
substantially in the form of and on the terms set forth on
Exhibit E hereto ("Amended and Restated NDC Leases"). In the
event that an affiliate of Buyer, and not the Buyer, is the
lessee under any of the Amended and Restated NDC Leases, the
Buyer shall unconditionally guarantee the obligations of the
Lessee in form reasonably satisfactory to NDC's lender.
7.12 Subordination, Nondisturbance and Attornment
Agreements. Buyer shall have received Subordination,
Nondisturbance and Attornment Agreements from each lender to NDC
for each parcel of NDC Leased Real Property and the Shareholders
shall have used their reasonable best efforts to obtain such
agreement from the lender or lenders to the owner of each parcel
of Other Leased Real Property, substantially in the form attached
hereto as Exhibit J (the "Subordination, Nondisturbance and
Attornment Agreements").
7.13 Closing of NDC Transaction. The transactions that are
the subject of the NDC Asset Purchase Agreement shall have been
closed, contemporaneously with the Closing under this Agreement.
ARTICLE VIII
Conditions to the Obligations of the Company and the Shareholders
The obligations of the Company and the Shareholders to
consummate the transactions contemplated hereunder shall be
subject to the satisfaction of each of the following conditions
on or prior to the Closing, unless waived by the Shareholders'
Agents in writing:
8.1 Representations and Warranties True . All of the
representations and warranties of the Buyer contained in this
Agreement (including, without limitation, the Disclosure
Schedule) shall be true and correct in all material respects on
the Closing Date as though such representations and warranties
were made on such date, and the Buyer shall have delivered
certificates to that effect at the Closing.
8.2 Performance . The Buyer shall have performed and
complied in all material respects with all covenants and
obligations under this Agreement which are required to be
performed or complied with by it on or prior to the Closing Date.
8.3 Approvals, Permits, Etc. All consents,
authorizations, approvals, exemptions, licenses or permits of, or
registrations, qualifications, declarations or filings with, any
governmental body or agency thereof that are required in
connection with the sale and transfer of the Subject Shares to
the Buyer pursuant to this Agreement and the consummation of the
transactions contemplated hereby shall have been duly obtained or
made in form and substance reasonably satisfactory to the
Shareholders and their counsel and shall be effective at and as
of the Closing Date.
8.4 Delivery of Closing Documents . The Shareholders shall
have received the cash, instruments, agreements and other
documents referred to in Section 2.5(b) hereof in form and
substance reasonably satisfactory to the Shareholders and their
counsel.
8.5 Absence of Certain Events . No statute, rule or
regulation shall have been enacted or promulgated which would
make any of the transactions contemplated by this Agreement
illegal or would otherwise prevent the consummation thereof. No
order, decree, writ or injunction shall have been issued and
shall remain in effect, by any court or governmental body or
agency thereof which restrains, enjoins or otherwise prohibits
the consummation of the transactions contemplated hereby, and no
action, suit or proceeding before any court or governmental body
or agency thereof shall have been instituted by any person (or
instituted or threatened by any governmental body or agency
thereof), and no investigation by any governmental body or agency
thereof shall have been commenced, with respect to the
transactions contemplated hereby which in the written opinion of
Shareholders' counsel would make it imprudent to proceed with the
transactions contemplated hereby.
8.6 Tri-City National Bank Agreement. Buyer shall have
entered into an agreement with Tri-City, substantially in the
form attached hereto as Exhibit F, pursuant to which Tri-City
will have a first right to negotiate in good faith with Buyer for
the operation of a bank branch in certain new retail grocery
stores opened by Buyer (and operated by Buyer or its subsidiaries
or Affiliates) and in which Buyer elects to place a banking
facility, during the ten (10) years following the Closing Date,
(the "Tri-City Bank Agreement").
8.7 Closing of NDC Transaction. The transactions that are
the subject of the NDC Asset Purchase Agreement shall have been
closed, contemporaneously with the Closing under this Agreement.
ARTICLE IX Termination
9.1 Termination . This Agreement may be terminated at any
time prior to the Closing Date:
(a) by the mutual written consent of the Buyer, on the
one hand, and all of the Shareholders who collectively own not
less than 80% of the Subject Shares (a "Supermajority of the
Shareholders"), on the other hand;
(b) by either the Buyer or a Supermajority of the
Shareholders if any statute, rule or regulation has been enacted
which in the written opinion of counsel for the terminating party
would make any of the transactions contemplated by this Agreement
illegal or would otherwise prevent the consummation thereof or if
any court or governmental body or agency thereof shall have
issued any writ or injunction, or taken any other action,
restraining, enjoining or otherwise prohibiting the transactions
contemplated hereby and all appeals and means of appeal therefrom
have been exhausted;
(c) by the Buyer, if any of the conditions specified
in Article VII have not been met or waived prior to such time as
such condition can no longer be satisfied; or
(d) by a Supermajority of the Shareholders, if any of
the conditions specified in Article VIII shall not have been met
or waived prior to such time as such condition can no longer be
satisfied; or
(e) by either the Buyer or a Supermajority of the
Shareholders, if the Closing has not occurred on or before April
17, 2000.
9.2 Effect of Termination . In the event of termination of
this Agreement pursuant to the preceding Section 9.1, this
Agreement shall forthwith become null and void and there shall be
no liability on the part of any party hereto or their respective
officers or directors, except for Sections 11.3 and 11.4 hereof,
which shall remain in full force and effect, and except that
nothing herein shall relieve any party hereto from liability for
a breach of this Agreement prior to the termination hereof.
ARTICLE X Indemnification; Survival of Representations and
Warranties
10.1 Indemnity Obligations of the Principal Shareholders .
Subject to the conditions and limitations set forth in this
Article X, the Principal Shareholders hereby agree, severally in
accordance with the "Indemnification Percentages" set forth
opposite their respective names on Section 2.2 of the Disclosure
Schedule, to indemnify and hold the Buyer and the Company and
their respective parents, subsidiaries, affiliates, directors,
officers, employees and agents (such parties being collectively
referred to herein as the "Buyer Indemnities") harmless from, and
to reimburse each such Buyer Indemnitee for, on an after-Tax
basis (within the meaning of Section 10.6(b)), any loss, damage,
deficiency, claim, liability, obligation, suit, action, fee,
penalty, fine, interest, surcharge, cost or expense of any nature
whatsoever, to the extent that any such item is not reserved for
or reflected as a liability on the Closing Balance Sheet and
taken into account in the computation of Closing Date Net Book
Value or, if such a reserve shall have been made, to the extent
that any such item exceeds the amount of such reserve
(collectively, "Losses"), arising out of, based upon or resulting
from:
(a) any inaccuracy in or any breach of any
representation and warranty of the Shareholders contained in this
Agreement or the Disclosure Schedule, certificate or other
written instrument or document delivered by the Shareholders
pursuant hereto,
(b) any breach or nonfulfillment of, or any failure to
perform, any of the covenants, agreements or undertakings of the
Company and the Shareholders contained in or made pursuant to
this Agreement,
(c) any liabilities or obligations arising out of any
and all actions, claims, suits, proceedings, demands,
assessments, judgments, recoveries, damages, costs and expenses
or deficiencies incident to the disposition of any Buyer
Indemnity Claim (as hereinafter defined) asserted under this
Section 10.1, and
(d) all interest, penalties, costs and expenses
(including, without limitation, all out-of-pocket expenses,
reasonable investigation expenses and reasonable fees and
disbursements of accountants and counsel) arising out of or
related to any such Buyer Indemnity Claims.
Subject to the conditions and limitations set forth in this
Article X, each Shareholder hereby individually agrees to
indemnify and hold the Buyer Indemnities harmless from and to
reimburse each such Buyer Indemnitee for, on an after-Tax Basis
(within the meaning of Section 10.6(b)), Losses arising out of,
based upon or resulting from (a) any inaccuracy in or any breach
of any representation and warranty of such Shareholder set forth
in Article IIIA hereof, or (b) any failure by such Shareholder to
pay to Buyer any amount owed to Buyer under Section 2.3(g)
hereof, and, in either case, any interest, penalties, costs and
expenses (including, without limitation, all out-of-pocket
expenses, reasonable investigation expenses and reasonable fees
and disbursements of accountants and counsel) arising out of or
related to any such Buyer Indemnity Claims.
All claims made by any Buyer Indemnities under this Section
10.1 are referred to herein as "Buyer Indemnity Claims." The
term "Buyer Indemnity Claims" also includes for all purposes
hereunder all claims in respect of Tax Liabilities as provided
for in Section 10.4.
10.2 Indemnity Obligations of the Buyer . The Buyer agrees
to indemnify and hold each of the Shareholders harmless from, and
to reimburse the Shareholders for, on an after-Tax basis (within
the meaning of Section 10.6(b)), any Shareholder Indemnity Claims
(as that term is hereinafter defined) arising under the terms and
conditions of this Agreement. For purposes of this Agreement,
the term "Shareholder Indemnity Claim" shall mean any loss,
damage, deficiency, claim, liability, suit, action, fee, cost or
expense of any nature whatsoever (collectively "Losses") arising
out of, based upon or resulting from:
(a) any inaccuracy in or any breach of any
representation and warranty of the Buyer contained in this
Agreement or the Disclosure Schedule, certificate or other
written instrument or document delivered by the Buyer pursuant
hereto;
(b) any breach or nonfulfillment of, or failure to
perform, any of the covenants, agreements or undertakings of the
Buyer contained in or made pursuant to the terms and conditions
of this Agreement;
(c) any obligations or liabilities arising out of any
and all actions, claims, suits, proceedings, demands,
assessments, judgments, recoveries, damages, costs and expenses
or deficiencies incident to the disposition of any matter which
is the subject of indemnification under this Section 10.2; and
(d) all interest, penalties, costs and expenses
(including, without limitation, all out-of-pocket expenses,
reasonable investigation expenses and reasonable fees and
disbursements of counsel and accountants) arising out of or
related to any Shareholder Indemnity Claims asserted under this
Section 10.2.
10.3 Procedures Relative to Indemnification Claims .
(a) Claim Notice. Subject to the provisions of
Section 10.4 below, in the event that any party hereto shall
claim that it is entitled to be indemnified pursuant to the terms
of this Article X, it (the "Claiming Party") shall provide
written notice of such claim (a "Claim Notice") to the party
against which the claim is made (the "Indemnifying Party") as
promptly as reasonably practical after confirmation of the facts
supporting the claim or receipt of a written notice of any claim
of a third party (a "Third Party Claim") that may reasonably be
expected to result in a claim by such party against the party to
which such notice is given, as the case may be. If the Claiming
Party is a Buyer Indemnitee, such Claim Notice shall be served
upon the Shareholders' Agents. Each such Claim Notice shall
specify in reasonable detail, to the extent feasible or relevant,
the breach of representation, warranty, covenant or agreement
claimed by the Claiming Party, together with the Claiming Party's
good faith estimate of the liability, loss, cost or expense
incurred by or imposed upon or expected to be incurred by or
imposed upon the Claiming Party on account thereof (including,
without limitation, such party's good faith estimate of the costs
and expenses, including reasonable attorney's fees, expected to
be incurred in connection therewith).
(b) Defense. Subject to the remaining provisions
hereof, the Indemnifying Party may, upon receipt of written
notice of a Third Party Claim and at its expense, defend such
claim in its own name or, if necessary, in the name of the
Claiming Party. The Claiming Party will cooperate with and make
available to the Indemnifying Party such assistance and materials
as may be reasonably requested of the Claiming Party, and the
Claiming Party shall have the right, to participate in but not
control the defense thereof at the expense of the Claiming Party;
provided, however, that the Claiming Party shall have the right
to approve the legal counsel selected by the Indemnifying Party,
which approval shall not be withheld unreasonably. The
Indemnifying Party shall have the right to settle and compromise
any such claim with respect to which it controls the defense only
with the consent of the Claiming Party, which consent shall not
be unreasonably withheld. If the proceeding involves a matter
solely of concern to the Claiming Party in addition to the claim
for which indemnification under this Article X is being sought,
the Claiming Party shall have the right to control the defense
and settlement of such additional claim in its own discretion and
with its own counsel at the expense of the Claiming Party.
(c) Defense of Claims Below Indemnification Threshold.
Notwithstanding anything to the contrary in the foregoing, the
Buyer shall have the right at its own expense to control the
defense of any Third Party Claim (other than Zero-Threshold
Claims (as hereinafter defined)) if the potential loss or
liability associated with such claim, together with the aggregate
amount of all previously settled claims, is less than the
Indemnification Threshold (as hereinafter defined); provided,
that the Buyer shall keep the Shareholders' Agents reasonably
informed as to the nature and conduct of such claim and the
Shareholders' Agents shall be afforded an opportunity to monitor
developments in connection therewith. The Buyer shall have the
right to settle any such matter with the consent of the
Shareholders' Agents, such consent not to be unreasonably
withheld or delayed.
(d) Defense by Claiming Party. In the event the
Indemnifying Party shall fail or not have the right to assume the
defense under Paragraphs 10.3(b) or 10.3(c), above, or shall
notify the Claiming Party that it shall refuse to conduct a
defense against a Third Party Claim, then the Claiming Party
shall have the right to conduct a defense against such claim and
shall have the right to settle and compromise such claim without
the consent of the Indemnifying Party (except as provided in
Paragraph 10.3(c)) at the expense of the Indemnifying Party.
Once the amount of such claim is liquidated and the claim is
finally determined, the Claiming Party shall be entitled to
pursue each and every remedy available to it at law or in equity
to enforce the indemnification provisions of this Article X,
subject to the provisions of this Agreement.
10.4 Special Indemnification for Tax Liabilities .
(a) Subject to the conditions and limitations of this
Article X, the Principal Shareholders, severally in accordance
with the "Indemnification Percentages" set forth opposite their
respective names on Section 2.2 of the Disclosure Schedule, shall
indemnify and hold harmless the Buyer and each Buyer Affiliate
(as that term is hereinafter defined) from and against the
payment of any and all Tax Liabilities (as that term is
hereinafter defined) and of any and all costs and expenses which
may be incurred in connection with contesting any claims for Tax
Liabilities, including, without limitation, reasonable fees and
disbursements of counsel, accountants and other experts (but not
the costs of the services of persons who are the in-house
personnel or employees of the Buyer or any Buyer Affiliates) (the
"Costs and Expenses"). To the extent that any such contest
involves a claim for Tax Liabilities subject to indemnification
hereunder and also claims for other liabilities not subject to
such indemnification, then, notwithstanding any other provision
of this Section 10.4, the Shareholders shall be liable to
indemnify the Buyer and any Buyer Affiliates for only that
portion of the Costs and Expenses as is reasonably related to the
defense or contest of the Tax Liabilities subject to
indemnification hereunder. The term "Buyer Indemnity Claims"
shall be deemed to include all claims for Tax Liabilities.
(b) For purposes of this Section 10.4, the term "Buyer
Affiliate" shall mean the Buyer, and any other corporation or
other entity which is, directly or indirectly, controlled by or
under common control with the Buyer, or any successor in interest
to, or transferee of, the Buyer, as determined from time to time,
including, without limitation, the Company and any successor in
interest to, or transferee of, the Company.
(c) For purposes of this Agreement, the term "Tax
Liabilities" shall mean and include any and all liabilities for
Taxes (as defined in Section 3.9(b)) to the extent the aggregate
amount thereof exceeds the amount "accrued or reserved" (as
hereinafter defined) for such Taxes in the Closing Balance Sheet
and taken into account as liabilities in the computation of the
Closing Date Net Book Value, (i) which are or shall be incurred,
with respect to any taxable year or any other period beginning
prior to the Closing by the Company or any predecessor of, or
transferor to, the Company, or (ii) which are or shall be
incurred by any affiliated group, as defined in Section 1504(a)
of the Code as in effect during any relevant period (or any other
group required to file or filing returns on a consolidated or
combined basis), of which the Company, or any predecessor of, or
transferor to, the Company has been a member at any time prior to
the Closing Date, in either case whether or not such Taxes were
assessed prior to the Closing Date; provided, however, that for
purposes of computing the amount of any Tax Liabilities subject
to indemnification hereunder, any such taxable year or other
period which ends after the Closing Date shall be deemed to end
at the close of business on the Closing Date, and provided
further, however, that in the case of any ad valorem property tax
imposed upon the ownership or holding of real property or
personal property, the term "Tax Liabilities" shall include only
that percentage of the liability therefor which equals the
percentage of the actual period to which such said liability
relates which precedes the Closing Date. Solely for purposes of
the first sentence of this paragraph (c), the amount "accrued or
reserved" for Taxes on the Closing Balance Sheet shall be deemed
to include only reserves or accruals for Taxes arising in the
future but relating to tax periods prior to the Closing Date, and
shall not include any reserves or accruals for future tax
liabilities that are known or expected to arise in future periods
and are attributable to such future periods (including, without
limitation, so-called "deferred tax accounts" attibutable to
differences between tax accounting and financial accounting
methods).
(d) In the event that any Buyer Affiliate receives
written notice of a claim made by any Federal, state, local,
foreign or other governmental authority from such governmental
authority and such claim, if successful, would result in an
obligation to indemnify pursuant to this Section 10.4
(hereinafter, referred to as a "Tax Claim"), the Buyer shall give
timely notice to the Shareholders' Agents of such Tax Claim in
writing, specifying in reasonable detail the basis of such Tax
Claim, and the facts pertaining thereto, and shall not make
payment of the Taxes claimed for at least fifteen (15) days after
the giving of such notice (unless required by law to make payment
prior to such time). If the Shareholders' Agents wishes the
indemnitee to contest such Tax Claim, the Shareholders' Agents
shall (i) within fifteen (15) days after notice by the indemnitee
to the Shareholders' Agents of such Tax Claim, or, if earlier,
the period required by law, request that such Tax Claim be
contested, (ii) if the indemnitee so requests, furnish an opinion
of independent tax counsel selected by the Shareholders' Agents
and reasonably satisfactory to the indemnitee, that there is a
reasonable defense to the Tax Claim, (iii) agree to pay the
indemnitee from time to time on demand, on an after-Tax basis
(within the meaning of Section 10.6(b)), an amount equal to the
Taxes which are ultimately payable as a result of contesting such
Tax Claim and all Costs and Expenses, to the extent subject to
indemnification under this Section 10.4 (provided, that nothing
in this clause (iii) shall be deemed to obligate any Indemnifying
Party to pay or reimburse any Buyer Affiliate for any Taxes or
Costs and Expenses prior to such time as the same are due and
payable, or paid, by such Buyer Affiliate). If any such Tax
Claim shall be made by any governmental authority and the
Shareholders' Agents shall have requested the indemnitee to
contest such Tax Claim, as above provided, and shall have duly
complied, and shall continue to duly comply, with all of the
terms of this Section 10.4, the indemnitee hereby agrees to take
such action in connection with contesting any such Tax Claim as
the Shareholders' Agents shall reasonably request in writing from
time to time, including consulting with the Shareholders' Agents
in connection with any audit, investigation or other
administrative proceeding by the IRS or other governmental
authority and any judicial proceeding; provided that Buyer or the
indemnitee shall retain ultimate control of any such audit,
investigation or other administrative or judicial proceeding; and
provided further, that the indemnitee may, at its sole option,
either pay the Taxes claimed and sue for a refund in the
appropriate court of proper jurisdiction, as the indemnitee shall
elect, or contest such Tax Claim without first paying the Taxes
claimed, considering, however, in good faith such request as the
Shareholders' Agents shall make concerning the most appropriate
forum in which to proceed. The Buyer agrees to notify the
Shareholders' Agents in a timely manner in writing of any action
taken or proposed to be taken from time to time by the
governmental authority with respect to such Tax Claim, and to
make available to the Shareholders' Agents any relevant
information relating to such Tax Claim which may be particularly
within the knowledge of the Buyer or any Buyer Affiliate and to
otherwise cooperate with the Shareholders' Agents in good faith
in order to contest effectively any such Tax Claim.
(e) An indemnitee's failure to give timely notice or
to make available information, including providing copies of
documents or furnishing relevant data in connection with any such
claim, shall not constitute a defense (in whole or in part) to
any claim for indemnification under this Section 10.4, except and
only to the extent that such failure shall result in any material
prejudice to the Shareholders.
(f) The Principal Shareholders' obligation to
indemnify the Buyer or any other indemnitee under this Section
10.4 shall become fixed upon a Final Determination (as
hereinafter defined) of the liability of the Buyer or other
indemnitee, and within fifteen (15) days after such Final
Determination any amounts owed to the Buyer or other indemnitee
under this Section 10.4 shall be paid to the Buyer or such other
indemnitee.
(g) For purposes of this Section 10.4, a "Final
Determination" shall be deemed to occur with respect to a
proposed or other adjustment forming the basis for a Tax Claim
when (i) there is a decision, judgment, decree or other order by
any court of competent jurisdiction, which decision, judgment,
decree or other order has become final with respect to the
indemnitee (i.e., all allowable appeals taken pursuant to this
Section 10.4 have been exhausted by either party to the action or
the time period within which such appeal may be filed has
expired), (ii) there is a closing agreement made under
Section 7121 of the Code (or any analogous provision under the
laws of any other jurisdiction) binding in respect of the
indemnitee or other administrative settlement with the IRS or
other governmental authority, (iii) the time for instituting a
claim for refund in respect of the indemnified claim has expired,
or, if a claim was filed, the time for instituting suit with
respect thereto has expired or (iv) the Taxes which are the
subject of a proposed or other adjustment are paid, and, pursuant
to written agreement between the Shareholders' Agents and the
Buyer, no claim for refund is filed, and no other contest of such
proposed or other adjustment is made.
(h) If any such Tax Claim referred to in
subsection 10.4(d) hereof shall be made by any Federal, state,
local, foreign or other governmental authority and the
Shareholders' Agents shall have failed (i) to request the
indemnitee to contest or not to contest such Tax Claim, as above
provided, or (ii) to comply with any of the other terms of this
Section 10.4, the indemnitee shall defend or contest such claim
in good faith to the extent it is reasonable to do so, taking
into account the merits of the indemnitee's legal position, the
magnitude of such claim and the overall Tax and other interests
of the indemnitee, and the Principal Shareholders shall become
obligated to pay the indemnitee, on an after-Tax basis (within
the meaning of Section 10.6(b)) and in accordance with the
provisions of this Section 10.4, an amount which shall be equal
to the Taxes which are paid as a result of such Tax Claim,
together with all Costs and Expenses which the indemnitee incurs
in connection with contesting such claim.
(i) In the event that the Shareholders' Agents receive
notice of any claim which, if successful, may result in an
obligation to indemnify pursuant to this Section 10.4, the
Shareholders' Agents (i) shall promptly notify the indemnitee in
writing of such claim (specifying in reasonable detail the basis
of such claim, action or suit and the facts pertaining thereto)
and of any action taken or proposed to be taken from time to time
by the IRS or any other governmental authority with respect
thereto, and (ii) shall agree in writing that such claim shall be
subject to the provisions of this Section 10.4 with respect to
obligations of the Principal Shareholders (to the extent that
such claim ultimately results in Tax Liabilities covered by his
Section 10.4), and shall comply with all such provisions.
10.5 Duration . Except as otherwise provided in this
Agreement, all representations and warranties of the parties
contained in or made pursuant to this Agreement, and the rights
of the parties to seek indemnification with respect thereto,
shall survive the Closing indefinitely; provided however, that,
except in respect of any claims for indemnification as to which a
Claim Notice or any similar notice under Section 10.4 shall have
been duly given prior to the relevant expiration date set forth
below, if any (which notice shall preserve such claim pending
resolution thereof pursuant to the terms hereof), the following
representations and warranties, and the right to make any
indemnification claims relating thereto, shall expire on the
following dates:
(a) in the case of any claims for Tax Liabilities
(including Costs and Expenses), the date of expiration of the
relevant statute of limitations, including any extensions thereof
(whether by waiver or otherwise), provided that, notwithstanding
anything to the contrary in the foregoing, the indemnity
obligations of the Principal Shareholders hereunder shall survive
with respect to any and all costs, expenses and liabilities
(including, without limitation, reasonable attorney's fees and
investigation expenses) incurred by any Buyer Indemnitee or Buyer
Affiliate, as applicable, in establishing or in seeking to
establish, whether in a judicial proceeding or otherwise, that
the underlying matter giving rise to such claim for
indemnification is time-barred under the applicable statute of
limitations, whether or not such efforts are successful;
(b) in the case of any Buyer Indemnity Claims other
than with respect to any breach of the representations and
warranties set forth in Sections 3.1 [Corporate Organization],
3A.1 [Authorization; No Violation], 3A.2 [Title to the Subject
Shares], 3.4 [Capitalization of the Company], 3.5 [Subsidiaries
and Affiliates], and 3.11(a), 3.11(b) and the first sentence of
3.11(e) [Title to Property and Related Matters] ( the "Special
Representations and Warranties"), fifteen (15) months after the
Closing Date; and
(c) in the case of any Shareholder Indemnity Claims,
fifteen (15) months after the Closing Date.
10.6 Tax and Insurance Effect of Losses; Certain
Limitations.
(a) Tax Benefits and Insurance Recoveries. In
determining the amount of any Buyer Indemnification Claim or
Shareholder Indemnification Claim, for all purposes hereunder,
there shall be taken into account any income or other Tax benefit
which the Claiming Party may actually have received or be
entitled to receive (if in the future, at its present value) as a
result of the Losses forming the basis of such claim. Any
indemnification payments under this Article X shall be treated
for income tax purposes as an adjustment to the Purchase Price.
If, notwithstanding the preceding sentence, the Claiming Party
incurs any income Tax or other Tax cost as a result of its
receipt of any indemnification payment from the Indemnifying
Party (including any such indemnification payment which the
Claiming Party would be entitled to receive but for the
provisions of Section 10.6(b)), such income Tax or other Tax cost
shall also be taken into account (net of any Tax benefit received
by the Claiming Party as a result of the Losses forming the basis
of the Claim in the current or any prior period). There shall
also be taken into account in determining the amount of any
Indemnification Claim under this Article X any amounts which the
Claiming Party may actually have received or be entitled to
receive or be reimbursed for, under insurance policies from
unaffiliated insurance carriers, that reduce Losses that would
otherwise be sustained.
(b) Indemnification Threshold and Cap.
Notwithstanding anything to the contrary herein, but subject to
Section 10.6(c): (i) any claim by a Claiming Party against any
Indemnifying Party under this Agreement shall be payable by the
Indemnifying Party only in the event and to the extent that the
accumulated amount of all claims that have been Definitively
Resolved (as hereinafter defined) (for purposes hereof, "Settled
Claims") against such Indemnifying Party shall exceed the amount
of Nine Hundred Nineteen Thousand Dollars ($919,000) in the
aggregate (the "Indemnification Threshold"); and (ii) the maximum
amount for which an Indemnifying Party shall be obligated to
provide indemnification hereunder shall not exceed Twenty Million
Dollars ($20,000,000) (the "Indemnification Cap"). In applying
the Indemnification Threshold and the Indemnification Cap, all
Buyer Indemnities (or Buyer Affiliates), on the one hand, and all
Principal Shareholders as a group, on the other hand, shall be
considered to be one "Indemnifying Party." At such time as the
aggregate amount of Settled Claims against an Indemnifying Party
shall exceed the Indemnification Threshold, such party shall
thereafter be liable on a dollar-for-dollar basis for the full
amount of all further claims beyond the Indemnification
Threshold, subject to the Indemnification Cap.
(c) Zero-Threshold Claims. Notwithstanding the
preceding Section 10.6(b), the following categories of claims for
indemnification ("Zero-Threshold Claims") shall not be subject to
the Indemnification Threshold or the Indemnification Cap, but
shall be payable on a dollar-for-dollar basis without any
exclusion therefor or limitation thereon:
(i) any claims for Tax Liabilities (including
Costs and Expenses);
(ii) any Indemnity Claims in respect of the Net
Book Value Adjustment (including the obligation of each party to
pay the amount of the Net Book Value Adjustment to the other
party as provided in Paragraph 2.3(e)); and
(iii) any Buyer Indemnity Claims relating to
the Special Representations and Warranties.
(d) Definitively Resolved. For purposes hereof, a
Buyer Indemnity Claim or Shareholder Indemnity Claim shall be
deemed to have been "Definitively Resolved" when any of the
following events has occurred:
(i) a claim is settled by mutual agreement of the
Buyer and the Shareholders' Agents; or
(ii) a final judgment, order or award of a court
of competent jurisdiction deciding such claim has been rendered,
as evidenced by a certified copy of such judgment, provided that
such judgment is not appealable or the time for taking an appeal
has expired; or
(iii) a claim is the subject of a "Final
Determination" as defined in Section 10.4(g) hereof.
10.7 Appointment of Shareholders' Agents.
(a) Each Shareholder hereby irrevocably constitutes
and appoints Christopher B. Noyes ("Noyes"), Jeffrey J. Jones
("Jones") and David A. Ulrich, Jr. ("Ulrich") as such
Shareholders' agents ("the Shareholders' Agents") for the purpose
of representing such Shareholders in connection with the
following matters: (i) consenting to, compromising or settling
any Buyer Indemnity Claims and (ii) resolving all matters arising
under Section 2.3 of this Agreement, including, without
limitation, all matters pertaining to the Net Book Value
Adjustment. The appointment of Christopher B. Noyes, Jeffrey J.
Jones and David A. Ulrich, Jr. as the Shareholders' Agents is
coupled with an interest and all authority hereby conferred shall
be irrevocable and shall not be terminated by any or all of the
Shareholders without the consent of the Buyer, which consent may
be withheld for any reason. Such appointment shall be binding
upon the heirs, executors, administrators, estates, personal
representatives, successors and assigns of each Shareholder.
(b) In furtherance and not in limitation of the
authority granted to the Shareholders' Agents in Section 10.7(a)
above, each of the Shareholders, for themselves and their
respective heirs, executors, administrators, successors and
assigns, hereby authorizes the Shareholders' Agents without
notice to such Shareholder hereunder to:
(i) waive any provision of this Agreement;
(ii) make and receive notices and other commu
nications pursuant to this Agreement, including any service of
process in any legal action or other proceeding arising out of or
related to this Agreement or any of the transactions hereunder
(and to that effect, any notice to be given to any Shareholder or
Shareholders hereunder need not be given to each Shareholder
separately, but rather shall be effective, as provided in Section
11.2 below, when given to any two or more of the Shareholders'
Agents);
(iii) settle any dispute, claim, action, suit
or proceeding arising out of or related to this Agreement on
behalf of all or any of the Shareholders, including, without
limitation, by consenting to the entry of any confession of
judgment in connection therewith, as further provided in Section
10.7(c), below;
(iv) appoint or provide for successor agents, with
the consent of the Buyer, such consent not to be unreasonably
withheld; and
(v) pay any expenses incurred or which may be
incurred by or on behalf of the Shareholders in connection with
this Agreement.
In the event of the failure or refusal of (a) Noyes to act as a
Shareholders' Agent (or upon his death), then the President of
Godfrey & Kahn, S.C., Milwaukee, Wisconsin, shall appoint a
shareholder of such firm to act as Shareholders' Agent as a
successor to Noyes; (b) Jones to act as a Shareholders' Agent (or
upon his death), then the President of Foley & Lardner,
Milwaukee, Wisconsin, shall appoint a partner of such firm to act
as Shareholders' Agent as a successor to Jones; and (c) Ulrich to
act as a Shareholders' Agent (or upon his death), then the
Shareholders which held a majority of the Subject Shares shall
promptly appoint one of the remaining Shareholders as a successor
to Ulrich for purposes of this Section 10.7, and failing such
appointment, the Buyer may, by written notice to the Shareholders
at the last address of the Shareholders designated under this
Agreement, designate one of the other Shareholders as such
successor. The appointment of any successor Shareholders' Agent
as provided in the preceding sentence shall not be effective
until notice of such appointment has been given to Roundy's and
Buyer in the manner provided herein.
(c) Any claim, action, suit or other proceeding,
whether in law or equity, to enforce any right, benefit or remedy
granted to the Shareholders under this Agreement relating to a
matter within the scope of the Shareholders' Agents' authority
specified in Section 10.7(a) may be asserted, brought, prosecuted
or maintained only by the Shareholders' Agents, and the
Shareholders hereby irrevocably waive any right to enforce such
rights in their own name. The Shareholders consent and agree
that any claim, action, suit or other proceeding, whether in law
or equity, to enforce any right, benefit or remedy granted to any
Buyer Indemnitee under this Agreement relating to a matter within
the scope of the Shareholders' Agents' authority specified in
Section 10.7(a), including, without limitation, any Buyer
Indemnity Claim asserted under Section 10.1, may be asserted,
brought, prosecuted or maintained by any Buyer Indemnitee against
the Shareholders by service of process on any two of the
Shareholders' Agents and without the necessity of serving process
on, or otherwise joining or naming as a defendant in such claim,
action, suit or other proceeding, any Shareholders. For this
purpose, each Shareholder hereby irrevocably stipulates and
agrees that any one of the Shareholders' Agents is a proper party
defendant to represent its interests in any such proceeding and
to appear on its behalf for all purposes therein, and that
service of process upon any two of the Shareholders' Agents shall
be effective to bind such Shareholder for all purposes of any
such proceeding. Each Shareholder hereby irrevocably waives any
and all rights it may have to object to jurisdiction or venue in
any proceeding in which service of process is served upon any
Shareholders' Agent on such Shareholder's behalf, in each case as
further provided in Section 11.13 below. With respect to any
matter within the scope of authority granted to the Shareholders'
Agents under this Section 10.7, the Shareholder shall be bound by
any determination in favor of or against the Shareholders' Agents
or the terms of any settlement or release to which the
Shareholders' Agents shall become a party, including, without
limitation, any confession of judgment or other stipulation or
settlement granted or entered into by the Shareholders' Agents on
their behalf.
(d) All out-of-pocket expenses incurred by the
Shareholders' Agents in the performance of his duties hereunder
(including, without limitation, attorneys' and accountants' fees)
shall be borne by the Shareholders, and neither the Company nor
the Buyer shall have any liability with respect thereto.
(e) In performing their duties hereunder, the
Shareholders' Agents will not be liable to the Shareholders in
the absence of gross negligence or wilful misconduct. The
Shareholders hereby agree, severally in proportion to their
"Percent of P-C Adjustment" set forth opposite their names in
Section 2.2 of the Disclosure Schedule, to indemnify and hold
each of the Shareholders' Agents harmless from and against any
and all claims, damages and/or expenses that may be asserted
against any of the Shareholders' Agents as a result of the
performance of their duties hereunder, absent gross negligence or
wilful misconduct on the part of the Shareholders' Agents.
10.8 Set-Off Rights. Buyer shall have the right to offset
any Buyer Indemnification Claims which have been Definitively
Resolved in favor of Buyer against amounts due to the
Shareholders under the Notes. Buyer will exercise such right of
set-off (to be applied against amounts due under the Notes in the
order of their maturity), to the full extent of all amounts
remaining due under the Notes, before pursuing any other remedies
that may be available to Buyer or any Buyer Indemnitee to recover
any Buyer Indemnification Claims, provided that the exercise of
such right of set off is not prohibited by and would not result
in a breach, default, or violation of any provisions of the
Senior Debt or the Subordination Agreement.
10.9 Exclusive Remedy. The parties agree that, except as
expressly provided herein, and except for claims for injunctive
relief to enforce specifically the provisions of this Agreement,
the rights of indemnification provided in this Article X shall be
the sole and exclusive remedies of Buyer, any Buyer Indemnitee or
Buyer Affiliate, the Company and the Shareholders for any claim
or cause of action arising out of or relating to the negotiation,
execution, delivery, performance or breach of this Agreement
(whether such claim or cause of action is based on breach of
contract, misrepresentation, tort, violation of statute
(including, but not limited to, Environmental Laws and securities
laws and regulations) or otherwise).
ARTICLE XI Miscellaneous Provisions
11.1 Waiver of Compliance . Any failure by any of the
parties hereto to comply with any obligation, covenant or
agreement or to fulfill any condition herein may be waived only
by a written notice from the party entitled to the benefits
thereof. No failure by any party hereto to exercise, and no
delay in exercising, any right hereunder, shall operate as a
waiver thereof, nor shall any single or partial exercise of any
right hereunder preclude any other or future exercise of that
right or any other right hereunder by that party.
11.2 Notices . Subject to Section 11.12(b) below, all
notices and other communications required or permitted hereunder
shall be deemed given if given in writing and delivered
personally, by commercial delivery service, by courier or by
facsimile transmission, telexed or mailed by registered or
certified mail (return receipt requested) fax, telex or postage
fees prepaid, to the party to receive the same at its respective
address set forth below, or at such other address as may from
time to time be designated by such party to the others in
accordance with this Section 11.2 (provided, that written notice
given in any other manner shall nonetheless be effective upon its
actual receipt by the party entitled to receive it):
If to the Shareholders'
Agents, to: David A. Ulrich, Jr.
7388 Trinity Court
Franklin, WI 53132
and to: Foley & Lardner
777 E. Wisconsin Avenue
Milwaukee, WI 53202
Attention: Jeffrey J. Jones
Facsimile: (414) 297-4900
and to : Godfrey & Kahn, S.C.
780 North Water Street
Milwaukee, WI 53202
Attention: Christopher B. Noyes
Facsimile: (414) 273-5198
Notices to the Shareholders' Agents shall be
effective when given (in the manner provided above, or
otherwise when received) by any two of the three
Shareholders' Agents.
If to the Buyer to: Roundy's, Inc.
23000 Roundy Drive
Pewaukee, WI 53072
Attention:
Edward G. Kitz, Vice President,
Secretary and Treasurer
Facsimile: (414) 547-4540
with a copy to: Whyte Hirschboeck Dudek S.C.
111 East Wisconsin Avenue
Suite 2100
Milwaukee, WI 53202
Attention: John F. Emanuel
Facsimile: (414) 223-5000
All such notices and communications hereunder shall be
deemed given when received, as evidenced by the acknowledgment of
receipt issued with respect thereto by the applicable postal
authorities or the signed acknowledgment of receipt of the person
to whom such notice or communication shall have been personally
delivered, confirmed answer back or other evidence of
transmission.
11.3 Expenses . Each party hereto shall bear and pay its
own expenses (and, in the case of the Shareholders, the Company's
expenses) in connection with the negotiation, execution and
delivery of this Agreement and the transactions contemplated
hereby, whether or not the Closing occurs hereunder. Without
limiting the generality of the foregoing, the Shareholders will
be solely responsible for the payment of any fees or commissions
due to any investment banker, financial advisor, attorneys or
accountants or the like retained by the Company and/or the
Shareholders; provided that the Company may pay any such
transaction expenses of the Shareholders if such payments are
taken into account as reductions of the Company's Closing Date
Net Book Value.
11.4 Public Announcements . No party hereto will issue any
report, statement or release to the general public, to the trade,
to the general or trade press, or to any third party (other than
its advisors and representatives in connection with the
transactions contemplated hereby), relating to this Agreement and
the transactions contemplated hereby, except as may be mutually
agreed by the parties hereto.
11.5 Binding Effect; Assignment. This Agreement shall
inure to the benefit of and be binding upon the parties hereto
and their respective successors and permitted assigns and, in the
case of the Shareholders, their heirs, beneficiaries,
remaindermen, personal representatives, executors,
administrators, fiduciaries and permitted assigns. Neither this
Agreement nor any rights, duties or obligations shall be
assigned by any party hereto without the prior hereto written
consent of the other parties, and any attempted assignment or
transfer without such prior written consent shall be null and
void; provided that, the Buyer shall have the right, without the
prior written consent of the Company or the Shareholders, to
assign their rights and delegate their duties under this
Agreement to any direct or indirect wholly-owned subsidiary of
Buyer, provided that no such assignment or delegation shall
relieve the Buyer of any liabilities or obligations hereunder
unless agreed to in writing by the Shareholders.
11.6 No Third Party Beneficiary . Neither this Agreement
nor any provision hereof, nor any statement, schedule,
certificate, instrument or other document delivered or to be
delivered pursuant hereto, nor any agreement entered into or to
be entered into pursuant hereto or any provision thereof, is
intended to create any right, claim or remedy in favor of, or
impose any obligation upon, any person or entity other than the
parties hereto and their respective successors and permitted
assigns, and in the case of the Shareholders, their heirs,
beneficiaries, personal representatives, executors and permitted
assigns.
11.7 Captions and Paragraph Headings . Captions and
paragraph headings used herein are for convenience only and are
not intended to be a part of this Agreement and shall not be used
in construing it.
11.8 Entire Agreement; Modifications; Severability . The
making, execution and delivery of this Agreement by the parties
hereto has been induced by no representations, statements,
warranties or agreements other than those herein expressed. This
Agreement embodies the entire agreement of the parties pertaining
to the subject matter hereof and supersedes all prior or
contemporaneous agreements or understandings, written or oral, of
the parties relating to the subject matter hereof. This
Agreement may be amended or modified only by an instrument signed
by the parties or their duly authorized agents. The invalidity,
illegality or unenforceability for any reason of any one or more
provisions of this Agreement shall not affect the validity,
legality or enforceability of the remainder of this Agreement.
11.9 Definition of Knowledge. With respect to the
representations and warranties of the Principal Shareholders set
forth herein which are made subject to the qualification "to the
Knowledge of the Principal Shareholders," the Principal
Shareholders shall be deemed to have Knowledge of (i) any matter,
fact, or thing that is, as of the date hereof or the Closing
Date, actually known to any Shareholder; and (ii) any matter,
fact or thing which reasonably should be known by any Principal
Shareholder after "due inquiry" by such Shareholder, taking into
account any and all roles or positions which such Shareholder may
hold and any and all duties and responsibilities he or she may
have vis-a-vis the Company and its business. In the case of any
Principal Shareholder which is a trust, estate, or other entity,
such Principal Shareholder shall be deemed to have the Knowledge
of those persons who are its fiduciaries or representatives and
beneficiaries (determined as through such fiduciaries or
representatives were "Principal Shareholders" as that term is
used in this Section 11.9).
11.10 Definition of Material Adverse Effect. The term
"Material Adverse Effect" as used in this Agreement shall mean an
effect that is materially adverse to the business, financial
condition or results of operations of the Company and the
Subsidiaries (or the Buyer and its subsidiaries, as the case may
be) taken as a whole; provided, that any impairment of the
Company's ability to conduct continuously any material aspect of
its business at any one or at more than one of its retail
locations will be deemed to constitute a Material Adverse Effect.
11.11 Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same instrument.
11.12 Governing Law . The parties hereby agree that
this Agreement, and the respective rights, duties and obligations
of the parties hereunder, shall be governed by and construed in
accordance with the laws of the State of Wisconsin, without
giving effect to principles of conflicts of law thereunder.
11.13 Exclusive Jurisdiction. Each of the parties
hereby (a) irrevocably consents and agrees that any legal or
equitable action or proceeding arising under or in connection
with this Agreement shall be brought exclusively in any Federal
or state court within Milwaukee or Waukesha County, State of
Wisconsin, and any court to which an appeal may be taken in any
such litigation, and (b) by execution and delivery of this
Agreement, irrevocably submits to and accepts with respect to any
such action or proceeding, for such party's heirs, beneficiaries
remaindermen, personal representatives, executors,
administrators, fiduciaries and permitted assigns and in respect
of such party's properties and assets, generally and
unconditionally, the jurisdiction of the aforesaid courts, and
irrevocably waives any and all rights such party may now or
hereafter have to object to such jurisdiction under the
constitution or laws of the State of Wisconsin or the
Constitution or laws of the United States of America or
otherwise. Each of the Shareholders hereby irrevocably
undertakes to designate and appoint, and hereby does designate
and appoint, the Shareholder's Agent, as such Shareholder's
authorized agent in Wisconsin to accept and acknowledge on such
Shareholder's behalf service of any and all process which may be
served in any such litigation in any such court, and agrees that
service of process upon such agent shall be deemed in every
respective effective service of process upon such party in any
such litigation and shall be taken and held to be valid personal
service upon such party.
11.14 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO A JURY TRIAL IN
CONNECTION WITH THIS AGREEMENT OR ANY DISPUTE OR CONTROVERSY
HEREUNDER OR THE TRANSACTIONS THAT ARE THE SUBJECT HEREOF.
11.15 Termination of Stockholder Agreements . By
executing this Agreement, and effective at the Closing, the
Stockholders and the Company agree that any and all stockholders'
agreements to which any of them may be a party, including without
limitation the agreement listed on Section 3.4 of the Disclosure
Schedule, shall be terminated and of no further force and effect.
IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement on the date first above written.
MEGA MARTS, INC. ROUNDY'S, INC.
By: By: EDWARD G. KITZ
Its: Edward G. Kitz, Vice-President,
__________________________ Secretary and Treasurer
NDC, INC.
By:
Its:
__________________________
SHAREHOLDERS:
DAVID A. ULRICH LIVING TRUST DAVID A. ULRICH GRANTOR
RETAINED ANNUITY TRUST NO. 2
JAMES O. HUBER JAMES O. HUBER
By:__________________________ By: _______________________________
James O. Huber, Co-Trustee James O. Huber, Co-Trustee
KATHLEEN MCGARRY KATHLEEN MCGARRY
By:____________________________ By:_________________________________
Kathleen McGarry, Co-Trustee Kathleen McGarry, Co-Trustee
JOHN M. RUPCICH JOHN M. RUPCHICH
By:____________________________ By:____________________________
John M. Rupcich, Co-Trustee John M. Rupcich, Co-Trustee
DAVID ULRICH, JR AGATHA T. ULRICH
_____________________________ ___________________________________
David A. Ulrich, Jr. Agatha T. Ulrich
GARY L. FRYDA JOHN M. RUPCICH
_____________________________ ____________________________________
Gary L. Fryda John M. Rupcich
BRENT A. RUPCICH TRUST FRANCO J. RUPCICH TRUST
JOHN M. RUPCICH JOHN M. RUPCICH
By:__________________________ By:________________________________
John M. Rupcich, Trustee John M. Rupcich, Trustee
NICHOLAS J. RUPCICH TRUST
JOHN M. RUPCICH KATHLEEN MCGARRY
By:__________________________ ___________________________________
John M. Rupcich, Trustee Kathleen McGarry
THOMAS ULRICH, SR MARILYN ULRICH GRAVES
_____________________________ ___________________________________
Thomas Ulrich, Sr. Marilyn Ulrich Graves
JOHN M. RUPCICH, III CHRISTEL RUPCICH HOLDWAY
_____________________________ ___________________________________
John M. Rupcich, III Christel Rupcich Holdway
APRIL RUPCICH SUTHERLAND
_____________________________
April Rupcich Sutherland
STOCK PURCHASE AGREEMENT
by and among
ROUNDY'S, INC.
AND
THE SHAREHOLDERS OF MEGA MARTS, INC.
________________________________
Dated as of March 31, 2000
________________________________
TABLE OF CONTENTS
ARTICLE I
Purchase and Sale of the Shares 1
ARTICLE II
Purchase Consideration; Closing 2
2.1 Purchase Consideration. 2
2.2 Payment of Purchase Price. 2
2.3 Net Book Value Adjustment. 3
2.4 Time and Place of Closing. 6
2.5 Deliveries. 6
ARTICLE IIIA
Representations and Warranties of the Shareholders
9
3A.1 Authority of the Shareholders; No Violations. 9
3A.2 Title to the Subject Shares. 11
ARTICLE III
Representations and Warranties of the Principal
Shareholders 11
3.1 Corporate Organization. 11
3.2 No Violations. 11
3.3 [Intentionally Left Blank] 12
3.4 Capitalization of the Company. 12
3.5 Subsidiaries and Affiliates 13
3.6 Financial Statements 13
3.7 Absence of Undisclosed Liabilities 14
3.8 Absence of Certain Changes or Events 14
3.9 Legal Proceedings. 15
3.10 Taxes 16
3.11 Title to Properties and Related Matters 17
3.12 Computer Software 21
3.13 Licenses, Permits, Authorizations and Consents 21
3.14 Patents, Trademarks, Etc. 21
3.15 Contracts 22
3.16 Employees 23
3.17 Benefit Plans. 25
3.18 Compliance with Applicable Law. 28
3.19 Ability to Conduct the Business. 28
3.20 Material Suppliers. 28
3.21 Inventories. 29
3.22 Accounts Receivable. 29
3.23 Insurance. 29
3.24 Bank Accounts; Powers of Attorney. 30
3.25 Minute Books, etc. 30
3.26 Books and Records. 30
3.27 Transactions with Related Parties. 30
3.28 Environmental Matters. 31
3.29 Disclosure. 33
3.30 Reliance. 33
3.31. Disclosure Schedule. 33
ARTICLE IV
Representations and Warranties of the Buyer 34
4.1 Corporate Organization 34
4.2 Authorization 34
4.3 Consents and Approvals; No Violations 34
ARTICLE V
Conduct of Business Pending Closing 36
5.1 Conduct of the Business of the Company 36
5.2 Access to Personnel, Properties, Books and
Records 39
5.3 Best Efforts 40
ARTICLE VI
Additional Covenants 40
6.1 Further Assurances 40
6.2 Transfer Taxes. 40
6.3 Tax Matters. 40
ARTICLE VII
Conditions to the Obligations of the Buyer 42
7.1 Representations and Warranties True 43
7.2 Performance 43
7.3 Approvals, Permits, Etc. 43
7.4 Delivery of Closing Documents 43
7.5 Absence of Certain Events 43
7.6 No Material Adverse Change. 44
7.7 Consents 44
8.1 Representations and Warranties True 45
8.2 Performance 46
8.3 Approvals, Permits, Etc. 46
8.4 Delivery of Closing Documents 46
8.5 Absence of Certain Events 46
ARTICLE IX
Termination 47
9.1 Termination 47
9.2 Effect of Termination 47
ARTICLE X
Indemnification; Survival of Representations and
Warranties 48
10.1 Indemnity Obligations of the Principal
Shareholders 48
10.2 Indemnity Obligations of the Buyer 49
10.3 Procedures Relative to Indemnification Claims 50
10.4 Special Indemnification for Tax Liabilities 51
10.5 Duration 54
10.6 Tax and Insurance Effect of Losses; Certain
Limitations. 55
10.7 Appointment of Shareholders' Agent 57
ARTICLE XI
Miscellaneous Provisions 59
11.1 Waiver of Compliance 59
11.2 Notices 59
11.3 Expenses 60
11.4 Public Announcements 61
11.5 Binding Effect; Assignment. 61
11.6 No Third Party Beneficiary 61
11.7 Captions and Paragraph Headings 61
11.8 Entire Agreement; Modifications; Severability 61
11.9 Definition of Knowledge. 62
11.10 Definition of Material Adverse Effect. 62
11.11 Counterparts. 62
11.12 Governing Law . 62
11.15 Termination of Stockholder Agreements 63
SCHEDULES
3.1 Corporate Organization
3.2 Authorization; No Violations
3.3 Title to the Subject Shares
3.4 Capitalization of the Company
3.5 Subsidiaries and Affiliates
3.6 Financial Statements
3.7 Absence of Undisclosed Liabilities
3.8 Absence of Certain Changes or Events
3.9 Legal Proceedings.
3.10 Taxes
3.11 Title to Properties and Related Matters
3.12 Computer Software
3.13 Licenses, Permits, Authorizations and Consents
3.14 Patents, Trademarks, Etc.
3.15 Contracts
3.16 Employees
3.17 Benefit Plans
3.18 Compliance with Applicable Law
3.19 Ability to Conduct the Business
3.20 Material Suppliers
3.21 Inventories
3.22 Accounts Receivable
3.23 Insurance
3.24 Bank Accounts; Powers of Attorney
3.25 Minute Books, etc.
3.26 Books and Records
3.27 Transactions with Related Parties.
3.28 Environmental Matters
3.29 Year 2000 Compliance
3.30 Disclosure
3.31 Reliance
5.1 Permitted Capital Expenditures
EXHIBITS
Exhibit A Promissory Notes
Exhibit B Subordination Agreements
Exhibit C-1 Foley & Lardner Legal Opinion
Exhibit C-2 Godfrey & Kahn S.C. Legal Opinion
Exhibit D Noncompetition Agreements
Exhibit E Amended and Restated NDC Leases
Exhibit F Tri-City Bank Agreement
Exhibit G Whyte Hirschboeck Dudek S.C. Legal Opinion
Exhibit H Landlord Consents and Estoppel Certificates
Exhibit I Sublessee Estoppel Certificates
Exhibit J Subordination, Nondisturbance and Attornment
Agreement
THE ABOVE-DESCRIBED EXHIBITS AND SCHEDULES ARE OMITTED FROM THIS
FILING PURSUANT TO ITEM 601(b)(1) OF REGULATION S-K. THE REGISTRANT,
ROUNDY'S, INC., HEREBY AGREES TO FURNISH A COPY OF SUCH EXHIBITS
AND SCHEDULES TO THE COMMISSION UPON REQUEST.
Exhibit 2.3
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made this 31st day of March, 2000, by and
among NDC, INC., a Wisconsin corporation (being referred to
hereinafter as "Seller"); MEGA MARTS, INC., a Wisconsin
corporation (being referred to hereinafter as "Buyer"); and
ROUNDY'S, INC., a Wisconsin corporation (being referred to
hereinafter as "Roundy's");
RECITALS:
WHEREAS, Seller owns and operates a grocery supermarket at
6312 South 27th Street, Oak Creek, Wisconsin, 53154 (being
hereinafter referred to as the "Store" and the business conducted
in the Store being hereinafter referred to as the "Business");
WHEREAS, pursuant to a Stock Purchase Agreement dated March
31, 2000, by and among Roundy's and the stockholders (the "Mega
Shareholders") of Buyer (the "Stock Purchase Agreement") Roundy's
will purchase 100% of the outstanding stock of Buyer from the
Mega Shareholders resulting in Buyer becoming a wholly-owned
subsidiary of Roundy's, and Roundy's is therefore willing to join
with Buyer as a party to this Agreement and guaranty the
obligations of Buyer hereunder;
WHEREAS, Seller desires to sell and Roundy's desires to
cause Buyer to purchase the Business and substantially all of
Seller's assets used in the conduct of the Business at the Store
upon the terms and conditions set forth in this Agreement; and
WHEREAS, at the Closing, Seller intends to transfer this
Agreement and substantially all of its other assets (except the
tangible and intangible assets of the Tri City True Value
Hardware Store and vehicles) to a newly-formed limited liability
company (the "Seller's LLC"), and thereafter to liquidate and
dissolve, transferring ownership of the Seller's LLC to the
shareholders of Seller ("NDC Shareholders"); Seller has requested
that the NDC Shareholders not be made parties to this Agreement,
and Roundy's and Buyer are willing to accede to that request and
to permit Seller to liquidate and transfer its assets and this
Agreement to the Seller's LLC only on the condition that the
Seller's LLC assume all of the obligations and liabilities of NDC
under this Agreement, agree to be bound thereby, and agree to the
other terms and provisions of this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, the parties hereto agree as follows:
AGREEMENT:
1. SALE OF ASSETS.
(a) Assets Sold. On the Closing Date (as hereinafter
defined), subject to the terms and conditions set forth in this
Agreement, Seller shall sell, convey, transfer, assign and
deliver to Buyer and Buyer shall purchase only the following
designated assets of Seller (collectively the "Purchased
Assets"):
(i) Inventory. All inventory, including video
tapes, owned by Seller and held for sale (or rental) in the
ordinary course of business at the Store as of the Effective
Time (as hereinafter defined), to the extent such inventory
is usable, saleable, and not outdated or damaged (the
"Inventory");
(ii) Store Cash and Other Current Assets. All
operating cash on hand and located in the Store as of the
Effective Time, together with the following other current
assets (the "Cash on Hand"):
A. all food stamps;
B. deposits in transit to the bank accounts of Buyer;
C. vouchers representing receivables from customers;
D. Coinstar vouchers;
E. unsold gift certificates and gift certificate
receivables;
F. debit and credit card receivables;
G. notes receivable from two employees that are being
repaid through payroll deductions;
H. unsold lottery tickets;
I. bus passes; and
J. vendor rebates receivable.
(iii) Trademarks, Trade Names and Other
Intellectual Property. All intellectual property associated
with the Business (including but not limited to all
trademarks, service marks, trade names, pending trademark,
service mark and trade name applications and registrations,
copyrights, and any interest Seller may have in or to any of
the "Intangible Rights" of Buyer and/or Roundy's, as that
term is defined in the Stock Purchase Agreement
("Intellectual Property");
(iv) Equipment. All fixtures, equipment,
furniture, machinery, tools, racks, partitions, shelving,
exterior signs, refrigeration equipment, leasehold
improvements, software, computer hardware, terminals and
peripheral equipment and scanning systems owned by Seller or
in which Seller has any interest, including any leasehold
interest, located at the Store and used in the operation of
the Business (the "Equipment");
(v) Assigned Contracts. All right, title and
interest of the Seller in, to and under the "Assigned
Contracts" (as hereinafter defined);
(vi) Permits. Only to the extent transferable,
all right, title and interest of Seller in, to and under all
transferable licenses, permits, orders, certificates,
approvals and other government authorizations owned by
Seller exclusively in connection with Seller's occupancy or
operation of the Store;
(vii) Other Personal Property. All other
personal property of every nature or description owned by
Seller and used primarily in the operation of the Business,
including, but not limited to, all store supplies, general
intangibles, and the goodwill and going concern value of the
Business.
(b) Excluded Assets. Except for those assets
specified in Section 1(a) above, the Buyer shall not purchase or
acquire any assets, rights, interests and other properties of the
Seller (the "Excluded Assets"), including, without limitation,
the following:
(i) Cash and Cash Equivalents. All cash and cash
equivalents other than Cash on Hand, including all bank
deposits, checking and saving accounts and the like (other
than deposits in transit described in paragraph 1(a)(ii)B);
(ii) Prepaid Expenses. All prepaid expenses
relating to the Store other than prorated prepaid expenses
(the "Prepaid Expenses") and all refunds and deposits of
Seller;
(iii) Roundy's Stock. All stock of Roundy's,
Inc. owned by the Seller;
(iv) Corporate Records. All corporate and
financial books and records, Seller's corporate charter and
similar items;
(v) Life Insurance Policies. All life insurance
policies owned by Seller;
(vi) Real Property. Any real property owned
by the Seller, including the improvements thereon;
(vii) Tax Refunds. The right to any of the
Seller's claims for any federal, state, local or foreign tax
refunds relating to, or arising out of, the conduct of the
Business prior to the Effective Time;
(viii) Tri City Stock. All stock of Tri City
Bankshares Corporation owned by the Seller;
(ix) Hardware Store. All tangible and intangible
assets of the Tri City True Value Hardware Store located at
6312 South 27th Street, Oak Creek, Wisconsin;
(x) Receivables. All notes receivable from NDC
Shareholders, and the "PECFA" receivable from the State of
Wisconsin; and
(xi) Non-Operating Assets. All of Seller's
corporate office assets, including, without limitation,
those assets listed on Section 1(b)(vii) of the Disclosure
Schedule.
(c) Assignment and Assumption of Contracts. The
"Assigned Contracts" consist of all of those leases, subleases,
contracts and agreements that are set forth on Section 6 (l) of
the Disclosure Schedule hereto and which are designated thereon
as "Assigned Contracts." At the Closing, effective as of the
Effective Time (as hereinafter defined), Seller will assign and
transfer to Buyer all of Seller's right, title and interest in,
to and under the Assigned Contracts, and Buyer will assume,
perform and discharge all of Seller's obligations and liabilities
arising after the Effective Time (and attributable to time
periods after the Effective Time) under the Assigned Contracts
(hereinafter "Contract Liabilities"); provided, that the Contract
Liabilities assumed by Buyer shall not in any event include:
(i) except as provided in Section 1(d), any
liability or obligation of Seller under any employment
agreement, collective bargaining agreement, agreements,
plans or arrangements concerning employee bonuses,
insurance, or other agreement with any employee, officer, or
shareholder of Seller; or any other liability or obligation
of any nature whatsoever of Seller to any employee or former
employee, whether pursuant to contract, arising by operation
of law, or otherwise to the extent they relate to matters
prior to the Effective Time; or
(ii) any liability or obligation attributable to
or arising as a result of any breach, violation, or non-
performance of any Assigned Contract by Seller prior to and
through the Effective Time, including, without limitation,
any breach or violation arising as a result of the
transactions contemplated by this Agreement.
(d) Assumption of Employee Accruals, Retirement Plan
Contributions, and Tenant Receivables Liability. Buyer will
assume the liability of Seller (i) for employee bonuses, vacation
and sick pay due from Seller to the "Transferred Employees" (as
that term is defined in Section 11(b)), but only in the amount
and to those persons for which Buyer receives a credit as
provided in Section 11(b) herein (the "Assumed Employee
Accruals"), (ii) for contributions to Seller's Profit Sharing and
401(k) Retirement Savings Plan on behalf of the Transferred
Employees (as that term is hereinafter defined) for the period
from January 1, 2000 through the Closing Date, in an amount equal
to four and one-half percent (4.5%) of compensation paid to the
Transferred Employees from January 1st, 2000 through the Closing
Date ("Accrued Retirement Plan Contributions") and (iii)
represented by the account on Seller's books called "Tenant
Receivables," consisting of amounts owed by Seller as of the
Effective Time to Aurora Pharmacy, Inc. under the contracts with
those parties that are included among the Assigned Contracts, but
only in the amount for which Buyer receives a credit as provided
in Section 11(c) herein (the "Tenant Receivables Liability").
(e) Execution of New Lease. At the Closing, Seller
will, and Roundy's will cause Jondex Corp. to, enter into a lease
of the Store site, in substantially the form attached hereto as
Exhibit 1(e) (the "New Lease"). In connection with the New
Lease, Seller will at the Closing execute and deliver to
Roundy's, for the benefit of Roundy's lenders, a Landlord's
Consent substantially in the form of that attached hereto as
Exhibit 1(e)(i).
2. LIABILITIES.
(a) Except for the Contract Liabilities expressly
assumed by Buyer under Section 1(c) above and the Assumed
Employee Accruals, Accrued Retirement Plan Contributions and
Tenant Receivables Liability assumed by Buyer pursuant to Section
1(d) above, Buyer shall not in any manner assume nor be liable or
responsible for any of the liabilities, debts, or obligations of
Seller or any NDC Shareholder, of any nature whatsoever,
including, but without limiting the generality of the foregoing,
the following:
(i) Past, current and future liabilities and
obligations of Seller for federal, state or local taxes of
any nature, including, without limitation, any interest,
penalties, additions to tax or costs of defense, and
including any taxes occasioned by the sale contemplated by
this Agreement, except for personal property taxes to be pro-
rated between Buyer and Seller as provided in Section 11
hereof; or
(ii) Liabilities or obligations of Seller of any
nature to employees or former employees relating to services
performed prior to the Effective Time, including, without
limitation, liabilities or obligations for wages,
withholding and employment taxes, vacation, sick pay,
bonuses, severance pay, retirement, and fringe benefits
incurred prior to and through the Effective Time, except for
Assumed Employee Accruals.
(b) Seller shall pay and discharge, when due, any and
all of the debts, liabilities and obligations of Seller which are
not assumed by Buyer.
3. PURCHASE PRICE. The purchase price to be paid by Buyer
to Seller for the Purchased Assets shall be Nine Million Five
Hundred Thousand Dollars ($9,500,000), plus an amount equal to
(i) the Cash on Hand and (ii) the value of the Inventory and
store supplies (in each case as valued and determined in
accordance with Section 5 hereof) as of the Effective Time, and
adjusted by the prorations and credits provided for in Section 11
hereof (the "Purchase Price").
4. PAYMENT AND ALLOCATION OF PURCHASE PRICE.
(a) Buyer shall pay the Purchase Price to Seller as
follows:
(i) At Closing, the sum of $9,500,000 plus the
parties' good faith estimate of the portion of the Purchase
Price attributable to Cash on Hand and the Inventory
("Estimated Cash and Inventory Value") shall be paid by wire
transfer of immediately available funds to an account
designated by Seller;
(ii) Upon the final determination of the value of
the Cash on Hand and Inventory as contemplated by Section 5
hereof, and the approval by Seller and Buyer of the final
closing statement, an amount equal to the difference between
the amount so determined (as further adjusted by the
prorations and credits provided for in Section 11) and the
Estimated Cash and Inventory Value shall be paid by Buyer to
Seller, or repaid by Seller to Buyer, as appropriate.
(b) The Purchase Price shall be allocated as follows:
(i) A portion of the Purchase Price equal to the
Cash on Hand, as determined pursuant to Section 5 hereof,
shall be allocated to cash and the several items included
within the definition of Cash on Hand as provided in
paragraph 1(a)(ii)B;
(ii) A portion of the Purchase Price equal to the
value of the Inventory, as determined pursuant to Section 5
hereof, shall be allocated to Inventory and store supplies;
(iii) $1,050,000.00 shall be allocated to
property and equipment;
(iv) $850,000.00 shall be allocated to leasehold
improvements.
(v) The remainder of the Purchase Price shall be
allocated to goodwill and the going concern value of the
Business.
The parties agree that they will file any reports
required to be filed (including, without limitation, I.R.S. Form
8594) under Section 1060 of the Internal Revenue Code of 1986, as
amended, consistent with the foregoing allocation and will not
take a position for income tax purposes which is inconsistent
with this Agreement.
5. PHYSICAL INVENTORY; DETERMINATION OF INVENTORY PRICE;
CLOSING.
(a) The transactions contemplated hereby will be
closed, and the sale and purchase of the Purchased Assets thereby
consummated, on March 31, 2000 or such other date as the parties
may mutually agree upon (the "Closing" or "Closing Date"). If
the Closing Date is March 31, 2000, the Closing will be deemed
effective for all purposes as of 11:59 p.m. on April 1, 2000
("Effective Time"). If the Closing Date is a date other than
March 31, 2000, the Effective Time will be such as the parties
mutually agree upon. This transaction shall be closed at the
offices of Whyte Hirschboeck Dudek S.C., 111 East Wisconsin
Avenue, Milwaukee, Wisconsin, or at such other place as the
parties may mutually agree.
(b) Inventory will be valued at its cost to Seller
consistent with the Company's historical methods for calculating
inventory values described in Section 5(b) of the Disclosure
Schedule, based on a physical inventory at the Store, to be taken
by Badger Inventory Services, Inc. (the "Inventory Service"), on
a date mutually agreed upon by Buyer and Seller, at or as near as
practicable to the Closing Date (the cost of the physical
inventory to be borne by Seller). The complete inventory
prepared by the Inventory Service shall be prepared in accordance
with the usual and customary practices of the industry and shall
show the total cost of such Inventory determined in the manner
provided above.
(c) For purposes of this Agreement (including Section
3 hereof) the several components of Cash on Hand will be valued
at their face amounts in a manner consistent with Seller's past
practice, except that deposits in transit will be included only
to the extent of amounts not reflected as part of the Closing
Date Net Book Value of Buyer for purposes of Section 3 of the
Stock Purchase Agreement. Seller will provide Buyer with
schedules setting forth in reasonable detail the components of
Cash on Hand and the values thereof.
(d) Buyer shall be given physical possession of the
Store and the Business at the Closing Date, but all revenue
earned and expense incurred by the Business through the Effective
Time will be for the account of the Seller. All revenue earned
and expense incurred after the Effective Time shall be for the
account of the Buyer.
6. REPRESENTATIONS AND WARRANTIES OF SELLER.
To induce Buyer and Roundy's to enter into this
Agreement, Seller makes the following representations and
warranties:
(a) Corporate Organization. Seller is a corporation
duly organized and validly existing under the laws of the State
of Wisconsin. Seller is current in all filings necessary to
maintain its corporate existence under Wisconsin law and no
proceedings have been filed or are pending for its dissolution or
winding up. Seller has all requisite corporate power and
authority to own, lease and operate the properties and assets it
now owns, leases or operates and to carry on its business as
presently conducted or presently proposed to be conducted.
(b) Authorization, Validity. Seller has all requisite
power and authority to enter this Agreement and to carry out its
obligations hereunder. The execution and delivery of this
Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by the NDC Shareholders and
Seller's Board of Directors. This Agreement is the legal, valid
and binding obligation of Seller enforceable in accordance with
its terms, except that the enforceability of this Agreement is
subject to bankruptcy, insolvency, reorganization and similar
laws of general applicability relating to or affecting creditors'
rights and limitations on the availability of the remedy of
specific performance and other equitable relief. No claim,
action, suit, proceeding, arbitration, investigation or inquiry
before any federal, state, municipal, foreign or other court or
governmental or administrative body or agency, any securities or
commodities exchange, other regulatory body or any private
arbitration tribunal is now pending or, to the Knowledge of
Seller, threatened, against or relating to Seller which would
adversely affect the ability of Seller to consummate the
transactions contemplated by this Agreement or any other
agreement or instrument to be executed or delivered by the Seller
hereunder.
(c) Compliance. The execution, delivery and
performance of this Agreement by Seller and the consummation of
the transactions contemplated hereby will not: (i) violate or
conflict with any provision of the charter documents of Seller;
(ii) breach, violate or (whether immediately or with the lapse of
time or the giving of notice or both) constitute an event of
default under or an event which would give rise to any right of
termination, cancellation, modification, acceleration or
foreclosure under, or require any consent of or the giving of any
notice to any third party under, any material note, bond,
indenture, credit facility, mortgage, security agreement, lease,
license, franchise, permit or other agreement, instrument or
obligation to which Seller is a party, or by which Seller or any
of its properties or assets may be bound, or give rise to the
creation of any Encumbrance upon the properties or assets of
Seller; (iii) violate or conflict with any law, statute, rule,
regulation, ordinance, code, judgment, order, writ, injunction,
decree or other requirement of any court or of any governmental
body or agency thereof applicable to Seller or by which any of
its properties or assets may be bound; or (iv) require any
registration or filing by Seller with, or any permit, license,
exemption, consent, authorization or approval of, or the giving
of any notice by Seller to, any governmental or regulatory body,
agency or authority, other than the HSR Filings and applications,
approvals, or consents relating to the transfer of any "Licenses"
(as defined in Section 6(j) below). (d) Financial
Statements . Seller has heretofore delivered to Buyer copies of
the unaudited financial statements of the Business for the fiscal
years ended December 28, 1996, January 3, 1998 and January 2,
1999, and unaudited interim financial statements for the period
ended October 2, 1999. The aforesaid financial statements,
including all notes thereto, are herein referred to collectively
as the "Financial Statements." The Financial Statements (i) have
been prepared from and are consistent with the books and records
of Seller, (ii) have been prepared in accordance with GAAP
consistently applied during the periods covered thereby
(provided, that as unaudited financial statements, the Financial
Statements do not reflect customary year end adjustments and
accruals and lack footnote disclosure and other presentation
items), and (iii) fairly and accurately present the financial
condition and results of operations of the Business as of the
dates, and for the periods, stated therein.
(e) Absence of Certain Changes or Events . Except as
set forth in Section 6(e) of the Disclosure Schedule, since
January 2, 1999, Seller has carried on the Business in the
ordinary course and consistent with past practice. Except as set
forth in Section 6(e) of the Disclosure Schedule, or as expressly
contemplated by this Agreement, with the regard to the Business,
since October 2, 1999, Seller has not:
(i) suffered any damage, destruction or loss,
whether or not covered by insurance, affecting the Purchased
Assets or the Business, exceeding $10,000 individually or
$25,000 in the aggregate;
(ii) mortgaged, pledged or subjected to any lien,
charge or other encumbrance any of the Purchased Assets;
(iii) experienced any material adverse change
in the financial condition, results of operations, cash
flows, assets, liabilities, or operations of the Business;
(iv) made any change in any accounting principle
or practice or in its method of applying any such principle
or practice, relating to the Business; or
(v) entered into any agreement or commitment to
do any of the foregoing.
(f) Legal Proceedings. Except as set forth in
Section 6(f) of the Disclosure Schedule and except for claims,
suits, actions or proceedings alleging personal injury or
property damage where the amount claimed or reasonably estimated
to be at issue in each case is less than $25,000 and Seller's
insurance carrier has assumed the defense thereof, there are no
suits, actions, proceedings (including, without limitation,
arbitral and administrative proceedings), or claims (including
without limitation, worker's compensation claims) pending or, to
the Knowledge of Seller, any governmental investigations or
audits pending, nor to the Knowledge of Seller, are any of the
foregoing threatened, against Seller involving the Purchased
Assets or the Business. There are no such suits, actions,
proceedings, or claims pending, or, to the Knowledge of Seller,
any governmental investigations or audits pending, nor, to the
Knowledge of Seller, are any of the foregoing threatened,
challenging the validity or propriety of, or otherwise relating
to or involving, this Agreement or the transactions contemplated
hereby. There is no judgment, order, writ, injunction, decree or
award (whether issued by a court, an arbitrator, a governmental
body or agency thereof or otherwise) to which Seller is a party,
or involving the Purchased Assets or the Business, which is
unsatisfied or which requires continuing compliance therewith by
Seller.
(g) Taxes.
(i) Except as set forth in Section 6(g) of the
Disclosure Schedule, all returns and reports relating to
Taxes (as hereinafter defined) which are required to be
filed with respect to Seller on or before the date hereof or
which will be required to be filed on or before the Closing
Date have been, or will be, duly and timely filed. Except
as set forth in Section 6(g) of the Disclosure Schedule, all
Taxes as shown by such returns and reports to be due and
payable, or levied, assessed or imposed on the Business or
Seller through the Closing Date (except for those which by
their terms are not yet due and payable, or those which are
being contested in good faith by appropriate proceedings)
have been, or will be, paid. Except as set forth in Section
6(g) of the Disclosure Schedule, there are no actions or
proceedings currently pending or, to the Knowledge of
Seller, threatened against Seller by any governmental
authority for the assessment or collection of Taxes, no
claim for the assessment or collection of Taxes has been
asserted or, to the Knowledge of Seller, threatened, against
Seller, and there are no matters under discussion by Seller
with any governmental authority regarding claims for the
assessment or collection of Taxes against Seller. There are
no Tax liens on any of the Purchased Assets (other than any
lien for current Taxes not yet due and payable).
(ii) For purposes of this Agreement, the terms
"Tax" and "Taxes" shall mean and include any and all
foreign, national, federal, state, local, or other taxes,
charges, duties, fees, levies or other assessments, payments-
in-lieu of taxes, social security obligations, deficiencies,
fees, export or import duties, or other governmental
charges, including, without limitation, income, excise,
property, sales, use, gross receipts, recording, insurance,
value added, profits, license, withholding, payroll,
employment, net worth, capital gains, transfer, stamp,
social security, environmental, occupation and franchise
taxes, any installment payment for taxes and contributions
or other amounts determined with respect to compensation
paid to directors, officers, employees or independent
contractors, from time to time imposed by or required to be
paid to any governmental authority (and including any
additions to tax thereon, penalties for failure to pay any
Tax or make any deposit or file any return or report, and
interest on any of the foregoing).
(h) Title to Assets, Properties and Related Matters .
(i) Purchased Assets. The Purchased Assets are
free and clear of all security interests, encumbrances,
liens, mortgages, pledges, charges, conditional sale or
title retention agreements and restrictions, except liens
for personal property taxes not yet due and payable, and
those security interests described in Section 6(h)(i) of the
Disclosure Schedule for which full and complete releases
will be obtained by Seller at or prior to the Closing.
Except as set forth in Section 6(h)(i) of the Disclosure
Schedule, there are no currently effective Uniform
Commercial Code financing statements of record covering any
of the Purchased Assets.
(ii) Real Property. Seller's LLC is the owner of
the premises comprising the Store location (the "Real
Property"). Seller's LLC has good and marketable title in
fee simple to the Real Property, including all structures,
plants, improvements, systems and fixtures thereon (except
to the extent the same consist of leasehold improvements
included among the Purchase Assets hereunder), free and
clear of all Encumbrances whatsoever, except (i) as
specifically disclosed in Section 6(h)(ii) of the Disclosure
Schedule, (ii) liens for Taxes not yet delinquent or due and
payable, and (iii) easements, rights-of-way and similar
covenants and restrictions of record and municipal and
zoning ordinances and building use restrictions filed of
record which do not in any material way impair the use of
such property in the manner currently used or impair the
Seller's good and marketable title to such Real Property.
Except as set forth in Section 6(h)(ii) of the Disclosure
Schedule, none of the structures, plants, buildings,
improvements or systems located on the Real Property
encroaches on any real property owned by others. Except as
set forth in Section 6(h)(ii) of the Disclosure Schedule,
neither the Real Property nor any portion thereof is subject
to any sublease, license, or other agreement, arrangement or
understanding for its use or occupancy by any person other
than Seller.
(iii) Real Property Representations. Except
as set forth in Section 6(h)(iii) of the Disclosure
Schedule, no work has been performed on or with respect to
or in connection with the Real Property that would cause the
Real Property to become subject to any mechanics',
materialmen's, workmen's, repairmen's, carriers' or similar
liens aggregating in excess of $15,000. The structures,
plants, improvements, systems and fixtures (excluding
storage tanks or other impoundment vessels, whether above or
below ground) located on the Real Property conform with all
Federal, state and local statutes and laws and all
ordinances, rules, regulations and similar governmental and
regulatory requirements applicable to their current uses
(except as set forth in Section 6(h)(iii) of the Disclosure
Schedule, and except for Environmental Laws which are
addressed exclusively in Section 6(r)) and are in good
operating condition and repair, ordinary wear and tear
excepted. The Real Property, in view of the purposes for
which it is currently used, conforms with all covenants or
restrictions of record and conforms with all applicable
building codes and zoning requirements; to the Knowledge of
Seller, current, valid certificates of occupancy (or
equivalent governmental approvals) have been issued for the
Real Property to the extent required by law; and Seller has
no Knowledge of any proposed material change in any such
governmental or regulatory requirements or in any such
zoning requirements. Except as set forth in Section
6(h)(iii) of the Disclosure Schedule, all existing
electrical, plumbing, fire sprinkler, lighting, air
conditioning, heating, ventilation, elevator and other
mechanical systems located in or about the Real Property are
in good operating condition and repair, ordinary wear and
tear excepted. Seller has all easements, rights-of-way and
similar rights necessary to conduct the Business as
presently conducted and to use the Real Property as
currently used, including, without limitation, easements and
licenses for pipelines, power lines, water lines, roadways
and other access. All such easements and rights are valid,
binding and in full force and effect, any amounts due and
payable thereon to date have been paid or have been fully
accrued for in the books and records of Seller, neither
Seller nor any other party thereto is in default thereunder,
and there exists no event or condition affecting Seller or
any other party thereto, which, with the passage of time or
notice or both, would constitute a material default
thereunder. No such easement or right will be breached by,
nor will any party thereto be given a right of termination
as a result of, the transactions contemplated by this
Agreement.
(iv) Personal Property. All items of
personal property included among the Purchased Assets (as
well as any that are leased pursuant to any of the Assigned
Contracts) are in good operating condition and repair,
ordinary wear and tear excepted, are physically located at
or about the Real Property, and are owned outright by
Seller, or validly leased by the Seller. No such item of
personal property is subject to any sublease, license or
other agreement, arrangement or understanding for its use by
any person other than Seller. The maintenance and operation
thereof has complied with all applicable laws, regulations,
ordinances, contractual commitments and obligations. Except
as set forth in Section 6(h)(iv) of the Disclosure Schedule
or as disclosed in the Financial Statements, no item of
tangible personal property with a fair market value
exceeding $10,000 owned or used by Seller is subject to any
conditional sale agreement, installment sale agreement or
title retention or security agreement or arrangement of any
kind; as to each item of personal property subject to any
such agreement or arrangement, Section 6(h)(iv) of the
Disclosure Schedule sets forth a brief description of the
property in question and the underlying obligation.
(i) Computer Software . All computer software used
by Seller or installed on any computers owned or used by Seller
is either (i) owned by Seller or (ii) used pursuant to valid and
effective licenses from the owners thereof. Seller is not in
material breach or default under any of such licenses, and has
not received any notice suggesting or alleging that any such
material breach or default has occurred or that Seller is using
or has used any computer software without an appropriate license
therefor.
(j) Licenses, Permits, Authorizations and Consents .
(i) Section 6(j) of the Disclosure Schedule sets
forth all material approvals, authorizations, consents,
licenses, orders and permits of all governmental and
regulatory authorities, whether foreign, federal, state or
local (collectively, "Licenses") used in or required for the
conduct of the Business. Each of the Licenses is in full
force and effect. Seller has complied with all of the
terms, conditions and requirements imposed by each of the
Licenses, except where the failure so to comply would not
have a Material Adverse Effect. Seller has not received any
notice of, and Seller has no Knowledge of, any intention on
the part of any appropriate authority to cancel, revoke or
modify, or any inquiries, proceedings or investigations the
purpose or possible outcome of which is the cancellation,
revocation or modification of any such permit, license,
exemption, consent, authorization or approval, except as set
forth in Section 6(j) of the Disclosure Schedule. The
Licenses set forth in Section 6(j) of the Disclosure
Schedule include all Licenses which are required for the
ownership of the Purchased Assets or the conduct of the
Business as it is presently conducted, except for Licenses
the absence of which would not have a Material Adverse
Effect. Licenses required under the Environmental Laws are
addressed exclusively in Section 6(r).
(ii) Except as set forth on Section 6(j) of
the Disclosure Schedule and except for the filing of notices
with the appropriate authorities under the Hart-Scott-Rodino
Antitrust Improvements Act ("HSR Filings") and the
expiration of the waiting periods thereunder, no consent,
approval or authorization of, or declaration, filing or
registration with, any governmental or regulatory authority
or agency, whether federal, state or local, is required in
connection with the execution or delivery of this Agreement
by Seller or the consummation by Seller of any of the
transactions contemplated hereby. Except as set forth in
Section 6(j) of the Disclosure Schedule, no consent of any
other entity, agency or person is required in connection
with the execution or delivery of this Agreement by Seller
or the consummation by Seller of any of the transactions
contemplated hereby, including, without limitation, consents
from any party to any Contract (whether or not an Assigned
Contract) to which Seller is a party, or which is applicable
to the Business or the Purchased Assets.
(k) Patents, Trademarks, Etc. Section 6(k) of the
Disclosure Schedule sets forth a complete and correct list of all
Intellectual Property. Except as set forth on Section 6(k) of
the Disclosure Schedule, Seller has the right to use all of the
Intellectual Property, including, but not limited to the name
"Mega Food Center," in the Business as and where the same is
currently conducted, and the use of such Intellectual Property in
the conduct of the Business as and where the same is currently
conducted does not conflict with the rights of others in any
manner. Except as set forth in Section 6(k) of the Disclosure
Schedule, there are no licenses, agreements or commitments
outstanding or effective granting any other person any right to
use, operate under, license or sublicense the Intellectual
Property. Seller has not received any notice or claim that any
of the Intellectual Property infringes upon or conflicts with the
rights of any other person. Except as set forth in Section 6(k)
of the Disclosure Schedule, to the Knowledge of Seller, there is
no infringement or violation by any other person of Seller's
rights in any of the Intellectual Property.
(l) Leases, Contracts, Etc . All leases, subleases,
maintenance agreements, service agreements and all other
agreements of any nature, whether written or oral, affecting the
Store or the Business or the Purchased Assets (collectively
"Contracts"), other than Purchase Orders (as hereinafter
defined), are listed on Section 6(l) (or on Sections 6(k) or
6(m)(i)) of the Disclosure Schedule. Except as set forth on
Section 6(l) (or on Sections 6(k) or 6(m)(i)) of the Disclosure
Schedule, for Purchase Orders, and for other contracts,
arrangements or understandings that would have been required to
be identified on any of the foregoing sections of the Disclosure
Schedule but for the fact that they were excepted from disclosure
pursuant to the terms of the applicable Section of this
Agreement, and except for agreements between the Seller and
Buyer, Seller is not a party to or subject to any Contract that
relates to the Business or Purchased Assets, including without
limitation any of the following:
(i) any contract, arrangement or understanding,
or series of related contracts, arrangements or
understandings, other than Purchase Orders, which involves
annual expenditures or receipts by Seller of more than
$25,000;
(ii) any personal property lease wherein the
property leased has a fair market value exceeding $25,000 or
the total annual rental payments in any year exceed $10,000;
(iii) any lease or sublease (as lessor or
lessee) of real property;
(iv) any license agreement other than software
licenses described in clause (i) of the first sentence of
Section 6(i) hereof;
(v) any contract, arrangement or understanding
not made in the ordinary course of business and consistent
with past practice involving annual payments not exceeding
$15,000 in each case;
(vi) any note, bond, indenture, credit
facility, mortgage, security agreement or other instrument
or document relating to or evidencing indebtedness for money
borrowed or a security interest or mortgage in the Purchased
Assets;
(vii) any contract, arrangement or
understanding granting to any person the right to use any
material item of the Purchased Assets; or
(viii) any outstanding offer or commitment to
enter into any contract or arrangement of the nature
described in subsections (i) through (vii) of this Section
6(l).
For purposes of this Agreement "Purchase Orders" shall mean
those purchase orders of Seller relating to the Business and
other contracts and commitments issued or entered into by Seller
relating to the Business to or with its suppliers and vendors for
the purchase of goods, products and supplies in the ordinary
course of business and on Seller's standard terms and conditions.
Seller previously has delivered to the Buyer and Roundy's
complete and correct copies of each written Contract (and any
amendments thereto), and Section 6(l) of the Disclosure Schedule
also contains a complete and correct description of each oral
Contract to which Seller is a party or bound which is required to
be disclosed on Section 6(l) of the Disclosure Schedule. Except
as set forth in Section 6(l) of the Disclosure Schedule, (i) each
Assigned Contract is in full force and effect; (ii) neither
Seller nor (to the Knowledge of Seller) any other party is in
material default under any Assigned Contract, and no event has
occurred which constitutes, or with the lapse of time or the
giving of notice or both would constitute, a default by Seller or
(to the Knowledge of Seller) by any other party under any
Assigned Contract; and (iii) there are no material disputes or
disagreements between Seller and any other party with respect to
any Assigned Contract.
(m) Employees .
(i) Seller previously has delivered to the Buyer
a schedule setting forth the names of all current salaried
and hourly employees of the Business and their current
salary or hourly rates. Except as set forth in Section 6(m)
of the Disclosure Schedule, Seller has accrued on its books
and records all obligations for salaries, vacations,
benefits and other compensation with respect to its
employees and any of its Former Employees (as hereinafter
defined), to the extent required by GAAP, including, but not
limited to, severance, bonuses, incentive and deferred
compensation. Except as disclosed in Section 6(m) of the
Disclosure Schedule, Seller does not currently offer, nor
has it ever offered, retiree health or insurance benefits to
employees or Former Employees (as hereinafter defined) of
the Business, and the Seller has no liabilities (contingent
or otherwise) with respect thereto. Complete and correct
copies of all material written agreements with or concerning
any employee (or any Former Employee) of the Business,
including, without limitation, union and collective
bargaining agreements, and all employment policies, employee
handbooks, and the like relating to the Business, and all
amendments and supplements thereto, have previously been
delivered to the Buyer, and a list of all such agreements,
handbooks and policies is set forth in Section 6(m) of the
Disclosure Schedule. Except as set forth in Section 6(m) of
the Disclosure Schedule and except pursuant to the terms of
any contract or agreement to which Seller is a party and
which is listed in any Section of the Disclosure Schedule,
since the latest Financial Statement, Seller has not
(i) except in the ordinary course of business and consistent
with past practice, increased the salary or other
compensation payable or to become payable to or for the
benefit of any of the employees of the Business,
(ii) provided any of the employees of the Business with any
increased security or tenure of employment, (iii) increased
the amounts payable to any of the employees of the Business
upon the termination of any such person's employment, or
(iv) amended any Benefit Plan (as hereafter defined) to
provide improved benefits granted to or for the benefit of
any of the employees of the Business under any Benefit Plan
(as hereinafter defined).
(ii) Since January 1, 1995, and to the Knowledge
of Seller, prior to that date, Seller has complied at all
times with all laws, statutes, rules and regulations
applicable with respect to employees or employment practices
in connection with the Business. In particular, Seller has,
in connection with the Business, complied with all laws and
statutes, and all rules and regulations applicable to and/or
aiming at discriminatory practices (including, without
limitation, discrimination based on race, age or gender),
labor standards and working conditions, occupational health
and safety, payment of minimum wages and overtime rates,
worker's compensation, the withholding and payment of Taxes
or any other kind of governmental charge from any kind of
compensation, or otherwise relating to the conduct of
employers with respect to employees or potential employees,
and there have been no claims made or, to the Knowledge of
Seller, threatened thereunder against Seller arising out of,
relating to or alleging any violation of any of the
foregoing, which claims, if resolved adversely to the
Seller, would have a Material Adverse Effect. Seller has,
in connection with the Business, complied in all material
respects with the employment eligibility verification form
requirements under the Immigration and Naturalization Act,
as amended ("INA"), in recruiting, hiring, reviewing and
documenting prospective employees for employment eligibility
verification purposes and has complied with the paperwork
provisions and anti-discrimination provisions of the INA,
except where failure to comply would not have a Material
Adverse Effect. Seller has obtained and maintained the
employee records and I-9 forms in proper order as required
by law. Except as set forth in Section 6(m) of the
Disclosure Schedule, and except for routine grievances none
of which, if resolved adversely to Seller, would,
individually or in the aggregate, have a Material Adverse
Effect, there are no material controversies, strikes, work
stoppages, picketing or disputes pending or, to the
Knowledge of Seller, threatened between Seller and any
employees or Former Employees of the Business; no
organizational effort by any labor union or other collective
bargaining unit is pending or, to the Knowledge of Seller,
threatened with respect to any employees of the Business;
and no consent of or any other action by or negotiation with
any labor union or other collective bargaining unit is
required in connection with or to consummate the
transactions contemplated by this Agreement.
(n) Benefit Plans.
(i) For purposes hereof, the term "Benefit Plan"
shall mean each and every defined benefit and defined
contribution plan, employee stock ownership plan, consulting
or employment agreement, executive compensation plan, bonus
plan, incentive compensation plan or arrangement, deferred
compensation agreement or arrangement, agreement with
respect to temporary employees, vacation pay, sickness,
disability or death benefit plan (whether provided through
insurance, on a funded or unfunded basis or otherwise),
employee stock option or stock purchase plan, severance pay
plan, arrangement or practice, employee relations policy,
practice or arrangement, retiree medical or life insurance
benefits, and each other employee benefit plan, program or
arrangement, which at any time has been maintained or
contributed to by Seller for the benefit of or relating to
any of the employees or to any former employee of the
Business ("Former Employee") or his/her dependents,
survivors or beneficiaries, whether written or oral, but not
including any multi-employer benefit plans within the
meaning of Section 3(37) of ERISA (a "Multi-Employer Plan").
Section 6(n)(i) of the Disclosure Schedule contains a
complete and correct list of all current Benefit Plans.
(ii) Except as set forth on Schedule 6(n)(ii) of
the Disclosure Schedule, each Benefit Plan which is an
"employee pension benefit plan" (as defined in Section 3(2)
of ERISA), meets the requirements of Section 401(a) of the
Code; the trust, if any, forming part of such plan is exempt
from U.S. federal income tax under Section 501(a) of the
Code; a favorable determination letter has been issued by
the Internal Revenue Service (the "IRS") with respect to
each plan and trust and each material amendment thereto; and
nothing has occurred since the date of such determination
letter that would adversely affect the qualification of such
plan. No Benefit Plan is a "voluntary employees beneficiary
association" (within the meaning of Section 501(c)(9) of the
Code) and there are no current "welfare benefit funds"
relating to Employees or Former Employees within the meaning
of Section 419 of the Code other than as set forth in
Section 6(n)(ii) of the Disclosure Schedule. No event or
condition exists which respect to any Benefit Plan that
could subject Seller to any material Tax under Section 4980B
of the Code (or under its predecessor statute, Section
162(k) of the Code). With respect to each Benefit Plan
listed on Schedule 6(n)(i), Seller has heretofore delivered
to the Buyer and Roundy's complete and correct copies of the
following documents, where applicable: (i) the most recent
annual report (Form 5500 series), together with schedules,
as required, filed with the IRS, and any financial
statements and opinions required by Section 103(a)(3) of
ERISA, (ii) the most recent determination letter issued by
the IRS, (iii) the most recent summary plan description and
all modifications, as well as all other descriptions
distributed to employees or set forth in any manuals or
other documents, (iv) the text of the Benefit Plan and of
any trust, insurance or annuity contracts maintained in
connection therewith, (v) the most recent independent
appraisal in the case of an employee stock ownership plan,
and (vi) the most recent actuarial report, if any, relating
to the Benefit Plan.
(iii) Except as set forth on Schedule
6(n)(iii) of the Disclosure Schedule, neither Seller nor any
corporation or other trade or business under common control
with Seller (as determined pursuant to Section 414(b) or (c)
of the Code) (a "Common Control Entity") has maintained or
contributed to or in any way directly or indirectly has any
liability (whether contingent or otherwise) with respect to
any Multi-Employer Plan. Seller has not completely or
partially withdrawn from any Multi-Employer Plan and, except
as set forth in Section 6(n)(iii) of the Disclosure
Schedule, Seller would have no withdrawal liability under
Title IV of ERISA if they were to withdraw as of the date
hereof from any multi-employer plan to which Seller has
contributed. To the Knowledge of Seller, no proceedings by
the Pension Benefit Guaranty Corporation (the "PBGC") to
terminate any Benefit Plan have been instituted or
threatened. To the Knowledge of Seller: no event has
occurred or condition exists which constitutes grounds for
the PBGC to terminate any Benefit Plan; neither Seller nor
any Common Control Entity is a party to or has any liability
under any agreement imposing secondary liability on it as a
seller of the assets of a business in accordance with
Section 4204 of ERISA or under any other provision of Title
IV of ERISA or other agreement; no contingent or other
liability with respect to which Seller has, had or could
have any liability exists under Title IV of ERISA to the
PBGC or to any Benefit Plan. None of the Purchased Assets
are subject to a lien under Sections 4064 or 4068 of ERISA.
Except as set forth in Section 6(n)(iii) of the Disclosure
Schedule, the Seller does not currently maintain or
contribute to any plan subject to Title IV of ERISA or
Section 412 of the Code (other than Multi-Employer Plans),
and, except as set forth in Section 6(n)(iii) of the
Disclosure Schedule, each such plan previously maintained or
contributed to by Seller has been terminated in accordance
with the provisions of the Code and ERISA and Seller does
not have any actual or contingent liability associated with
any such terminated plan, including, but not limited to, any
future obligations or liability associated with (i) the
solvency or ability to provide benefits of any insurance
company providing annuity payments under such terminated
plan, (ii) claims by participants resulting from any alleged
breach of fiduciary duty in connection with the termination
of any such terminated plan, or (iii) the disqualification
of any such terminated plan. All contributions and payments
required to be made to or with respect to each Benefit Plan
(including contributions to union-sponsored pension or
health and welfare plans) with respect to the service of
employees or other individuals with or related to Seller
prior to the date hereof have been made or have been accrued
for in the Financial Statements, or, for periods after the
most recent of the Financial Statements and through the
Closing Date, will be accrued in the books and records of
Seller, and will be accrued and reflected as liabilities on
the Closing Balance Sheet and, except to the extent so
accrued, Seller shall have no liability to or with respect
to any Benefit Plan relating to such prior period.
Except as set forth in Section 6(n)(iii) of the
Disclosure Schedule, Seller does not provide, nor does it
have any obligation to provide, post-retirement medical,
life insurance or other benefits to employees or Former
Employees or their survivors, dependents and beneficiaries,
except as may be required by the Consolidated Omnibus Budget
Reconciliation Act of 1986 or similar state medical
temporary benefits continuation law. Except as set forth in
Section 6(n)(iii) of the Disclosure Schedule, Seller will
not incur any liability under any severance agreement,
deferred compensation agreement, employment agreement or
other compensation agreement as a result of the consummation
of the transactions contemplated by this Agreement, nor will
the terms or Seller's liability or obligations under any
such agreement be altered or increased as a result of such
transactions.
(iv) Except as set forth in Section 6(n)(iv) of
the Disclosure Schedule: none of the Benefit Plans has been
subject to a "reportable event," within the meaning of
Section 4043 of ERISA (whether or not waived); there have
been no "prohibited transactions", within the meaning of
Section 4975 of the Code or Part 4 of Subtitle B of Title I
of ERISA; there have been no breaches of fiduciary
responsibility within the meaning of Part 4 of Subtitle B of
Title I of ERISA; and none of the Benefit Plans which are
subject to Section 412 of the Code has incurred any
"accumulated funding deficiency" (whether or not waived)
within the meaning of Section 412 of the Code and no event
or set of conditions exist which could subject Seller to any
material Tax under Section 4971 of the Code or a lien under
Section 412(n) of the Code.
(v) Each Benefit Plan has been administered to
date in accordance with the applicable provisions of ERISA,
the Code and applicable law and with the terms and
provisions of all documents, contracts or agreements
pursuant to which such Benefit Plan is maintained. All
reports and information required to be filed with the
Department of Labor, the IRS, the PBGC or plan participants
or beneficiaries with respect to any Benefit Plan have been
timely filed; there is no dispute, arbitration, claim, suit
or grievance pending or to the Knowledge of Seller,
threatened, involving a Benefit Plan (other than routine
claims for benefits). To the Knowledge of Seller, none of
the Benefit Plans nor any fiduciary thereof has been the
direct or indirect subject of an order or investigation or
examination by a governmental or quasi-governmental agency
and there are no matters pending before the IRS, the
Department of Labor, the PBGC or any other domestic or
foreign governmental agency with respect to a Benefit Plan.
There have been no claims, or notice of claims, filed under
any fiduciary liability insurance policy covering any
Benefit Plan. Seller will incur no liability or obligation
to make any "parachute payment" (as that term is defined in
Section 280G(b)(2) of the Code) to any of the employees
prior to the Closing or in connection with the transactions
contemplated hereby. No event or set of conditions exist
which would subject Seller to any material Tax under
Sections 4972, 4974-76, 4979, 4980, 4999 or 5000 of the
Code.
(o) Compliance with Applicable Law . Except as set
forth in Section 6(o) of the Disclosure Schedule, Seller has
complied with all applicable foreign or domestic laws and
statutes and all ordinances, codes, rules, regulations,
judgments, orders, injunctions, writs or decrees of any Federal,
state, local or foreign court or any governmental body or agency
thereof to which Seller may be subject in connection with the
Business or which are applicable to the Business (as it is
currently conducted) or the Purchased Assets (except for the
Environmental Laws, which are addressed exclusively in Section
6(r)). Seller has not received any written notice alleging any
such violation.
(p) Inventories. Except for Inventory which has
been written down on the books of Seller to its net realizable
value, or is eligible to be returned to the vendors thereof, the
Inventory is of merchantable and salable quality and is not
damaged or outdated. The quantities of Inventory on hand are
such that they can reasonably be expected (on the basis of
Seller's past experience) either (i) to be sold within the time
period remaining prior to the expiration of their applicable date
codes, or (ii) to be able to be returned to the vendors thereof.
(q) [intentionally left blank]
(r) Environmental Matters .
(i) No Hazardous Substances. Except as set forth
in Section 6(r)(i) of the Disclosure Schedule, and except
for Hazardous Substances (as hereinafter defined in Section
6(r)(iii)) generated, stored, treated, manufactured,
refined, handled, produced, disposed of or used by Seller in
the ordinary course of its business, in compliance with the
requirements of currently applicable laws, rules and
regulations or otherwise in a manner which would not give
rise to any liabilities or obligations under such laws,
rules and regulations (i) the Seller has not caused there to
be, nor to the Knowledge of the Seller are there, any
Hazardous Substances in, on or under any of the Real
Property; (ii) the Real Property has not been designated,
restricted or investigated by any governmental authority as
a result of the actual or suspected presence, spillage,
leakage, discharge or other emission of Hazardous
Substances; (iii) no Hazardous Substances have been
generated, used, stored, treated, manufactured, refined,
handled, produced or disposed of in, on or under, and no
Hazardous Substances have been transported, released or
disposed of at, from or to, the Real Property by Seller or
by any persons or agents operating under the control,
direction and supervision of Seller including, without
limitation, all employees, agents and contractors of Seller;
and (iv) Seller has not received any written or oral
governmental notice, order, inquiry, investigation,
environmental audit or assessment or any lien, encumbrance,
decree, easement, covenant, restriction, servitude or
proceeding concerning, or arising by reason of, the actual
or suspected presence, spillage, leakage, discharge,
disposal or other emission of any Hazardous Substance in,
on, under, around, about or in the vicinity of, or the
transportation of any Hazardous Substance at, from or to,
the Real Property. Section 6(r)(i) of the Disclosure
Schedule contains a list of all above ground or underground
tanks used for the storage of Hazardous Substances on or
below the surface of the Real Property;
(ii) Compliance with Environmental Laws. Except
as disclosed in Section 6(r)(ii) of the Disclosure Schedule,
and except for conditions that are not attributable to any
act or omission of the Seller and of which the Seller has no
Knowledge, (i) neither Seller nor the Real Property
(including storage tanks or other impoundment vessels,
whether above or below ground) are in material violation of,
or subject to any material liabilities as a result of any
past or current violations of, any existing federal, state
or local law (including common law), statute, ordinance,
rule or regulation of any federal, state or local
governmental authority relating to occupational health and
safety or relating to pollution or protection of the
environment, including, without limitation, statutes, laws,
ordinances, rules and regulations relating to the emission,
generation, discharge, spillage, leakage, storage, off-site
dumping, release or threatened release of Hazardous
Substances into ambient air, surface water, ground water or
land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport
or handling of Hazardous Substances (collectively,
"Environmental Laws"); and (ii) no material expenditures are
required in connection with the operation of the Business as
presently conducted in order to comply with any
Environmental Laws. Except as disclosed in Section 6(r)(ii)
of the Disclosure Schedule, Seller and the Real Property
have in all material respects passed all inspections
conducted by applicable governmental authorities and
regulatory bodies in connection with the matters described
in the preceding sentence. The Seller has all approvals,
authorizations, consents, licenses, orders and permits of
all governmental and regulatory authorities required under
any Environmental Laws (collectively, "Environmental
Permits"), except for Environmental Permits the lack of
which could not give rise to any material obligation or
liability on the part of the Seller or otherwise have any
Material Adverse Effect, nor impair the ability of the
Seller to conduct any material aspect of the Business at any
one or more of its locations. Each of the Environmental
Permits is in full force and effect. The Seller has
complied with all of the terms, conditions and requirements
imposed by each of the Environmental Permits, except where
the failure so to comply would not have a Material Adverse
Effect. The Seller have received no notice of, and has no
Knowledge of, any intention on the part of any appropriate
authority to cancel, revoke or modify, or any inquiries,
proceedings or investigations the purpose or possible
outcome of which is the cancellation, revocation or
modification of any such Environmental Permit. All cleanup,
removal and other remediation activities carried out by
Seller or by agents of Seller at the Real Property have been
conducted in material compliance with all applicable
Environmental Laws, and there is no basis for liability on
the part of Seller as a result of such activities.
(iii) Definition of "Hazardous Substances".
For purposes of this Agreement, the term "Hazardous
Substance" shall mean any product, substance, chemical,
contaminant, pollutant, effluent, waste or other material
which, or the presence, nature, quantity and/or intensity of
existence, use, manufacture, disposal, transportation,
emission, discharge, spill, release or effect of which,
either by itself or in combination with other materials
located on any of the Real Property, is defined or listed
in, regulated or monitored by, or otherwise classified
pursuant to, any statute, law, ordinance, rule or regulation
applicable to the Real Property as "hazardous substances,"
"hazardous materials," "hazardous wastes," "infectious
wastes" or "toxic substances." Hazardous Substances shall
include, but not be limited to, (i)(A) any "hazardous
substance" as defined in the Comprehensive Environmental
Response, Compensation and Liability Act, (B) any "regulated
substance" as defined in the Solid Waste Disposal Act or
(C) any substance subject to regulation pursuant to the
Toxic Substances Control Act, as such laws are now in effect
or may be amended through the Closing Date and any rule,
regulation or administrative or judicial policy statement,
guideline, order or decision under such laws, (ii) petroleum
and refined petroleum products, (iii) asbestos and asbestos-
containing products, (iv) flammable explosives, (v)
radioactive materials, and (vi) radon.
(iv) This Section 6(r) contains the sole
representations and warranties of the Seller with respect to
any matters that relate to or are governed by Environmental
Laws.
(s) Disclosure. No representation or warranty made by
Seller in this Section 6 (including, without limitation, any
section of the Disclosure Schedule relating thereto), and no
section of the Disclosure Schedule, certificate or other written
document or instrument delivered or to be delivered by Seller, as
applicable, pursuant to this Agreement or in connection with the
transactions contemplated hereby, contains or will contain, any
untrue statement of a material fact or omits or will omit to
state any material fact necessary to make the statements
contained therein not misleading. The disclosure of any matter
in any schedule to this Agreement shall be deemed to be a
disclosure for all purposes of this Agreement to which such
matter could reasonably be expected to be pertinent.
(t) Reliance . The representations and warranties of
Seller made in Section 6 of this Agreement are made by Seller
with the knowledge and expectation that the Buyer and Roundy's
are placing reliance thereon in entering into, and performing
their obligations under this Agreement, and the same shall not be
affected or deemed waived in any respect whatsoever by reason of
any investigation heretofore or hereafter conducted or knowledge
gained by or on behalf of the Buyer or Roundy's (including,
without limitation, by any of their advisors, consultants or
representatives and any information contained in any Phase I or
Phase II or other environmental audit or investigation procured
by or on behalf of the Buyer or Roundy's or otherwise) prior to
the Closing, whether in contemplation of this Agreement or
otherwise, or by reason of the fact that the Buyer or Roundy's or
any of such advisors, consultants or representatives knew or
should have known that any such representation or warranty is or
might be inaccurate, or that any covenant or undertaking has been
or might have been breached, at or prior to the Closing, and no
claims by the Buyer or Roundy's with respect thereto shall be
waived or otherwise affected as a result of such knowledge on the
part of the Buyer or Roundy's (or any of their advisors,
consultants or representatives) and Seller shall not raise any
such matter as a defense to any claim by the Buyer or Roundy's
for indemnification hereunder; provided that the Buyer or
Roundy's shall provide the Seller with written notice of any
fact, matter or circumstance of which the Buyer or Roundy's is or
has become aware which would or which the Buyer or Roundy's
reasonably believes might be considered to constitute a breach or
violation of any representation, warranty, covenant or agreement
of Seller in this Agreement.
(u) Disclosure Schedule. Any information which is
disclosed in the Disclosure Schedule or any other Schedule or
Exhibit hereto shall be deemed to be disclosed for all Sections
of this Agreement to which such disclosure is relevant. All
capitalized terms used in the Disclosure Schedule and not
otherwise defined therein shall have the same meanings as are
ascribed to such terms in this Agreement. The Disclosure
Schedule shall not vary, change or alter the literal meaning of
the representations and warranties of Seller contained in this
Agreement, other than creating specific, limited exceptions
thereto which are directly responsive to the language of the
applicable warranties and representations contained in this
Agreement. Seller shall be entitled to amend the Disclosure
Schedule prior to Closing; provided, however, (i) such
amendments, if any, shall occur no later than the earlier of
Closing or two days after the matter causing the amendment comes
to the Knowledge of Seller, (ii) that such amendments may be made
only to the extent that the Buyer and Roundy's approve the same
(such approval not to be withheld in bad faith).
7. REPRESENTATIONS AND WARRANTIES OF ROUNDY'S.
To induce Seller to enter into this Agreement, Roundy's
makes the following representations and warranties:
(a) Corporate Organization. Roundy's is a corporation
duly organized and validly existing under the laws of the State
of Wisconsin. Roundy's is current in all filings necessary to
maintain its corporate existence under Wisconsin law and no
proceedings have been filed or are pending for its dissolution or
winding up. Roundy's has all requisite corporate power and
authority to own, lease and operate the properties and assets it
now owns, leases or operates and to carry on its business as
presently conducted or presently proposed to be conducted.
(b) Authorization. Roundy's has full corporate power
and authority to execute, deliver and perform this Agreement.
The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly approved
by the Board of Directors of Roundy's, and no other corporate
action on the part of Roundy's is necessary to approve and
authorize the execution and delivery of this Agreement by
Roundy's or the consummation of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by
Roundy's and constitutes the valid and binding agreement of
Roundy's enforceable in accordance with its terms, except that
the enforceability of this Agreement is subject to bankruptcy,
insolvency, reorganization and similar laws of general
applicability relating to or affecting creditors' rights and
limitations on the availability of the remedy of specific
performance and other equitable remedies.
(c) Consents and Approvals; No Violations. Except as
set forth in Section 7(c) of the Disclosure Schedule, the
execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby will not: (i) violate or
conflict with any provision of the charter documents of Roundy's,
(ii) breach, violate or constitute an event of default (or an
event which with the lapse of time or the giving of notice or
both would constitute an event of default) under, give rise to
any right of termination, cancellation, modification,
acceleration or foreclosure under, or require any consent or the
giving of any notice under, any note, bond, indenture, mortgage,
security agreement, lease, license, franchise, permit, agreement
or other instrument or obligation to which Roundy's is a party,
or by which Roundy's or any of its properties or assets may be
bound, or result in the creation of any encumbrance or other
right of any third party of any kind whatsoever upon the
properties or assets of Roundy's pursuant to the terms of any
such instrument or obligation, (iii) except for the obtaining of
the permits, licenses and approvals necessary to operate the
Business as set forth in Section 7(c) of the Disclosure Schedule,
violate or conflict with any law, statute, ordinance, code, rule,
regulation, judgment, order, writ, injunction, decree or other
instrument of any court or governmental or regulatory body,
administration, agency or authority applicable to Roundy's or by
which any of its properties or assets may be bound or (iv) except
for the obtaining of the permits, licenses and approvals
necessary to operate the Business as set forth in Section 7(c) of
the Disclosure Schedule, require any filing by Roundy's with, or
any permit, license, exemption, consent, authorization or
approval of, or the giving of any notice by Roundy's to, any
governmental or regulatory body, agency or authority, other than
the HSR Filings (as defined in Section 6(j)(ii)) and the
expiration of the waiting periods thereunder.
(d) No Brokers or Finders. Neither Roundy's nor any
of its officers, directors or employees, on behalf of Roundy's,
has employed any broker or finder or incurred any other liability
for any brokerage fees, commissions or finders' fees in
connection with the transactions contemplated hereby.
(e) Financial Statements. Roundy's has provided to
Seller true and complete copies of the financial statements of
Roundy's consisting of (i) balance sheets of Roundy's as of
January 2, 1999 and January 3, 1998 and the related statements of
income and cash flows for the years then ended (including the
notes contained therein or annexed thereto), which financial
statements have been reported on, and are accompanied by, the
signed, unqualified opinions of Deloitte & Touche LLP,
independent auditors for Roundy's for such years and (ii) an
unaudited balance sheet of Roundy's as of January 1, 2000 (the
"Recent Balance Sheet"), and the related unaudited statements of
income for the year then ended (including the notes and schedules
contained therein or annexed thereto). All of the financial
statements referred to in (i) and (ii) above (including all notes
and schedules contained therein or annexed thereto) have been
prepared in accordance with generally accepted accounting
principles (except, in the case of unaudited statements, for the
absence of footnote disclosure) applied on a consistent basis,
have been prepared in accordance with the books and records of
Roundy's and fairly present, in accordance with generally
accepted accounting principles, the assets, liabilities and
financial position, the results of operations and cash flows of
Roundy's as of the dates and for the years indicated.
(f) Claims, Legal Actions. There is no claim, legal
action, counterclaim, suit, arbitration, governmental
investigation or other legal, administrative or tax proceeding,
nor any order, decree or judgment in progress or pending, or to
the knowledge of Roundy's, threatened against or relating to
Roundy's that would have a Material Adverse Effect on Roundy's,
or on the transactions contemplated by this Agreement, nor does
Roundy's know of any basis for the same. There are no
applications, complaints or proceedings pending or, to the
knowledge of Roundy's, threatened before any federal, state or
local agency involving environmental issues relating to Roundy's
under any federal, state or local environmental law or regulation
which, if concluded adversely to Roundy's, would have a Material
Adverse Effect on Roundy's. No order, writ, injunction or decree
is in effect or, to the knowledge of Roundy's, is threatened with
respect to Roundy's which would have a Material Adverse Effect on
Roundy's.
(g) Disclosure. To the knowledge of Roundy's, no
representation or warranty by Roundy's in this Agreement, nor any
statement, certificate, schedule, document or exhibit hereto
furnished or to be furnished by or on behalf of Roundy's pursuant
to this Agreement or in connection with the transactions
contemplated hereby, contains or shall contain any untrue
statement of material fact or omits or shall omit a material fact
necessary to make the statements contained therein not
misleading.
8. CONDUCT OF BUSINESS PRIOR TO CLOSING. Seller covenants
and agrees that from the date of this Agreement to the Effective
Time, except with the prior written consent of Roundy's or as
otherwise specifically provided for by this Agreement, Seller
shall, with respect to the Store and the Business:
(a) carry on the Business in the normal and ordinary
course in a manner consistent with the manner in which the
Business has heretofore been conducted (including but not limited
to maintaining the Store and all leasehold improvements and
equipment contained therein in good condition, repair and working
order, ordinary wear and tear excepted);
(b) not enter into any material contract (other than
for purchases of inventory and supplies in the usual and ordinary
course of business upon terms consistent with past practices);
(c) not encumber any of the Purchased Assets or enter
into any transaction or make any commitment relating to the
Purchased Assets or the Business, other than in the usual and
ordinary course of business;
(d) not hire any additional employees (except in the
ordinary course of business and consistent with past practices)
or grant any increase in the salaries or rates of pay of any
employee (except for normal periodic merit or seniority increases
under existing agreements or established policies and practices
of Seller and consistent in amount and timing with Seller's prior
practices), establish any new retirement or fringe benefit plan
or grant any increase in benefits under any existing plan;
(e) maintain all of its property, casualty, liability
and other insurance in effect as of the date hereof; and
(f) promptly pay when and as due all taxes, license
fees, charges, franchises and contributions required to be paid
by Seller to governmental agencies or taxing authorities, with
respect to the operation of the Business, except where payment or
the amount thereof is being contested in good faith in
appropriate proceedings and adequate reserves therefor have been
established.
9. CONDITIONS TO OBLIGATIONS OF BUYER AND ROUNDY'S. Buyer
and Roundy's obligation to purchase the Purchased Assets under
this Agreement shall be subject to the satisfaction, at or before
the Closing, of each of the following conditions, unless waived
in writing by Roundy's:
(a) Representations and Warranties True. Each and
every representation and warranty of Seller contained in Section
6 hereof, and in each certificate and other document delivered or
to be delivered by Seller or its representatives pursuant hereto
or in connection with the transactions contemplated hereby, shall
be true and accurate in all material respects as of the date when
made and as of the Effective Time and the Closing Date as though
such representation and warranty were made by Seller on the
Closing Date.
(b) Performance. Seller shall have performed and
complied in all material respects with each and every covenant,
obligation and condition required by this Agreement to be
performed or complied with by it at or prior to the Closing.
(c) No Proceedings or Litigation. As of the Closing,
no suit, action, investigation, inquiry or other proceeding by or
before any court or governmental body or other regulatory or
administrative agency or commission shall be threatened,
instituted or pending which questions the validity or legality of
this Agreement or the consummation of the transactions
contemplated hereby which in the written opinion of Buyer's
counsel would make it imprudent to proceed with the transactions
contemplated hereby.
(d) No Injunction. As of the Closing, there shall not
be any effective injunction, writ, preliminary restraining order
or any order of any nature issued by a court, governmental or
regulatory agency directing that the transactions provided for
herein or any of them not be consummated as so provided or
imposing any condition on the consummation of any of the
transactions contemplated hereby.
(e) No Material Adverse Change. There shall have been
no material adverse change in the financial condition, results of
operations, cash flows, assets, liabilities, business or
operations of the Business during the period between January 2,
1999 and the Closing Date.
(f) Closing of Mega Marts Transaction. The
transactions that are the subject of the Stock Purchase Agreement
shall have been closed, contemporaneously with the Closing under
this Agreement.
(g) Consents, Approvals, Permits, Etc. All consents,
authorizations, approvals, exemptions, licenses or permits of, or
registrations, qualifications, declarations or filings with any
governmental body or agency thereof that are required in
connection with the sale and transfer of the Purchased Assets to
the Buyer pursuant to this Agreement and the consummation of the
transactions contemplated hereby and are identified on Section
9(g) of the Disclosure Schedule shall have been duly obtained or
made in form and substance reasonably satisfactory to the Buyer
and its counsel and shall be effective at and as of the Closing
Date.
(h) Permits, Licenses. Buyer shall have received all
necessary permits, licenses, consents, approvals and the like
from third parties and governmental and administrative agencies
necessary for Buyer's conduct of the Business as presently
conducted, except those the absence of which would not have a
Material Adverse Effect.
(i) Termination and Release Agreement. Roundy's,
Seller and the Mega Shareholders shall have entered into an
agreement among them, in form and substance satisfactory to them
and their respective counsel, whereby all agreements (including
the "Pick `N Save" trademark license and supply agreements)
entered into between the parties (or their affiliates) prior to
the date hereof (the "Existing Agreements") are terminated and
the parties mutually release each other from and against any and
all claims, demands, causes of action, liabilities, costs,
expenses, or obligations (other than those arising out of this
Agreement) that any party may have against any other arising out
of or relating to the Existing Agreements or the business
relationships existing between the parties (the "Termination and
Release Agreement").
(j) Deliveries at or Prior to Closing. Seller shall
have delivered or caused to be delivered to Roundy's the
following at or prior to the Closing, all in form and substance
reasonably satisfactory to Roundy's counsel:
(i) Copies of resolutions of Seller's Board of
Directors and its shareholders authorizing the execution,
delivery and performance by Seller of this Agreement and the
consummation by Seller of the transactions contemplated
hereby, and authorizing Seller's officers, employees and
agents to carry out and perform the terms and provisions
hereof and thereof, certified by the corporate secretary of
Seller;
(ii) a closing certificate from the President or a
Vice President of Seller certifying the fulfillment of the
conditions set forth in this Section;
(iii) a certificate of status of Seller issued
by the Department of Financial Institutions of the State of
Wisconsin, dated not more than twenty (20) days prior to the
Closing Date;
(iv) The written consents of all parties that are
required for the assignment by Seller to Buyer of the
Assigned Contracts;
(v) The New Lease duly executed by Seller;
(vi) the written opinion of Godfrey & Kahn,
S.C., counsel for Seller, dated the Closing Date, in form
and substance reasonably acceptable to Roundy's;
(vii) All other instruments and documents
required by this Agreement to be delivered by Seller to
Buyer, and such other instruments and documents which Buyer
or its counsel may reasonably request not inconsistent with
the provisions hereof so as to effectively transfer to Buyer
all of Seller's right, title and interest in and to the
Purchased Assets as provided by this Agreement, including,
without limitation:
(A) a warranty bill of sale for the Purchased Assets;
(B) an assignment of the Assigned Contracts; and
(C) assignments of the Intellectual Property.
10. CONDITIONS TO OBLIGATIONS OF SELLER. Each and every
obligation of Seller under this Agreement (other than those
contained in Section 8) to be performed at or before the Closing
shall be subject to the satisfaction, at or before the Closing,
of each of the following conditions, unless waived in writing by
Seller:
(a) Representations and Warranties True. Each and
every representation and warranty of Roundy's contained in
Section 7 hereof, and in each certificate and other document
delivered or to be delivered by Roundy's or its representatives
pursuant hereto or in connection with the transactions
contemplated hereby, shall be true and accurate in all material
respects as of the date when made and as of the Closing Date as
though such representation and warranty were made by Roundy's on
the Closing Date.
(b) Performance. Roundy's shall have performed and
complied with each and every covenant, obligation and material
condition required by this Agreement to be performed or complied
with by it at or prior to the Closing.
(c) No Proceedings or Litigation. As of the Closing,
no suit, action, investigation, inquiry or other proceeding by or
before any court or governmental body or other regulatory or
administrative agency or commission shall be threatened,
instituted or pending which questions the validity or legality of
this Agreement or the consummation of the transactions
contemplated hereby which in the written opinion of Seller's
counsel would make it imprudent to proceed with the transactions
contemplated hereby.
(d) No Injunction. As of the Closing Date, there
shall not be any effective injunction, writ, preliminary
restraining order or any order of any nature issued by a court,
governmental or regulatory agency directing that the transactions
provided for herein or any of them not be consummated as so
provided or imposing any condition on the consummation of any of
the transactions contemplated hereby.
(e) Consents, Approvals, Permits, Etc. All consents,
authorizations, approvals, exemptions, licenses or permits of, or
registrations, qualifications, declarations or filings with, any
governmental body or agency thereof that are required in
connection with the sale and transfer of the Purchased Assets to
the Buyer pursuant to this Agreement and the consummation of the
transactions contemplated hereby shall have been duly obtained or
made in form and substance reasonably satisfactory to the Seller
and its counsel and shall be effective at and as of the Closing
Date.
(f) Closing of Mega Marts Transaction. The
transactions that are the subject of the Mega Marts Stock
Purchase Agreement shall have been closed, contemporaneously with
the Closing under this Agreement.
(g) Deliveries at Closing. Buyer shall have delivered
to Seller at the Closing:
(i) that portion of the Purchase Price payable at
the Closing;
(ii) the Termination and Release Agreement duly
executed by Buyer and Roundy's, as appropriate;
(iii) a closing certificate from the President
or a Vice President of Buyer and Roundy's certifying the
fulfillment of the conditions set forth in this Section 10;
and
(iv) The New Lease duly executed by Jondex Corp.
11. PRORATIONS and ACCRUALS.
(a) Personal property taxes applicable to the
Purchased Assets for the year (or other period) in which the
Effective Time occurs shall be prorated as of the Effective Time
on the basis of the personal property tax bills for the year
1999. Utility charges for the billing periods in which the
Closing occurs will be apportioned between Buyer and Seller based
on actual meter readings as of the Effective Time.
(b) Buyer will be entitled to a credit against the
Purchase Price for (i) the amount of all accrued but unpaid
employee bonuses, vacation and holiday pay due as of the
Effective Time to all employees of the Store hired by Buyer
("Transferred Employees"), (ii) the liability of Seller to make
the Accrued Retirement Plan Contributions for the Transferred
Employees assumed by Buyer under Section 1(d), in an amount
determined as provided in that Section, and (iii) the amount of
Tenant Receivables Liability assumed by Buyer under Section 1(d).
For purposes of this Section 11(b), accrued employee bonuses,
vacation and holiday pay for which Buyer will be entitled to a
credit will be determined in accordance with GAAP, provided that
in making such determination for purposes of this subsection
(iii) accrued employee vacation and holiday pay will include that
which each Transferred Employee has earned but not used as of the
Closing Date, as well as a pro-rata portion of that which each
Transferred Employee has accrued through the Closing Date, even
though such employee may not be entitled thereto unless he or she
would have remained employed by the Seller for some additional
time after the Closing Date, and the gross amount so determined
will be reduced by the amount of accrued vacation pay that
Transferred Employees will be assumed to forfeit, at a forfeiture
rate consistent with the Business's past experience.
(c) All costs and charges payable by or to Seller
under any Assigned Contracts will be prorated as of the Effective
Time.
12. NONCOMPETITION.
(a) Seller hereby covenants and agrees with Roundy's
that during the five (5) year period following the Closing (the
"Restricted Period"), it will not, directly or indirectly, as a
principal, agent, owner, trustee, beneficiary, distributor,
partner, co-venturer, shareholder or in any other capacity:
(i) subject to subparagraphs (b)(ii) and (iii)
below, own, operate, manage, join, finance, control,
participate in the ownership, management, operation or
control of, or acquire any securities of, or otherwise
become associated with or provide assistance to any entity,
business, activity or enterprise (other than Roundy's and
its subsidiaries and affiliates, collectively referred to
hereinafter as the "Roundy's Entities") which is engaged in
the business of owning or operating one or more retail
grocery stores having a total selling space (in any one
store) of more than 10,000 square feet (a "Competing
Business") anywhere within the State of Wisconsin;
(ii) subject to subparagraphs (b)(ii) and (iii)
below, own, operate, manage, join, finance, control,
participate in the ownership, management, operation or
control of, or acquire any securities of, or otherwise
become associated with or provide assistance to any entity,
firm, business, activity or enterprise (other than any of
the Roundy's Entities) which is engaged in the business of
owning or investing in real property that is leased to or
otherwise occupied by a Competing Business (other than any
of the Roundy's Entities) anywhere within the State of
Wisconsin (a "Competing Real Estate Business"); or
(iii) solicit or seek to cause any salaried
employee of any of the Roundy's Entities (including Buyer)
to terminate, curtail or otherwise modify his or her
employment relationship with any of the Roundy's Entities
for the purpose of entering into an employment or other
relationship with Seller or with any entity, firm, business,
activity or enterprise with which Seller is directly or
indirectly affiliated, for the purpose of conducting a
Competing Business or a Competing Real Estate Business.
(b) Notwithstanding the provisions of Section 12(a)
hereof:
(i) Seller may acquire securities of any entity
engaged in a Competing Business the securities of which are
publicly traded, provided that the value of the securities
of such entity held directly or indirectly by such Seller
immediately following such acquisition is less than 5% of
the total value of the then outstanding class or type of
securities acquired;
(ii) Seller's interest in a Competing Real Estate
Business shall not be deemed a breach or violation of
Section 12(a) of this Agreement to the extent that the real
estate owned by such business (A) is leased by such
Competing Real Estate Business to any of the Roundy's
Entities, (B) consists of the parcel of real estate owned by
the Seller as the Closing Date at Calumet Avenue and Dewey
Street in Manitowoc, Wisconsin, or (C) was leased by such
Competing Real Estate Business to any of the Roundy's
Entities at any time after the Effective Date and such lease
was terminated either by the lessee, by the lessor as a
result of a default thereunder by the lessee, or by the
expiration of its term; and
(iii) Seller may develop and lease the
property currently owned by it at South 27th Street and Ryan
Road, Milwaukee, Wisconsin (the "27th Street Property"), to
a Competing Business other than a Roundy's Entity, provided
that, before entering into any such transaction with a
Competing Business other than a Roundy's Entity Seller first
provides Roundy's with notice thereof. Thereafter, Seller
and Roundy's agree to negotiate in good faith for a period
of fifteen days for the purpose of determining whether one
of the Roundy's Entities has a bona fide, good faith
interest in leasing or purchasing the 27th Street Property.
If on the basis of such negotiations Seller determines in
its good faith judgment that Roundy's does not have a bona
fide interest in purchasing or leasing the 27th Street
Property on terms that are likely to result in an agreement
between Seller and Roundy's to that effect, then Seller may
develop, sell and or lease the 27th Street Property to a
Competing Business. If on the basis of such negotiations
Seller determines in its good faith judgment that Roundy's
does have a bona fide interest in purchasing or leasing the
27th Street Property on terms that are likely to result in
an agreement between Seller and Roundy's to that effect,
then Seller agrees to negotiate in good faith with Roundy's
for an additional thirty day period toward a definitive
agreement for such lease or sale. If at the end of such
thirty day period Seller and a Roundy's Entity have not
reached a definitive agreement with respect to such lease or
sale, then Seller may develop, sell or lease the 27th Street
Property to a Competing Business.
(c) Seller acknowledges and agrees that the
restrictions set forth in this Section 12 are founded on valuable
consideration and are reasonable in duration and geographic area
in view of the circumstances under which this Agreement is
executed and that such restrictions are necessary to protect the
legitimate interests of Roundy's. In the event that any
provision of this Section 12 is determined to be invalid by any
court of competent jurisdiction, the provisions of this Section
12 shall be deemed to have been amended and the parties will
execute any documents and take whatever action is necessary to
evidence such amendment, so as to eliminate or modify any such
invalid provision and to carry out the intent of this Section 12
so to render the terms of this Section 12 enforceable in all
respects as so modified.
(d) Seller acknowledges and agrees that irreparable
injury will result to Roundy's in the event Seller breaches any
covenant contained in this Section 12 and that the remedy at law
for such breach will be inadequate. Therefore, if Seller engages
or threatens to engage in any act in violation of the provisions
of this Section 12, Roundy's shall be entitled, in addition to
such other remedies and damages as may be available to it by law
or under this Agreement, to injunctive or other equitable relief
to enforce the provisions of this Section 12.
13. FURTHER ASSURANCES; BOOKS AND RECORDS.
(a) From time to time after the Closing, Seller shall,
without cost to Buyer, execute and deliver to or cause to be
executed and delivered to Buyer such other and further transfer
documents and instruments, and take such other action as Buyer
may reasonably request to carry out more effectively the sale of
the Purchased Assets contemplated by this Agreement and to
protect Buyer's right, title and interest in and enjoyment of the
Purchased Assets and the Business.
(b) Following the Closing, for a period of five (5)
years, Seller will preserve those of its books, records, files
and other materials which are not part of the Purchased Assets
hereunder but that relate to the operation of the Store and/or
the Purchased Assets, and will make the same available to Buyer,
during reasonable times and upon reasonable advance notice, for
Buyer's inspection and copying, for purposes reasonably related
to Buyer's operation of the Business and/or ownership of the
Purchased Assets.
(c) Buyer shall permit authorized representatives of
Seller, at all reasonable times after the Closing, access to its
records and accounts which relate to the Business and the Store
for time periods prior to the Effective Time, for the purpose of
obtaining any information necessary or desirable for the
preparation and filing of any tax returns or other reports to any
governmental agency for any period or for any other purpose
reasonably related to the rights or obligations of the parties
under this Agreement. Without limiting the generality of the
foregoing, Buyer will furnish reasonable assistance to Seller in
matters which pertain to accounts receivable, liabilities,
obligations and contract or other rights and obligations retained
by the Seller and not acquired or assumed by Buyer. If the
Seller believes that information with respect to claims or
liabilities asserted by or against the Seller is, or may be,
available from records or other Purchased Assets acquired by
Buyer or from former employees of Seller who have entered Buyer's
employment, such cooperation will include, among other things,
giving Seller the opportunity to inspect records and to consult
with such employees, permitting Seller, after consultation with
Buyer, to copy the records and giving such employees reasonable
leave during working hours to meet with representatives of
Seller, to furnish testimony or render other assistance to
Seller.
14. EMPLOYEES.
(a) Termination and Hiring. Seller shall terminate
all of the employees employed by it at the Store immediately
prior to the Effective Time. Buyer will offer reasonably
equivalent employment to all of the Store level employees of
Seller ("Store Employees"). Seller acknowledges that Buyer
intends to hire none of the corporate office employees and other
non-store level employees of Seller, and agrees that Seller will
be solely responsible for (and indemnify Buyer against) any
liability under any plant closing or similar law (including the
Worker Adjustment and Retraining Notification Act, 29 U.S.C.
Section 2101, et. seq., and its Wisconsin counterpart) that may
arise as a result of the failure of Buyer to hire any such
corporate officer and non-store level employees or the
termination of their employment by Seller. The employees of
Seller hired by Buyer as of the Closing Date are referred to
herein as "Transferred Employees."
(b) Health Insurance. Contemporaneously with the
Closing, the Transferred Employees will become participants in
Buyer's employee group health insurance coverage, with no waiting
period, no interruption in coverage and no exclusion for prior
existing conditions.
(c) Retirement Plans. Effective as of the Closing
Date, the Seller shall cause the separate accounts of all
Transferred Employees under the Seller's Profit Sharing and
401(k) Retirement Savings Plan (the "Seller's Plan") to be
segregated from the other accounts of the Seller's Plan and
transferred by a plan-to-plan transfer of all assets and
liabilities of the separate accounts of all Transferred Employees
to the Mega Marts, Inc. Profit Sharing 401(k) Plan ("Buyer's
Plan") as soon as practicable after the Closing Date. The
Seller, Roundy's and the Buyer agree to cooperate in the transfer
of the Seller's Plan assets to Buyer's Plan, so that such
transfer shall comply with Sections 401(a)(12) and 414(1) of the
Code and that thereafter each Transferred Employee will have an
account balance in Buyer's Plan equal to his or her account
balance in the NDC Plan immediately before the transfer of
assets.
15. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNITY.
(a) Survival. All representations and warranties of a
party contained in this Agreement or in any certificate or other
document delivered pursuant hereto shall survive the Closing Date
(regardless of any investigation by the other party to this
Agreement) for a period of fifteen (15) months following the
Closing, except for the representations and warranties contained
in Subsections 6(a), (b), (c), and (h)(i), and Subsections 7(a),
(b) (c) and (e) which shall survive indefinitely, and those
contained in Subsection 6(g) which shall survive until the
expiration of the applicable statutes of limitations (the period
of survival of any representation or warranty being referred to
as its "Survival Period").
(b) General. From and after the Closing, the parties
shall indemnify each other as provided in this Section 15. The
party seeking indemnification is sometimes referred to herein as
the "Indemnified Party" and the party from which indemnification
is sought is sometimes referred to as the "Indemnifying Party."
The remedies provided in this Section 15 shall be cumulative and
shall not preclude the assertion by either party hereto of any
other rights or the seeking of any other remedies against the
other party hereto.
(c) Seller's Indemnification Covenants. Seller will
indemnify Buyer and Roundy's and their affiliates and hold them
harmless from and against any and all liabilities, demands,
claims, suits, proceedings, actions or causes of action,
assessments, losses, penalties, costs, damages and expenses,
including reasonable attorneys' and expert witness fees
(collectively, "Damages"), sustained or incurred by Buyer or
Roundy's or their affiliates as a result of, arising out of or
incidental to:
(i) any breach or inaccuracy of any
representation or warranty made by Seller in this Agreement
or in any certificate or other document or instrument
delivered by Seller to Buyer or Roundy's in connection with
the transactions contemplated hereby;
(ii) any failure of Seller to comply with, or any
breach or nonfulfillment by Seller of, any covenant of
Seller set forth in this Agreement or in any certificate or
other document or instrument delivered by Seller to Buyer or
Roundy's in connection with the transactions contemplated
hereby;
(iii) any failure of Seller to timely pay,
perform or discharge when due any liability or obligation of
Seller (including, without limitation, any tax liabilities),
except for the Contract Liabilities and Assumed Employee
Accruals expressly assumed by Buyer hereunder;
(iv) any failure of Seller to comply with the
requirements of any bulk sales or bulk transfer law; and
(v) any act or omission of Seller occurring prior
to the Effective Time.
(d) Buyer's Indemnification Covenants. Buyer and
Roundy's, jointly and severally, will indemnify Seller for and
hold it harmless from and against any and all liabilities,
demands, claims, suits, proceedings, actions or causes of action,
assessments, losses, penalties, costs, damages and expenses,
including reasonable attorneys' and expert witness fees
(collectively, "Damages"), sustained or incurred by Seller as a
result of, arising out of or incidental to:
(i) any breach or inaccuracy of any
representation or warranty made by Buyer or Roundy's in this
Agreement or in any certificate or other document or
instrument delivered by Buyer or Roundy's to Seller in
connection with the transactions contemplated hereby;
(ii) any failure of Buyer or Roundy's to comply
with, or any breach or nonfulfillment by Buyer or Roundy's
of any covenant of Buyer or Roundy's set forth in this
Agreement or in any certificate or other document or
instrument delivered by Buyer or Roundy's to Seller in
connection with the transactions contemplated hereby; or
(iii) any failure of Buyer to timely pay,
perform or discharge any of the liabilities of Seller
expressly assumed by Buyer hereunder.
(iv) any and all liabilities arising after the
Effective Time and attributable to Buyer's conduct of the
Business after the Effective Time.
(e) Claims for Indemnification.
(i) Promptly upon an Indemnified Party's
obtaining knowledge of any facts causing it to believe that
it has or will have a claim for indemnification against any
Indemnifying Party or Parties hereunder, the Indemnified
Party shall give written notice of such claim to the
Indemnifying Party or Parties. Such written notice shall
set forth the nature and (to the extent then known) the
amount of Damages incurred by or threatened against the
Indemnified Party. Notwithstanding the foregoing, the right
of indemnification hereunder shall not be affected by any
failure of the Indemnified Party to give or by its delay in
giving such notice unless, and then only to the extent that,
the rights of the Indemnifying Party are prejudiced as a
result of such failure or delay.
(ii) The Indemnified Party shall tender to the
Indemnifying Party the defense of any claim, suit,
proceeding, action or assessment brought by any third party
(hereinafter "Third Party Claim"). Failure by the
Indemnifying Party to notify the Indemnified Party of its
election to defend any such Third Party Claim within ten
(10) days after the Indemnified Party's notice to the
Indemnifying Party of the same shall be deemed a waiver by
the Indemnifying Party of its right so to defend. If the
Indemnifying Party assumes such defense, the obligations of
the Indemnifying Party hereunder as to such Third Party
Claim shall include taking all steps reasonably necessary in
the defense or settlement thereof and holding the
Indemnified Party harmless from and against any and all
Damages sustained or incurred by the Indemnified Party which
result from, arise out of or are incidental to any
settlement approved by the Indemnifying Party or any
judgment in connection therewith. Legal counsel engaged by
the Indemnifying Party to defend such claim shall be
reasonably acceptable to the Indemnified Party. Except with
the written consent of the Indemnified Party, the
Indemnifying Party, in the defense of any such Third Party
Claim, shall not consent to the entry of any judgment
against or adversely affecting the Indemnified Party (other
than a judgment of dismissal on the merits and without
costs) or enter into any settlement unless such settlement
provides that the Indemnified Party is fully released by the
third party as to such Third Party Claim.
(iii) If the Indemnifying Party does not
assume the defense of any such Third Party Claim as provided
herein, the Indemnified Party may defend against such Third
Party Claim in such manner as the Indemnified Party deems
advisable or appropriate and may settle such Third Party
Claim or consent to the entry of judgment with respect
thereto upon such terms as it deems advisable or
appropriate, and in such event the Indemnifying Party shall
promptly reimburse the Indemnified Party for the amount of
such settlement or judgment and for any and all Damages
sustained or incurred by the Indemnified Party which result
from, arise out of or are incidental to the defense or
settlement of such Third Party Claim.
(f) Time Limitations on Claims. An Indemnified Party
shall not be entitled to indemnification pursuant to this Section
15 with respect to any claim for indemnification under
subparagraph 15(c)(i) or Subparagraph 15(d)(i) unless written
notice of such claim is given by the Indemnified Party to the
Indemnifying Party within the applicable Survival Period.
(g) Indemnification Threshold and Cap.
Notwithstanding anything to the contrary herein and except as
provided in Section 15(h): (i) any claim by an Indemnified Party
against any Indemnifying Party under Sections 15(c)(i) or
15(d)(i) shall be payable by the Indemnifying Party only in the
event and to the extent that the accumulated amount of all claims
against such Indemnifying Party shall exceed the amount of Eighty
One Thousand Dollars ($81,000) in the aggregate (the
"Indemnification Threshold"); and (ii) the maximum amount for
which an Indemnifying Party shall be obligated to provide
indemnification hereunder shall not exceed Two Million Dollars
($2,000,000) (the "Indemnification Cap"). In applying the
Indemnification Threshold and the Indemnification Cap, Buyer and
Roundy's, on the one hand, and Seller, on the other hand, shall
be considered to be one "Indemnifying Party." At such time as
the aggregate amount of claims against an Indemnifying Party
shall exceed the Indemnification Threshold, such party shall
thereafter be liable on a dollar-for-dollar basis for the full
amount of all further claims beyond the Indemnification
Threshold, subject to the Indemnification Cap.
(h) Zero-Threshold Claims. Notwithstanding the
preceding Section 15(g), the following categories of claims for
indemnification ("Zero-Threshold Claims") shall not be subject to
the Indemnification Threshold or the Indemnification Cap, but
shall be payable on a dollar-for-dollar basis without any
exclusion therefor or limitation thereon:
(i) any claims related to a breach of the
representations and warranties contained in Subsections
6(a), (b), (c), (h)(i), and (g) or Subsections 7(a), (b) and
(c);
(ii) any claims by either party against the other
for payment or return of the Purchase Price or any portion
thereof, including any adjustments to the Purchase Price
payable under Section 4 or 5 hereof.
(i) Tax Effect of Losses; Insurance. In determining
the amount of any indemnification claim for purposes of this
Section 15 there shall be taken into account any income or other
Tax benefit which the Indemnified Party may actually have
received or be entitled to receive (if in the future, at its
present value) as a result of the Damages forming the basis of
such claim, and there shall also be taken into account any income
or other Tax cost which the Indemnified Party would incur as a
result of its receipt of any indemnification payment from the
Indemnifying Party (including any such indemnification payment
which the Indemnified Party would be entitled to receive but for
the provisions of Section 15(g)).
(j) Exclusive Remedy. The parties agree that, except
as expressly provided herein, and except for claims for
injunctive relief to enforce specifically the provisions of this
Agreement, the rights of indemnification provided in this Section
15 shall be the sole and exclusive remedies of Buyer, Roundy's
and Seller for any claim or cause of action arising out of or
relating to the negotiation, execution, delivery, performance or
breach of this Agreement (whether such claim or cause of action
is based on breach of contract, misrepresentation, tort,
violation of statute (including, but not limited to,
Environmental Laws and securities laws and regulations) or
otherwise).
16. COUPONS. Buyer will not acquire hereunder any of the
rights of Seller to be reimbursed for any coupons accepted by
Seller from customers prior to the Effective Time, and Buyer does
not assume hereunder (and Seller will hold Buyer harmless from)
any liability of Seller relating to such coupons or the Seller's
acceptance thereof.
17. MISCELLANEOUS PROVISIONS.
(a) Seller's Transfer of This Agreement to its LLC.
At the Closing, Seller intends to transfer this Agreement and
substantially all of its other assets (except the tangible and
intangible assets of the Tri City True Value Hardware Store and
vehicles) to the Seller's LLC, and thereafter liquidate and
dissolve, transferring ownership of the Seller's LLC to the NDC
Shareholders. In consideration of Roundy's and Buyer's
willingness to permit such assignment and liquidation without
requiring the NDC Shareholders personally to become parties to
this Agreement or guaranty the obligations of Seller hereunder,
Seller represents, warrants and covenants as follows:
(i) At the Closing, Seller will cause Seller's
LLC to execute and deliver to Roundy's and Buyer an
assumption of the obligations of the Seller hereunder, in
form and substance reasonably satisfactory to Roundy's;
(ii) Seller represents and warrants that the pro
forma balance sheet of Seller's LLC that has been provided
to Roundy's and Buyer ("Pro Forma Balance Sheet") fairly
reflects in all material respects the assets, liabilities
and financial condition of Seller's LLC as the same will
exist immediately following the transactions contemplated by
this Agreement and the susbsequent liquidation of Seller
(the values of the assets of Seller's LLC indicated thereon
being based on their current book value on Seller's books);
(iii) as of the Closing Date, the NDC
Shareholders have no present plan or intention to liquidate
or dissolve Seller's LLC or otherwise transfer any
substantial portion of the assets reflected on the Pro Forma
Balance Sheet to the NDC Shareholders or to any other entity
owned or controlled by the NDC Shareholders, in such a
manner as to diminish materially the net assets of Seller's
LLC.
(b) Waiver of Compliance. Any failure by any of the
parties hereto to comply with any obligation, covenant or
agreement or to fulfill any condition herein may be waived only
by a written notice from the party entitled to the benefits
thereof. No failure by any party hereto to exercise, and no
delay in exercising, any right hereunder, shall operate as a
waiver thereof, nor shall any single or partial exercise of any
right hereunder preclude any other or future exercise of that
right or any other right hereunder by that party.
(c) Notices. Subject to Section 17(m)(ii) below, all
notices and other communications required or permitted hereunder
shall be deemed given if given in writing and delivered
personally, by commercial delivery service, by courier or by
facsimile transmission, telexed or mailed by registered or
certified mail (return receipt requested) fax, telex or postage
fees prepaid, to the party to receive the same at its respective
address set forth below, or at such other address as may from
time to time be designated by such party to the others in
accordance with this Section 17(c) (provided, that written notice
given in any other manner shall nonetheless be effective upon its
actual receipt by the party entitled to receive it):
If to the Seller, to:
NDC, Inc.
6312 South 27th Street
Oak Creek, WI 53154
Attention:
with copies to: Foley & Lardner
777 E. Wisconsin Avenue
Milwaukee, WI 53202
Attention: Jeffrey J. Jones
Facsimile: (414) 297-4900
and to: Godfrey & Kahn, S.C.
780 N. Water Street
Milwaukee, WI 53202
Attention: Christopher Noyes
Facsimile: (414) 273-5198
If to the Buyer or
to Roundy's to: Roundy's, Inc.
23000 Roundy Drive
Pewaukee, WI 53072
Attention:
Edward G. Kitz, Vice President,
Secretary and Treasurer
Facsimile: (262)953-7989
with a copy to:
Whyte Hirschboeck Dudek S.C.
111 East Wisconsin Avenue
Suite 2100
Milwaukee, WI 53202
Attention: John F. Emanuel
Facsimile: (414) 223-5000
All such notices and communications hereunder shall be
deemed given when received, as evidenced by the acknowledgment of
receipt issued with respect thereto by the applicable postal
authorities or the signed acknowledgment of receipt of the person
to whom such notice or communication shall have been personally
delivered, confirmed answer back or other evidence of
transmission.
(c) Mill Shop. Seller and Buyer each acknowledge and
agree that neither of such parties has any continuing liability
or obligation to the other, whether pursuant to any written or
oral contract, by course of dealing, or otherwise, with respect
to the Seller's business known as the "mill shop." In
particular, Buyer has no continuing obligation to use the
services of the "mill shop," employ any of its personnel, or bear
any of the costs of its operations.
(d) Expenses. Each party hereto shall bear and pay
its own expenses in connection with the negotiation, execution
and delivery of this Agreement and the transactions contemplated
hereby, whether or not the Closing occurs hereunder. Without
limiting the generality of the foregoing, Seller will be solely
responsible for the payment of any fees or commissions due to any
investment banker, financial advisor, attorneys or accountants or
the like retained by Seller.
(e) Public Announcements. No party hereto will issue
any report, statement or release to the general public, to the
trade, to the general or trade press, or to any third party
(other than its advisors and representatives in connection with
the transactions contemplated hereby), relating to this Agreement
and the transactions contemplated hereby, except as may be
mutually agreed by the parties hereto.
(f) Binding Effect; Assignment. This Agreement shall
inure to the benefit of and be binding upon the parties hereto
and their respective successors and permitted assigns. Neither
this Agreement nor any rights, duties or obligations shall be
assigned by any party hereto without the prior hereto written
consent of the other parties, and any attempted assignment or
transfer without such prior written consent shall be null and
void.
(g) No Third Party Beneficiary. Neither this
Agreement nor any provision hereof, nor any statement, schedule,
certificate, instrument or other document delivered or to be
delivered pursuant hereto, nor any agreement entered into or to
be entered into pursuant hereto or any provision thereof, is
intended to create any right, claim or remedy in favor of, or
impose any obligation upon, any person or entity other than the
parties hereto and their respective successors and permitted
assigns.
(h) Captions and Paragraph Headings. Captions and
paragraph headings used herein are for convenience only and are
not intended to be a part of this Agreement and shall not be used
in construing it.
(i) Entire Agreement; Modifications; Severability.
The making, execution and delivery of this Agreement by the
parties hereto has been induced by no representations,
statements, warranties or agreements other than those herein
expressed. This Agreement embodies the entire agreement of the
parties pertaining to the subject matter hereof and supersedes
all prior or contemporaneous agreements or understandings,
written or oral, of the parties relating to the subject matter
hereof. This Agreement may be amended or modified only by an
instrument signed by the parties or their duly authorized agents.
The invalidity, illegality or unenforceability for any reason of
any one or more provisions of this Agreement shall not affect the
validity, legality or enforceability of the remainder of this
Agreement.
(j) Definition of Knowledge. With respect to the
representations and warranties of the Seller set forth herein
which are made subject to the qualification "to the Knowledge of"
the Seller, the Seller shall be deemed to have Knowledge of (i)
any matter, fact, or thing that is, as of the date hereof or the
Closing Date, actually known to any of the President, Chief
Financial Officer, Secretary or any Vice President of Seller (the
latter being referred to collectively as "Seller's Officers");
and (ii) any matter, fact or thing which reasonably should be
known by any of Seller's Officers after "due inquiry" by such
person, taking into account any and all roles or positions which
such person may hold and any and all duties and responsibilities
he or she may have vis-a-vis Seller and the Business; for this
purpose, "due inquiry" shall include (but not necessarily be
limited to) a review of the accounting and financial records and
books of account of Seller; a review of Seller's regularly
maintained files and records relating to its assets, liabilities,
and business; a review of the minute books and stock records of
Seller; a visual inspection of Seller's real property and
tangible personal property; and an inquiry of the attorneys,
accountants, and similar professionals retained or engaged by
Seller at any time within the preceding two (2) years.
(k) Definition of Material Adverse Effect. The term
"Material Adverse Effect" as used in this Agreement shall mean an
effect that is materially adverse to the business, financial
condition or results of operations of Seller (or the Buyer and
its subsidiaries, as the case may be); provided, that any
impairment of Seller's ability to conduct continuously any
material aspect of the Business will be deemed to constitute a
Material Adverse Effect.
(l) Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same instrument.
(m) Governing Law . The parties hereby agree that
this Agreement, and the respective rights, duties and obligations
of the parties hereunder, shall be governed by and construed in
accordance with the laws of the State of Wisconsin, without
giving effect to principles of conflicts of law thereunder.
(n) Exclusive Jurisdiction. Each of the parties
hereby (i) irrevocably consents and agrees that any legal or
equitable action or proceeding arising under or in connection
with this Agreement shall be brought exclusively in any Federal
or state court within Milwaukee or Waukesha County, State of
Wisconsin, and any court to which an appeal may be taken in any
such litigation, and (ii) by execution and delivery of this
Agreement, irrevocably submits to and accepts with respect to any
such action or proceeding, for such party's heirs, beneficiaries
remaindermen, personal representatives, executors,
administrators, fiduciaries and permitted assigns and in respect
of such party's properties and assets, generally and
unconditionally, the jurisdiction of the aforesaid courts, and
irrevocably waives any and all rights such party may now or
hereafter have to object to such jurisdiction under the
constitution or laws of the State of Wisconsin or the
Constitution or laws of the United States of America or
otherwise.
(o) WAIVER OF JURY TRIAL. EACH OF THE PARTIES HEREBY
IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO A JURY TRIAL IN
CONNECTION WITH THIS AGREEMENT OR ANY DISPUTE OR CONTROVERSY
HEREUNDER OR THE TRANSACTIONS THAT ARE THE SUBJECT HEREOF.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first written above.
SELLER: BUYER:
NDC, INC. MEGA MARTS, INC.
By: By:
____________________________, ___________________________
_______________, President Edward G. Kitz, Vice President
ROUNDY'S:
ROUNDY'S, INC.
By:
___________________________
Edward G. Kitz, Vice-President,
Secretary, Treasurer
EXHIBITS
Exhibit 1(e) New Lease
Exhibit 1(e)(i) Landlord's Consent
THE ABOVE-DESCRIBED EXHIBITS AND SCHEDULES, AND THE DISCLOSURE
SCHEDULE TO THIS AGREEMENT, ARE OMITTED FROM THIS FILING PURSUANT
TO ITEM 601(b)(1) OF REGULATION S-K. THE REGISTRANT, ROUNDY'S,INC.,
HEREBY AGREES TO FURNISH A COPY OF SUCH EXHIBITS AND SCHEDULES TO
THE COMMISSION UPON REQUEST.
Exhibit 4.6
$170,000,000 REVOLVING LOANS
$80,000,000 TERM LOAN
CREDIT AGREEMENT
AMONG
ROUNDY'S, INC.,
THE LENDERS,
BANK ONE, WISCONSIN
AS AGENT,
HARRIS TRUST AND SAVINGS BANK
AND NATIONAL CITY BANK
AS CO-SYNDICATION AGENTS,
AND
BANC ONE CAPITAL MARKETS, INC.
AS LEAD ARRANGER AND SOLE BOOK RUNNER
Dated as of March 31, 2000
<PAGE>
TABLE OF CONTENTS
ARTICLE I. DEFINITIONS 1
ARTICLE II. THE CREDITS 20
2.1. Term Loans. 20
2.1.1. Making the Term Loans. 20
2.1.2 Interest Repayment Dates; Repayment
of the Term Loans. 20
2.2. Revolving Loans. 21
2.2.1. Making the Revolving Loans. 22
2.2.2. Interest Repayment Dates;
Repayment of the Revolving Loans. 22
2.3 Swing Line Loans. 22
2.3.1. Amount of Swing Line Loans. 22
2.3.2. Borrowing Notice. 22
2.3.3. Making of Swing Line Loans. 22
2.3.4. Repayment of Swing Line Loans. 23
2.4 Types of Advances 23
2.5 Commitment Fee; Reduction in Aggregate Revolving
Loan Commitment 24
2.6 Minimum Amount of Each Advance 24
2.7 Certain Principal Payments. 24
2.7.1 Optional Payments. 24
2.7.2 Mandatory Payments. 25
2.8 Method of Selecting Types and Interest Periods
for New Advances. 26
2.9 Conversion and Continuation of Outstanding
Advances. 26
2.10 Changes in Interest Rate, etc. 27
2.11 Rates Applicable After Default. 27
2.12 Method of Payment. 27
2.13 Noteless Agreement; Evidence of Indebtedness. 28
2.14 Telephonic Notices. 28
2.15 Interest and Fees Basis. 28
2.16 Notification of Advances, Interest Rates,
Prepayment and Commitment Reduction. 29
2.17 Lending Installations. 29
2.18 Non-Receipt of Funds by the Agent. 29
2.19. Facility LCs. 29
2.19.1. Issuance. 29
2.19.2. Participations. 30
<PAGE>
2.19.3. Notice. 29
2.19.4. LC Fees. 30
2.19.5. Administration; Reimbursement by Lenders. 30
2.19.6. Reimbursement by Borrower. 31
2.19.7. Obligations Absolute 31
2.19.8. Actions of LC Issuer. 32
2.19.9. Indemnification. 32
2.19.10. Lenders' Indemnification. 33
2.19.11. Facility LC Collateral Account. 33
2.19.12. Rights as a Lender. 33
2.20 Replacement of Lender. 33
ARTICLE III. YIELD PROTECTION; TAXES 34
3.1 Yield Protection. 34
3.2 Changes in Capital Adequacy Regulations. 35
3.3 Availability of Types of Advances. 35
3.4 Funding Indemnification. 35
3.5 Taxes. 36
3.6 Lender Statements; Survival of Indemnity. 37
ARTICLE IV. CONDITIONS PRECEDENT 38
4.1 Initial Credit Extension. 38
4.2 Each Credit Extension. 41
ARTICLE V. REPRESENTATIONS AND WARRANTIES 41
5.1 Organization and Qualification. 41
5.2 Subsidiaries. 41
5.3 Power and Authority. 42
5.4 Validity and Binding Effect. 42
5.5. No Conflict. 42
5.6. Litigation. 42
5.7. Title to Properties. 43
5.8. Financial Statements. 43
5.9. Use of Proceeds; Margin Stock. 43
5.10 Full Disclosure. 44
5.11. Taxes 44
5.12. Consents and Approvals. 44
5.13. No Event of Default; Compliance with Instruments. 44
5.14. Patents, Trademarks, Copyrights, Licenses, Etc. 44
5.15. Insurance. 45
5.16. Compliance with Laws. 45
5.17. Material Contracts; Burdensome Restrictions. 45
5.18. Investment Companies: Regulated Entities. 45
5.19. Plans and Benefit Arrangements. 45
<PAGE>
5.20. Employment Matters. 46
5.21. Environmental Matters. 47
5.22 Subordinated Indebtedness. 48
5.23. Updates to Schedules. 48
5.24 Solvency. 48
ARTICLE VI. COVENANTS 49
6.1. Affirmative Covenants. 49
6.1.1. Preservation of Existence, Etc. 49
6.1.2. Payment of Liabilities, Including
Taxes, Etc. 49
6.1.3. Maintenance of Insurance. 50
6.1.4. Maintenance of Properties and Leases. 50
6.1.5. Maintenance of Patents, Trademarks, Etc. 50
6.1.6. Visitation Rights. 50
6.1.7. Keeping of Records and Books of Account. 50
6.1.8. Plans and Benefit Arrangements. 50
6.1.9. Compliance with Laws. 51
6.1.10. Use of Proceeds. 51
6.1.10.1. General. 51
6.1.10.2. Margin Stock. 51
6.1.10.3. Section 20 Subsidiaries. 51
6.1.11. Subordination of Intercompany Loans. 51
6.1.12. Rate Management Transactions. 51
6.2. Negative Covenants. 51
6.2.1. Indebtedness. 52
6.2.2. Liens. 52
6.2.3. Contingent Obligations. 52
6.2.4. Loans and Investments. 53
6.2.5. Dividends and Related Distributions. 54
6.2.6. Liquidations, Mergers, Consolidations,
Acquisitions. 54
6.2.7. Dispositions of Assets or Subsidiaries. 55
6.2.8. Affiliate Transactions. 55
6.2.9. Subsidiaries, Partnerships and
Joint Ventures. 55
6.2.9.1. New Subsidiaries. 55
6.2.9.2. Joinder of Subsidiaries as Required
Under Other Circumstances. 56
6.2.10. Continuation of or Change in Business. 56
6.2.11. Plans and Benefit Arrangements. 56
6.2.12. Fiscal Year. 57
6.2.13. Changes in Organizational Documents. 57
6.2.14. Financial Covenants. 57
6.2.14.1. Minimum Net Worth. 58
6.2.14.2. Leverage Ratio. 58
6.2.14.3. Fixed Charge Coverage Ratio. 58
<PAGE>
6.2.14.4. Capital Expenditures. 59
6.2.15. Subordinated Indebtedness. 59
6.2.16. Sale of Accounts. 59
6.2.17. Sale and Leaseback Transactions and
other Off-Balance Sheet Liabilities. 59
6.2.18. Financial Contracts. 59
6.3. Reporting Requirements. 59
6.3.1 Quarterly Financial Statements 60
6.3.2. Annual Financial Statements. 60
6.3.3. Certificate of the Borrower. 60
6.3.4. Notice of Default. 60
6.3.5. Notice of Litigation. 61
6.3.6. Forecasts, Other Reports and Information. 61
6.3.7. Notices Regarding Plans and Benefit
Arrangements. 61
6.3.7.1. Certain Events. 61
6.3.7.2. Notices of Involuntary Termination and
Annual Reports. 62
6.3.7.3. Notice of Voluntary Termination. 62
ARTICLE VII. DEFAULTS 63
ARTICLE VIII. ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES 65
8.1 Acceleration; Facility LC Collateral Account. 65
8.2 Amendments. 66
8.3 Preservation of Right. 67
ARTICLE IX. GENERAL PROVISIONS 68
9.1 Survival of Representations. 68
9.2 Governmental Regulation. 68
9.3 Headings. 68
9.4 Entire Agreement. 68
9.5 Several Obligations; Benefits of this Agreement. 68
9.6 Expenses; Indemnification. 68
9.7 Number of Documents. 69
9.8 Accounts. 69
9.9 Severability of Provisions. 69
9.10 Nonliability of Lenders. 69
9.11 Confidentiality. 70
9.12. Nonreliance 70
9.13 Disclosure. 70
ARTICLE X. THE AGENT 70
10.1 Appointment; Nature of Relationship. 70
10.2 Powers. 71
10.3 General Immunity. 71
<PAGE>
10.4. No Responsibility for Loans, Recitals, etc. 71
10.5 Action on Instructions of Lenders. 71
10.6 Employment of Agents and Counsel. 72
10.7 Reliance on Documents; Counsel. 72
10.8 Agent's Reimbursement and Indemnification. 72
10.9 Notice of Default. 72
10.10 Rights as a Lender. 73
10.11 Lender Credit Decision. 73
10.12. Successor Agent 73
10.13. Agent's Fee. 74
10.14 Delegation to Affiliates. 74
10.15 Execution of Collateral Documents. 74
10.16 Collateral Releases. 74
10.17 Co-Agents, Documentation Agent, Syndication
Agent, etc. 74
ARTICLE XI. SETOFF; RATABLE PAYMENTS 74
11.1 Setoff. 74
11.2 Ratable Payments. 75
ARTICLE XII. BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS 75
12.1 Successors and Assigns. 75
12.2 Participations. 76
12.2.1 Permitted Participants; Effect. 76
12.2.2 Voting Rights. 76
12.2.3 Benefit of Setoff. 76
12.3 Assignments. 76
12.3.1 Permitted Assignments. 76
12.3.2 Effect; Effective Date. 77
12.4 Dissemination of Information. 77
12.5 Tax Treatment. 77
ARTICLE XIII. NOTICES 78
13-1 Notices 78
13.2 Change of Address. 78
ARTICLE XIV. COUNTERPARTS 78
ARTICLE XV. CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY
TRIAL 79
15.1 Choice of Law. 79
15.2 Consent to Jurisdiction. 79
15.3 Waiver of Jury Trial. 79
<PAGE>
CREDIT AGREEMENT
This Credit Agreement, dated as of March 31, 2000, is among
Roundy's, Inc., the Lenders and Bank One, Wisconsin, as LC Issuer
and as Agent. The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
------------
As used in this Agreement, the following terms shall have the
following meanings:
"Acquisition" means any transaction, or any series of related
transactions, consummated on or after the date of this Agreement, by
which the Borrower or any of its Subsidiaries (i) acquires any going
business or all or substantially all of the assets of any firm,
corporation or limited liability company, or division thereof,
whether through purchase of assets, merger or otherwise or (ii)
directly or indirectly acquires (in one transaction or as the most
recent transaction in a series of transactions) at least a majority
(in number of votes) of the securities of a corporation which have
ordinary voting power for the election of directors (other than
securities having such power only by reason of the happening of a
contingency) or a majority (by percentage or voting power) of the
outstanding ownership interests of a partnership or limited
liability company.
"Advance" means a borrowing hereunder, (i) made by the Lenders
on the same Borrowing Date, or (ii) converted or continued by the
Lenders on the same date of conversion or continuation, consisting,
in either case, of the aggregate amount of the several Loans (other
than Swing Line Loans) of the same Type and, in the case of
Eurodollar Loans, for the same Interest Period.
"Affiliate" of any Person means any other Person directly or
indirectly controlling, controlled by or under common control with
such Person. A Person shall be deemed to control another Person if
the controlling Person owns 10% or more of any class of voting
securities (or other ownership interests) of the controlled Person
or possesses, directly or indirectly, the power to direct or cause
the direction of the management or policies of the controlled
Person, whether through ownership of stock, by contract or
otherwise.
"Agent" means Bank One in its capacity as contractual
representative of the Lenders pursuant to Article X, and not in its
individual capacity as a Lender, and any successor Agent appointed
pursuant to Article X.
"Agent's Letter" shall have the meaning assigned to that term
in Section 10.13.
<PAGE>
"Aggregate Commitment" means the aggregate of the Commitments
of all the Lenders, as reduced from time to time pursuant to the
terms hereof.
"Aggregate Outstanding Credit Exposure" means, at any time, the
aggregate of the Outstanding Credit Exposure of all Lenders.
"Aggregate Outstanding Revolving Credit Exposure" means, at any
time, the aggregate of the Outstanding Revolving Credit Exposure of
all Lenders.
"Aggregate Revolving Loan Commitment" means the aggregate of
the Revolving Loan Commitments of all the Lenders, as reduced from
time to time pursuant to the terms hereof.
"Aggregate Term Loan Commitment" means the aggregate of the
Term Loan Commitments of all the Lenders.
"Agreement" means this credit agreement, as it may be amended
or modified and in effect from time to time.
"Agreement Accounting Principles" means generally accepted
accounting principles as in effect from time to time, applied in a
manner consistent with that used in preparing the financial
statements referred to in Section 5.8.
"Alternate Base Rate" means, for any day, a rate of interest
per annum equal to the higher of (i) the Prime Rate for such day or
(ii) the sum of the Federal Funds Effective Rate for such day plus
1/2% per annum.
"Applicable Fee Rate" means, at any time, the percentage rate
per annum at which commitment fees are accruing on the unused
portion of the Aggregate Revolving Loan Commitment at such time as
set forth in the Pricing Schedule.
"Applicable Margin" means, with respect to Credit Extensions of
any Type at any time, the percentage rate per annum which is
applicable at such time with respect to Credit Extensions of such
Type as set forth in the Pricing Schedule.
"Arranger" means Banc One Capital Markets, Inc., a Delaware
corporation, and its successors, in its capacity as Lead Arranger
and Sole Book Runner.
"Article" means an article of this Agreement unless another
document is specifically referenced.
"Asset Disposition" means the sale, sale leaseback, exchange or
similar disposition (including by means of merger, consolidation or
amalgamation) of any Property, business or assets of the Borrower or
its Subsidiaries (other than sales of inventory in the ordinary
course of business or obsolete or worn-out Property in the ordinary
course of business) to any Person or Persons other than the Borrower
or any of its Subsidiaries.
<PAGE>
"Authorized Representative" means: (i) with respect to or for
purposes of any notice or communication initiated by a Loan Party
pursuant to Article II of this Agreement, any of the following
individuals: Robert Ranus, Edward Kitz, Kim Brurok or Beth Preston
or such other persons as the Borrower may from time to time
designate in writing to the Agent, acting singly: (ii) with respect
to any other reference herein to an "Authorized Representative" of a
Loan Party, any of the President, Chief Financial Officer, Secretary
or Treasurer of such Loan Party, acting singly; and (iii) with
respect to any reference herein to an "Authorized Person" of any
Lender, any Vice President or Director of such Lender, acting
singly.
"Bank One" means Bank One, Wisconsin, in its individual
capacity, and its successors and assigns.
"Benefit Arrangement" means at any time an "employee benefit
plan," within the meaning of Section 3(3) of ERISA, which is neither
a Plan nor a Multiemployer Plan and which is maintained, sponsored
or otherwise contributed to by any member of the Controlled Group.
"Borrower" means Roundy's, Inc., a Wisconsin corporation, and
its successors and assigns.
"Borrowing Date" means a date on which a Credit Extension is
made hereunder.
"Borrowing Notice" is defined in Section 2.8.
"Business Day" means (i) with respect to any borrowing, payment
or rate selection of Eurodollar Advances, a day (other than a
Saturday or Sunday) on which banks generally are open in Chicago and
New York for the conduct of substantially all of their commercial
lending activities, interbank wire transfers can be made on the
Fedwire system and dealings in United States dollars are carried on
in the London interbank market and (ii) for all other purposes, a
day (other than a Saturday or Sunday) on which banks generally are
open in Chicago for the conduct of substantially all of their
commercial lending activities and interbank wire transfers can be
made on the Fedwire system.
"Capital Expenditures" means, without duplication, any
expenditures for any purchase or other acquisition of any asset
which would be classified as a fixed or capital asset on a
consolidated balance sheet of the Borrower and its Subsidiaries
prepared in accordance with Agreement Accounting Principles
excluding (i) expenditures of insurance proceeds to rebuild or
replace any asset after a casualty loss and (ii) leasehold
improvement expenditures for which the Borrower or a Subsidiary is
reimbursed promptly by the lessor.
"Capitalized Lease" of a Person means any lease of Property by
such Person as lessee which would be capitalized on a balance sheet
of such Person prepared in accordance with Agreement Accounting
Principles.
<PAGE>
"Capitalized Lease Obligations" of a Person means the amount of
the obligations of such Person under Capitalized Leases which would
be shown as a liability on a balance sheet of such Person prepared
in accordance with Agreement Accounting Principles.
"Cash Equivalent Investments" means (i) direct obligations of
the United States of America or any agency or instrumentality
thereof or obligations backed by the full faith and credit of the
United States of America maturing in twelve (12) months or less from
the date of acquisition; (ii) commercial paper either (A) maturing
in 270 days or less rated not lower than A-1, by S&P or P-1 or
better by Moody's on the date of acquisition or (B) maturing in 30
days or less which is not rated but with respect to which the issuer
has an unconditional line of credit supporting the repayment of such
paper with a commercial bank whose obligations are rated A-1, A or
the equivalent or better by S&P on the date of acquisition; (iii)
demand deposits, time deposits or certificates of deposit maturing
within one year in commercial banks whose obligations are rated A-1,
A or the equivalent or better by S&P on the date of acquisition; and
(iv) money market accounts or mutual fund accounts investing solely
in securities described in (i) through (iii) above.
"Change in Control" means the acquisition by any Person (other
than the Roundy's, Inc. Voting Trust), or two or more Persons acting
in concert, of beneficial ownership (within the meaning of Rule
13d-3 of the Securities and Exchange Commission under the Securities
Exchange Act of 1934) of 30% or more of the outstanding shares of
voting stock of the Borrower.
"Closing Date" means the date upon which the conditions
precedent to the initial Credit Extension have been satisfied or
waived by the Lenders and the Term Loans and initial Revolving Loans
are made hereunder.
"Code" means the Internal Revenue Code of 1986, as amended,
reformed or otherwise modified from time to time.
"Collateral Documents" means, collectively, the Pledge and
Security Agreement and the Mortgages.
"Collateral Shortfall Amount" is defined in Section 8.1.
"Commitment" means, for each Lender, collectively, such
Lender's Revolving Loan Commitment and Term Loan Commitment.
"Consolidated Capital Expenditures" means, with reference to
any period, the Capital Expenditures of the Borrower and its
Subsidiaries calculated on a consolidated basis for such period.
"Consolidated EBITDA" means Consolidated Net Income plus, to
the extent deducted from revenues in determining Consolidated Net
Income, (i) Patronage Dividends, (ii) Consolidated Interest Expense,
(iii) expense for taxes paid or accrued, (iv) depreciation, (v)
amortization and (vi) extraordinary losses incurred other than in
the ordinary course of business, minus, to the extent included in
<PAGE>
Consolidated Net Income, extraordinary gains realized other than in
the ordinary course of business, all calculated for the Borrower and
its Subsidiaries on a consolidated basis.
"Consolidated Funded Indebtedness" means at any time the
aggregate dollar amount of Consolidated Indebtedness which has
actually been funded and is outstanding at such time, whether or not
such amount is due or payable at such time.
"Consolidated Indebtedness" means at any time the Indebtedness
of the Borrower and its Subsidiaries calculated on a consolidated
basis as of such time.
"Consolidated Intangible Assets" means at any time goodwill
(including any amounts, however designated, representing the excess
of the purchase price paid for assets or stock acquired subsequent
to the date of this Agreement over the value assigned thereto on the
books of the Borrower and its Subsidiaries), patents, trademarks,
trade names, copyrights and all other intangible assets of the
Borrower and its Subsidiaries calculated on a consolidated basis as
of such time.
"Consolidated Interest Expense" means, with reference to any
period, the interest expense of the Borrower and its Subsidiaries
calculated on a consolidated basis for such period.
"Consolidated Net Income" means, with reference to any period,
the net income (or loss) of the Borrower and its Subsidiaries
calculated on a consolidated basis for such period.
"Consolidated Net Rentals" means, with reference to any period,
the Net Rentals of the Borrower and its Subsidiaries calculated on a
consolidated basis for such period.
"Consolidated Net Worth" means at any time the consolidated
stockholders' equity of the Borrower and its Subsidiaries calculated
on a consolidated basis as of such time plus the book value of the
Borrower's redeemable common stock.
"Consolidated Tangible Assets" means at any time the total
amount of all assets of the Borrower and its Subsidiaries (less
depreciation, depletion and other properly deductible valuation
reserves) less all Consolidated Intangible Assets.
"Consolidated Working Capital" means, as at any date of
determination, the excess, if any, of (i) the current assets of the
Borrower and its Subsidiaries calculated on a consolidated basis at
such date (except cash and Cash Equivalent Investments) over (ii)
the current liabilities of the Borrower and its Subsidiaries
calculated on a consolidated basis at such date (except current
maturities of long-term debt and Revolving Loans as of such date and
all accrued interest as of such date).
"Contingent Obligation" of a Person means any agreement,
undertaking or arrangement by which such Person guarantees,
contingently agrees to purchase or provide funds for the payment of,
<PAGE>
or otherwise becomes or is contingently liable upon, the obligation
or liability of any other Person, or agrees to maintain the net
worth or working capital or other financial condition of any other
Person, or otherwise assures any creditor of such other Person
against loss, including, without limitation, any comfort letter,
operating agreement, take-or-pay contract or the obligations of any
such Person as general partner of a partnership with respect to the
liabilities of the partnership.
"Conversion/Continuation Notice" is defined in Section 2.9.
"Controlled Group" means all members of a controlled group of
corporations or other business entities and all trades or businesses
(whether or not incorporated) under common control which, together
with the Borrower or any of its Subsidiaries, are treated as a
single employer under Section 414 of the Code.
"Credit Extension" means the making of an Advance or the
issuance of a Facility LC hereunder.
"Default" means an event described in Article VII.
"Environmental Complaint" means any written complaint setting
forth a cause of action for personal or property damage or natural
resource damage or equitable relief, order, notice of violation,
citation, request for information issued pursuant to any
Environmental Laws by an Official Body, subpoena or other written
notice of any type relating to, arising out of, or issued pursuant
to, any of the Environmental Laws or any Environmental Conditions,
as the case may be.
"Environmental Conditions" means any conditions of the
environment, including the workplace, the ocean, natural resources
(including flora or fauna), soil, surface water, groundwater, any
actual or potential drinking water supply sources, substrata or the
ambient air, relating to or arising out of, or caused by, the use,
handling, storage, treatment, recycling, generation, transportation,
release, spilling, leaking, pumping, emptying, discharging,
injecting, escaping, leaching, disposal, dumping, threatened release
or other management or mismanagement of Regulated Substances
resulting from the use of, or operations on, any Property.
"Environmental Laws" means any and all federal, state, local
and foreign statutes, laws, judicial decisions, regulations,
ordinances, rules, judgments, orders, decrees, plans, injunctions,
permits, concessions, grants, franchises, licenses, agreements and
other governmental restrictions relating to (i) the protection of
the environment, (ii) the effect of the environment on human health,
(iii) emissions, discharges or releases of pollutants, contaminants,
hazardous substances or wastes into surface water, ground water or
land, or (iv) the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants,
contaminants, hazardous substances or wastes or the clean-up or
other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and any rule or regulation
issued thereunder.
"Eurodollar Advance" or "Eurodollar Loan" means an Advance
which, except as otherwise provided in Section 2.11, bears interest
at the applicable Eurodollar Rate.
<PAGE>
"Eurodollar Base Rate" means, with respect to a Eurodollar
Advance for the relevant Interest Period, the applicable British
Bankers' Association Interest Settlement Rate for deposits in U.S.
dollars appearing on Reuters Screen FRBD as of 11:00 a.m. (London
time) two Business Days prior to the first day of such Interest
Period, and having a maturity equal to such Interest Period,
provided that, (i) if Reuters Screen FRBD is not available to the
Agent for any reason, the applicable Eurodollar Base Rate for the
relevant Interest Period shall instead be the applicable British
Bankers' Association Interest Settlement Rate for deposits in U.S.
dollars as reported by any other generally recognized financial
information service as of 11:00 a.m. (London time) two Business Days
prior to the first day of such Interest Period, and having a
maturity equal to such Interest Period, and (ii) if no such British
Bankers' Association Interest Settlement Rate is available to the
Agent, the applicable Eurodollar Base Rate for the relevant Interest
Period shall instead be the rate determined by the Agent to be the
rate at which Bank One or one of its Affiliate banks offers to place
deposits in U.S. dollars with first-class banks in the London
interbank market at approximately 11:00 a.m. (London time) two
Business Days prior to the first day of such Interest Period, in the
approximate amount of Bank One's relevant Eurodollar Loan and having
a maturity equal to such Interest Period.
"Eurodollar Rate" means, with respect to a Eurodollar Advance
for the relevant Interest Period, the sum of (i) the quotient of (a)
the Eurodollar Base Rate applicable to such Interest Period, divided
by (b) one minus the Reserve Requirement (expressed as a decimal)
applicable to such Interest Period, plus (ii) the Applicable Margin.
"Excess Cash Flow" means, for any fiscal year of the Borrower,
an amount equal to the Borrower's (i) Consolidated EBITDA for such
period minus (ii) income taxes paid in cash for such period minus
(iii) Consolidated Capital Expenditures paid in cash during such
period minus (iv) Consolidated Interest Expense for such period
minus (v) all payments of the principal portion of the Term Loans
and scheduled amortization of the principal portion of all other
term Indebtedness of the Borrower and its Subsidiaries during such
period minus (vi) cash payments in respect of extraordinary and
nonrecurring items minus (vii) the increase (or plus the decrease)
in Consolidated Working Capital during such period (provided, that
for purposes of determining the Borrower's Consolidated Working
Capital for its 2000 fiscal year, the amount of Working Capital (as
hereinafter defined) of any Person that the Borrower acquires during
its 2000 fiscal year (an "Acquired Person") shall be added as an
asset to the Borrower's audited consolidated and consolidating
balance sheet dated as of January 1, 2000; for purposes hereof,
"Working Capital" means, as at any date of determination, the
excess, if any, of (A) the current assets of the Acquired Person
calculated at such date (except cash and Cash Equivalent
Investments) over (B) the current liabilities of the Acquired Person
calculated at such date (except current maturities of long-term debt
and all accrued interest as of such date) minus (viii) Patronage
Dividends paid in cash in an amount not to exceed thirty percent
(30%) of all Patronage Dividends, in each case as calculated in
accordance with Agreement Account Principles minus (ix) permitted
redemptions of Borrower's common stock.
"Excluded Taxes" means, in the case of each Lender or
applicable Lending Installation and the Agent, taxes imposed on its
overall net income, and franchise taxes imposed on it under the laws
of any jurisdiction.
<PAGE>
"Exhibit" refers to an exhibit to this Agreement, unless
another document is specifically referenced.
"Existing Letters of Credit" means those letters of credit
outstanding on the Closing Date and identified on Schedule 2.19.
"Facility LC" is defined in Section 2.19.1.
"Facility LC Application" is defined in Section 2.19.3.
"Facility LC Collateral Account" is defined in Section
2.19.11.
"Federal Funds Effective Rate" means, for any day, an interest
rate per annum equal to the weighted average of the rates on
overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as
published for such day (or, if such day is not a Business Day, for
the immediately preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day which
is a Business Day, the average of the quotations at approximately
10:00 a.m. (Chicago time) on such day on such transactions received
by the Agent from three Federal funds brokers of recognized standing
selected by the Agent in its sole discretion.
"Financial Contract" of a Person means (i) any exchange-traded
or over-the-counter futures, forward, swap or option contract or
other financial instrument with similar characteristics or (ii) any
Rate Management Transaction.
"Floating Rate" means, for any day, a rate per annum equal to
(i) the Alternate Base Rate for such day plus (ii) the Applicable
Margin, in each case changing when and as the Alternate Base Rate
changes.
"Floating Rate Advance" or "Floating Rate Loan" means an
Advance which, except as otherwise provided in Section 2.11, bears
interest at the Floating Rate.
"General Intangibles Mortgage" means that certain General
Intangibles Mortgage and Security Agreement dated as of the Closing
Date, executed by the Borrower in favor of the Agent, for the
ratable benefit of the Lenders, as it may be amended or modified and
in effect from time to time.
"Guarantors" means each of the Borrower's Subsidiaries that are
parties to the Guaranty, and their successors and assigns.
"Guaranty" means that certain Guaranty dated as of the Closing
Date, executed by certain of the Borrower's direct and indirect
Subsidiaries as identified therein in favor of the Agent, for the
ratable benefit of the Lenders, as it may be amended or modified and
in effect from time to time.
<PAGE>
"Indebtedness" of a Person means such Person's (i) obligations
for borrowed money, (ii) obligations representing the deferred
purchase price of Property or services (other than accounts payable
arising in the ordinary course of such Person's business payable on
terms customary in the trade), (iii) obligations, whether or not
assumed, secured by Liens or payable out of the proceeds or
production from Property now or hereafter owned or acquired by such
Person, (iv) obligations which are evidenced by notes, acceptances,
or other similar instruments, (v) obligations of such Person to
purchase securities or other Property arising out of or in
connection with the sale of the same or substantially similar
securities or Property, (vi) Capitalized Lease Obligations (vii)
Contingent Obligations, (viii) Reimbursement Obligations, (ix) Net
Mark-to-Market Exposure under Rate Management Transactions and other
Financial Contracts, (x) Off-Balance Sheet Liabilities, (xi) Sale
and Leaseback Transactions, and (xii) any other obligation for
borrowed money or other similar financial accommodation which in
accordance with Agreement Accounting Principles would be shown as a
liability on the consolidated balance sheet of such Person, but
excluding guaranties by one Loan Party of the Indebtedness of
another Loan Party.
"Ineligible Security" means any security which may not be
underwritten or dealt in by member banks of the Federal Reserve
System under Section 16 of the Banking Act of 1933 (12 U.S.C.
Section 24, Seventh), as amended.
"Intercompany Subordination Agreement" means that certain
subordination agreement among the Loan Parties in the form attached
hereto as Exhibit 1.1(A).
"Interest Period" means, with respect to a Eurodollar Advance,
a period of one, two, three or six months commencing on a Business
Day selected by the Borrower pursuant to this Agreement. Such
Interest Period shall end on the day which corresponds numerically
to such date one, two, three or six months thereafter, provided,
however, that if there is no such numerically corresponding day in
such next, second, third or sixth succeeding month, such Interest
Period shall end on the last Business Day of such next, second,
third or sixth succeeding month. If an Interest Period would
otherwise end on a day which is not a Business Day, such Interest
Period shall end on the next succeeding Business Day, provided,
however, that if said next succeeding Business Day falls in a new
calendar month, such Interest Period shall end on the immediately
preceding Business Day.
"Investment" of a Person means any loan, advance (other than
commission, travel and similar advances to officers and employees
made in the ordinary course of business), extension of credit (other
than accounts receivable arising in the ordinary course of business
on terms customary in the trade) or contribution of capital by such
Person; stocks, bonds, mutual funds, partnership interests, notes,
debentures or other securities owned by such Person; any deposit
accounts and certificate of deposit owned by such Person; and
structured notes, derivative financial instruments and other similar
instruments or contracts owned by such Person.
"Labor Contracts" means all employment agreements, employment
contracts, collective bargaining agreements and other agreements
among any Loan Party and its employees.
"LC Fee" is defined in Section 2.19.4.
<PAGE>
"LC Issuer" means Bank One (or any subsidiary or affiliate of
Bank One designated by Bank One) in its capacity as issuer of
Facility LCs hereunder.
"LC Obligations" means, at any time, the sum, without
duplication, of (i) the aggregate undrawn stated amount under all
Facility LCs outstanding at such time plus (ii) the aggregate unpaid
amount at such time of all Reimbursement Obligations.
"LC Payment Date" is defined in Section 2.19.5.
"Lenders" means the lending institutions listed on the
signature pages of this Agreement and their respective successors
and assigns. Unless otherwise specified, the term "Lenders"
includes Bank One in its capacity as Swing Line Lender.
"Lending Installation" means, with respect to a Lender or the
Agent, the office, branch, subsidiary or affiliate of such Lender or
the Agent listed on the signature pages hereof or on a Schedule or
otherwise selected by such Lender or the Agent pursuant to Section
2.17.
"Leverage Ratio" means, as of any date of calculation, the
ratio of (i) Consolidated Funded Indebtedness outstanding on such
date to (ii) Consolidated EBITDA for the Borrower's then most-
recently ended four fiscal quarters.
"Lien" means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance or other
security agreement of any kind or nature whatsoever (including,
without limitation, the interest of a vendor or lessor under any
conditional sale, Capitalized Lease or other title retention
agreement).
"Loan" means, with respect to a Lender, such Lender's loans
made pursuant to Article II (or any conversion or continuation
thereof), and collectively all Revolving Loans and Term Loans,
whether made or continued as or converted to Floating Rate Advances
or Eurodollar Advances and, in the case of the Swing Line Lender,
any Swing Line Loan made by it pursuant to Section 2.3.
"Loan Documents" means this Agreement, the Agent's Letter, any
Notes issued pursuant to Section 2.13, the Collateral Documents, the
Facility LCs, the Facility LC Applications, the Guaranty, the Pledge
and Security Agreements, the Mortgages, the General Intangibles
Mortgage, the Intercompany Subordination Agreement, the
Subordination Agreement, and any other instruments, certificates or
documents delivered or contemplated to be delivered hereunder or
thereunder or in connection herewith or therewith, as the same may
be supplemented or amended from time to time in accordance herewith
or therewith, and "Loan Document" shall mean any of the Loan
Documents.
"Loan Parties" means, collectively, the Borrower and the
Guarantors and "Loan Party" shall mean any of the Loan Parties.
<PAGE>
"Material Adverse Effect" means a material adverse effect on
(i) the business, Property, condition (financial or otherwise),
results of operations, or prospects of the Borrower and its
Subsidiaries taken as a whole, (ii) the ability of the Borrower to
perform its obligations under the Loan Documents to which it is a
party, or (iii) the validity or enforceability of any of the Loan
Documents or the rights or remedies of the Agent, the LC Issuer or
the Lenders thereunder.
"Material Subsidiary" means, on any date of determination, any
Subsidiary which meets the requirements set forth in (i) or (ii)
below:
(i) the gross revenues of such Subsidiary over the twelve-
months preceding the date of determination equals or exceeds 5% of
the consolidated gross revenues of the Borrower and its Subsidiaries
(determined in accordance with Agreement Accounting Principles); or
(ii) the book value of the assets of such Subsidiary on such
date equals or exceeds 5% of the book value of the consolidated
assets of the Borrower and its Subsidiaries (determined in
accordance with Agreement Accounting Principles).
If the Borrower acquires assets or stock or other ownership
interests of another business (the "Acquired Business") in a
Permitted Acquisition (as that term is defined in Section 6.2.6)
whether by merger, purchase or otherwise, the Borrower shall
determine whether each Subsidiary of Borrower is a "Material
Subsidiary" on the date of such Permitted Acquisition after giving
effect to such Permitted Acquisition and the Borrower shall treat
the Acquired Business and any Subsidiaries formed or acquired by the
Borrower in connection therewith as having been owned by the
Borrower throughout the 12 months preceding the date of such
Permitted Acquisition for purposes of clause (i) above.
"Mega Marts Agreement" means that certain Stock Purchase
Agreement dated as of March 31, 2000 among the Borrower and the
shareholders of Mega Marts, Inc.
"Mega Marts Notes" means those certain 8.25% promissory notes
due five years from the consummation of the transactions
contemplated by the Mega Marts Agreements, in an original principal
amount of $39,000,000, issued and outstanding from time to time
under, and pursuant to, the Mega Marts Agreement.
"Modify" and "Modification" are defined in Section 2.19.1.
"Moody's" means Moody's Investors Service, Inc.
"Mortgages" means those certain Real Estate Mortgages dated as
of the Closing Date, executed by the Borrower and certain of the
Guarantors, for the ratable benefit of the Lenders, as the same may
be amended or modified and in effect from time to time.
"Multiemployer Plan" means any employee benefit plan which is a
"multiemployer plan" within the meaning of Section 4001(a)(3) of
ERISA and to which the Borrower or any member of the Controlled
<PAGE>
Group is then making or accruing an obligation to make contributions
or, within the preceding five Plan years, has made or had an
obligation to make such contributions.
"Multiple Employer Plan" means a Plan which has two or more
contributing sponsors (including the Borrower or any member of the
Controlled Group) at least two of whom are not under common control,
as such a plan is described in Sections 4063 and 4064 of ERISA.
"Net Mark-to-Market Exposure" of a Person means, as of any date
of determination, the excess (if any) of all unrealized losses over
all unrealized profits of such Person arising from Rate Management
Transactions. "Unrealized losses" means the fair market value of
the cost to such Person of replacing such Rate Management
Transaction as of the date of determination (assuming the Rate
Management Transaction were to be terminated as of that date), and
"unrealized profits" means the fair market value of the gain to such
Person of replacing such Rate Management Transaction as of the date
of determination (assuming such Rate Management Transaction were to
be terminated as of that date).
"Net Proceeds" means (a) with respect to any Asset Disposition,
the net amount equal to the aggregate amount received in cash
(including any cash received by way of deferred payment pursuant to
a note receivable, other non-cash consideration or otherwise, but
only as and when such cash is so received) in connection with such
Asset Disposition minus the sum of (i) the reasonable fees
(including, without limitation, reasonable attorneys' fees),
commissions and other out-of-pocket expenses (as evidenced by
supporting documentation provided to the Agent) incurred by the
Borrower or any Subsidiary in connection with such Asset Disposition
and (ii) federal, state and local taxes incurred in connection with
such sale, whether payable at such time or thereafter; or (b) with
respect to the issuance of any equity security or the incurrence of
any Indebtedness by the Borrower or any of its Subsidiaries, the net
amount equal to the aggregate amount received in cash in connection
with such issuance or incurrence minus the reasonable fees
(including, without limitation, reasonable attorneys' fees),
commissions and other out-of-pocket expenses (as evidenced by
supporting documentation provided to the Agent) incurred by the
Borrower or such Subsidiary in connection with such issuance or
incurrence.
"Net Rentals" means, for any period of determination, the
greater of (i) $0 or (ii) the difference between Operating Lease
expenses and income from subleases of the Borrower and its
Subsidiaries on a consolidated basis during such period.
"Non-U.S. Lender" is defined in Section 3.5(iv).
"Note" means any Revolving Note, the Swing Line Note or any
Term Note.
"Notice of Assignment" is defined in Section 12.3.2.
"Obligations" means all unpaid principal of and accrued and
unpaid interest on the Loans, all Reimbursement Obligations, all
accrued and unpaid fees and all expenses, reimbursements,
indemnities and other obligations of the Borrower to the Lenders or
to any Lender, the Agent, the Swing Line Lender, the LC Issuer or
any indemnified party arising under the Loan Documents.
<PAGE>
"Off-Balance Sheet Liability" of a Person means (i) any
repurchase obligation or liability of such Person with respect to
accounts or notes receivable sold by such Person, (ii) any liability
under any Sale and Leaseback Transaction which is not a Capitalized
Lease, (iii) any liability under any so-called "synthetic lease"
transaction entered into by such Person, or (iv) any obligation
arising with respect to any other transaction which is the
functional equivalent of or takes the place of borrowing but which
does not constitute a liability on the balance sheets of such
Person, but excluding from this clause (iv) Operating Leases.
"Official Body" means any national, federal, state, local or
other government or political subdivision or any agency, authority,
bureau, central bank, commission, department or instrumentality of
either, or any court, tribunal, grand jury or arbitrator, in each
case whether foreign or domestic.
"Operating Lease" of a Person means any lease of Property
(other than a Capitalized Lease) by such Person as lessee which has
an original term (including any required renewals and any renewals
effective at the option of the lessor) of one year or more.
"Other Taxes" is defined in Section 3.5(ii).
"Outstanding Credit Exposure" means, as to any Lender at any
time, the sum of (i) the aggregate principal amount of its Term
Loans outstanding at such time, plus (ii) the aggregate principal
amount of its Revolving Loans outstanding at such time, plus (iii)
an amount equal to its Pro Rata Share of the LC Obligations at such
time, plus (iv) an amount equal to its Pro Rata Share of the
aggregate principal amount of Swing Line Loans outstanding at such
time.
"Outstanding Revolving Credit Exposure" means, as to any Lender
at any time, the sum of (i) the aggregate principal amount of its
Revolving Loans outstanding at such time, plus (ii) an amount equal
to its Pro Rata Share of the LC Obligations outstanding at such
time, plus (iii) an amount equal to its Pro Rata Share of Swing Line
Loans outstanding at such time.
"Participants" is defined in Section 12.2.1.
"Patronage Dividends" means "patronage dividends" as such term
is defined in Section 1388(a) of the Code which Patronage Dividends
may be excluded from taxable income pursuant to Section 1382(b) of
the Code.
"Payment Date" means (i) as to any Eurodollar Advance having an
Interest Period of three months or less, the last day of such
Interest Period, (ii) as to any Eurodollar Advance having an
Interest Period longer than three months, each day which is the last
day of each three-month interval during such Interest Period, (iii)
as to any Floating Rate Advance, the last day of each month while
such Advance is outstanding and the date of the final principal
payment in respect thereof.
"PBGC" means the Pension Benefit Guaranty Corporation, or any
successor thereto.
<PAGE>
"Permitted Liens" means:
(i) Liens for taxes, assessments, or similar
charges, incurred in the ordinary course of business and which are
not yet due and payable;
(ii) Pledges or deposits made in the ordinary course
of business to secure payment of workers' compensation, or to
participate in any fund in connection with workers' compensation,
unemployment insurance, old-age pensions or other social security
programs;
(iii) Liens of mechanics, materialmen,
warehousemen, carriers, or other like Liens, securing obligations
incurred in the ordinary course of business that are not yet due and
payable and Liens of landlords securing obligations to pay lease
payments that are not yet due and payable or in default;
(iv) Good-faith pledges or deposits made in the
ordinary course of business to secure performance of bids, tenders,
contracts (other than for the repayment of borrowed money) or
leases, not in excess of the aggregate amount due thereunder, or to
secure statutory obligations, or surety, appeal, indemnity,
performance or other similar bonds required in the ordinary course
of business;
(v) Encumbrances consisting of zoning restrictions,
easements or other restrictions on the use of real property, none of
which materially impairs the use of such property or the value
thereof, and none of which is violated in any material respect by
existing or proposed structures or land use;
(vi) Liens, security interests and mortgages in favor
of the Agent for the benefit of the Lenders;
(vii) Liens on property leased by a Loan Party
under Capitalized and Operating Leases securing obligations of such
Loan Party to the lessor under such leases;
(viii) Any Lien existing on the date of this
Agreement and described on Schedule 1.1(B), provided that the
principal amount secured thereby is not hereafter increased, and no
additional assets become subject to such Lien;
(ix) Purchase Money Security Interests in the
ordinary course of business, provided that the aggregate amount of
loans and deferred payments secured by such Purchase Money Security
Interests shall not exceed $25,000,000 (excluding for the purpose of
this computation any loans or deferred payments secured by Liens
described on Schedule 1.1(B));
(x) Liens securing Indebtedness permitted under
Section 6.2.1 (ix); and
(xi) The following, (A) if the validity or amount
thereof is being contested in good faith by appropriate and lawful
proceedings diligently conducted so long as levy and execution
<PAGE>
thereon have been stayed and continue to be stayed or (B) if a final
judgment is entered and such judgment is discharged within thirty
(30) days of entry or, in the aggregate, do not materially impair
the ability of any Loan Party to perform its Obligations hereunder
or under the other Loan Documents:
(1) Claims or Liens for taxes, assessments or charges due
and payable and subject to interest or penalty, provided that
the applicable Loan Party maintains such reserves or other
appropriate provisions as shall be required by Agreement
Accounting Principles and pays all such taxes, assessments or
charges forthwith upon the commencement of proceedings to
foreclose any such Lien;
(2) Claims, Liens or encumbrances upon, and defects of
title to, real or personal property, including any attachment
of personal or real property or other legal process prior to
adjudication of a dispute on the merits;
(3) Claims of Liens of mechanics, materialmen,
warehousemen, carriers, or other statutory nonconsensual Liens;
or
(4) Liens resulting from final judgments or orders
described in Section 7.9.
"Person" means any natural person, corporation, firm, joint
venture, partnership, limited liability company, association,
enterprise, trust or other entity or organization, or any government
or political subdivision or any agency, department or
instrumentality thereof.
"Plan" means at any time an employee pension benefit plan
(including a Multiple Employer Plan, but not a Multiemployer Plan)
which is covered by Title IV of ERISA or is subject to the minimum
funding standards under Section 412 of the Code and either (i) is
maintained by any member of the Controlled Group for employees of
any member of the Controlled Group or (ii) has at any time within
the preceding five years been maintained by any entity which was at
such time a member of the Controlled Group for employees of any
entity which was at such time a member of the Controlled Group.
"Pledge and Security Agreements" means those certain Pledge and
Security Agreements dated as of the Closing Date, executed by each
of the Loan Parties for the ratable benefit of the Lenders, as they
may be amended or modified and in effect from time to time.
"Pricing Schedule" means the Schedule attached hereto
identified as such.
"Prime Rate" means a rate per annum equal to the prime rate of
interest announced from time to time by Bank One or its parent
(which is not necessarily the lowest rate charged to any customer),
changing when and as said prime rate changes.
"Prohibited Transaction" means any prohibited transaction as
defined in Section 4975 of the Code or Section 406 of ERISA for
which neither an individual nor a class exemption has been issued by
the United States Department of Labor.
<PAGE>
"Pro Rata Share" means, with respect to any Lender at any time,
the percentage obtained by dividing (i) the sum of such Lender's
Term Loan and Revolving Loan Commitment at such time (in each case,
as adjusted from time to time in accordance with the provisions of
this Agreement) by (ii) the sum of the aggregate amount of all the
Term Loans outstanding hereunder at such time and the Aggregate
Revolving Loan Commitment at such time, provided, however, that if
all of the Revolving Loan Commitments are terminated pursuant to the
terms of this Agreement, then "Pro Rata Share" means, with respect
to any Lender at any time, the percentage obtained by diving (x) the
sum of such Lender's Term Loan and Revolving Loans outstanding at
such time by (y) the sum of the aggregate amount of all the Term
Loans and Revolving Loans outstanding hereunder at such time.
"Property" of a Person means any and all property, whether
real, personal, tangible, intangible, or mixed, of such Person, or
other assets owned, leased or operated by such Person.
"Purchase Money Security Interest" means Liens upon tangible
personal property securing loans to any Loan Party or deferred
payments by such Loan Party for the purchase of such tangible
personal property.
"Purchasers" is defined in Section 12.3.1.
"Rate Management Transaction" means any transaction (including
an agreement with respect thereto) now existing or hereafter entered
into between the Borrower and any Lender or Affiliate thereof which
is a rate swap, basis swap, forward rate transaction, commodity
swap, commodity option, equity or equity index swap, equity or
equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar
transaction, forward transaction, currency swap transaction, cross-
currency rate swap transaction, currency option or any other similar
transaction (including any option with respect to any of these
transactions) or any combination thereof, whether linked to one or
more interest rates, foreign currencies, commodity prices, equity
prices or other financial measures.
"Rate Management Obligations" of a Person means any and all
obligations of such Person, whether absolute or contingent and
howsoever and whensoever created, arising, evidenced or acquired
(including all renewals, extensions and modifications thereof and
substitutions therefor), under (i) any and all Rate Management
Transactions, and (ii) any and all cancellations, buy backs,
reversals, terminations or assignments of any Rate Management
Transactions.
"Regulated Substances" means any substance, including any
solid, liquid, semisolid, gaseous, thermal, thoriated or radioactive
material, refuse, garbage, wastes, chemicals, petroleum products, by-
products, coproducts, impurities, dust, scrap, heavy metals, defined
as a "hazardous substance," "pollution," "contaminant," "hazardous
or toxic substance," "extremely hazardous substance," "toxic
chemical," "toxic waste," "hazardous waste," "industrial waste,"
"residual water," "solid waste," "municipal waste," "mixed waste,"
"infectious waste," "chemotherapeutic waste," "medical waste," or
"regulated substance" or any related materials, substances or wastes
as now or hereafter defined pursuant to any Environmental Laws,
<PAGE>
ordinances, rules, regulations or other directives of any Official
Body, the generation, manufacture, extraction, processing,
distribution, treatment, storage, disposal, transport, recycling,
reclamation, use, reuse, spilling, leaking, dumping, injection,
pumping, leaching, emptying, discharge, escape, release or other
management or mismanagement of which is regulated by the
Environmental Laws.
"Regulation D" means Regulation D of the Board of Governors of
the Federal Reserve System as from time to time in effect and any
successor thereto or other regulation or official interpretation of
said Board of Governors relating to reserve requirements applicable
to member banks of the Federal Reserve System.
"Regulation U" means Regulation U of the Board of Governors of
the Federal Reserve System as from time to time in effect and any
successor or other regulation or official interpretation of said
Board of Governors relating to the extension of credit by banks for
the purpose of purchasing or carrying margin stocks applicable to
member banks of the Federal Reserve System.
"Reimbursement Obligations" means, at any time, the aggregate
of all obligations of the Borrower then outstanding under Section
2.19 to reimburse the LC Issuer for amounts paid by the LC Issuer in
respect of any one or more drawings under Facility LCs.
"Reportable Event" means a reportable event as defined in
Section 4043 of ERISA and the regulations issued under such section,
with respect to a Plan, excluding, however, such events as to which
the PBGC has by regulation waived the requirement of Section 4043(a)
of ERISA that it be notified within 30 days of the occurrence of
such event, provided, however, that a failure to meet the minimum
funding standard of Section 412 of the Code and of Section 302 of
ERISA shall be a Reportable Event regardless of the issuance of any
such waiver of the notice requirement in accordance with either
Section 4043(a) of ERISA or Section 412(d) of the Code.
"Reports" is defined in Section 9.6.
"Required Lenders" means Lenders in the aggregate having at
least 51% of the Aggregate Commitment or, if the Aggregate
Commitment has been terminated, Lenders in the aggregate holding at
least 51% of the Aggregate Outstanding Credit Exposure.
"Reserve Requirement" means, with respect to an Interest
Period, the maximum aggregate reserve requirement (including all
basic, supplemental, marginal and other reserves) which is imposed
under Regulation D on Eurocurrency liabilities.
"Revolving Loan" is defined in Section 2.2.1.
"Revolving Loan Commitment" means, for each Lender, the
obligation of such Lender to make Revolving Loans to, participate in
Facility LCs issued upon the application of, and participate in the
making of Swing Line Loans to, the Borrower in an amount not
exceeding the amount set forth adjacent to the caption "Revolving
Loan Commitment" opposite its signature below or as set forth in any
<PAGE>
Notice of Assignment relating to any assignment that has become
effective pursuant to Section 12.3.2, as such amount may be modified
from time to time pursuant to the terms hereof.
"Revolving Loan Pro Rata Share" means, with respect to any
Lender at any time, the percentage obtained by dividing (i) the
amount of such Lender's Revolving Loan Commitment at such time (in
each case, as adjusted from time to time in accordance with the
provisions of this Agreement) by (ii) the Aggregate Revolving Loan
Commitment at such time, provided, however, that if all of the
Revolving Loan Commitments are terminated pursuant to the terms of
this Agreement, then "Revolving Loan Pro Rata Share" means, with
respect to any Lender at any time, the percentage obtained by
dividing (x) the amount of such Lender's Revolving Loans outstanding
at such time by (y) the aggregate amount of all the Revolving Loans
outstanding hereunder at such time.
"Revolving Loan Termination Date" means March 31, 2005 or any
earlier date upon which the Aggregate Revolving Loan Commitment is
reduced to zero or otherwise terminated pursuant to the terms
hereof.
"Revolving Note" means any promissory note evidencing the
Revolving Loans issued at the request of a Lender pursuant to
Section 2.13 in the form of Exhibit E-1.
"S&P" means Standard and Poor's Ratings Services, a division of
The McGraw Hill Companies, Inc.
"Sale and Leaseback Transaction" means any sale or other
transfer of Property by any Person with the intent to lease such
Property as lessee.
"Schedule" refers to a specific schedule to this Agreement,
unless another document is specifically referenced.
"Section" means a numbered section of this Agreement, unless
another document is specifically referenced.
"Section 20 Subsidiary" means the Subsidiary of the bank
holding company controlling any bank, which Subsidiary has been
granted authority by the Federal Reserve Board to underwrite and
deal in certain Ineligible Securities.
"Secured Obligations" means, collectively, (i) the Obligations
and (ii) all Rate Management Obligations owing to one or more
Lenders.
"Seller Agreements" means collectively, the Mega Marts
Agreement, the Ultra Mart Agreement, and that certain Asset Purchase
Agreement dated as of March 31, 2000 among the Borrower, NDC, Inc.
and Mega Marts, Inc.
<PAGE>
"Single Employer Plan" means a Plan maintained by the Borrower
or any member of the Controlled Group for employees of the Borrower
or any member of the Controlled Group.
"Subordinated Indebtedness" of a Person means any Indebtedness
of such Person the payment of which is subordinated to payment of
the Secured Obligations to the written satisfaction of the Required
Lenders, including without limitation the Indebtedness evidenced by
the Mega Marts Notes which is subordinated to the Secured
Obligations pursuant to the terms of the Subordination Agreement;
provided, however, that the term "Subordinated Indebtedness" shall
not be deemed to include up to $1,000,000 (plus interest accrued
thereon at a rate not to exceed 8.25% per annum) in respect of
noncompetition payments to be made by the Borrower to certain former
shareholders of Mega Marts, Inc. pursuant to the terms of the Mega
Marts Agreement.
"Subordination Agreement" means that certain Subordination
Agreement dated as of the Closing Date, executed by the Borrower,
the Agent on behalf of the Lenders, and certain former shareholders
of Mega Marts, Inc.
"Subsidiary" of a Person means (i) any corporation more than
50% of the outstanding securities having ordinary voting power of
which shall at the time be owned or controlled, directly or
indirectly, by such Person or by one or more of its Subsidiaries or
by such Person and one or more of its Subsidiaries, or (ii) any
partnership, limited liability company, association, joint venture
or similar business organization more than 50% of the ownership
interests having ordinary voting power of which shall at the time be
so owned or controlled. Unless otherwise expressly provided, all
references herein to a "Subsidiary" shall mean each direct and
indirect Subsidiary of the Borrower.
"Substantial Portion" means, with respect to the Property of
the Borrower and its Subsidiaries, Property which (i) represents
more than 10% of the consolidated assets of the Borrower and its
Subsidiaries as would be shown in the consolidated financial
statements of the Borrower and its Subsidiaries as at the beginning
of the twelve-month period ending with the month in which such
determination is made, or (ii) is responsible for more than 10% of
the consolidated net sales or of the consolidated net income of the
Borrower and its Subsidiaries as reflected in the financial
statements referred to in clause (i) above.
"Swing Line Commitment" means the obligation of the Swing Line
Lender to make Swing Line Loans up to a maximum principal amount of
$5,000,000 at any one time outstanding
"Swing Line Lender" means Bank One or such other Lender that
may succeed to its rights and obligations pursuant to the terms of
this Agreement .
"Swing Line Loan" means a Loan made available to the Borrower
by the Swing Line Lender pursuant to Section 2.3 hereof.
"Swing Line Note" means any note evidencing the Swing Line
Loans issued at the request of the Agent pursuant to Section 2.13 in
the form of Exhibit E-2.
<PAGE>
"Taxes" means any and all present or future taxes, duties,
levies, imposts, deductions, charges or withholdings, and any and
all liabilities with respect to the foregoing, but excluding
Excluded Taxes and Other Taxes.
"Term Loan" is defined in Section 2.1.1.
"Term Loan Commitment" means, for each Lender, the obligation
of such Lender to make Term Loans not exceeding the amount set forth
adjacent to the caption "Term Loan Commitment" opposite its
signature below or as set forth in any Notice of Assignment relating
to any assignment that has become effective pursuant to Section
12.3.2, as such amount may be modified from time to time pursuant to
the terms hereof.
"Term Loan Termination Date" means March 31, 2007.
"Term Note" means any promissory note evidencing a Term Loan
issued at the request of a Lender pursuant to Section 2.13 in the
form of Exhibit E-3.
"Transferee" is defined in Section 12.4.
"Type" means, with respect to any Credit Extension, its nature
as a Floating Rate Advance or a Eurodollar Advance.
"Ultra Mart Agreement" means that certain Asset Purchase
Agreement dated as of December 23, 1999 among the Borrower, Ultra
Mart, Inc., Robert A. Farrell, Scott A. Sylla and Ultra Mart Foods,
Inc.
"Unmatured Default" means an event which but for the lapse of
time or the giving of notice, or both, would constitute a Default.
The foregoing definitions shall be equally applicable to both
the singular and plural forms of the defined terms. Terms defined
in the Wisconsin Uniform Commercial Code which are not otherwise
defined in this Agreement are used herein as defined in the
Wisconsin Commercial Code as in effect on the date hereof.
ARTICLE II
THE CREDITS
------------
2.1. Term Loans.
2.1.1. Making the Term Loans. Each Lender severally
agrees to make, on the Closing Date, a term loan to the Borrower in
an amount equal to such Lender's Term Loan Commitment (each
<PAGE>
individually, a "Term Loan" and, collectively, the "Term Loans").
All Term Loans shall be made by the Lenders on the Closing Date
simultaneously, it being understood that no Lender shall be
responsible for any failure by any other Lender to perform its
obligation to make any Term Loan hereunder nor shall the Term Loan
Commitment of any Lender be increased or decreased as a result of
any such failure.
2.1.2. Interest Repayment Dates; Repayment of the Term
Loans. The Term Loans shall be repaid as follows: from June 30,
2000 through and including March 31, 2002, the accrued but unpaid
interest on the Term Loans shall be repaid on each Payment Date; and
(ii) thereafter, the accrued but unpaid interest on the Term Loans
shall be repaid on each Payment Date and the outstanding principal
amount of the Term Loans shall be repaid in consecutive quarterly
installments commencing on June 30, 2002, in the aggregate amounts
set forth below, and continuing thereafter until the Term Loan
Termination Date, and the Term Loans shall be permanently reduced by
the amount of each such installment on the date payment thereof is
made hereunder.
Principal Payment Date Term Loan Installment Amount
---------------------- ----------------------------
June 30, 2002 $4,000,000
September 30, 2002 $4,000,000
December 31, 2002 $4,000,000
March 31, 2003 $4,000,000
June 30, 2003 $4,000,000
September 30, 2003 $4,000,000
December 31, 2003 $4,000,000
March 31, 2004 $4,000,000
June 30, 2004 $4,000,000
September 30, 2004 $4,000,000
December 31, 2004 $4,000,000
March 31, 2005 $4,000,000
June 30, 2005 $4,000,000
September 30, 2005 $4,000,000
December 31, 2005 $4,000,000
March 31, 2006 $4,000,000
June 30, 2006 $4,000,000
September 30, 2006 $4,000,000
December 31, 2006 $4,000,000
March 31, 2007 $4,000,000
Notwithstanding the foregoing, the then outstanding principal
balance of the Term Loans and accrued but unpaid interest thereon,
if any, shall be due and payable on the Term Loan Termination Date.
No portion of any Term Loan shall be reborrowed once it is repaid.
In addition to the foregoing installment payments, the Borrower may
make voluntary prepayments and shall make mandatory prepayments as
described in Section 2.7.2.
<PAGE>
2.2. Revolving Loans.
2.2.1. Making the Revolving Loans. From and including
the Closing Date and prior to the Revolving Loan Termination Date,
each Lender severally agrees, on the terms and conditions set forth
in this Agreement, to: (i) make revolving loans to the Borrower from
time to time in an amount not to exceed in the aggregate at any one
time outstanding the amount of its Revolving Loan Commitment (each
individually, a "Revolving Loan" and, collectively, the "Revolving
Loans"); and (ii) to participate in Facility LCs issued pursuant to
Section 2.19 upon the request of the Borrower, provided, that after
giving effect to the making of each such Revolving Loan and the
issuance of each such Facility LC, such Lender's Outstanding
Revolving Credit Exposure shall not exceed its Revolving Loan
Commitment. Each Advance under this Section 2.2.1 shall consist of
Revolving Loans made by each Lender ratably in proportion to such
Lender's respective Revolving Loan Pro Rata Share, it being
understood that no Lender shall be responsible for any failure by
any other Lender to perform its obligation to make any Revolving
Loan hereunder nor shall the Revolving Loan Commitment of any Lender
be increased or decreased as a result of any such failure. Subject
to the terms of this Agreement, the Borrower may borrow, repay and
reborrow Revolving Loans at any time prior to the Revolving Loan
Termination Date. The Revolving Loan Commitments of the Lenders
shall expire on the Revolving Loan Termination Date.
2.2.2. Interest Repayment Dates; Repayment of the
Revolving Loans2.2.Required Payments; Termination. The accrued but
unpaid interest on the Revolving Loans shall be repaid on each
Payment Date. On the Revolving Loan Termination Date, the Borrower
shall repay in full the outstanding principal balance of the
Revolving Loans and accrued but unpaid interest thereon.
2.3 Swing Line Loans.
2.3.1. Amount of Swing Line Loans. Upon the satisfaction
of the conditions precedent set forth in Section 4.2, and, if such
Swing Line Loan is to be made on the date of the initial Credit
Extension hereunder, the satisfaction of the conditions precedent
set forth in Section 4.1, as well, from and including the date of
this Agreement and prior to the Revolving Loan Termination Date, the
Swing Line Lender agrees, on the terms and conditions set forth in
this Agreement, to make Swing Line Loans to the Borrower from time
to time in an aggregate principal amount not to exceed the Swing
Line Commitment, provided that the Aggregate Outstanding Revolving
Credit Exposure shall not at any time exceed the Aggregate Revolving
Loan Commitment, and provided further that the sum of (i) the Swing
Line Lender's Revolving Loan Pro Rata Share of the Swing Line Loans
plus (ii) the outstanding Revolving Loans made by the Swing Line
Lender pursuant to Section 2.2, shall not exceed the Swing Line
Lender's Revolving Loan Commitment at such time. Subject to the
terms of this Agreement, the Borrower may borrow, repay and reborrow
Swing Line Loans at any time prior to the Revolving Loan Termination
Date.
2.3.2. Borrowing Notice. The Borrower shall deliver to
the Agent and the Swing Line Lender a Borrowing Notice, signed by
it, not later than 3:00 p.m. (Chicago time) on the Borrowing Date of
each Swing Line Loan (or at such later time as may be acceptable to
<PAGE>
the Swing Line Lender in its sole discretion), in each case,
specifying (i) the applicable Borrowing Date (which date shall be a
Business Day and which may be the same date as the date the
Borrowing Notice is given and (ii) the aggregate amount of the
requested Swing Line Loan, which shall be an amount not less than
$500,000. The Swing Line Loans shall bear interest at the Floating
Rate for an interest period as agreed to by the Swing Line Lender
and the Borrower (which interest period shall not in any event
exceed five Business Days).
2.3.3. Making of Swing Line Loans. Promptly after
receipt of the Borrowing Notice under Section 2.3.2 in respect of
Swing Line Loans, the Agent shall notify each Lender by telex or
telecopy, or other similar form of transmission, of the requested
Swing Line Loan. Not later than 4:00 p.m. (Chicago time) on the
applicable Borrowing Date, the Swing Line Lender shall make
available its Swing Line Loan, in funds immediately available in
Chicago to the Agent at its address specified pursuant to Article
XIII. The Agent will promptly make the funds so received from the
Swing Line Lender available to the Borrower on the Borrowing Date at
the Agent's aforesaid address.
2.3.4. Repayment of Swing Line Loans. Each Swing Line
Loan shall be paid in full by the Borrower (x) on or before the
fifth business Day after the Borrowing Date for such Swing Line
Loan. The Borrower may at any time pay, without penalty or premium,
all outstanding Swing Line Loans upon notice to the Agent and the
Swing Line Lender. In addition, the Agent (i) may at any time in
its sole discretion with respect to any outstanding Swing Line Loan
or (ii) shall on the fifth Business Day after the Borrowing Date of
any Swing Line Loan, require each Lender (including the Swing Line
Lender) to make a Revolving Loan in the amount of such Lender's
Revolving Loan Pro Rata Share of such Swing Line Loan, for the
purpose of repaying such Swing Line Loan. Not later than 2:00 p.m.
(Chicago time) on the date of any notice received pursuant to this
Section 2.3.4, each Lender shall make available its required
Revolving Loan or Revolving Loans, in funds immediately available in
Chicago to the Agent at its address specified pursuant to Article
XIII. Revolving Loans made pursuant to this Section 2.3.4 shall
initially be Floating Rate Loans and thereafter may be continued as
Floating Rate Loans or converted into Eurodollar Loans in the manner
provided in Section 2.9 and subject to the other conditions and
limitations therein set forth and set forth in this Article II.
Unless a Lender shall have notified the Swing Line Lender, prior to
its making any Swing Line Loan, that any applicable condition
precedent set forth in Sections 4.1 and 4.2, as applicable, had not
then been satisfied, such Lender's obligation to make Revolving
Loans pursuant to this Section 2.3.4 to repay Swing Line Loans shall
be unconditional, continuing, irrevocable and absolute and shall not
be affected by any circumstances, including, without limitation, (a)
any set-off, counterclaim, recoupment, defense or other right which
such Lender may have against the Agent, the Swing Line Lender or any
other Person, (b) the occurrence or continuance of a Default or
Unmatured Default, (c) any adverse change in the condition
(financial or otherwise) of the Borrower, or (d) any other
circumstances, happening or event whatsoever. In the event that any
Lender fails to make payment to the Agent of any amount due under
this Section 2.3.4, the Agent shall be entitled to receive, retain
and apply against such obligation the principal and interest
otherwise payable to such Lender hereunder until the Agent receives
such payment from such Lender or such obligation is otherwise fully
satisfied. In addition to the foregoing, if for any reason any
Lender fails to make payment to the Agent of any amount due under
this Section 2.3.4, such Lender shall be deemed, at the option of
<PAGE>
the Agent, to have unconditionally and irrevocably purchased from
the Swing Line Lender, without recourse or warranty, an undivided
interest and participation in the applicable Swing Line Loan in the
amount of such Revolving Loan, and such interest and participation
may be recovered from such Lender together with interest thereon at
the Federal Funds Effective Rate for each day during the period
commencing on the date of demand and ending on the date such amount
is received. On the Revolving Loan Termination Date, the Borrower
shall repay in full the outstanding principal balance of any unpaid
Swing Line Loans, together with accrued but unpaid interest thereon.
2.4. Types of Advances . (i) The Term Loans may be Floating
Rate Advances or Eurodollar Advances, or a combination thereof,
selected by the Borrower in accordance with Sections 2.8 and 2.9.
During such periods as the Term Loans shall be comprised of Floating
Rate Advances, the Term Loans shall bear interest at a per annum
rate equal to the Floating Rate. During such periods as the Term
Loans shall be comprised of Eurodollar Rate Advances, the Terms
Loans shall bear interest at a per annum rate equal to the
Eurodollar Rate. Notwithstanding the foregoing, at such time as the
Mega Marts Notes are indefeasibly paid in full or converted to
equity on terms acceptable to the Required Lenders, the Term Loans
shall bear interest at the Eurodollar Rate without reference to the
Applicable Margin.
(ii) The Revolving Loans may be Floating Rate Advances or
Eurodollar Advances, or a combination thereof, selected by the
Borrower in accordance with Sections 2.8 and 2.9. During such
periods as the Revolving Loans shall be comprised of Floating Rate
Advances, the Revolving Loans shall bear interest at a per annum
rate equal to the Floating Rate. During such periods as the
Revolving Loans shall be comprised of Eurodollar Rate Advances, the
Revolving Loans shall bear interest at a per annum rate equal to the
Eurodollar Rate.
(iii) The Swing Loans shall bear interest as set forth in
Section 2.3.2.
2.5. Commitment Fee; Reductions in Aggregate Revolving Loan
Commitment. The Borrower agrees to pay to the Agent for the
account of each Lender a commitment fee at a per annum rate equal to
the Applicable Fee Rate on the difference of (i) the average daily
Aggregate Revolving Loan Commitment minus (ii) the sum of (x) the
average daily principal amount of Revolving Loans outstanding (it
being understood that the term "Revolving Loans" does not include
Swing Line Loans) plus (y) the average daily amount of Reimbursement
Obligations, payable for the period from the date hereof to and
including the Revolving Loan Termination Date, payable in arrears on
the last day of each June, September, December and March hereafter
and on the Revolving Loan Termination Date, in each case, calculated
for the three month period ending on such date. The Borrower may
permanently reduce the Aggregate Revolving Loan Commitment in whole,
or in part ratably among the Lenders in the minimum amount of
$5,000,000 (and in integral multiples of $1,000,000 in excess
thereof) upon at least five Business Days' written notice to the
Agent, which notice shall specify the amount of any such reduction,
provided, however, that the amount of the Aggregate Revolving Loan
Commitment may not be reduced below the aggregate principal amount
of the outstanding Revolving Loans. All accrued commitment fees
shall be payable on the effective date of any termination of the
obligations of the Lenders to make Revolving Loans hereunder.
2.6. Minimum Amount of Each Advance. Each Eurodollar Advance
shall be in the minimum amount of $ 2,500,000 (and in multiples of
<PAGE>
$500,000 if in excess thereof), and each Floating Rate Advance shall
be in the minimum amount of $1,000,000 (and in multiples of $500,000
if in excess thereof), provided, however, that any Floating Rate
Advance may be in the amount of the unused Aggregate Revolving Loan
Commitment.
2.7 Certain Principal Payments.
2.7.1 Optional Payments2.7.Optional Principal Payments.
The Borrower may from time to time pay, without penalty or premium,
all outstanding Floating Rate Advances, or, in a minimum aggregate
amount of $1,000,000 or any integral multiple of $500,000 in excess
thereof, any portion of the outstanding Floating Rate Advances upon
same-day notice to the Agent. The Borrower may from time to time
pay, subject to the payment of any funding indemnification amounts
required by Section 3.4 but without penalty or premium, all
outstanding Eurodollar Advances, or, in a minimum aggregate amount
of $1,000,000 or any integral multiple of $500,000 in excess
thereof, any portion of the outstanding Eurodollar Advances upon
five Business Days' prior notice to the Agent. Principal payments
made on the Term Loans shall be applied to the principal
installments payable under Section 2.1.2 in the inverse order of
maturity.
2.7.2 Mandatory Payments. In addition to the payments
required by Section 2.1.2, the Borrower shall make mandatory
prepayments of the outstanding principal amount of the Term Loans in
inverse order of maturity as follows:
(a) Upon receipt by Borrower or any of its Subsidiaries of
any Net Proceeds in connection with the issuance of any equity
security or debt security (such as a promissory note or other
similar instrument) by the Borrower or such Subsidiary after the
Closing Date, other than proceeds of any outstanding Indebtedness
permitted under Section 6.2.1(ix), then on the first Business Day
after such issuance, the Borrower shall repay the principal amount
of the Term Loans in inverse order of maturity in an amount equal to
100% of such Net Proceeds. Notwithstanding any term in this Section
2.7.2(a) to the contrary, the Borrower shall not be required to make
any mandatory prepayment with: (i) the first $2,000,000 of Net
Proceeds received in connection with the exercise of stock options
by officers of the Loan Parties during any fiscal year of the
Borrower or (ii) Net Proceeds received in connection with sales of
stock (A) to employees or former employees of the Borrower or its
Subsidiaries according to the Borrower's stock option plan in effect
from time to time or according to policies of the Borrower
summarized in the documents filed by the Borrower with the
Securities and Exchange Commission and (B) to retailer customers of
the Borrower and its Subsidiaries in the ordinary course of the
Borrower's business;
(b) Upon receipt by Borrower or any of its
Subsidiaries of any Net Proceeds with respect to an Asset
Disposition permitted pursuant to Section 6.2.7, then on the first
Business Day after receipt of the Net Proceeds from such Asset
Disposition, the Borrower shall repay the principal amount of the
Term Revolving Loans in inverse order of maturity in an amount equal
to 100% of such Net Proceeds. Notwithstanding any term in this
Section 2.7.2(b) to the contrary, the Borrower shall not be required
to make any mandatory prepayment with: (A) Net Proceeds received in
connection with any Asset Disposition so long as all of such Net
Proceeds are reinvested in other Property or assets to be used by
the Borrower or the applicable Subsidiary in its business operations
<PAGE>
within 180 days of the consummation of the relevant Asset
Disposition; and (B) the first $5,000,000 of Net Proceeds received
in connection with any Asset Disposition during any fiscal year of
the Borrower that are not otherwise used to purchase replacement
Property or assets pursuant to the terms of Section 2.7.2(b)(A);
(c) Within ten days of its delivery of the financial
statements required under Section 6.3.2, the Borrower shall repay
the principal amount of the Term Loans in inverse order of maturity
as follows: (i) from the Closing Date through March 30, 2002, the
repayment required by this Section 2.7.2(c) shall be in an amount
equal to 90% of Excess Cash Flow; thereafter, (ii) if the Leverage
Ratio at the end of the Borrower's most recently ended fiscal year
(as determined by reference to the financial statements delivered
pursuant to Section 6.3.2; the "Determination Date") is equal to or
greater than 3.5 to 1.0, such repayment shall be in an amount equal
to 90% of Excess Cash Flow; (iii) if the Leverage Ratio at the
Determination Date is less than 3.5 to 1.0 but greater than or equal
to 2.75 to 1.0, such repayment shall be in an amount equal to 75% of
Excess Cash Flow; and (iv) if the Leverage Ratio at the
Determination Date is less than 2.75 to 1.0, the Borrower shall not
be required to make any repayment otherwise required by this Section
2.7.2(c).
2.8. Method of Selecting Types and Interest Periods for New
Advances. The Borrower shall select the Type of Advance and, in
the case of each Eurodollar Advance, the Interest Period applicable
thereto from time to time. The Borrower shall give the Agent
irrevocable notice (a "Borrowing Notice") not later than 11:00 a.m.
(Milwaukee time) on the Borrowing Date of each Floating Rate Advance
and three Business Days before the Borrowing Date for each
Eurodollar Advance, specifying:
(i) the Borrowing Date, which shall be a Business Day, of such
Advance,
(ii) the aggregate amount of such Advance,
(iii) the Type of Advance selected, and whether such
Advance is comprised of Term Loans or Revolving Loans, and
(iv) in the case of each Eurodollar Advance, the Interest
Period applicable thereto.
Not later than noon (Chicago time) on each Borrowing Date, each
Lender shall make available its Loan or Loans in funds immediately
available in Chicago to the Agent at its address specified pursuant
to Article XIII. The Agent will make the funds so received from the
Lenders available to the Borrower at the Agent's aforesaid address.
2.9. Conversion and Continuation of Outstanding Advances.
Floating Rate Advances shall continue as Floating Rate Advances
unless and until such Floating Rate Advances are converted into
Eurodollar Advances pursuant to this Section 2.9 or are repaid in
accordance with Section 2.7. Each Eurodollar Advance shall continue
as a Eurodollar Advance until the end of the then applicable
Interest Period therefor, at which time such Eurodollar Advance
<PAGE>
shall be automatically converted into a Floating Rate Advance unless
(x) such Eurodollar Advance is or was repaid in accordance with
Section 2.7 or (y) the Borrower shall have given the Agent a
Conversion/Continuation Notice (as defined below) requesting that,
at the end of such Interest Period, such Eurodollar Advance continue
as a Eurodollar Advance for the same or another Interest Period.
Subject to the terms of Section 2.6, the Borrower may elect from
time to time to convert all or any part of a Floating Rate Advance
into a Eurodollar Advance. The Borrower shall give the Agent
irrevocable notice (a "Conversion/Continuation Notice") of each
conversion of a Floating Rate Advance into a Eurodollar Advance or
continuation of a Eurodollar Advance not later than 10:00 a.m.
(Chicago time) at least three Business Days prior to the date of the
requested conversion or continuation, specifying:
(i) the requested date, which shall be a Business Day, of such
conversion or continuation,
(ii) the aggregate amount and Type of the Advance which is to
be converted or continued, and whether such Advance is comprised of
Term Loans or Revolving Loans, and
(iii)the amount of such Advance which is to be converted
into or continued as a Eurodollar Advance and the duration of the
Interest Period applicable thereto.
2.10. Changes in Interest Rate, etc. Each Floating Rate
Advance shall bear interest on the outstanding principal amount
thereof, for each day from and including the date such Advance is
made or is automatically converted from a Eurodollar Advance into a
Floating Rate Advance pursuant to Section 2.9, to but excluding the
date it is paid or is converted into a Eurodollar Advance pursuant
to Section 2.9 hereof, at a rate per annum equal to the Floating
Rate for such day. Changes in the rate of interest on that portion
of any Advance maintained as a Floating Rate Advance will take
effect simultaneously with each change in the Alternate Base Rate.
Each Eurodollar Advance shall bear interest on the outstanding
principal amount thereof from and including the first day of the
Interest Period applicable thereto to (but not including) the last
day of such Interest Period at the interest rate determined by the
Agent as applicable to such Eurodollar Advance based upon the
Borrower's selections under Sections 2.8 and 2.9 and otherwise in
accordance with the terms hereof. No Interest Period may end after
the Term Loan Termination Date. The Borrower shall select Interest
Periods so that it is not necessary to repay any portion of a
Eurodollar Advance prior to the last day of the applicable Interest
Period in order to make a mandatory repayment required pursuant to
Section 2.7.2.
2.11. Rates Applicable After Default. Notwithstanding
anything to the contrary contained in Section 2.8 or 2.9, during the
continuance of a Default or Unmatured Default the Required Lenders
may, at their option, by notice to the Borrower (which notice may be
revoked at the option of the Required Lenders notwithstanding any
provision of Section 8.2 requiring unanimous consent of the Lenders
to changes in interest rates), declare that no Advance may be made
as, converted into or continued as a Eurodollar Advance. During the
continuance of a Default the Required Lenders may, at their option,
by notice to the Borrower (which notice may be revoked at the option
of the Required Lenders notwithstanding any provision of Section 8.2
requiring unanimous consent of the Lenders to changes in interest
<PAGE>
rates), declare that (i) each Eurodollar Advance shall bear interest
for the remainder of the applicable Interest Period at the rate
otherwise applicable to such Interest Period plus 2% per annum and
(ii) each Floating Rate Advance shall bear interest at a rate per
annum equal to the Floating Rate in effect from time to time plus 2%
per annum, provided that, during the continuance of a Default under
Section 7.6 or 7.7, the interest rates set forth in clauses (i) and
(ii) above shall be applicable to all Advances without any election
or action on the part of the Agent or any Lender.
2.12. Method of Payment. All payments of the Secured
Obligations hereunder shall be made, without setoff, deduction, or
counterclaim, in immediately available funds to the Agent at the
Agent's address specified pursuant to Article XIII, or at any other
Lending Installation of the Agent specified in writing by the Agent
to the Borrower, by noon (local time) on the date when due and shall
be applied ratably by the Agent among the Lenders. Each payment
delivered to the Agent for the account of any Lender shall be
delivered promptly by the Agent to such Lender in the same type of
funds that the Agent received at its address specified pursuant to
Article XIII or at any Lending Installation specified in a notice
received by the Agent from such Lender. The Agent is hereby
authorized to charge the account of the Borrower maintained with
Bank One for each payment of principal, interest and fees as it
becomes due hereunder.
2.13. Noteless Agreement; Evidence of Indebtedness. (i)
Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing the indebtedness of the Borrower to
such Lender resulting from each Loan made by such Lender from time
to time, including the amounts of principal and interest payable and
paid to such Lender from time to time hereunder.
(ii) The Agent shall also maintain accounts in which it will
record (a) the amount of each Loan made hereunder, the Type thereof
and the Interest Period with respect thereto, (b) the amount of any
principal or interest due and payable or to become due and payable
from the Borrower to each Lender hereunder and (c) the amount of any
sum received by the Agent hereunder from the Borrower and each
Lender's share thereof.
(iii) The entries maintained in the accounts maintained
pursuant to paragraphs (i) and (ii) above shall be prima facie
evidence of the existence and amounts of the Obligations therein
recorded; provided, however, that the failure of the Agent or any
Lender to maintain such accounts or any error therein shall not in
any manner affect the obligation of the Borrower to repay the
Obligations in accordance with their terms.
(iv) Any Lender may request that its Loans be evidenced by a
Note. In such event, the Borrower shall prepare, execute and
deliver to such Lender a Note payable to the order of such Lender in
the form of Exhibits E-1, E-2 and E-3. Thereafter, the Loans
evidenced by such Note and interest thereon shall at all times
(including after any assignment pursuant to Section 12.3) be
represented by one or more Notes payable to the order of the payee
named therein or any assignee pursuant to Section 12.3, except to
the extent that any such Lender or assignee subsequently returns any
such Note for cancellation and requests that such Loans once again
be evidenced as described in paragraphs (i) and (ii) above.
2.14. Telephonic Notices. The Borrower hereby authorizes
the Lenders and the Agent to extend, convert or continue Advances,
effect selections of Types of Advances and to transfer funds based
on telephonic notices made by any person or persons the Agent or any
Lender in good faith believes to be acting on behalf of the
<PAGE>
Borrower, it being understood that the foregoing authorization is
specifically intended to allow Borrowing Notices and
Conversion/Continuation Notices to be given telephonically. The
Borrower agrees to deliver promptly to the Agent a written
confirmation, if such confirmation is requested by the Agent or any
Lender, of each telephonic notice signed by an Authorized
Representative. If the written confirmation differs in any material
respect from the action taken by the Agent and the Lenders, the
records of the Agent and the Lenders shall govern absent manifest
error.
2.15. Interest and Fee Basis. Interest in respect of
Eurodollar Advances and commitment fees shall be calculated for
actual days elapsed on the basis of a 360-day year and interest in
respect of Floating Advances shall be calculated for days elapsed on
the basis of a 365-day year. Interest shall be payable for the day
an Advance is made but not for the day of any payment on the amount
paid if payment is received prior to noon (local time) at the place
of payment. If any payment of principal of or interest on an
Advance shall become due on a day which is not a Business Day, such
payment shall be made on the next succeeding Business Day and, in
the case of a principal payment, such extension of time shall be
included in computing interest in connection with such payment.
2.16. Notification of Advances, Interest Rates, Prepayments
and Commitment Reductions. Promptly after receipt thereof, the
Agent will notify each Lender of the contents of each Aggregate
Revolving Loan Commitment reduction notice, Borrowing Notice,
Conversion/Continuation Notice, and repayment notice received by it
hereunder. The Agent will notify each Lender of the interest rate
applicable to each Eurodollar Advance promptly upon determination of
such interest rate and will give each Lender prompt notice of each
change in the Alternate Base Rate.
2.17. Lending Installations. Each Lender may book its
Loans at any Lending Installation selected by such Lender and may
change its Lending Installation from time to time. All terms of
this Agreement shall apply to any such Lending Installation and the
Loans and any Notes issued hereunder shall be deemed held by each
Lender for the benefit of any such Lending Installation. Each
Lender may, by written notice to the Agent and the Borrower in
accordance with Article XIII, designate replacement or additional
Lending Installations through which Loans will be made by it and for
whose account Loan payments are to be made.
2.18. Non-Receipt of Funds by the Agent. Unless the
Borrower or a Lender, as the case may be, notifies the Agent prior
to the date on which it is scheduled to make payment to the Agent of
(i) in the case of a Lender, the proceeds of a Loan or (ii) in the
case of the Borrower, a payment of principal, interest or fees to
<PAGE>
the Agent for the account of the Lenders, that it does not intend to
make such payment, the Agent may assume that such payment has been
made. The Agent may, but shall not be obligated to, make the amount
of such payment available to the intended recipient in reliance upon
such assumption. If such Lender or the Borrower, as the case may
be, has not in fact made such payment to the Agent, the recipient of
such payment shall, on demand by the Agent, repay to the Agent the
amount so made available together with interest thereon in respect
of each day during the period commencing on the date such amount was
so made available by the Agent until the date the Agent recovers
such amount at a rate per annum equal to (x) in the case of payment
by a Lender, the Federal Funds Effective Rate for such day for the
first three days and, thereafter, the interest rate applicable to
the relevant Loan or (y) in the case of payment by the Borrower, the
interest rate applicable to the relevant Loan.
2.19. Facility LCs.
2.19.1. Issuance. The LC Issuer hereby agrees, on the
terms and conditions set forth in this Agreement, to issue standby
letters of credit (each, a "Facility LC") and to renew, extend,
increase, decrease or otherwise modify each Facility LC ("Modify,"
and each such action a "Modification"), from time to time from and
including the date of this Agreement and prior to the Revolving Loan
Termination Date upon the request of the Borrower; provided that
immediately after each such Facility LC is issued or Modified, (i)
the aggregate amount of the outstanding LC Obligations shall not
exceed $15,000,000 and (ii) the Aggregate Outstanding Revolving
Credit Exposure shall not exceed the Aggregate Revolving Loan
Commitment. No Facility LC shall have an expiry date later than the
earlier of (x) the fifth Business Day prior to the Revolving Loan
Termination Date and (y) one year after its issuance.
2.19.2. Participations. Each Lender, with respect to
the Existing Letters of Credit, hereby purchases a participation
interest in such Existing Letters of Credit, and upon the issuance
or Modification by the LC Issuer of a Facility LC in accordance with
this Section 2.19, the LC Issuer shall be deemed, without further
action by any party hereto, to have unconditionally and irrevocably
sold to each Lender, and each Lender shall be deemed, without
further action by any party hereto, to have unconditionally and
irrevocably purchased from the LC Issuer, a participation in such
Facility LC (and each Modification thereof) and the related LC
Obligations, in each case, in proportion to its Revolving Loan Pro
Rata Share. Notwithstanding any term herein to the contrary, the
parties agree that the Existing Letters of Credit shall be replaced
upon their expiration with Facility LCs.
2.19.3. Notice. Subject to Section 2.19.1, the Borrower
shall give the LC Issuer notice prior to 10:00 a.m. (Chicago time)
at least five Business Days prior to the proposed date of issuance
or Modification of each Facility LC, specifying the beneficiary, the
proposed date of issuance (or Modification) and the expiry date of
such Facility LC, and describing the proposed terms of such Facility
LC and the nature of the transactions proposed to be supported
thereby. Upon receipt of such notice, the LC Issuer shall promptly
notify the Agent, and the Agent shall promptly notify each Lender,
of the contents thereof and of the amount of such Lender's
participation in such proposed Facility LC. The issuance or
Modification by the LC Issuer of any Facility LC shall, in addition
to the conditions precedent set forth in Article IV (the
satisfaction of which the LC Issuer shall have no duty to
ascertain), be subject to the conditions precedent that such
Facility LC shall be satisfactory to the LC Issuer and that the
Borrower shall have executed and delivered such application
agreement and/or such other instruments and agreements relating to
such Facility LC as the LC Issuer shall have reasonably requested
(each, a "Facility LC Application"). In the event of any conflict
between the terms of this Agreement and the terms of any Facility LC
Application, the terms of this Agreement shall control.
2.19.4. LC Fees. The Borrower shall pay to the Agent,
for the account of the Lenders ratably in accordance with their
respective Revolving Loan Pro Rata Shares, with respect to each
standby Facility LC, a letter of credit fee at a per annum rate
equal to the Applicable Margin for Eurodollar Loans in effect from
<PAGE>
time to time on the average daily undrawn stated amount under such
standby Facility LC, such fee to be payable in arrears on each
Payment Date (an "LC Fee"). The Borrower shall also pay to the LC
Issuer for its own account (x) at the time of issuance of each
Facility LC, a fronting fee at the rate of .125% of the face amount
of such Facility LC per annum, and (y) documentary and processing
charges in connection with the issuance or Modification of and draws
under Facility LCs in accordance with the LC Issuer's standard
schedule for such charges as in effect from time to time.
2.19.5. Administration; Reimbursement by Lenders. Upon
receipt from the beneficiary of any Facility LC of any demand for
payment under such Facility LC, the LC Issuer shall notify the Agent
and the Agent shall promptly notify the Borrower and each other
Lender as to the amount to be paid by the LC Issuer as a result of
such demand and the proposed payment date (the "LC Payment Date").
The responsibility of the LC Issuer to the Borrower and each Lender
shall be only to determine that the documents (including each demand
for payment) delivered under each Facility LC in connection with
such presentment shall be in conformity in all material respects
with such Facility LC. The LC Issuer shall endeavor to exercise the
same care in the issuance and administration of the Facility LCs as
it does with respect to letters of credit in which no participations
are granted, it being understood that in the absence of any gross
negligence or willful misconduct by the LC Issuer, each Lender shall
be unconditionally and irrevocably liable without regard to the
occurrence of any Default or any condition precedent whatsoever, to
reimburse the LC Issuer on demand for (i) such Lender's Revolving
Loan Pro Rata Share of the amount of each payment made by the LC
Issuer under each Facility LC to the extent such amount is not
reimbursed by the Borrower pursuant to Section 2.19.6 below, plus
(ii) interest on the foregoing amount to be reimbursed by such
Lender, for each day from the date of the LC Issuer's demand for
such reimbursement (or, if such demand is made after 11:00 a.m.
(Chicago time) on such date, from the next succeeding Business Day)
to the date on which such Lender pays the amount to be reimbursed by
it, at a rate of interest per annum equal to the Federal Funds
Effective Rate for the first three days and, thereafter, at a rate
of interest equal to the rate applicable to Floating Rate Advances.
2.19.6. Reimbursement by Borrower. The Borrower shall
be irrevocably and unconditionally obligated to reimburse the LC
Issuer on or before the applicable LC Payment Date for any amounts
to be paid by the LC Issuer upon any drawing under any Facility LC,
without presentment, demand, protest or other formalities of any
kind; provided that neither the Borrower nor any Lender shall hereby
be precluded from asserting any claim for direct (but not
consequential) damages suffered by the Borrower or such Lender to
the extent, but only to the extent, caused by (i) the willful
misconduct or gross negligence of the LC Issuer in determining
whether a request presented under any Facility LC issued by it
complied with the terms of such Facility LC or (ii) the LC Issuer's
failure to pay under any Facility LC issued by it after the
presentation to it of a request strictly complying with the terms
and conditions of such Facility LC. All such amounts paid by the LC
Issuer and remaining unpaid by the Borrower shall bear interest,
payable on demand, for each day until paid at a rate per annum equal
<PAGE>
to (x) the rate applicable to Floating Rate Advances for such day if
such day falls on or before the applicable LC Payment Date and (y)
the sum of 2% plus the rate applicable to Floating Rate Advances for
such day if such day falls after such LC Payment Date. The LC
Issuer will pay to each Lender ratably in accordance with its
Revolving Loan Pro Rata Share all amounts received by it from the
Borrower for application in payment, in whole or in part, of the
Reimbursement Obligation in respect of any Facility LC issued by the
LC Issuer, but only to the extent such Lender has made payment to
the LC Issuer in respect of such Facility LC pursuant to Section
2.19.5. Subject to the terms and conditions of this Agreement
(including without limitation, the submission of a Borrowing Notice
in compliance with Section 2.8 and the satisfaction of the
applicable conditions precedent set forth in Article IV), the
Borrower may request a Revolving Advance hereunder for the purpose
of satisfying any Reimbursement Obligation.
2.19.7. Obligations Absolute . The Borrower's
obligations under this Section 2.19 shall be absolute and
unconditional under any and all circumstances and irrespective of
any setoff, counterclaim or defense to payment which the Borrower
may have or have had against the LC Issuer, any Lender or any
beneficiary of a Facility LC. The Borrower further agrees with the
LC Issuer and the Lenders that the LC Issuer and the Lenders shall
not be responsible for, and the Borrower's Reimbursement Obligation
in respect of any Facility LC shall not be affected by, among other
things, the validity or genuineness of documents or of any
endorsements thereon, even if such documents should in fact prove to
be in any or all respects invalid, fraudulent or forged, or any
dispute between or among the Borrower, any of its Affiliates, the
beneficiary of an Facility LC or any financing institution or other
party to whom any Facility LC may be transferred or any claims or
defenses whatsoever of the Borrower or of any of its Affiliates
against the beneficiary of any Facility LC or any such transferee.
The LC Issuer shall not be liable for any error, omission,
interruption or delay in transmission, dispatch or delivery of any
message or advice, however transmitted, in connection with any
Facility LC, other than for any of the foregoing which are the
result of the LC Issuer's gross negligence or willful misconduct.
The Borrower agrees that any action taken or omitted by the LC
Issuer or any Lender under or in connection with each Facility LC
and the related drafts and documents, if done without gross
negligence or willful misconduct, shall be binding upon the Borrower
and shall not put the LC Issuer or any Lender under any liability to
the Borrower. The LC Issuer agrees to comply with the terms of each
Facility LC. Nothing in this Section 2.19.7 is intended to limit
the right of the Borrower to make a claim against the LC Issuer for
damages as contemplated by the proviso to the first sentence of
Section 2.19.6.
2.19.8. Actions of LC Issuer. The LC Issuer shall be
entitled to rely, and shall be fully protected in relying, upon any
Facility LC, draft, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex
or teletype message, statement, order or other document believed by
it to be genuine and correct and to have been signed, sent or made
by the proper Person or Persons, and upon advice and statements of
legal counsel, independent accountants and other experts selected by
the LC Issuer. The LC Issuer shall be fully justified in failing or
refusing to take any action under this Agreement unless it shall
first have received such advice or concurrence of the Required
Lenders as it reasonably deems appropriate or it shall first be
<PAGE>
indemnified to its reasonable satisfaction by the Lenders against
any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action.
Notwithstanding any other provision of this Section 2.19, the LC
Issuer shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement in accordance with a
request of the Required Lenders, and such request and any action
taken or failure to act pursuant thereto shall be binding upon the
Lenders and any future holders of a participation in any Facility
LC.
2.19.9. Indemnification. The Borrower hereby agrees to
indemnify and hold harmless each Lender, the LC Issuer and the
Agent, and their respective directors, officers, agents and
employees from and against any an all claims and damages, losses,
liabilities, costs or expenses which such Lender, the LC Issuer or
the Agent may incur (or which may be claimed against such Lender,
the LC Issuer or the Agent by any Person whatsoever) by reason of or
in connection with the issuance, execution and delivery or transfer
of or payment or failure to pay under any Facility LC or any actual
or proposed use of any Facility LC, including, without limitation,
any claims, damages, losses, liabilities, costs or expense
(including reasonable counsel fees and disbursements) which the LC
Issuer may incur by reason of or in connection with (i) the failure
of any other Lender to fulfill or comply with its obligations to the
LC Issuer hereunder (but nothing herein contained shall affect any
rights the Borrower may have against any defaulting Lender) or (ii)
by reason of or on account of the LC Issuer issuing any Facility LC
which specifies that the term "Beneficiary" included therein
includes any successor by operation of law of the named Beneficiary,
but which Facility LC does not require that any drawing by any such
successor Beneficiary be accompanied by a copy of a legal document,
satisfactory to the LC Issuer, evidencing the appointment of such
successor Beneficiary; provided that the Borrower shall not be
required to indemnify any Lender, the LC Issuer or the Agent for any
claims, damages, losses, liabilities, costs or expenses to the
extent, but only to the extent, caused by (x) the willful misconduct
or gross negligence of the LC Issuer in determining whether a
request presented under any Facility LC complied with the terms of
such Facility LC or (y) the LC Issuer's failure to pay under any
Facility LC after the presentation to it of a request strictly
complying with the terms and conditions of such Facility LC or (z)
the LC Issuer's failure to comply with the terms of a Facility LC.
Nothing in this Section 2.19.9 is intended to limit the obligations
of the Borrower under any other provisions of this Agreement.
2.19.10. Lenders' Indemnification. Each Lender shall,
ratably in accordance with its Revolving Loan Pro Rata Share,
indemnify the LC Issuer, its affiliates and their respective
directors, officers, agents and employees (to the extent not
reimbursed by the Borrower) against any cost, expense (including
reasonable counsel fees and disbursements), claim, demand, action,
loss or liability (except such as result from such indemnitees'
gross negligence or willful misconduct or the LC Issuer's failure to
pay under any Facility LC after the presentation to it of a request
strictly complying with the terms and conditions of the Facility LC)
that such indemnitees may suffer or incur in connection with this
Section 2.19 or any action taken or omitted by such indemnitees
hereunder.
2.19.11. Facility LC Collateral Account. The Borrower
agrees that it will, upon the occurrence and during the continuance
of a Default, and subject to the terms of Section 8.1, maintain a
special collateral account pursuant to arrangements satisfactory to
the Agent (the "Facility LC Collateral Account") at the Agent's
office at the address specified pursuant to Article XIII, in the
name of such Borrower but under the sole dominion and control of the
Agent, for the benefit of the Lenders and in which such Borrower
shall have no interest other than as set forth in Section 8.1. The
<PAGE>
Borrower hereby pledges, assigns and grants to the Agent, on behalf
of and for the ratable benefit of the Lenders and the LC Issuer, a
security interest in all of the Borrower's right, title and interest
in and to all funds which may from time to time be on deposit in the
Facility LC Collateral Account to secure the prompt and complete
payment and performance of the Secured Obligations. The Agent will
invest any funds on deposit from time to time in the Facility LC
Collateral Account in certificates of deposit of Bank One having a
maturity not exceeding 30 days.
2.19.12. Rights as a Lender. In its capacity as a
Lender, the LC Issuer shall have the same rights and obligations as
any other Lender.
2.20. Replacement of Lender. If the Borrower is required
pursuant to Section 3.1, 3.2 or 3.5 to make any additional payment
to any Lender or if any Lender's obligation to make or continue, or
to convert Floating Rate Advances into, Eurodollar Advances shall be
suspended pursuant to Section 3.3 (any Lender so affected an
"Affected Lender"), the Borrower may elect, if such amounts continue
to be charged or such suspension is still effective, to replace such
Affected Lender as a Lender party to this Agreement, provided that
no Default or Unmatured Default shall have occurred and be
continuing at the time of such replacement, and provided further
that, concurrently with such replacement, (i) another bank or other
entity which is reasonably satisfactory to the Borrower and the
Agent shall agree, as of such date, to purchase for cash the
Advances and other Obligations due to the Affected Lender pursuant
to an assignment substantially in the form of Exhibit 12.3.1 and to
become a Lender for all purposes under this Agreement and to assume
all obligations of the Affected Lender to be terminated as of such
date and to comply with the requirements of Section 12.3 applicable
to assignments, and (ii) the Borrower shall pay to such Affected
Lender in same day funds on the day of such replacement (A) all
interest, fees and other amounts then accrued but unpaid to such
Affected Lender by the Borrower hereunder to and including the date
of termination, including without limitation payments due to such
Affected Lender under Sections 3.1, 3.2 and 3.5, and (B) an amount,
if any, equal to the payment which would have been due to such
Lender on the day of such replacement under Section 3.4 had the
Loans of such Affected Lender been prepaid on such date rather than
sold to the replacement Lender.
ARTICLE III
YIELD PROTECTION; TAXES
------------------------
3.1. Yield Protection. If, on or after the date of this
Agreement, the adoption of any law or any governmental or
quasi-governmental rule, regulation, policy, guideline or directive
(whether or not having the force of law), or any change in the
interpretation or administration thereof by any governmental or
quasi-governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof, or
compliance by any Lender or applicable Lending Installation or the
LC Issuer with any request or directive (whether or not having the
force of law) of any such authority, central bank or comparable
agency:
(i) subjects any Lender or any applicable Lending Installation
or the LC Issuer to any Taxes, or changes the basis of taxation of
payments (other than with respect to Excluded Taxes) to any Lender
<PAGE>
or the LC Issuer in respect of its Eurodollar Loans, Facility LCs or
participations therein, or
(ii) imposes or increases or deems applicable any reserve,
assessment, insurance charge, special deposit or similar requirement
against assets of, deposits with or for the account of, or credit
extended by, any Lender or any applicable Lending Installation or
the LC Issuer (other than reserves and assessments taken into
account in determining the interest rate applicable to Eurodollar
Advances), or
(iii) imposes any other condition the result of which is to
increase the cost to any Lender or any applicable Lending
Installation or the LC Issuer of making, funding or maintaining its
Eurodollar Loans, or of issuing or participating in Facility LCs, or
reduces any amount receivable by any Lender or any applicable
Lending Installation or the LC Issuer in connection with its
Eurodollar Loans, Facility LCs or participations therein, or
requires any Lender or any applicable Lending Installation or the LC
Issuer to make any payment calculated by reference to the amount of
Eurodollar Loans, Facility LCs or participations therein held or
interest received by it, by an amount deemed material by such Lender
or the LC Issuer, as the case may be, and the result of any of the
foregoing is to increase the cost to such Lender or applicable
Lending Installation or the LC Issuer, as the case may be, of making
or maintaining its Eurodollar Loans or Commitment or of issuing or
participating in the Facility LCs or to reduce the return received
by such Lender or applicable Lending Installation or the LC Issuer,
as the case may be, in connection with such Eurodollar Loans,
Commitment, Facility LCs or participations therein, then, within 15
days of demand by such Lender or the LC Issuer, as the case may be,
the Borrower shall pay such Lender or the LC Issuer, as the case may
be, such additional amount or amounts as will compensate such Lender
or the LC Issuer, as the case may be, for such increased cost or
reduction in amount received.
3.2. Changes in Capital Adequacy Regulations. If a Lender or
the LC Issuer determines the amount of capital required or expected
to be maintained by such Lender or the LC Issuer, any Lending
Installation of such Lender or the LC Issuer, or any corporation
controlling such Lender or LC Issuer is increased as a result of a
Change, then, within 15 days of demand by such Lender or LC Issuer,
the Borrower shall pay such Lender or the LC Issuer the amount
necessary to compensate for any shortfall in the rate of return on
the portion of such increased capital which such Lender or the LC
Issuer determines is attributable to this Agreement, its Outstanding
<PAGE>
Credit Exposure or its commitment to make Loans and issue or
participate in Facility LCs, as the case may be, hereunder (after
taking into account such Lender's or LC Issuer's policies as to
capital adequacy). "Change" means (i) any change after the date of
this Agreement in the Risk-Based Capital Guidelines or (ii) any
adoption of or change in any other law, governmental or
quasi-governmental rule, regulation, policy, guideline,
interpretation, or directive (whether or not having the force of
law) after the date of this Agreement which affects the amount of
capital required or expected to be maintained by any Lender or the
LC Issuer or any Lending Installation or any corporation controlling
any Lender or the LC Issuer. "Risk-Based Capital Guidelines" means
(i) the risk-based capital guidelines in effect in the United States
on the date of this Agreement, including transition rules, and (ii)
the corresponding capital regulations promulgated by regulatory
authorities outside the United States implementing the July 1988
report of the Basle Committee on Banking Regulation and Supervisory
Practices Entitled "International Convergence of Capital
Measurements and Capital Standards," including transition rules, and
any amendments to such regulations adopted prior to the date of this
Agreement.
3.3. Availability of Types of Advances. If any Lender
determines that maintenance of its Eurodollar Loans at a suitable
Lending Installation would violate any applicable law, rule,
regulation, or directive, whether or not having the force of law, or
if the Required Lenders determine that (i) deposits of a type and
maturity appropriate to match fund Eurodollar Advances are not
available or (ii) the interest rate applicable to Eurodollar
Advances does not accurately reflect the cost of making or
maintaining Eurodollar Advances, then the Agent shall suspend the
availability of Eurodollar Advances and require any affected
Eurodollar Advances to be repaid or converted to Floating Rate
Advances, subject to the payment of any funding indemnification
amounts required by Section 3.4.
3.4. Funding Indemnification. If any payment of a Eurodollar
Advance occurs on a date which is not the last day of the applicable
Interest Period, whether because of acceleration, prepayment or
otherwise, or a Eurodollar Advance is not made on the date specified
by the Borrower for any reason other than default by the Lenders,
the Borrower will indemnify each Lender for any loss or cost
incurred by it resulting therefrom, including, without limitation,
any loss or cost in liquidating or employing deposits acquired to
fund or maintain such Eurodollar Advance.
3.5. Taxes. (i) All payments by the Borrower to or for the
account of any Lender, the LC Issuer or the Agent hereunder or under
any Note or Facility LC Application shall be made free and clear of
and without deduction for any and all Taxes. If the Borrower shall
be required by law to deduct any Taxes from or in respect of any sum
payable hereunder to any Lender, the LC Issuer or the Agent, (a)
the sum payable shall be increased as necessary so that after making
all required deductions (including deductions applicable to
additional sums payable under this Section 3.5) such Lender, the LC
Issuer or the Agent (as the case may be) receives an amount equal to
the sum it would have received had no such deductions been made, (b)
the Borrower shall make such deductions, (c) the Borrower shall pay
the full amount deducted to the relevant authority in accordance
with applicable law and (d) the Borrower shall furnish to the Agent
the original copy of a receipt evidencing payment thereof within 30
days after such payment is made.
(ii) In addition, the Borrower hereby agrees to pay any
present or future stamp or documentary taxes and any other excise or
property taxes, charges or similar levies which arise from any
payment made hereunder or under any Note or Facility LC Application
or from the execution or delivery of, or otherwise with respect to,
this Agreement or any Note or Facility LC Application, but excluding
Excluded Taxes ("Other Taxes").
(iii) The Borrower hereby agrees to indemnify the Agent, the
LC Issuer and each Lender for the full amount of Taxes or Other
Taxes (including, without limitation, any Taxes or Other Taxes
imposed on amounts payable under this Section 3.5) paid by the
Agent, the LC Issuer or such Lender and any liability (including
penalties, interest and expenses) arising therefrom or with respect
thereto. Payments due under this indemnification shall be made
within 30 days of the date the Agent, the LC Issuer or such Lender
makes demand therefor pursuant to Section 3.6.
<PAGE>
(iv) Each Lender that is not incorporated under the laws of
the United States of America or a state thereof (each a "Non-U.S.
Lender") agrees that it will, not less than ten Business Days after
the date of this Agreement, (i) deliver to each of the Borrower and
the Agent two duly completed copies of United States Internal
Revenue Service Form 1001 or 4224, certifying in either case that
such Lender is entitled to receive payments under this Agreement
without deduction or withholding of any United States federal income
taxes, and (ii) deliver to each of the Borrower and the Agent a
United States Internal Revenue Form W-8 or W-9, as the case may be,
and certify that it is entitled to an exemption from United States
backup withholding tax. Each Non-U.S. Lender further undertakes to
deliver to each of the Borrower and the Agent (x) renewals or
additional copies of such form (or any successor form) on or before
the date that such form expires or becomes obsolete, and (y) after
the occurrence of any event requiring a change in the most recent
forms so delivered by it, such additional forms or amendments
thereto as may be reasonably requested by the Borrower or the Agent.
All forms or amendments described in the preceding sentence shall
certify that such Lender is entitled to receive payments under this
Agreement without deduction or withholding of any United States
federal income taxes, unless an event (including without limitation
any change in treaty, law or regulation) has occurred prior to the
date on which any such delivery would otherwise be required which
renders all such forms inapplicable or which would prevent such
Lender from duly completing and delivering any such form or
amendment with respect to it and such Lender advises the Borrower
and the Agent that it is not capable of receiving payments without
any deduction or withholding of United States federal income tax.
(v) For any period during which a Non-U.S. Lender has failed
to provide the Borrower with an appropriate form pursuant to clause
(iv), above (unless such failure is due to a change in treaty, law
or regulation, or any change in the interpretation or administration
thereof by any governmental authority, occurring subsequent to the
date on which a form originally was required to be provided), such
Non-U.S. Lender shall not be entitled to indemnification under this
Section 3.5 with respect to Taxes imposed by the United States;
provided that, should a Non-U.S. Lender which is otherwise exempt
from or subject to a reduced rate of withholding tax become subject
to Taxes because of its failure to deliver a form required under
clause (iv), above, the Borrower shall take such steps as such Non-
U.S. Lender shall reasonably request to assist such Non-U.S. Lender
to recover such Taxes.
(vi) Any Lender that is entitled to an exemption from or
reduction of withholding tax with respect to payments under this
Agreement or any Note pursuant to the law of any relevant
jurisdiction or any treaty shall deliver to the Borrower (with a
copy to the Agent), at the time or times prescribed by applicable
law, such properly completed and executed documentation prescribed
by applicable law as will permit such payments to be made without
withholding or at a reduced rate.
(vii) If the U.S. Internal Revenue Service or any other
governmental authority of the United States or any other country or
any political subdivision thereof asserts a claim that the Agent did
not properly withhold tax from amounts paid to or for the account of
<PAGE>
any Lender (because the appropriate form was not delivered or
properly completed, because such Lender failed to notify the Agent
of a change in circumstances which rendered its exemption from
withholding ineffective, or for any other reason), such Lender shall
indemnify the Agent fully for all amounts paid, directly or
indirectly, by the Agent as tax, withholding therefor, or otherwise,
including penalties and interest, and including taxes imposed by any
jurisdiction on amounts payable to the Agent under this subsection,
together with all costs and expenses related thereto (including
attorneys fees and time charges of attorneys for the Agent, which
attorneys may be employees of the Agent). The obligations of the
Lenders under this Section 3.5(vii) shall survive the payment of the
Secured Obligations and termination of this Agreement.
3.6. Lender Statements; Survival of Indemnity. To the extent
reasonably possible, each Lender shall designate an alternate
Lending Installation with respect to its Eurodollar Loans to reduce
any liability of the Borrower to such Lender under Sections 3.1, 3.2
and 3.5 or to avoid the unavailability of Eurodollar Advances under
Section 3.3, so long as such designation is not, in the judgment of
such Lender, disadvantageous to such Lender. Each Lender shall
deliver a written statement of such Lender to the Borrower (with a
copy to the Agent) as to the amount due, if any, under Section 3.1,
3.2, 3.4 or 3.5. Such written statement shall set forth in
reasonable detail the calculations upon which such Lender determined
such amount and shall be final, conclusive and binding on the
Borrower in the absence of manifest error. Determination of amounts
payable under such Sections in connection with a Eurodollar Loan
shall be calculated as though each Lender funded its Eurodollar Loan
through the purchase of a deposit of the type and maturity
corresponding to the deposit used as a reference in determining the
Eurodollar Rate applicable to such Loan, whether in fact that is the
case or not. Unless otherwise provided herein, the amount specified
in the written statement of any Lender shall be payable on demand
after receipt by the Borrower of such written statement. The
obligations of the Borrower under Sections 3.1, 3.2, 3.4 and 3.5
shall survive payment of the Secured Obligations and termination of
this Agreement.
ARTICLE IV
CONDITIONS PRECEDENT
--------------------
4.1. Initial Credit Extension. (a) The Lenders shall not be
required to make the initial Credit Extension hereunder unless the
Borrower has furnished to the Agent with sufficient copies for the
Lenders:
(i) This Agreement, executed by an Authorized
Representative of each party hereto.
(ii) Any Notes requested by a Lender pursuant to
Section 2.13 payable to the order of each such
requesting Lender executed by an Authorized
Representative of the maker thereof.
(iii) The Pledge and Security
Agreements, together with UCC financing statements
and stock certificates representing all of the issued
and outstanding capital stock of each of the
Guarantors (with stock powers duly endorsed in
blank), in each case, executed by an Authorized
Representative of each party thereto.
(iv) The Mortgages with respect to the real
property identified on Schedule 4.1 (iv), in each
case executed by an Authorized Representative of each
party thereto, together with such surveys and title
insurance policies as the Agent may require.
<PAGE>
(v) The Guaranty executed by an Authorized
Representative of each of the Guarantors.
(vi) The Intercompany Subordination Agreement
and the Subordination Agreement, each executed by an
Authorized Representative or authorized
representative of each party thereto.
(vii) A true and complete copy of the
Seller Agreements and the Mega Marts Notes, which
Seller Agreements and Mega Marts Notes shall be in
form and substance reasonably satisfactory to the
Agent and the Required Lenders, together with a
certificate executed by an Authorized Person of the
Borrower, certifying that the transactions
contemplated by the Seller Agreements have been
consummated substantially in accordance with their
terms.
(viii) Copies of the articles or certificate
of incorporation of the Borrower and each of the
Guarantors, together with all amendments, and a
certificate of good standing or current status, each
certified by the appropriate governmental officer in
their respective jurisdiction of incorporation.
(ix) Copies, certified by the Secretary or
Assistant Secretary of the Borrower and each of the
Guarantors, of their respective by-laws and of their
respective Board of Directors' resolutions and of
resolutions or actions of any other body authorizing
the execution of the Loan Documents to which the
Borrower and each of the other Loan Parties is a
party.
(x) Incumbency certificates, executed by the
Secretary or Assistant Secretary of the Borrower and
each of the Guarantors, which shall identify by name
and title and bear the signatures of the Authorized
Representatives and any other officers of the
Borrower and the Guarantors authorized to sign the
Loan Documents to which each of the Borrower and the
Guarantors is a party, upon which certificate the
Agent and the Lenders shall be entitled to rely until
informed of any change in writing by the Borrower or
a Guarantor.
(xi) A certificate, signed by the chief
financial officer of the Borrower, stating that on
the initial Credit Extension Date no Default or
Unmatured Default has occurred and is continuing and
that there has been no material adverse change in the
business, condition (financial or otherwise),
operations, performance, Properties or prospects of
the Loan Parties since January 1, 2000.
(xii) A written opinion of the Loan Parties'
counsel, addressed to the Lenders in substantially
the form of Exhibit 4.1(xii).
<PAGE>
(xiii) Written money transfer instructions,
in substantially the form of Exhibit 4.1(xiii),
addressed to the Agent and signed by an Authorized
Representative, together with such other related
money transfer authorizations as the Agent may have
reasonably requested.
(xiv) Evidence that there is no suit,
action, injunction or restraining order which, in the
reasonable judgment of the Agent: (a) seeks to
prohibit the making of the Loans, and (b) that if
adversely determined against any Loan Party, would
have a Material Adverse Effect.
(xv) Information satisfactory to the Agent
and the Required Lenders regarding the Agent's due
diligence investigation of the Loan Parties,
including without limitation, information pertaining
to the Loan Parties' Contingent Obligations,
contractual obligations, compliance with
Environmental Laws (including compliance with the
terms set forth in the Agent's Environmental Policy)
and other legal (including all applicable
requirements of Regulations U, T and X of the Board
of Governors of the Federal Reserve System) and
regulatory matters, joint venture liability, products
liability exposure, and intellectual property and
license agreements.
(xvi) Audited financial statements for the
1997 and 1998 fiscal year ends of each of Mega Marts,
Inc. and Ultra Mart, Inc., and unaudited financial
statements for the 1999 fiscal year end of Ultra
Mart, Inc.
(xvii) Pro forma opening financial statements
and updated projections giving effect to the
Borrower's acquisitions of Mega Marts, Inc. and Ultra
Mart, Inc., together with such other information as
the Agent may reasonably request to confirm the tax,
legal and business assumptions made in such pro forma
opening financial statements and updated projections
(a) which must not be materially less favorable, in
the Agent's reasonable judgment, than the projections
previously delivered by the Borrower to the Agent and
(b) which must demonstrate, in the Agent's reasonable
judgment, that the Borrower can repay its Obligations
as and when due and can comply with the financial
covenants set forth in Section 6.2.14 of this
Agreement.
(xviii) Evidence satisfactory to the Agent
that all of the Loan Parties' obligations under all
existing bank credit facilities and all senior note
agreements have been indefeasibly paid in full and
that all committed and uncommitted credit facilities
have been terminated.
(xix) If the initial Credit Extension will
be the issuance of a Facility LC, a properly
completed Facility LC Application.
<PAGE>
(xx) Evidence of the insurance coverage
described in Section 6.1.3.
(xxi) The General Intangibles Mortgage
executed by an Authorized Representative of the
Borrower.
(xxii) Such other documents as any Lender or its
counsel may have reasonably requested.
(b) In addition to the deliveries required under Section
4.1(a), the Lenders shall not be required to make the initial Credit
Extension hereunder unless: (i) the Borrower has delivered or caused
to be delivered executed lessor's agreements in form and substance
satisfactory to the Agent for each of the locations identified on
Schedule 4.1(b)(i) hereto (Warehouses), and (ii) the Borrower
demonstrates to the Agent's reasonable satisfaction that it has used
reasonable commercial efforts to obtain executed lessor's agreements
in form and substance satisfactory to the Agent for each of the
locations identified on Schedule 4.1(b)(ii) hereto (Leased Store
Locations).
(c) Notwithstanding any term contained herein to the contrary,
within sixty (60) days of the Closing Date, the Borrower shall
furnish to the Agent (with sufficient copies for the Lenders), the
audited financial statements for the 1999 fiscal year of Mega Marts,
Inc.
4.2. Each Credit Extension. The Lenders shall not be required
to make any Credit Extension unless on the applicable Credit
Extension Date:
(i) There exists no Default or Unmatured Default.
(ii) The representations and warranties contained in
Article V are true and correct as of such Credit Extension
Date except to the extent any such representation or
warranty is stated to relate solely to an earlier date, in
which case such representation or warranty shall have been
true and correct on and as of such earlier date.
(iii) All legal matters incident to the making of such
Credit Extension shall be satisfactory to the Lenders and
their counsel.
Each Borrowing Notice or request for issuance of a Facility LC
with respect to each such Credit Extension shall constitute a
representation and warranty by the Borrower that the conditions
contained in Sections 4.2(i) and (ii) have been satisfied. Any
Lender may require a duly completed compliance certificate in
substantially the form of Exhibit 6.3.3 as a condition to making an
Advance.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
------------------------------
<PAGE>
The Borrower hereby represents and warrants to the Agent and
each of the Lenders as follows:
5.1. Organization and Qualification. Each Loan Party and each
Material Subsidiary is a corporation, partnership or limited
liability company duly organized, validly existing and in good
standing or current status under the laws of its jurisdiction of
organization. Each Loan Party and each Material Subsidiary has the
lawful power to own or lease its properties and to engage in the
business it presently conducts or proposes to conduct. Each Loan
Party and each Material Subsidiary is duly licensed or qualified and
in good standing or current status in each jurisdiction listed on
Schedule 5.1 and in all other jurisdictions where the property owned
or leased by it or the nature of the business transacted by it or
both makes such licensing or qualification necessary. The foregoing
warranty is subject to Section 6.2.6 after the Closing Date.
5.2. Subsidiaries . Schedules 5.1 and 5.2 state the name of
each of the Borrower's Subsidiaries, its jurisdiction of
incorporation, its authorized capital stock, the issued and
outstanding shares (referred to herein as the "Subsidiary Shares")
and the owners thereof if it is a corporation, its outstanding
partnership interests (the "Partnership Interests") if it is a
partnership and its outstanding limited liability company interests,
interests assigned to managers thereof and the voting rights
associated therewith (the "LLC Interests") if it is a limited
liability company. The Borrower and each Subsidiary of the Borrower
has good and marketable title to all of the Subsidiary Shares,
Partnership Interests and LLC Interests it purports to own, free and
clear in each case of any Lien. All Subsidiary Shares, Partnership
Interests and LLC Interests have been validly issued, and all
Subsidiary Shares are fully paid and nonassessable. All capital
contributions and other consideration required to be made or paid in
connections with the issuance of the Partnership Interests and LLC
Interests have been made or paid, as the case may be. There are no
options, warrants or other rights outstanding to purchase any such
Subsidiary Shares, Partnership Interests or LLC Interests except as
indicated on Schedule 5.2.
5.3. Power and Authority. Each Loan Party has full power to
enter into, execute, deliver and carry out this Agreement and the
other Loan Documents to which it is a party, to incur the
Indebtedness contemplated by the Loan Documents and to perform its
Obligations under the Loan Documents to which it is a party, and all
such actions have been duly authorized by all necessary proceedings
on its part.
5.4 Validity and Binding Effect. This Agreement has been
duly and validly executed and delivered by each Loan Party, and each
other Loan Document which any Loan Party is required to execute and
deliver on or after the date hereof will have been duly executed and
delivered by such Loan Party on the required date of delivery of
<PAGE>
such Loan Document. This Agreement and each other Loan Document
constitutes, or will constitute, legal, valid and binding
obligations of each Loan Party which is or will be a party thereto
on and after its date of delivery thereof, enforceable against such
Loan Party in accordance with its terms, except to the extent that
enforceability of any of such Loan Document may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforceability of creditors' rights generally or
limiting the right of specific performance.
5.5. No Conflict. Neither the execution and delivery of this
Agreement or the other Loan Documents by any Loan Party nor the
consummation of the transaction herein or therein contemplated or
compliance with the terms and provisions hereof or thereof by any of
them will conflict with, constitute a default under or result in any
breach of (i) the terms and conditions of the articles or
certificate of incorporation, bylaws, certificate of limited
partnership, partnership agreement, certificate of formation,
limited liability company agreement or other organizational
documents of any Loan Party or (ii) any law or any agreement
material to the Borrower and its Subsidiaries taken as a whole or
instrument or order, writ, judgment, injunction or decree to which
any Loan Party or any of its Subsidiaries is a party or by which it
or any of its Subsidiaries is bound or to which it is subject, or
result in the creation or enforcement of any Lien, charge or
encumbrance whatsoever upon any property (now or hereafter acquired)
of any Loan Party or any of its Subsidiaries (other than Liens
granted under the Loan Documents).
5.6. Litigation. There are no actions, suits, proceedings or
investigations pending or, to the knowledge of any Loan Party,
threatened against such Loan Party or any Subsidiary of such Loan
Party at law or equity before any Official Body which individually
or in the aggregate may have a Material Adverse Effect. None of the
Loan Parties or any Subsidiaries of any Loan Party is in violation
of any order, writ, injunction or any decree of any Official Body
which may have a Material Adverse Effect.
5.7. Title to Properties. Subject to the transactions
permitted under Section 6.2.7(i), the real property owned or leased
by each Loan Party and each Subsidiary of each Loan Party on the
date hereof (excluding facilities which a Loan Party or Subsidiary
of a Loan Party leases as lessee and subleases as the lessor and
which such Loan Party does not operate and excluding the "vacant
leased locations" set forth on Schedule 5.7(a) which a Loan Party or
Subsidiary of a Loan Party leases but does not sublease for grocery
store use) is described on Schedule 5.7 (subject to Section 5.23).
Each Loan Party and each Subsidiary of each Loan Party has good and
marketable title to or valid leasehold interest in all material
properties, assets and other rights which it purports to own or
lease or which are reflected as owned or leased on its books and
records, free and clear of all Liens and encumbrances except
Permitted Liens, and subject to the terms and conditions of the
applicable leases. All leases of property are in full force and
effect in all material respects without the necessity for any
consent which has not previously been obtained upon consummation of
the transactions contemplated hereby.
5.8. Financial Statements.
(i) Historical Statements. The Borrower has delivered to the
Agent copies of its audited consolidated financial statements for
its fiscal years ending on or about January 3, 1998, January 2, 1999
and January 1, 2000 (the "Historical Statements"). The Historical
Statements were compiled from the books and records maintained by
the Borrower's management, are correct and complete and fairly
<PAGE>
represent the consolidated financial condition of the Borrower and
its Subsidiaries as of their dates and the results of operations for
the fiscal periods then ended and have been prepared in accordance
with Agreement Accounting Principles consistently applied.
(ii) Accuracy of Financial Statements. Neither the Borrower
nor any of its Subsidiaries has any liabilities, contingent or
otherwise, or any forward or long-term commitments, which in the
case of any of the foregoing are required under Agreement Accounting
Principles to be disclosed in the Historical Statements or in the
notes thereto and are not so disclosed, and except as disclosed
therein there are no unrealized or anticipated losses from any
commitments of the Borrower or any Subsidiary of the Borrower which
may have a Material Adverse Effect. Since January 1, 2000, there
has been no Material Adverse Effect on the business or operations of
the Loan Parties.
5.9. Use of Proceeds; Margin Stock. The Loan Parties intend
to use the proceeds of the Loans in accordance with Section 6.1.10.
None of the Loan Parties or any Subsidiaries of any Loan Party
engages or intends to engage principally, or as one of its important
activities, in the business of extending credit for the purpose,
immediately, incidentally or ultimately, of purchasing or carrying
margin credit for the purpose, immediately, incidentally or
ultimately, of purchasing or carrying margin stock (within the
meaning of Regulation U). No part of the proceeds of any Loan has
been or will be used, immediately, incidentally or ultimately, to
purchase or carry any margin stock or to extend credit to others for
the purpose of purchasing or carrying any margin stock or to refund
Indebtedness originally incurred for such purpose, or for any
purpose which entails a violation of or which is inconsistent with
the provisions of the regulations of the Board of Governors of the
Federal Reserve System. None of the Loan Parties or any Subsidiary
of any Loan Parties holds or intends to hold margin stock in such
amounts that more than 25% of the reasonable value of the assets of
any Loan Party or Subsidiary of any Loan Party are or will be
represented by margin stock.
5.10 Full Disclosure. Neither this Agreement nor any other
Loan Document, nor any certificate, statement, agreement or other
documents furnished to the Agent or any Lender in connection
herewith or therewith, contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make
the statements contained herein and therein, in light of the
circumstances under which they were made, not misleading. There is
no fact known to any Loan Party which materially adversely affects
the business, property, assets, financial condition, results of
operations or prospects of any Material Subsidiary or the Borrower
and its Subsidiaries taken as a whole which has not been set forth
in this Agreement or in the certificates, statements, agreements or
other documents furnished in writing to the Agent and the Lenders
prior to or at the date hereof in connection with the transactions
contemplated hereby.
5.11. Taxes . All federal, state, local and other tax
returns required to have been filed with respect to each Loan Party
and each Subsidiary of each Loan Party have been filed, and payment
or adequate provision has been made for the payment of all taxes,
fees, assessments and other governmental charges which have or may
become due pursuant to said returns or to assessments received,
except to the extent that such taxes, fees, assessments and other
<PAGE>
charges are being contested in good faith by appropriate proceedings
diligently conducted and for which such reserves or other
appropriate provisions, if any, as shall be required by Agreement
Accounting Principles shall have been made. There are no agreements
or waivers extending the statutory period of limitations applicable
to any federal income tax return of any Loan Party or Subsidiary of
any Loan Party for any period.
5.12. Consents and Approvals. No consent, approval,
exemption, order or authorization of, or a registration or filing
with, any Official Body or any other Person is required by any law
or any agreement in connection with the execution, delivery and
carrying out of this Agreement and the other Loan Documents by any
Loan Party, except as listed on Schedule 5.12, all of which shall
have been obtained or made on or prior to the Closing Date except as
otherwise indicated on Schedule 5.12.
5.13. No Event of Default; Compliance with Instruments.
No event has occurred and is continuing and no condition exists or
will exist after giving effect to the Credit Extensions to be made
on the Closing Date under or pursuant to the Loan Documents which
constitutes a Default or Unmatured Default. None of the Loan
Parties or any Subsidiaries of any Loan Party is in violation of (i)
any term of its articles or certificate of incorporation, bylaws,
certificate of limited partnership, partnership agreement,
certificate of formation, limited liability company agreement or
other organizational documents or (ii) any material agreement or
instrument to which it is a party or by which it or any of its
properties may be subject or bound where such violation would have a
Material Adverse Effect.
5.14. Patents, Trademarks, Copyrights, Licenses, Etc.
Each Loan Party and each Subsidiary of each Loan Party owns or
possesses all the material patents, trademarks, service marks, trade
names, copyrights, licenses, registrations, franchises, permits and
rights necessary to own and operate its properties and to carry on
its business as presently conducted and planned to be conducted by
such Loan Party or Subsidiary, without known possible, alleged or
actual conflict with the rights of others, except for conflicts
which could not have a Material Adverse Effect.
5.15. Insurance. All insurance policies and other bonds
to which each Loan Party or Subsidiary of any Loan Party is a party,
are valid and in full force and effect. No notice has been given or
claim made and no grounds exist to cancel or avoid any of such
policies or bonds or to reduce the coverage provided thereby. Such
policies and bonds provide adequate coverage from reputable and
financially sound insurers in amounts sufficient to insure the
assets and risks of each Loan Party and each Subsidiary of each Loan
Party in accordance with prudent business practice in the industry
of the Loan Parties and their Subsidiaries.
5.16. Compliance with Laws. The Loan Parties and their
Subsidiaries are in compliance in all material respects with all
applicable laws (other than Environmental Laws which are
specifically addressed in Section 5.21) in all jurisdictions in
which any Loan Party or Subsidiary of any Loan Party is presently or
will be doing business except where the failure to do so would not
have a Material Adverse Effect.
5.17. Material Contracts; Burdensome Restrictions. All
contracts material to the Loan Parties and their Subsidiaries taken
as a whole relating to the business operations of each Loan Party
and each Subsidiary of each Loan Party, including all material
employee benefit plans and Labor Contracts are valid, binding and
<PAGE>
enforceable upon such Loan Party or Subsidiary and each of the other
parties thereto in accordance with their respective terms, and there
is no default thereunder, to the Loan Parties' knowledge, with
respect to parties other than such Loan Party or Subsidiary. None
of the Loan Parties or their Subsidiaries is bound by any
contractual obligation, or subject to any restriction in any
organization document, or any requirement of law which could have a
Material Adverse Effect.
5.18. Investment Companies: Regulated Entities. None of
the Loan Parties or any Subsidiaries of any Loan Party is an
"investment company" registered or required to be registered under
the Investment Company Act of 1940 or under the "control" of an
"investment company" as such terms are defined in the Investment
Company Act of 1940 and shall not become such an "investment
company" or under such "control." None of the Loan Parties or any
Subsidiaries of any Loan Party is subject to any other Federal or
state statute or regulation limiting its ability to incur
Indebtedness for borrowed money.
5.19. Plans and Benefit Arrangements. Except as set
forth on Schedule 5.19:
(i) The Borrower and each other member of the Controlled Group
are in compliance in all material respects with any applicable
provisions of ERISA with respect to all Benefit Arrangements, Plans
and Multiemployer Plans. There has been no Prohibited Transaction
with respect to any Benefit Arrangement or any Plan or, to the best
knowledge of the Borrower, with respect to any Multiemployer Plan or
Multiemployer Plan, which could result in any material liability of
the Borrower or any other member of the Controlled Group. The
Borrower and all other members of the Controlled Group have made
when due any and all payments required to be made under any
agreement relating to a Multiemployer Plan or a Multiple Employer
Plan or any law pertaining thereto. With respect to each Plan and
Multiemployer Plan, the Borrower and each other member of the
Controlled Group (i) have fulfilled in all material respects their
obligations under the minimum funding standards of ERISA, (ii) have
not incurred any liability to the PBGC, and (iii) have not had
asserted against them any penalty for failure to fulfill the minimum
funding requirements of ERISA.
(ii) To the best of the Borrower's knowledge, each
Multiemployer Plan and Multiple Employer Plan is able to pay
benefits thereunder when due.
(iii) Neither the Borrower nor any other member of the
Controlled Group has instituted or intends to institute proceedings
to terminate any Plan.
(iv) No event requiring notice to the PBGC under Section
302(f)(4)(A) of ERISA has occurred or is reasonably expect to occur
with respect to any Plan, and no amendment with respect to which
security is required under Section 307 of ERISA has been made or is
reasonably expected to be made to any Plan.
(v) The aggregate actuarial present value of all benefit
liabilities (whether or not vested) under each Plan, determined on a
plan termination basis, as disclosed in, and as of the date of, the
most recent actuarial report for such Plan, does not exceed the
aggregate fair market value of the assets of such Plan.
<PAGE>
(vi) Neither the Borrower nor any other member of the
Controlled Group has incurred or reasonably expects to incur any
material withdrawal liability under ERISA to any Multiemployer Plan
or Multiple Employer Plan. Neither the Borrower nor any other
member of the Controlled Group has been notified by any
Multiemployer Plan or Multiple Employer Plan that such Multiemployer
Plan or Multiple Employer Plan has been terminated within the
meaning of Title IV of ERISA and, to the best knowledge of the
Borrower, no Multiemployer Plan or Multiple Employer Plan is
reasonably expected to be reorganized or terminated, within the
meaning of Title IV of ERISA.
(vii) To the extent that any Benefit Arrangement is
insured, the Borrower and all other members of the Controlled Group
have paid when due all premiums required to be paid for all periods
through the Closing Date. To the extent that any Benefit
Arrangement is funded other than with insurance, the Borrower and
all other members of the Controlled Group have made when due all
contributions required to be paid for all periods through the
Closing Date.
(viii) All Plans, Benefit Arrangements and Multiemployer
Plans have been administered in accordance with their terms and
applicable law.
5.20. Employment Matters. Each of the Loan Parties and
each Subsidiary of each Loan Party is in compliance with the Labor
Contracts and all applicable federal, state and local labor and
employment laws including those related to equal employment
opportunity and affirmative action, labor relations, minimum wage,
overtime, child labor, medical insurance continuation, worker
adjustment and relocation notices, immigration controls and worker
and unemployment compensation, in each case where the failure to
comply would have a Material Adverse Effect. There are no
outstanding grievances, arbitration awards or appeals therefrom
arising out of the Labor Contracts or current or threatened strikes,
picketing, hand billing or other work stoppages or slowdowns at
facilities of any of the Loan Parties or any of their Subsidiaries
which in any case would have a Material Adverse Effect.
5.21. Environmental Matters. Except as disclosed on
Schedule 5.21 and except as are not or could not individually or in
the aggregate have a Material Adverse Effect:
(i) None of the Loan Parties or any Subsidiaries of any Loan
Party has received any Environmental Complaint from any Official
Body or private Person alleging that such Loan Party or Subsidiary
or any prior or subsequent owner of any of the Property is a
potentially responsible party under the Comprehensive Environmental
Response, Cleanup and Liability Act, 42. U.S.C. 9601, et seq., and
none of the Loan Parties has any reason to believe that such an
Environmental Complaint might be received. There are no pending or,
to any Loan Party's knowledge, threatened Environmental Complaints
relating to any Loan Party or Subsidiary of any Loan Party or, to
any Loan Party's knowledge, any prior or subsequent owner of any of
the Property pertaining to, or arising out of, any Environmental
Conditions.
(ii) There are no circumstances at, on or under any of the
Property that constitute a breach of or non-compliance with any of
the Environmental Laws, and there are no past or present
Environmental Conditions at, on or under any of the Property or, to
any Loan Party's knowledge, at, on or under adjacent property, that
prevent compliance with the Environmental Laws at any of the
Property.
<PAGE>
(iii) Neither any of the Property nor any structures,
improvements, equipment, fixtures, activities or facilities thereon
or thereunder contain or use Regulated Substances except in
compliance with Environmental Laws. There are no processes,
facilities, operations, equipment or other activities at, on or
under any of the Property, or, to any Loan Party's knowledge, at on
or under adjacent property, that currently result in the release or
threatened release of Regulated Substances onto any of the Property,
except to the extent that such releases or threatened releases are
not a breach of or otherwise not a violation of the Environmental
Laws.
(iv) There are no aboveground storage tanks, underground
storage tanks or underground piping associated with such tanks, used
for the management of Regulated Substances at, on or under any of
the Property that (a) do not have, to the extent required by
Environmental Laws, a full operational secondary containment system
in place, and (b) are not otherwise in compliance with all
Environmental Laws. There are no abandoned underground storage
tanks or underground piping associated with such tanks, previously
used for the management of Regulated Substances at, on or under any
of the Property that have not either been closed in place in
accordance with Environmental Laws or removed in compliance with all
applicable Environmental Laws and no contamination associated with
the use of such tanks exists on any of the Property that is not in
compliance with Environmental Laws.
(v) Each Loan Party and each Subsidiary of each Loan Party has
all material permits, licenses, authorizations, plans and approvals
necessary under Environmental Laws for the conduct of the business
of such Loan Party or Subsidiary as presently conducted. Each Loan
Party and each Subsidiary of each Loan Party has submitted all
material notices, reports and other filings required by the
Environmental Laws to be submitted to an Official Body which pertain
to past and current operations on any of the Property.
(vi) All past and present on-site generation, storage,
processing, treatment, recycling, reclamation, disposal or other use
or management of Regulated Substances at, on, or under any of the
Property and all off-site transportation, storage, processing,
treatment, recycling, reclamation, disposal or other use or
management of Regulated Substances have been done in accordance with
the Environmental Laws.
5.22. Subordinated Indebtedness. The Secured Obligations
constitute senior indebtedness which is entitled to the benefits of
the subordination provisions of all outstanding Subordinated
Indebtedness.
5.23. Updates to Schedules. Should any of the
information or disclosures provided on any of the Schedules attached
hereto become outdated or incorrect in any material respect, the
Borrower shall provide the Agent in writing with such revisions or
updates to such Schedule as may be necessary or appropriate to
update or correct same:
<PAGE>
(a) promptly after such schedule becomes outdated or incorrect
in the case of Schedules 5.7 (title to properties, with respect to
warehouse locations), 5.12 (consents and approvals), 5.19 (employee
benefit plan disclosures), and 5.21 (environmental disclosures);
notwithstanding this clause (a) neither Schedule 5.7, 5.12, 5.19,
nor Schedule 5.21 shall be deemed to have been amended, modified or
superseded by any correction or update thereto, nor shall any breach
of warranty or representation resulting from the inaccuracy or
incompleteness of such Schedule be deemed to have been cured
thereby, unless and until the Required Lenders, in their sole and
absolute discretion, shall have accepted in writing such revisions
or updates to such Schedule, and
(b) on a quarterly basis at the time the Borrower delivers its
compliance certificate described in Section 6.3.3 in the case of
Schedules 5.1 (qualifications to do business ), 5.2 (subsidiaries),
and 5.7 (title to properties, with respect to property other than
warehouse locations).
5.24. Solvency. (i) Immediately after the consummation of
the transactions to occur on the date hereof and immediately
following the making of each Credit Extension, if any, made on the
date hereof and after giving effect to the application of the
proceeds of such Credit Extensions, (a) the fair value of the assets
of the Borrower and its Subsidiaries on a consolidated basis, at a
fair valuation, will exceed the debts and liabilities, subordinated,
contingent or otherwise, of the Borrower and its Subsidiaries on a
consolidated basis; (b) the present fair saleable value of the
Property of the Borrower and its Subsidiaries on a consolidated
basis will be greater than the amount that will be required to pay
the probable liability of the Borrower and its Subsidiaries on a
consolidated basis on their debts and other liabilities,
subordinated, contingent or otherwise, as such debts and other
liabilities become absolute and matured; (c) the Borrower and its
Subsidiaries on a consolidated basis will be able to pay their debts
and liabilities, subordinated, contingent or otherwise, as such
debts and liabilities become absolute and matured; and (d) the
Borrower and its Subsidiaries on a consolidated basis will not have
unreasonably small capital with which to conduct the businesses in
which they are engaged as such businesses are now conducted and are
proposed to be conducted after the date hereof.
(ii) The Borrower does not intend to, or to permit any of its
Subsidiaries to, and does not believe that it or any of its
Subsidiaries will, incur debts beyond its ability to pay such debts
as they mature, taking into account the timing of and amounts of
cash to be received by it or any such Subsidiary and the timing of
the amounts of cash to be payable on or in respect of its
Indebtedness or the Indebtedness of any such Subsidiary.
<PAGE>
ARTICLE VI
COVENANTS
---------
6.1. Affirmative Covenants.
During the term of this Agreement, unless the Required Lenders
shall otherwise consent in writing:
6.1.1. Preservation of Existence, Etc. The Borrower
shall, and shall cause each of its Subsidiaries to, maintain its
legal existence as a corporation, limited partnership or limited
liability company and its license or qualification and good standing
or current status in each jurisdiction in which its ownership or
lease of property or the nature of its business makes such license
or qualification necessary, except as otherwise expressly permitted
in Section 6.2.6.
6.1.2. Payment of Liabilities, Including Taxes, Etc.
The Borrower shall, and shall cause each of its Subsidiaries to,
duly pay and discharge all liabilities to which it is subject or
which are asserted against it, promptly as and when the same shall
become due and payable, including all taxes, assessments and
governmental charges upon it or any of its properties, assets,
income or profits, prior to the date on which penalties attach
thereto, except to the extent that such liabilities, including
taxes, assessments or charges, are being contested in good faith and
by appropriate and lawful proceedings diligently conducted and for
which such reserve or other appropriate provisions, if any, as shall
be required by Agreement Accounting Principles shall have been made,
but only to the extent that failure to discharge any such
liabilities would not result in any additional liability which would
have a Material Adverse Effect, provided that the Loan Parties and
their Subsidiaries will pay all such liabilities forthwith upon the
commencement of proceedings to foreclose any Lien which may have
attached as security therefor if such proceedings or Lien could have
a Material Adverse Effect.
6.1.3. Maintenance of Insurance. The Borrower shall,
and shall cause each of its Subsidiaries to, insure its properties
and assets against loss or damage by fire and such other insurable
hazards as such assets are commonly insured (including fire,
extended coverage, property damage, workers' compensation, public
liability and business interruption insurance) and against other
risks (including errors and omissions) in such amount as similar
properties and assets are insured by prudent companies in similar
circumstances carrying on similar businesses, and with reputable and
financially sound insurers, including self-insurance to the extent
customary, all as reasonably determined by the Agent. Without
limiting the generality of the foregoing, the Agent, for itself and
the benefit of the other Lenders, shall be named as lender loss
<PAGE>
payee and mortgagee under any insurance policy which relates to the
Collateral (as that term is defined in the Pledge and Security
Agreements) or relates to any real estate covered by a Mortgage and
shall be named as an additional insured with respect to the
Borrowers' and its Subsidiaries' liability insurance policies. The
Borrower shall, at the Agent's request, provide copies to the Agent
of all insurance policies and other material related thereto
maintained by the Borrower or any Subsidiary from time to time.
Pursuant to Section 4.1(xx), the Borrower shall supply the Agent
with certificates of insurance evidencing that the Agent has been
named an additional insured for purposes of this provision and
further providing that no such policy of insurance on which the
Agent has been named as lender loss payee and mortgagee and/or
additional insured may be canceled or terminated without a thirty
(30) day written notice to the Agent.
6.1.4. Maintenance of Properties and Leases. The
Borrower shall, and shall cause each of its Subsidiaries to,
maintain in good repair, working order and condition (ordinary wear
and tear excepted) in accordance with the general practice of other
businesses of similar character and size, all of those properties
useful or necessary to its business, and from time to time, such
Loan Party will make or cause to be made all appropriate repairs,
renewals or replacements thereof.
6.1.5. Maintenance of Patents, Trademarks, Etc. The
Borrower shall, and shall cause each of its Subsidiaries to,
maintain in full force and effect all patents, trademarks, service
marks, trade names, copyrights, licenses, franchises, permits and
other authorizations necessary for the ownership and operation of
its properties and business if the failure so to maintain the same
would have a Material Adverse Effect.
6.1.6. Visitation Rights. The Borrower shall, and shall
cause each of its Subsidiaries to, permit any of the officers or
authorized employees or representatives of the Agent or any of the
Lenders to visit and inspect any of its properties and to examine
and make excerpts from its books and records and discuss its
business affairs, finances and accounts with its officers, all in
such detail and at such times and as often as any of the Lenders may
reasonably request, provided that, prior to the occurrence of a
Default, each Lender shall provide the Borrower and the Agent with
reasonable notice prior to any visit or inspection. In the event
any Lender desires to conduct an audit of any Loan Party, such
Lender shall make a reasonable effort to conduct such audit
contemporaneously with any audit to be performed by the Agent.
6.1.7. Keeping of Records and Books of Account. The
Borrower shall, and shall cause each of its Subsidiaries to,
maintain and keep proper books of record and account which enable
the Borrower and its Subsidiaries to issue financial statements in
accordance with Agreement Accounting Principles and as otherwise
required by applicable laws of any Official Body having jurisdiction
over the Borrower or any Subsidiary of the Borrower, and in which
full, true and correct entries shall be made in all material
respects of all its dealings and business and financial affairs.
<PAGE>
6.1.8. Plans and Benefit Arrangements. The Borrower
shall, and shall cause each other member of the Controlled Group to,
comply with ERISA, the Code and other applicable laws applicable to
Plans and Benefit Arrangements except where such failure, alone or
in conjunction with any other failure, would not have a Material
Adverse Effect. Without limiting the generality of the foregoing,
the Borrower shall cause all its Plans and all Plans maintained by
any member of the Controlled Group to be funded in accordance with
the minimum funding requirements of ERISA and shall make, and cause
each member of the Controlled Group to make, in a timely manner, all
contributions due to Plans, Benefit Arrangements and Multiemployer
Plans.
6.1.9. Compliance with Laws. The Borrower shall, and
shall cause each of its Subsidiaries to, comply with all applicable
laws, including all Environmental Laws, in all respects, provided
that it shall not be deemed to be a violation of this Section 6.1.9
if any failure to comply with any law would not result in fines,
penalties, remediation costs, other similar liabilities or
injunctive relieve which in the aggregate would have a Material
Adverse Effect.
6.1.10. Use of Proceeds.
6.1.10.1. General. The Loan Parties will use the
Facility LCs and the proceeds of the Revolving Loans only (i) to
refinance existing Indebtedness, (ii) for general corporate purposes
and (iii) to make acquisitions permitted hereunder. The Loan
Parties will use the proceeds of the Term Loans only (i) to
refinance existing Indebtedness and (ii) for general corporate
purposes.
6.1.10.2. Margin Stock. The Loan Parties shall not
use the proceeds of the Loans to purchase margin stock as more fully
provided in Section 5.9.
6.1.10.3. Section 20 Subsidiaries. The Loan
Parties will not, directly or indirectly, use any portion of the
proceeds of the Loans (i) knowingly to purchase any Ineligible
Securities from a Section 20 Subsidiary during any period in which
such Section 20 Subsidiary makes a market in such Ineligible
Securities, (ii) knowingly to purchase during the underwriting or
placement period Ineligible Securities being underwritten or
privately placed by a Section 20 Subsidiary, or (iii) to make
payments of principal or interest on Ineligible Securities
underwritten or privately placed by as Section 20 Subsidiary and
issued by or for the benefit of any Loan Party or any Affiliate of
any Loan Party.
6.1.11. Subordination of Intercompany Loans. Each Loan
Party shall cause any intercompany Indebtedness or loans or advances
owed by any Loan Party to any other Loan Party to be subordinated
pursuant to the terms of the Intercompany Subordination Agreement.
6.1.12. Rate Management Transactions[6.22.Required Rate
Hedging Agreements. Within 10 Business Days of the initial
Extension of Credit, the Borrower will enter into one or more Rate
Management Transactions with one or more financial institutions
acceptable to the Required Lenders in their reasonable discretion,
providing for a fixed rate of interest on a notional amount of at
least $ 40,000,000 and an average weighted maturity of at least two
years.
<PAGE>
6.2. Negative Covenants.
During the term of this Agreement, unless the required Lenders
shall otherwise consent in writing:
6.2.1. Indebtedness. The Borrower shall not, and shall
not permit any of its Subsidiaries to, at any time create, incur,
assume or suffer to exist any Indebtedness, except:
(i) Indebtedness under the Loan Documents;
(ii) Indebtedness evidenced by the Mega Marts Notes which
is subordinated pursuant to the terms of the Subordination
Agreement;
(iii) Existing Indebtedness as set forth on Schedule
6.2.1 (including any extensions or renewals thereof, provided there
is no increase in the amount thereof or other significant change in
the terms thereof unless otherwise specified on Schedule 6.2.1;
(iv) Indebtedness secured by Purchase Money Security
Interests not exceeding $25,000,000;
(v) Indebtedness of a Loan Party or a Subsidiary of a
Loan Party to another Loan Party or a Subsidiary of a Loan Party
which is subordinated pursuant to the terms of the Intercompany
Subordination Agreement;
(vi) Indebtedness of the Borrower in respect of up to
$1,000,000 (plus interest accrued thereon at a rate not to exceed
8.25% per annum) in noncompetition payments to be made to certain
former shareholders of Mega Marts, Inc. pursuant to the terms of the
Mega Marts Agreement;
(vii) Indebtedness arising under Rate Management
Transactions having a Net Mark-to-Market Exposure not exceeding
$10,000,000;
(viii) Contingent Obligations permitted under Section
6.2.3(iii), (iv) and (v);
(ix) Indebtedness the proceeds of which is paid to
Lenders under Section 2.7.2(a);
(x) Indebtedness (other than Indebtedness permitted by
Section 6.2.1(i) through (ix)) of the Loan Parties, provided that
the amount thereof which the Loan Parties may have outstanding
between the Closing Date and the Term Loan Termination Date shall
not exceed $5,000,000 in the aggregate.
<PAGE>
6.2.2. Liens. The Borrower shall not, and shall not
permit any of its Subsidiaries to, at any time create, incur, assume
or suffer to exist any Lien on any of its property or assets,
tangible or intangible, now owned or hereafter acquired, or agree or
become liable to do so, except Permitted Liens.
6.2.3. Contingent Obligations[6.26.Contingent
Obligations. The Borrower shall not, and shall not permit any of
its Subsidiaries to, make or suffer to exist any Contingent
Obligation (including, without limitation, any Contingent Obligation
with respect to the obligations of a Subsidiary), except:
(i) by endorsement of instruments for deposit or
collection in the ordinary course of business;
(ii) for the Guaranty;
(iii) guaranties of Indebtedness permitted hereunder
of the Loan Parties and their Subsidiaries and guaranties of other
obligations of the Loan Parties or their Subsidiaries owed to one
another;
(iv) guaranties of obligations of customers of the Loan
Parties or their Subsidiaries incurred in the ordinary course of
their business not in excess of $17,500,000 in the aggregate; and
(v) guaranties of obligations of officers of the Loan
Parties or their Subsidiaries in connection with the exercise of
stock options of not in excess of $7,500,000 in the aggregate.
6.2.4. Loans and Investments. The Borrower shall not,
and shall not permit any of its Subsidiaries to, at any time make or
suffer to remain outstanding any loan or advance to, or purchase,
acquire or own any stock, bonds, notes or securities of, or any
partnership interest (whether general or limited) or limited
liability company interest in, or any other investment or interest
in, or make any capital contribution to, any other Person, or agree,
become or remain liable to do any of the foregoing, except:
(i) trade credit extended on usual and customary terms in
the ordinary course of business;
(ii) advances to employees to meet expenses incurred by
such employees in the ordinary course of business;
(iii) Cash Equivalent Investments;
(iv) loans, advances and investments in other Loan Parties
or their Subsidiaries;
(v) loans to customers and investments in the ordinary
course of the business of the Loan Parties or their Subsidiaries
outstanding on the Closing Date and described on Schedule 6.2.4;
(vi) loans to customers entered into after the date hereof
in the ordinary course of the business of the Loan Parties or their
Subsidiaries in an amount not to exceed at any one time 10% of
Consolidated Tangible Assets at such time;
<PAGE>
(vii) mergers, consolidations and acquisitions
described in and permitted under Section 6.2.6; and
(viii) loans not in excess of $7,500,000 in the
aggregate to employees and officers of the Loan Parties or their
Subsidiaries in connection with the exercise of stock options.
6.2.5. Dividends and Related Distributions. The
Borrower shall not, and shall not permit any of its Subsidiaries to,
make or pay, or agree to become or remain liable to make or pay, any
dividend or other distribution of any nature (whether in cash,
property, securities or otherwise) on account of or in respect of
its shares of capital stock, partnership interests or limited
liability company interest on account of the purchase, redemption,
retirement or acquisition of its shares of capital stock (or
warrants, options or rights therefor), partnership interest or
limited liability company interests, except that: (a) the Borrower
may purchase or otherwise acquire shares of its capital stock by
exchange for or out of the proceeds received from a substantially
concurrent issue of new shares of its capital stock; (b) prior to a
Default which is continuing, the Borrower may purchase, redeem,
retire or otherwise acquire shares of its capital stock owned by
current or former employees, customers or directors in accordance
with the policies of Borrower summarized in the documents filed by
Borrower with the Securities and Exchange Commission; (c) Borrower
and its Subsidiaries may sell or exchange stock of the Borrower's
Subsidiaries to or with Borrower and its Subsidiaries; (d) prior to
a Default which is continuing, the Borrower may pay Patronage
Dividends in accordance with the terms of the Borrower's by-laws if,
after such dividends are paid, the book value per share of the
Borrower and its Subsidiaries on a consolidated basis is at least
five percent (5%) greater than such book value on the last day of
the immediately preceding fiscal year, provided that not more than
forty percent (40%) of the aggregate amount of Patronage Dividends
paid during any fiscal year while this Agreement is in effect shall
be paid in cash or cash equivalents and (e) the Loan Parties and
their Subsidiaries may pay dividends to the other Loan Parties or
their Subsidiaries.
6.2.6. Liquidations, Mergers, Consolidations,
Acquisitions. The Borrower shall not, and shall not permit any of
its Subsidiaries to, dissolve, liquidate or wind-up its affairs, or
become a party to any merger or consolidation, or acquire by
purchase, lease or otherwise all or substantially all of the assets
or capital stock of any other Person, provided that
(1) any Loan Party other than the Borrower may
consolidate with or merge into another Loan Party and any
Subsidiary of the Borrower may consolidate with or merger into
another Subsidiary of the Borrower or into a Loan Party if the Loan
Party shall be the surviving entity, and
(2) any Loan Party or Subsidiary of a Loan Party may
acquire, whether by purchase or by merger, (A) all of the ownership
interests of another Person or (B) substantially all of assets of
another Person or of a business or division of another Person (each
a "Permitted Acquisition") provided that each of the following
requirements is met:
<PAGE>
(i) if a Loan Party will form or acquire any
Material Subsidiary in such acquisition or if any existing
Subsidiary shall become a Material Subsidiary as a result of such
acquisition, such Material Subsidiary shall execute a guarantor
joinder agreement in form and substance satisfactory to the Agent
and join this Agreement, the Guaranty and the Intercompany
Subordination Agreement,
(ii) the business acquired, or the business
conducted by the Person whose ownership interests are being
acquired, as applicable, shall be substantially the same as one or
more line or lines of business conducted by the Loan Parties and
shall comply with Section 6.2.10,
(iii) no Default or Unmatured Default shall
exist immediately prior to and after giving effect to such
Permitted Acquisition, and
(iv) the Borrower shall demonstrate that it
shall be in compliance with the covenants contained in Sections
6.2.1, 6.2.6 and 6.2.14 after giving effect to Such Permitted
Acquisition by delivering at least ten (10) Business Days prior to
such Permitted Acquisition a certificate in the form of Exhibit
6.2.6 evidencing such compliance.
6.2.7. Dispositions of Assets or Subsidiaries. The
Borrower shall not, and shall not permit any of its Subsidiaries to,
engage in any Asset Disposition, except:
(i) transactions in the ordinary course of business
involving one or more of the following: (w) the leasing or
subleasing of real property, (x) the sale of the assets of a retail
grocery store to a Person who will use such assets in the operation
of a grocery store, or (y) the sale of inventory; or (z) any sale of
undeveloped or vacant real property having an aggregate fair market
value of less than $10,000,000, provided, that all such
transactions are subject to the terms of Section 2.7.2(b), provided
further, that the Lenders acknowledge and agree that any undeveloped
or vacant real property having an aggregate fair market value of
less than $10,000,000 shall not be subject to any Mortgage in favor
of the Agent for the benefit of the Lenders, provided further, the
Loan Parties acknowledge and agree that should Borrower or any
Subsidiary of the Borrower acquire one or more parcels of
undeveloped or vacant real property having an aggregate fair market
value in excess of $10,000,000, all such real estate shall be
subject to a Mortgage in favor of the Agent for the benefit of the
Lenders;
(ii) any sale, transfer or lease of assets (including
stores) in the ordinary course of business which are no longer
necessary or required in the conduct of the Loan Party's or a
Subsidiary's business;
(iii) any sale, transfer or lease of assets by any
wholly owned Subsidiary of a Loan Party to another Loan Party or
another Subsidiary of a Loan Party;
(iv) any sale, transfer or lease of assets in the ordinary
course of business which are replaced by substitute assets; and
(v) any sale, transfer or lease of assets, other than
those specifically excepted pursuant to clauses (i) through (iv)
above, which is approved by the Required Lenders.
<PAGE>
6.2.8. Affiliate Transactions. The Borrower shall not,
and shall not permit any of its Subsidiaries to, enter into or carry
out any transaction (including purchasing property or services from
or selling property or services to any Affiliate or any Loan Party
or other Person) unless such transaction is (i) with another Loan
Party or Subsidiary of a Loan Party or (ii) not otherwise prohibited
by this Agreement, is entered into in the ordinary course of
business upon fair and reasonable arm's-length terms and conditions
and is in accordance with all applicable law and the terms thereof
are disclosed to the Agent, provided that if the transaction is with
a retail customer of the Loan Parties or their Subsidiaries entered
into in the ordinary course of business, then the requirement above
that the Loan Parties and their Subsidiaries shall disclose the
terms thereof to the Agent shall not apply.
6.2.9. Subsidiaries, Partnerships and Joint Ventures.
6.2.9.1. New Subsidiaries. The Borrower shall not,
and shall not permit any of its Subsidiaries to, own or create
directly or indirectly any Material Subsidiaries other than (i) any
Material Subsidiary which has joined this Agreement, the Guaranty
and the Intercompany Subordination Agreement on the Closing Date;
and (ii) any Material Subsidiary formed or acquired after the
Closing Date or any Subsidiary which becomes a Material Subsidiary
after the Closing Date which joins this Agreement, the Guaranty and
the Intercompany Subordination Agreement as a Guarantor pursuant to
Section 6.2.6. No Loan Party shall become or agree to (1) become a
general or limited partner in any general or limited partnership,
except that the Loan Parties may be general or limited partners in
other Loan Parties and State Street Limited Partnership, (2) become
a member or manager of, or hold a limited liability company interest
in, a limited liability company, except that the Loan Parties may be
members or managers of, or hold limited liability company interests
in, other Loan Parties, or (3) become a joint venturer or hold a
joint venture interest in any joint venture.
6.2.9.2. Joinder of Subsidiaries as Required Under
Other Circumstances. Each of the following requirements shall be
met at all times:
(A) the consolidated gross revenues of the Loan
Parties over the twelve-months preceding any date of
determination (as determined according to Agreement Accounting
Principles) shall equal or exceed 80% of the consolidated gross
revenues of the Borrower and all of the Borrower's Subsidiaries
on such date of determination; and
(B) the book value of the assets of the Loan
Parties collectively shall equal or exceed 80% of the book
value of the consolidated assets of the Borrower and all of the
Borrower's Subsidiaries.
<PAGE>
If the Loan Parties fail to maintain gross revenues and assets
according to the levels required in clauses (A) and (B) above, the
Borrower shall promptly cause additional Subsidiaries to join this
Agreement, the Guaranty Agreement and the Intercompany Subordination
Agreement pursuant to a guarantor joinder agreement in form and
substance acceptable to the Agent, such that the total gross
revenues and assets of the Loan Parties shall meet the requirements
in clauses (A) and (B) above.
6.2.10. Continuation of or Change in Business. The
Borrower shall not, and shall not permit any of its Subsidiaries to,
engage in any business other than their current lines of business
(collectively, the "Business"), substantially as conducted and
operated by such Loan Parties and their Subsidiaries during the
present fiscal year, and the Loan Parties and their Subsidiaries
shall not permit any material change in the Business.
6.2.11. Plans and Benefit Arrangements. Except as to
exceptions on Schedule 5.19, the Borrower shall not, and shall not
permit any of its Subsidiaries to:
(i) fail to satisfy the minimum funding requirements of
ERISA and the Code with respect to any Plan;
(ii) request a minimum funding waiver from the Internal
Revenue Service with respect to any Plan;
(iii) engage in a Prohibited Transaction with any
Plan, Benefit Arrangement or Multiemployer Plan which, alone or in
conjunction with any other circumstances or set of circumstances
resulting in liability under ERISA, would have a Material Adverse
Effect;
(iv) permit the aggregate actuarial present value of all
benefit liabilities (whether or not vested) under each Plan,
determined on a plan termination basis, as disclosed in the most
recent actuarial report completed with respect to such Plan, to
exceed, as of any actuarial valuation date, the fair market value of
the assets of such Plan;
(v) fail to make when due any contribution to any
Multiemployer Plan that the Borrower or any member of the Controlled
Group may be required to make under any agreement relating to such
Multiemployer Plan, or any law pertaining thereto;
(vi) withdraw (completely or partially) from any
Multiemployer Plan or withdraw (or be deemed under Section 4062(e)
of ERISA to withdraw) from any Multiple Employer Plan, where any
such withdrawal is likely to result in a material liability of the
Borrower or any member of the Controlled Group.
(vii) terminate, or institute proceedings to
terminate, any Plan, where such termination is likely to result in a
material liability to the Borrower or any member of the Controlled
Group;
(viii) make any amendment to any Plan with respect to
which security is required under Section 307 of ERISA; or
<PAGE>
(ix) fail to give any and all notices and make all
disclosures and governmental filings required under ERISA or the
Code, where such failure is likely to have a Material Adverse
Effect.
6.2.12. Fiscal Year. The Borrower shall not, and shall
not permit any of its Subsidiaries to, change its fiscal year from
the 52 or 53 week period ending on the Saturday nearest to December
31 of each year.
6.2.13. Changes in Organizational Documents. The
Borrower shall not, and shall not permit any of its Subsidiaries to,
amend in any respect its certificate or articles of incorporation
(including any provisions or resolutions relating to capital stock),
by-laws, voting trust agreement, or other organizational documents
in any respect which would affect the authorized capital stock of
any Loan Party or the rights of holders of such stock without
providing at least fifteen (15) calendar days' prior written notice
to the Agent and the Lenders and, in the event such change would be
adverse to the Lenders as determined by the Agent in its sole
discretion, obtaining the prior written consent of the Required
Lenders.
6.2.14. Financial Covenants.
6.2.14.1. Minimum Net Worth. The Borrower will at
all times maintain Consolidated Net Worth of not less than the sum
of (i) $120,000,000 plus (ii) 55% of Consolidated Net Income earned
in each fiscal quarter beginning with the quarter ending July 1,
2000 (without deduction for losses) plus (iii) 100% of the Net
Proceeds received by the Borrower directly or indirectly, whether in
cash or other property, in connection with any sale of capital stock
of the Borrower (except for sales of stock (i) to employees or
former employees of the Borrower or its Subsidiaries according to
the Borrower's stock option plan in effect from time to time or
according to policies of the Borrower summarized in the documents
filed by the Borrower with the Securities and Exchange Commission
and (ii) to retail customers of the Borrower and its Subsidiaries in
the ordinary course of the Borrower's business) during the period
commencing on the Closing Date.
6.2.14.2. Leverage Ratio. The Borrower will not
permit the ratio, determined as of the end of each of its fiscal
quarters, beginning with the quarter ending July 1, 2000, of (i)
Consolidated Funded Indebtedness to (ii) Consolidated EBITDA for the
then most-recently ended four fiscal quarters to be greater than the
following ratios for the following periods of time:
For the Borrower's fiscal
quarter ended July 1, 2000 4.25 to 1.0
For the Borrower's fiscal
quarter ended September 30, 2000 4.00 to 1.0
For the Borrower's fiscal
quarter ended December 30, 2000 3.75 to 1.0
<PAGE>
For the Borrower's 2001 fiscal year: 3.50 to 1.0
For the Borrower's 2002 fiscal year: 3.25 to 1.0
At all times following the end
of the Borrower's 2002 fiscal year: 2.75 to 1.0.
6.2.14.3. Fixed Charge Coverage Ratio. The
Borrower will not permit the ratio, determined as of the end of each
of its fiscal quarters for the then most-recently ended four fiscal
quarters, of (i) Consolidated EBITDA plus Consolidated Net Rentals
to (ii) Consolidated Interest Expense plus Consolidated Net Rentals
plus actual scheduled principal payments of Indebtedness plus income
tax expense paid or accrued, all calculated for the then most-
recently ended four fiscal quarters of the Borrower and its
Subsidiaries on a consolidated basis, to be less than the following:
From July 1, 2000 through the Borrower's
fiscal quarter ended March 30, 2002 1.5 to 1.0
For the Borrower's fiscal
quarter ended June 29, 2002 1.4 to 1.0
For the Borrower's fiscal
quarter ended September 28, 2002 1.3 to 1.0
At December 28, 2002 and
at all times following the end
of the Borrower's 2002 fiscal year 1.25 to 1.0
6.2.14.4. Capital Expenditures. The Borrower shall
not permit, and shall not permit any of its Subsidiaries, to make or
contract to make Capital Expenditures which, in the aggregate as to
the Borrower and its Subsidiaries, exceed an amount of $40,000,000
per fiscal year for the Borrower's 2000 and 2001 fiscal years or
which, in the aggregate as to the Borrower and its Subsidiaries,
exceed an amount of $45,000,000 per fiscal year at any time
thereafter, provided, that amounts in respect of permitted Capital
Expenditures which are not used during any fiscal year may be
carried over on a non-cumulative basis to the immediately succeeding
fiscal year.
6.2.15. Subordinated Indebtedness[6.21.Subordinated
Indebtedness. The Borrower shall not, and shall not permit any of
<PAGE>
its Subsidiaries to, make any amendment or modification to any
indenture, note or other agreement evidencing or governing any
Subordinated Indebtedness (including, without limitation, the
Subordination Agreement), or directly or indirectly voluntarily
prepay, defease or in substance defease, purchase, redeem, retire or
otherwise acquire, any Subordinated Indebtedness.
6.2.16. Sale of Accounts[6.24.Sale of Accounts.
The Borrower shall not, and shall not permit any of its Subsidiaries
to, sell or otherwise dispose of any notes receivable or accounts
receivable, with or without recourse, except for transactions among
Loan Parties.
6.2.17. Sale and Leaseback Transactions and other
Off-Balance Sheet Liabilities[6.25.Sale and Leaseback Transactions
and other Off-Balance Sheet Liabilities. The Borrower shall not,
nor shall it permit any of its Subsidiaries to, enter into or suffer
to exist any (i) Sale and Leaseback Transactions involving an
aggregate amount in excess of $5,000,000 at any time outstanding
from the Closing Date until the Term Loan Termination Date or (ii)
any other transaction pursuant to which it incurs or has incurred
Off-Balance Sheet Liabilities, except for Rate Management
Obligations permitted to be incurred under the terms of this
Agreement.
6.2.18. Financial Contracts[6.28.Financial
Contracts. The Borrower will not, nor will it permit any
Subsidiary to, enter into or remain liable upon any Financial
Contract, except Rate Management Transactions permitted under this
Agreement.
6.3. Reporting Requirements. During the term of this
Agreement, unless the Required Lenders shall otherwise consent in
writing, the Borrower will furnish or cause to be furnished to the
Agent and each of the Lenders:
6.3.1. Quarterly Financial Statements . As soon as
available and in any event within sixty (60) calendar days after the
end of each of the first three fiscal quarters in each fiscal year,
financial statements of the Borrower, consisting of a consolidated
and consolidating balance sheet as of the end of such fiscal quarter
and related consolidated and consolidating statements of income, and
stockholders' equity and related consolidated cash flows for the
fiscal quarter then ended and the fiscal year through that date, all
in reasonable detail and certified (subject to normal year-end audit
adjustments) by an Authorized Representative as having been prepared
in accordance with Agreement Accounting Principles, consistently
applied and subject to year end adjustments, and setting forth in
comparative form the respective financial statements for the
corresponding date and period in the previous fiscal year.
6.3.2. Annual Financial Statements. As soon as
available and in any event within one hundred and twenty (120) days
after the end of each fiscal year of the Borrower, financial
statements of the Borrower consisting of a consolidated and
consolidating balance sheet as of the end of such fiscal year, and
related consolidated and consolidating statements of income, and
stockholders' equity and related consolidated cash flows for the
fiscal year then ended, all in reasonable detail and setting forth
<PAGE>
in comparative form the financial statements as of the end of and
for the preceding fiscal year, and certified by independent
certified public accountants of nationally recognized standing
satisfactory to the Agent. The certificate of report of accountants
shall be free of qualifications (other than any consistency
qualification that may result from a change in the method used to
prepare the financial statements as to which such accountants
concur) and shall not indicate the occurrence or existence of any
event, condition or contingency which would materially impair the
prospect of payment of performance of any covenant, agreement or
duty of any Loan Party under any of the Loan Documents.
6.3.3. Certificate of the Borrower. Concurrently with
the financial statements of the Borrower furnished to the Agent and
to the Lenders pursuant to Sections 6.3.1 and 6.3.2, a certificate
of the Borrower signed by an Authorized Representative of the
Borrower, in the form of Exhibit 6.3.3, to the effect that, except
as described pursuant to Section 6.3.4, (i) the representations and
warranties of the Borrower contained in Article V and in the other
Loan Documents are true on and as of the date of such certificate
with the same effect as though such representations and warranties
had been made on and as of such date (except representations and
warranties which expressly relate solely to an earlier date or time)
and the Loan Parties have performed and complied with all covenants
and conditions hereof, (ii) no Default or Unmatured Default exists
and is continuing on the date of such certificate (iii) containing
calculations in sufficient detail to demonstrate compliance as of
the date of such financial statements with all financial covenants
contained in Section 6.2.14 and determining the Applicable Margin
and the Applicable Fee Rate.
6.3.4. Notice of Default. Promptly after any officer
of any Loan Party has learned of the occurrence of any Default or
Unmatured Default, a certificate signed by an Authorized
Representative of such Loan Party setting forth the details of such
Default or Unmatured Default and the action which such Loan Party
proposes to take with respect thereto.
6.3.5. Notice of Litigation. Promptly after the
commencement thereof, notice of all actions, suits, proceedings or
investigations before or by any Official Body or any other Person
against any Loan Party or Subsidiary of any Loan Party which involve
a claim or series of claims in excess of $5,000,000 or which if
adversely determined would have a Material Adverse Effect.
6.3.6. Forecasts, Other Reports and Information.
Promptly upon their becoming available to the Borrower:
(i) the forecasts or projections of the Borrower, to be
supplied not later than one hundred twenty (120) days after
commencement of the fiscal year to which any of the foregoing may be
applicable,
(ii) any reports, notices or proxy statements generally
distributed by the Borrower to its stockholders on a date no later
than the date supplied to such stockholders,
(iii) regular or periodic reports, including Forms 10-
K, 10-Q and 8-K, registration statements and prospectuses, filed by
the Borrower with the Securities and Exchange Commission,
(iv) a copy of any order in any material proceeding to
which the Borrower or any of its Subsidiaries is a party issued by
any Official Body, and
(v) such other reports and information as any of the
Lenders may from time to time reasonably request. The Borrower
shall also notify the Lenders promptly of the enactment or adoption
of any law which may have a Material Adverse Effect.
<PAGE>
Promptly upon the request of the Agent, any reports including
management letters submitted to the Borrower by independent
accountants in connection with any annual, interim or special audit.
6.3.7. Notices Regarding Plans and Benefit Arrangements.
6.3.7.1. Certain Events. Promptly upon becoming
aware of the occurrence thereof, notice (including the nature of the
event and, when known, any action taken or threatened by the
Internal Revenue Service or the PBGC with respect thereto) of:
(i) any Reportable Event, other than a merger of a
Plan into another Plan, with respect to the Borrower or any other
member of the Controlled Group (regardless of whether the obligation
to report said Reportable Event to the PBGC has been waived),
(ii) any Prohibited Transaction which could subject
the Borrower or any other member of the Controlled Group to a civil
penalty assessed pursuant to Section 502(i) of ERISA or a tax
imposed by Section 4975 of the Internal Revenue Code in connection
with any Plan, any Benefit Arrangement or any trust created
thereunder,
(iii) any assertion of material withdrawal
liability with respect to any Multiemployer Plan,
(iv) any partial or complete withdrawal from a
Multiemployer Plan by the Borrower or any other member of the
Controlled Group under Title IV of ERISA (or assertion thereof),
where such withdrawal is likely to result in material withdrawal
liability,
(v) any cessation of operations (by the Borrower or
any other member of the Controlled Group) at a facility in the
circumstances described in Section 4062(e) of ERISA,
(vii) withdrawal by the Borrower or any other
member of the Controlled Group to make a payment to a Plan required
to avoid imposition of a Lien under Section 302(f) of ERISA,
(viii) the adoption of an amendment to a Plan
requiring the provision of security to such Plan pursuant to Section
307 of ERISA, or
(ix) any change in the actuarial assumptions or
funding methods used for any Plan, where the effect of such change
is to materially increase or materially reduce the unfunded benefit
liability or obligation to make periodic contributions.
<PAGE>
6.3.7.2. Notices of Involuntary Termination and
Annual Reports. Promptly after receipt thereof, copies of (a) all
notices received by the Borrower or any other member of the
Controlled Group of the PBGC's intent to terminate any Plan
administered or maintained by the Borrower or any member of the
Controlled Group, or to have a trustee appointed to administer any
such Plan; and (b) at the request of the Agent or any Lender each
annual report (IRS Form 5500 series) and all accompanying schedules,
the most recent actuarial reports, the most recent financial
information concerning the financial status of each Plan
administered or maintained by the Borrower or any other member of
the Controlled Group, and schedules showing the amounts contributed
to each such Plan or by or on behalf of the Borrower or any other
member of the Controlled Group in which any of their personnel
participate or from which such personnel may derive a benefit, and
each Schedule B (Actuarial Information) to the annual report filed
by the Borrower or any other member of the Controlled Group with the
Internal Revenue Service with respect to each such Plan.
6.3.7.3. Notice of Voluntary Termination. Promptly
upon the filing thereof, copies of any Form 5310, or any successor
or equivalent form to Form 5310, filed with the PBGC in connection
with the termination of any Plan.
ARTICLE VII
DEFAULTS
--------
The occurrence of any one or more of the following events shall
constitute a Default:
7.1. Any representation or warranty made or deemed made by
or on behalf of the Borrower or any of its Subsidiaries to the
Lenders or the Agent under or in connection with this Agreement, any
Credit Extension, or any certificate or information delivered in
connection with this Agreement or any other Loan Document shall be
materially false on the date as of which made.
7.2. Nonpayment of principal of any Loan when due,
nonpayment of any Reimbursement Obligation within one Business Day
after the same becomes due, or nonpayment of interest upon any Loan
or of any commitment fee, LC Fee or other obligations under any of
the Loan Documents within five days after the same becomes due.
7.3. The breach by the Borrower of any of the terms or
provisions of Sections 6.1.6, 6.1.10, 6.1.11, or 6.2, or the breach
by the Borrower or any Material Subsidiary of any of the terms or
provisions of Section 6.1.1.
7.4. The breach by the Borrower (other than a breach which
constitutes a Default under another Section of this Article VII) of
any of the terms or provisions of this Agreement which is not
remedied within ten days after written notice from the Agent or any
Lender (or such longer period of time as the Agent may permit in its
sole discretion).
<PAGE>
7.5. Failure of the Borrower or any of its Subsidiaries to
pay when due any Indebtedness in a principal amount in excess of
$1,000,000 in any individual case, or in excess of $5,000,000 in the
aggregate; or the default by the Borrower or any of its Subsidiaries
in the performance (beyond the applicable grace period with respect
thereto, if any) of any term, provision or condition contained in
any agreement under which any such Indebtedness was created or is
governed, or any other event shall occur or condition exist, the
effect of which default or event is to cause, or to permit the
holder or holders of such Indebtedness to cause, such Indebtedness
to become due prior to its stated maturity; or any Indebtedness of
the Borrower or any of its Subsidiaries shall be declared to be due
and payable or required to be prepaid or repurchased (other than by
a regularly scheduled payment) prior to the stated maturity thereof;
or the Borrower or any of its Subsidiaries shall not pay, or admit
in writing its inability to pay, its debts generally as they become
due.
7.6. The Borrower or any of its Subsidiaries shall (i)
have an order for relief entered with respect to it under the
Federal bankruptcy laws as now or hereafter in effect, (ii) make an
assignment for the benefit of creditors, (iii) apply for, seek,
consent to, or acquiesce in, the appointment of a receiver,
custodian, trustee, examiner, liquidator or similar official for it
or any Substantial Portion of its Property, (iv) institute any
proceeding seeking an order for relief under the Federal bankruptcy
laws as now or hereafter in effect or seeking to adjudicate it a
bankrupt or insolvent, or seeking dissolution, winding up,
liquidation, reorganization, arrangement, adjustment or composition
of it or its debts under any law relating to bankruptcy, insolvency
or reorganization or relief of debtors or fail to file an answer or
other pleading denying the material allegations of any such
proceeding filed against it, (v) take any corporate or partnership
action to authorize or effect any of the foregoing actions set forth
in this Section 7.6 or (vi) fail to contest in good faith any
appointment or proceeding described in Section 7.7.
7.7. Without the application, approval or consent of the
Borrower or any of its Subsidiaries, a receiver, trustee, examiner,
liquidator or similar official shall be appointed for the Borrower
or any of its Subsidiaries or any Substantial Portion of its
Property, or a proceeding described in Section 7.6(iv) shall be
instituted against the Borrower or any of its Subsidiaries and such
appointment continues undischarged or such proceeding continues
undismissed or unstayed for a period of 30 consecutive days.
7.8. Any court, government or governmental agency shall
condemn, seize or otherwise appropriate, or take custody or control
of, all or any portion of the Property of the Borrower and its
Subsidiaries which, when taken together with all other Property of
the Borrower and its Subsidiaries so condemned, seized,
appropriated, or taken custody or control of, during the
twelve-month period ending with the month in which any such action
occurs, constitutes a Substantial Portion.
7.9. The Borrower or any of its Subsidiaries shall fail
within 30 days to pay, bond or otherwise discharge one or more (i)
judgments or orders for the payment of money in excess of $5,000,000
(or the equivalent thereof in currencies other than U.S. Dollars) in
the aggregate, or (ii) nonmonetary judgments or orders which,
individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect, which judgment(s), in any such case,
is/are not stayed on appeal or otherwise being appropriately
contested in good faith.
<PAGE>
7.10. Any of the following occurs: (i) any Reportable
Event, other than a merger of a Plan with another Plan, which the
Agent determines in good faith constitutes grounds for the
termination of any Plan by the PBGC or the appointment of a trustee
to administer or liquidate any Plan, shall have occurred and be
continuing; (ii) proceedings shall have been instituted or other
action taken to terminate any Plan, or a termination notice shall
have been filed with respect to any Plan; (iii) a trustee shall be
appointed to administer or liquidate any Plan; (iv) the PBGC shall
give notice of its intent to institute proceedings to terminate any
Plan or Plans or to appoint a trustee to administer or liquidate any
Plan; and, in the case of the occurrence of (i), (ii), (iii) or (iv)
above, the Agent determines in good faith that the amount of the
Borrower's liability is likely to exceed 10% of its Consolidated
Tangible Assets; (v) the Borrower or any member of the Controlled
Group shall fail to make any contributions when due to a Plan or a
Multiemployer Plan; (vi) the Borrower or any other member of the
Controlled Group shall make any amendment to a Plan with respect to
which security is required under Section 307 of ERISA; (vii) the
Borrower or any other member of the Controlled Group shall withdraw
completely or partially from a Multiemployer Plan; (viii) the
Borrower or any other member of the Controlled Group shall withdraw
(or shall be deemed under Section 4062(e) of ERISA to withdraw) from
a Multiple Employer Plan; or (ix) any applicable law is adopted,
changed or interpreted by an Official Body with respect to or
otherwise affecting one or more Plans, Multiemployer Plans or
Benefit Arrangements and, with respect to any of the events
specified in (v), (vi), (vii), (viii) or (ix), the Agent determines
in good faith that any such occurrence would be reasonably likely to
materially and adversely affect the total enterprise represented by
the Borrower and the other members of the Controlled Group.
7.11. The Borrower or any of its Subsidiaries shall (i) be the
subject of any proceeding or investigation pertaining to the release
by the Borrower, any of its Subsidiaries or any other Person of any
toxic or hazardous waste or substance into the environment, or (ii)
violate any Environmental Law, which, in the case of an event
described in clause (i) or clause (ii), could have a Material
Adverse Effect.
7.12. Any Change in Control shall occur.
7.13. The occurrence of any "default," as defined in any Loan
Document (other than this Agreement) or the breach of any of the
terms or provisions of any Loan Document (other than this
Agreement), which default or breach continues beyond any period of
grace therein provided, including without limitation, the occurrence
of any default under the Subordination Agreement.
7.14. Nonpayment by the Borrower or any Subsidiary of any Rate
Management Obligation within five days after the same becomes due or
the breach by the Borrower or any Subsidiary of any term, provision
or condition contained in any Rate Management Transaction.
7.15. The Guaranty shall fail to remain in full force or
effect or any action shall be taken to discontinue or to assert the
invalidity or unenforceability of the Guaranty, or any Guarantor
shall fail to comply with any of the terms or provisions of the
Guaranty, or any Guarantor shall deny that it has any further
liability under the Guaranty, or shall give notice to such effect.
<PAGE>
7.16. Any Collateral Document shall for any reason fail to
create a valid and perfected first priority security interest in any
collateral purported to be covered thereby, except as permitted by
the terms of any Collateral Document, or any Collateral Document
shall fail to remain in full force or effect or any action shall be
taken to discontinue or to assert the invalidity or unenforceability
of any Collateral Document, or the Borrower shall fail to comply
with any of the terms or provisions of any Collateral Document.
ARTICLE VIII
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
-----------------------------------------------
8.1. Acceleration; Facility LC Collateral Account. (i) If
any Default described in Section 7.6 or 7.7 occurs with respect to
the Borrower, the obligations of the Lenders to make Loans hereunder
and the obligation and power of the LC Issuer to issue Facility LCs
shall automatically terminate and the Secured Obligations shall
immediately become due and payable without any election or action on
the part of the Agent, the LC Issuer or any Lender and the Borrower
will be and become thereby unconditionally obligated, without any
further notice, act or demand, to pay to the Agent an amount in
immediately available funds, which funds shall be held in the
Facility LC Collateral Account, equal to the difference of (x) the
amount of LC Obligations at such time, less (y) the amount on
deposit in the Facility LC Collateral Account at such time which is
free and clear of all rights and claims of third parties and has not
been applied against the Secured Obligations (such difference, the
"Collateral Shortfall Amount"). If any other Default occurs, the
Required Lenders (or the Agent with the consent of the Required
Lenders) may (a) terminate or suspend the obligations of the Lenders
to make Loans hereunder and the obligation and power of the LC
Issuer to issue Facility LCs, or declare the Secured Obligations to
be due and payable, or both, whereupon the Secured Obligations shall
become immediately due and payable, without presentment, demand,
protest or notice of any kind, all of which the Borrower hereby
expressly waives, and (b) upon notice to the Borrower and in
addition to the continuing right to demand payment of all amounts
payable under this Agreement, make demand on the Borrower to pay,
and the Borrower will, forthwith upon such demand and without any
further notice or act, pay to the Agent the Collateral Shortfall
Amount, which funds shall be deposited in the Facility LC Collateral
Account.
(ii) If at any time while any Default is continuing, the Agent
determines that the Collateral Shortfall Amount at such time is
greater than zero, the Agent may make demand on the Borrower to pay,
and the Borrower will, forthwith upon such demand and without any
further notice or act, pay to the Agent the Collateral Shortfall
Amount, which funds shall be deposited in the Facility LC Collateral
Account.
(iii) The Agent may at any time or from time to time after
funds are deposited in the Facility LC Collateral Account, apply
such funds to the payment of the Secured Obligations and any other
amounts as shall from time to time have become due and payable by
the Borrower to the Lenders or the LC Issuer under the Loan
Documents.
<PAGE>
(iv) At any time while any Default is continuing, neither the
Borrower nor any Person claiming on behalf of or through the
Borrower shall have any right to withdraw any of the funds held in
the Facility LC Collateral Account. After all of the Secured
Obligations have been indefeasibly paid in full and the Aggregate
Commitment has been terminated, any funds remaining in the Facility
LC Collateral Account shall be returned by the Agent to the Borrower
or paid to whomever may be legally entitled thereto at such time.
(v) If, within 30 days after acceleration of the maturity of
the Secured Obligations or termination of the obligations of the
Lenders to make Loans and the obligation and power of the LC Issuer
to issue Facility LCs hereunder as a result of any Default (other
than any Default as described in Section 7.6 or 7.7 with respect to
the Borrower) and before any judgment or decree for the payment of
the Secured Obligations due shall have been obtained or entered, the
Required Lenders (in their sole discretion) shall so direct, the
Agent shall, by notice to the Borrower, rescind and annul such
acceleration and/or termination.
8.2. Amendments. Subject to the provisions of this Article
VIII, the Required Lenders (or the Agent with the consent in writing
of the Required Lenders) and the Borrower may enter into agreements
supplemental hereto for the purpose of adding or modifying any
provisions to the Loan Documents or changing in any manner the
rights of the Lenders or the Borrower hereunder or waiving any
Default hereunder; provided, however, that no such supplemental
agreement shall, without the consent of all of the Lenders:
(i) Extend the final maturity of any Loan, or extend the
expiry date of any Facility LC to a date after the Revolving Loan
Termination Date, or postpone any regularly scheduled payment of
principal of any Loan or forgive all or any portion of the principal
amount thereof or any Reimbursement Obligation related thereto, or
reduce the rate or extend the time of payment of interest or fees
thereon or Reimbursement Obligation related thereto.
(ii) Reduce the percentage specified in the definition of
Required Lenders or any other percentage of Lenders specified to be
the applicable percentage in this Agreement to act on specified
matters, or amend the definitions of "Revolving Loan Pro Rata Share"
or "Pro Rata Share."
(iii) Extend the Revolving Loan Termination Date or the
Term Loan Termination Date, or reduce the amount or extend the
payment date for, the mandatory payments required under Section
2.7.2, or increase the amount of the Aggregate Revolving Loan
Commitment or of the Revolving Loan Commitment of any Lender
hereunder or the commitment to issue Facility LCs, or of the
Aggregate Term Loan Commitment or of the Term Loan Commitment of any
Lender hereunder, or permit the Borrower to assign its rights under
this Agreement.
(iv) Amend this Section 8.2.
<PAGE>
(v) Release any guarantor of any Credit Extension or, except
as provided in the Collateral Documents, release, or agree to
subordinate the Lenders' Liens with respect to, all or substantially
all of the Collateral.
No amendment of any provision of this Agreement relating to the
Agent shall be effective without the written consent of the Agent,
and no amendment to any provision relating to the LC Issuer shall be
effective without the written consent of the LC Issuer. The Agent
may waive payment of the fee required under Section 12.3.2 without
obtaining the consent of any other party to this Agreement.
8.3. Preservation of Rights . No delay or omission of the
Lenders, the LC Issuer or the Agent to exercise any right under the
Loan Documents shall impair such right or be construed to be a
waiver of any Default or an acquiescence therein, and the making of
a Credit Extension notwithstanding the existence of a Default or the
inability of the Borrower to satisfy the conditions precedent to
such Credit Extension shall not constitute any waiver or
acquiescence. Any single or partial exercise of any such right
shall not preclude other or further exercise thereof or the exercise
of any other right, and no waiver, amendment or other variation of
the terms, conditions or provisions of the Loan Documents whatsoever
shall be valid unless in writing signed by the Lenders required
pursuant to Section 8.2, and then only to the extent in such writing
specifically set forth. All remedies contained in the Loan
Documents or by law afforded shall be cumulative and all shall be
available to the Agent, the LC Issuer and the Lenders until the
Obligations have been paid in full.
ARTICLE IX
GENERAL PROVISIONS
------------------
9.1. Survival of Representations. All representations and
warranties of the Borrower contained in this Agreement shall survive
the making of the Credit Extensions herein contemplated.
9.2. Governmental Regulation. Anything contained in this
Agreement to the contrary notwithstanding, neither the LC Issuer nor
any Lender shall be obligated to extend credit to the Borrower in
violation of any limitation or prohibition provided by any
applicable law, statute or regulation.
9.3. Headings. Section headings in the Loan Documents are for
convenience of reference only, and shall not govern the
interpretation of any of the provisions of the Loan Documents.
9.4. Entire Agreement. The Loan Documents embody the entire
agreement and understanding among the Borrower, the Agent, the LC
Issuer and the Lenders and supersede all prior agreements and
understandings among the Borrower, the Agent, the LC Issuer and the
Lenders relating to the subject matter thereof other than the fee
letter described in Section 10.13.
9.5. Several Obligations; Benefits of this Agreement. The
respective obligations of the Lenders hereunder are several and not
joint and no Lender shall be the partner or agent of any other
(except to the extent to which the Agent is authorized to act as
such). The failure of any Lender to perform any of its obligations
hereunder shall not relieve any other Lender from any of its
<PAGE>
obligations hereunder. This Agreement shall not be construed so as
to confer any right or benefit upon any Person other than the
parties to this Agreement and their respective successors and
assigns, provided, however, that the parties hereto expressly agree
that the Arranger shall enjoy the benefits of the provisions of
Sections 9.6, 9.10 and 10.11 to the extent specifically set forth
therein and shall have the right to enforce such provisions on its
own behalf and in its own name to the same extent as if it were a
party to this Agreement.
9.6. Expenses; Indemnification. (i) The Borrower shall
reimburse the Agent and the Arranger for any costs, internal charges
and out-of-pocket expenses (including attorneys' fees and time
charges of attorneys for the Agent, which attorneys may be employees
of the Agent) paid or incurred by the Agent or the Arranger in
connection with the preparation, negotiation, execution, delivery,
syndication, review, amendment, modification, and administration of
the Loan Documents. The Borrower also agrees to reimburse the
Agent, the Arranger, the LC Issuer and the Lenders for any costs,
internal charges and out-of-pocket expenses (including attorneys'
fees and time charges of attorneys for the Agent, the Arranger, the
LC Issuer and the Lenders, which attorneys may be employees of the
Agent, the Arranger, the LC Issuer or the Lenders) paid or incurred
by the Agent, the Arranger, the LC Issuer or any Lender in
connection with the collection and enforcement of the Loan
Documents. Expenses being reimbursed by the Borrower under this
Section include, without limitation, costs and expenses incurred in
connection with the Reports described in the following sentence.
The Borrower acknowledges that from time to time Bank One may
prepare and may distribute to the Lenders (but shall have no
obligation or duty to prepare or to distribute to the Lenders)
certain audit reports (the "Reports") pertaining to the Borrower's
assets for internal use by Bank One from information furnished to it
by or on behalf of the Borrower, after Bank One has exercised its
rights of inspection pursuant to this Agreement.
(ii) The Borrower hereby further agrees to indemnify the Agent,
the Arranger, the LC Issuer and each Lender, their respective
affiliates, and each of their directors, officers and employees
against all losses, claims, damages, penalties, judgments,
liabilities and expenses (including, without limitation, all
expenses of litigation or preparation therefor whether or not the
Agent, the Arranger, the LC Issuer any Lender or any affiliate is a
party thereto) which any of them may pay or incur arising out of or
relating to this Agreement, the other Loan Documents, the
transactions contemplated hereby or the direct or indirect
application or proposed application of the proceeds of any Credit
Extension hereunder except to the extent that they are determined in
a final non-appealable judgment by a court of competent jurisdiction
to have resulted from the gross negligence or willful misconduct of
the party seeking indemnification. The obligations of the Borrower
under this Section 9.6 shall survive the termination of this
Agreement.
<PAGE>
9.7. Numbers of Documents. All statements, notices, closing
documents, and requests hereunder shall be furnished to the Agent
with sufficient counterparts so that the Agent may furnish one to
each of the Lenders.
9.8. Accounting. Except as provided to the contrary herein,
all accounting terms used herein shall be interpreted and all
accounting determinations hereunder shall be made in accordance with
Agreement Accounting Principles.
9.9. Severability of Provisions. Any provision in any Loan
Document that is held to be inoperative, unenforceable, or invalid
in any jurisdiction shall, as to that jurisdiction, be inoperative,
unenforceable, or invalid without affecting the remaining provisions
in that jurisdiction or the operation, enforceability, or validity
of that provision in any other jurisdiction, and to this end the
provisions of all Loan Documents are declared to be severable.
9.10. Nonliability of Lenders. The relationship between
the Borrower on the one hand and the Lenders, the LC Issuer and the
Agent on the other hand shall be solely that of borrower and lender.
Neither the Agent, the Arranger, the LC Issuer nor any Lender shall
have any fiduciary responsibilities to the Borrower. Neither the
Agent, the Arranger, the LC Issuer nor any Lender undertakes any
responsibility to the Borrower to review or inform the Borrower of
any matter in connection with any phase of the Borrower's business
or operations. The Borrower agrees that neither the Agent, the
Arranger, the LC Issuer nor any Lender shall have liability to the
Borrower (whether sounding in tort, contract or otherwise) for
losses suffered by the Borrower in connection with, arising out of,
or in any way related to, the transactions contemplated and the
relationship established by the Loan Documents, or any act, omission
or event occurring in connection therewith, unless it is determined
in a final non-appealable judgment by a court of competent
jurisdiction that such losses resulted from the gross negligence or
willful misconduct of the party from which recovery is sought.
Neither the Agent, the Arranger, the LC Issuer nor any Lender shall
have any liability with respect to, and the Borrower hereby waives,
releases and agrees not to sue for, any special, indirect or
consequential damages suffered by the Borrower in connection with,
arising out of, or in any way related to the Loan Documents or the
transactions contemplated thereby.
9.11. Confidentiality. Each Lender agrees to hold any
confidential information which it may receive from the Borrower
pursuant to this Agreement in confidence, except for disclosure (i)
to its Affiliates and to other Lenders and their respective
Affiliates, (ii) to legal counsel, accountants, and other
professional advisors to such Lender or to a Transferee, (iii) to
regulatory officials, (iv) to any Person as requested pursuant to or
as required by law, regulation, or legal process, (v) to any Person
in connection with any legal proceeding to which such Lender is a
party, (vi) to such Lender's direct or indirect contractual
counterparties in swap agreements or to legal counsel, accountants
and other professional advisors to such counterparties, and (vii)
permitted by Section 12.4.
<PAGE>
9.12. Nonreliance . Each Lender hereby represents that it
is not relying on or looking to any margin stock (as defined in
Regulation U of the Board of Governors of the Federal Reserve
System) for the repayment of the Credit Extensions provided for
herein.
9.13. Disclosure. The Borrower and each Lender hereby
(i) acknowledge and agree that Bank One and/or its Affiliates from
time to time may hold investments in, make other loans to or have
other relationships with the Borrower and its Affiliates, and (ii)
waive any liability of Bank One or such Affiliate of Bank One to the
Borrower or any Lender, respectively, arising out of or resulting
from such investments, loans or relationships other than liabilities
arising out of the gross negligence or willful misconduct of Bank
One or its Affiliates.
<PAGE>
ARTICLE X
THE AGENT
---------
10.1. Appointment; Nature of Relationship. Bank One,
Wisconsin is hereby appointed by each of the Lenders as its
contractual representative (herein referred to as the "Agent")
hereunder and under each other Loan Document, and each of the
Lenders irrevocably authorizes the Agent to act as the contractual
representative of such Lender with the rights and duties expressly
set forth herein and in the other Loan Documents. The Agent agrees
to act as such contractual representative upon the express
conditions contained in this Article X. Notwithstanding the use of
the defined term "Agent," it is expressly understood and agreed that
the Agent shall not have any fiduciary responsibilities to any
Lender by reason of this Agreement or any other Loan Document and
that the Agent is merely acting as the contractual representative of
the Lenders with only those duties as are expressly set forth in
this Agreement and the other Loan Documents. In its capacity as the
Lenders' contractual representative, the Agent (i) does not hereby
assume any fiduciary duties to any of the Lenders, (ii) is a
"representative" of the Lenders within the meaning of Section 9-105
of the Uniform Commercial Code and (iii) is acting as an independent
contractor, the rights and duties of which are limited to those
expressly set forth in this Agreement and the other Loan Documents.
Each of the Lenders hereby agrees to assert no claim against the
Agent on any agency theory or any other theory of liability for
breach of fiduciary duty, all of which claims each Lender hereby
waives.
10.2. Powers. The Agent shall have and may exercise such
powers under the Loan Documents as are specifically delegated to the
Agent by the terms of each thereof, together with such powers as are
reasonably incidental thereto. The Agent shall have no implied
duties to the Lenders, or any obligation to the Lenders to take any
action thereunder except any action specifically provided by the
Loan Documents to be taken by the Agent.
10.3. General Immunity. Neither the Agent nor any of its
directors, officers, agents or employees shall be liable to the
Borrower, the Lenders or any Lender for any action taken or omitted
to be taken by it or them hereunder or under any other Loan Document
or in connection herewith or therewith except to the extent such
action or inaction is determined in a final non-appealable judgment
by a court of competent jurisdiction to have arisen from the gross
negligence or willful misconduct of such Person.
10.4. No Responsibility for Loans, Recitals, etc. Neither
the Agent nor any of its directors, officers, agents or employees
shall be responsible for or have any duty to ascertain, inquire
into, or verify (a) any statement, warranty or representation made
in connection with any Loan Document or any borrowing hereunder; (b)
the performance or observance of any of the covenants or agreements
of any obligor under any Loan Document, including, without
limitation, any agreement by an obligor to furnish information
directly to each Lender; (c) the satisfaction of any condition
specified in Article IV, except receipt of items required to be
delivered solely to the Agent; (d) the existence or possible
existence of any Default or Unmatured Default; (e) the validity,
enforceability, effectiveness, sufficiency or genuineness of any
Loan Document or any other instrument or writing furnished in
<PAGE>
connection therewith; (f) the value, sufficiency, creation,
perfection or priority of any Lien in any collateral security; or
(g) the financial condition of the Borrower or any guarantor of any
of the Obligations or of any of the Borrower's or any such
guarantor's respective Subsidiaries. The Agent shall have no duty
to disclose to the Lenders information that is not required to be
furnished by the Borrower to the Agent at such time, but is
voluntarily furnished by the Borrower to the Agent (either in its
capacity as Agent or in its individual capacity).
10.5. Action on Instructions of Lenders. The Agent shall
in all cases be fully protected in acting, or in refraining from
acting, hereunder and under any other Loan Document in accordance
with written instructions signed by the Required Lenders, and such
instructions and any action taken or failure to act pursuant thereto
shall be binding on all of the Lenders. The Lenders hereby
acknowledge that the Agent shall be under no duty to take any
discretionary action permitted to be taken by it pursuant to the
provisions of this Agreement or any other Loan Document unless it
shall be requested in writing to do so by the Required Lenders. The
Agent shall be fully justified in failing or refusing to take any
action hereunder and under any other Loan Document unless it shall
first be indemnified to its satisfaction by the Lenders pro rata
against any and all liability, cost and expense that it may incur by
reason of taking or continuing to take any such action.
10.6. Employment of Agents and Counsel. The Agent may
execute any of its duties as Agent hereunder and under any other
Loan Document by or through employees, agents, and attorneys-in-fact
and shall not be answerable to the Lenders, except as to money or
securities received by it or its authorized agents, for the default
or misconduct of any such agents or attorneys-in-fact selected by it
with reasonable care. The Agent shall be entitled to advice of
counsel concerning the contractual arrangement between the Agent and
the Lenders and all matters pertaining to the Agent's duties
hereunder and under any other Loan Document.
10.7. Reliance on Documents; Counsel. The Agent shall be
entitled to rely upon any Note, notice, consent, certificate,
affidavit, letter, telegram, statement, paper or document believed
by it to be genuine and correct and to have been signed or sent by
the proper person or persons, and, in respect to legal matters, upon
the opinion of counsel selected by the Agent, which counsel may be
employees of the Agent.
10.8. Agent's Reimbursement and Indemnification. The
Lenders agree to reimburse and indemnify the Agent ratably in
proportion to their respective Commitments (or, if the Commitments
have been terminated, in proportion to their Commitments immediately
prior to such termination) (i) for any amounts not reimbursed by the
Borrower for which the Agent is entitled to reimbursement by the
Borrower under the Loan Documents, (ii) for any other expenses
incurred by the Agent on behalf of the Lenders, in connection with
the preparation, execution, delivery, administration and enforcement
<PAGE>
of the Loan Documents (including, without limitation, for any
expenses incurred by the Agent in connection with any dispute
between the Agent and any Lender or between two or more of the
Lenders) and (iii) for any liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind and nature whatsoever which may be imposed
on, incurred by or asserted against the Agent in any way relating to
or arising out of the Loan Documents or any other document delivered
in connection therewith or the transactions contemplated thereby
(including, without limitation, for any such amounts incurred by or
asserted against the Agent in connection with any dispute between
the Agent and any Lender or between two or more of the Lenders), or
the enforcement of any of the terms of the Loan Documents or of any
such other documents, provided that (i) no Lender shall be liable
for any of the foregoing to the extent any of the foregoing is found
in a final non-appealable judgment by a court of competent
jurisdiction to have resulted from the gross negligence or willful
misconduct of the Agent and (ii) any indemnification required
pursuant to Section 3.5(vii) shall, notwithstanding the provisions
of this Section 10.8, be paid by the relevant Lender in accordance
with the provisions thereof. The obligations of the Lenders under
this Section 10.8 shall survive payment of the Secured Obligations
and termination of this Agreement.
10.9. Notice of Default. The Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or
Unmatured Default hereunder unless the Agent has received written
notice from a Lender or the Borrower referring to this Agreement
describing such Default or Unmatured Default and stating that such
notice is a "notice of default". In the event that the Agent
receives such a notice, the Agent shall give prompt notice thereof
to the Lenders.
10.10. Rights as a Lender. In the event the Agent is a
Lender, the Agent shall have the same rights and powers hereunder
and under any other Loan Document with respect to its Commitment and
its Loans as any Lender and may exercise the same as though it were
not the Agent, and the term "Lender" or "Lenders" shall, at any time
when the Agent is a Lender, unless the context otherwise indicates,
include the Agent in its individual capacity. The Agent and its
Affiliates may accept deposits from, lend money to, and generally
engage in any kind of trust, debt, equity or other transaction, in
addition to those contemplated by this Agreement or any other Loan
Document, with the Borrower or any of its Subsidiaries in which the
Borrower or such Subsidiary is not restricted hereby from engaging
with any other Person. The Agent, in its individual capacity, is
not obligated to remain a Lender.
10.11. Lender Credit Decision. Each Lender acknowledges
that it has, independently and without reliance upon the Agent, the
Arranger or any other Lender and based on the financial statements
prepared by the Borrower and such other documents and information as
it has deemed appropriate, made its own credit analysis and decision
to enter into this Agreement and the other Loan Documents. Each
Lender also acknowledges that it will, independently and without
reliance upon the Agent, the Arranger or any other Lender and based
on such documents and information as it shall deem appropriate at
the time, continue to make its own credit decisions in taking or not
taking action under this Agreement and the other Loan Documents.
10.12. Successor Agent . The Agent may resign at any time
by giving written notice thereof to the Lenders and the Borrower,
<PAGE>
such resignation to be effective upon the appointment of a successor
Agent or, if no successor Agent has been appointed, forty-five days
after the retiring Agent gives notice of its intention to resign.
The Agent may be removed at any time with or without cause by
written notice received by the Agent from the Required Lenders, such
removal to be effective on the date specified by the Required
Lenders. Upon any such resignation or removal, the Required Lenders
shall have the right to appoint, on behalf of the Borrower and the
Lenders, a successor Agent. If no successor Agent shall have been
so appointed by the Required Lenders within thirty days after the
resigning Agent's giving notice of its intention to resign, then the
resigning Agent may appoint, on behalf of the Borrower and the
Lenders, a successor Agent. Notwithstanding the previous sentence,
the Agent may at any time without the consent of the Borrower or any
Lender, appoint any of its Affiliates which is a commercial bank as
a successor Agent hereunder. If the Agent has resigned or been
removed and no successor Agent has been appointed, the Lenders may
perform all the duties of the Agent hereunder and the Borrower shall
make all payments in respect of the Secured Obligations to the
applicable Lender and for all other purposes shall deal directly
with the Lenders. No successor Agent shall be deemed to be
appointed hereunder until such successor Agent has accepted the
appointment. Any such successor Agent shall be a commercial bank
having capital and retained earnings of at least $100,000,000. Upon
the acceptance of any appointment as Agent hereunder by a successor
Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the
resigning or removed Agent. Upon the effectiveness of the
resignation or removal of the Agent, the resigning or removed Agent
shall be discharged from its duties and obligations hereunder and
under the Loan Documents. After the effectiveness of the
resignation or removal of an Agent, the provisions of this Article X
shall continue in effect for the benefit of such Agent in respect of
any actions taken or omitted to be taken by it while it was acting
as the Agent hereunder and under the other Loan Documents. In the
event that there is a successor to the Agent by merger, or the Agent
assigns its duties and obligations to an Affiliate pursuant to this
Section 10.12, then the term "Prime Rate" as used in this Agreement
shall mean the prime rate, base rate or other analogous rate of the
new Agent.
10.13. Agent's Fee. The Borrower agrees to pay to the
Agent, for its own account, the fees agreed to by the Borrower and
the Agent pursuant to that certain letter agreement dated December
30, 1999 (the "Agent's Letter"), or as otherwise agreed from time to
time.
10.14. Delegation to Affiliates. The Borrower and the
Lenders agree that the Agent may delegate any of its duties under
this Agreement to any of its Affiliates. Any such Affiliate (and
such Affiliate's directors, officers, agents and employees) which
performs duties in connection with this Agreement shall be entitled
to the same benefits of the indemnification, waiver and other
protective provisions to which the Agent is entitled under Articles
IX and X.
10.15. Execution of Collateral Documents. The Lenders
hereby empower and authorize the Agent to execute and deliver to the
Borrower on their behalf the Mortgages, the Pledge and Security
Agreement and all related financing statements and any financing
statements, agreements, documents or instruments as shall be
necessary or appropriate to effect the purposes of the Collateral
Documents.
10.16. Collateral Releases. The Lenders hereby empower and
authorize the Agent to execute and deliver to the Borrower on their
behalf any agreements, documents or instruments as shall be
necessary or appropriate to effect any releases of Collateral which
shall be permitted by the terms hereof or of any other Loan Document
or which shall otherwise have been approved by the Required Lenders
(or, if required by the terms of Section 8.2, all of the Lenders) in
writing.
<PAGE>
10.17. Co-Agents, Documentation Agent, Syndication Agent, etc.
No Lender identified in this Agreement as a "co-agent,"
"Documentation Agent," "Syndication Agent" or similar title shall
have any right, power, obligation, liability, responsibility or duty
under this Agreement other than those applicable to all Lenders as
such. Without limiting the foregoing, none of such Lenders shall
have or be deemed to have a fiduciary relationship with any Lender.
Each Lender hereby makes the same acknowledgments with respect to
such Lenders as it makes with respect to the Agent in Section 10.11.
ARTICLE XI
SETOFF; RATABLE PAYMENTS
------------------------
11.1. Setoff. In addition to, and without limitation of,
any rights of the Lenders under applicable law, if the Borrower
becomes insolvent, however evidenced, or any Default occurs, any and
all deposits (including all account balances, whether provisional or
final and whether or not collected or available) and any other
Indebtedness at any time held or owing by any Lender or any
Affiliate of any Lender to or for the credit or account of the
Borrower may be offset and applied toward the payment of the Secured
Obligations owing to such Lender, whether or not the Secured
Obligations, or any part thereof, shall then be due.
11.2. Ratable Payments. If any Lender, whether by setoff
or otherwise, has payment made to it upon its Outstanding Credit
Exposure (other than payments received pursuant to Section 3.1, 3.2,
3.4 or 3.5) in a greater proportion than that received by any other
Lender, such Lender agrees, promptly upon demand, to purchase a
portion of the Aggregate Outstanding Credit Exposure held by the
other Lenders so that after such purchase each Lender will hold its
Pro Rata Share of the Aggregate Outstanding Credit Exposure. If any
Lender, whether in connection with setoff or amounts which might be
subject to setoff or otherwise, receives collateral or other
protection for its Obligations or such amounts which may be subject
to setoff, such Lender agrees, promptly upon demand, to take such
action necessary such that all Lenders share in the benefits of such
collateral ratably in proportion to their respective Pro Rata Shares
of the Aggregate Outstanding Credit Exposure. In case any such
payment is disturbed by legal process, or otherwise, appropriate
further adjustments shall be made. If an amount to be setoff is to
be applied to Indebtedness of the Borrower to a Lender other than
Indebtedness comprised of Outstanding Credit Exposure of such
Lender, such amount shall be applied ratably to such other
Indebtedness and to the Indebtedness comprised of such Outstanding
Credit Exposure.
ARTICLE XII
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
-------------------------------------------------
12.1. Successors and Assigns. The terms and provisions of
the Loan Documents shall be binding upon and inure to the benefit of
the Borrower and the Lenders and their respective successors and
assigns, except that (i) the Borrower shall not have the right to
assign its rights or obligations under the Loan Documents and (ii)
any assignment by any Lender must be made in compliance with Section
<PAGE>
12.3. The parties to this Agreement acknowledge that clause (ii) of
this Section 12.1 relates only to absolute assignments and does not
prohibit assignments creating security interests, including, without
limitation, any pledge or assignment by any Lender of all or any
portion of its rights under this Agreement and any Note to a Federal
Reserve Bank; provided, however, that no such pledge or assignment
creating a security interest shall release the transferor Lender
from its obligations hereunder unless and until the parties thereto
have complied with the provisions of Section 12.3. The Agent may
treat the Person which made any Loan or which holds any Note as the
owner thereof for all purposes hereof unless and until such Person
complies with Section 12.3; provided, however, that the Agent may in
its discretion (but shall not be required to) follow instructions
from the Person which made any Loan or which holds any Note to
direct payments relating to such Loan or Note to another Person.
Any assignee of the rights to any Loan or any Note agrees by
acceptance of such assignment to be bound by all the terms and
provisions of the Loan Documents. Any request, authority or consent
of any Person, who at the time of making such request or giving such
authority or consent is the owner of the rights to any Loan (whether
or not a Note has been issued in evidence thereof), shall be
conclusive and binding on any subsequent holder or assignee of the
rights to such Loan.
12.2. Participations.
12.2.1. Permitted Participants; Effect. Any Lender may,
in the ordinary course of its business and in accordance with
applicable law, at any time sell to one or more banks or other
entities ("Participants") participating interests in any Outstanding
Credit Exposure of such Lender, any Note held by such Lender, any
Commitment of such Lender or any other interest of such Lender under
the Loan Documents. In the event of any such sale by a Lender of
participating interests to a Participant, such Lender's obligations
under the Loan Documents shall remain unchanged, such Lender shall
remain solely responsible to the other parties hereto for the
performance of such obligations, such Lender shall remain the owner
of its Outstanding Credit Exposure and the holder of any Note issued
to it in evidence thereof for all purposes under the Loan Documents,
all amounts payable by the Borrower under this Agreement shall be
determined as if such Lender had not sold such participating
interests, and the Borrower and the Agent shall continue to deal
solely and directly with such Lender in connection with such
Lender's rights and obligations under the Loan Documents.
12.2.2. Voting Rights. Each Lender shall retain the
sole right to approve, without the consent of any Participant, any
amendment, modification or waiver of any provision of the Loan
Documents other than any amendment, modification or waiver with
respect to any Credit Extension or Commitment in which such
Participant has an interest which forgives principal, interest, fees
or any Reimbursement Obligation or reduces the interest rate or fees
payable with respect to any such Credit Extension or Commitment,
extends the Revolving Loan Termination Date or the Term Loan
Termination Date, postpones any date fixed for any
regularly-scheduled payment of principal of or interest on any Loan
in which such Participant has an interest, or any regularly-
<PAGE>
scheduled payment of fees on, any such Credit Extension or
Commitment, releases any guarantor of any such Credit Extension or
releases any collateral held in the Facility LC Collateral Account
(except in accordance with the terms hereof) or all or substantially
all or any other collateral, if any, securing any such Credit
Extension.
12.2.3. Benefit of Setoff. The Borrower agrees that
each Participant shall be deemed to have the right of setoff
provided in Section 11.1 in respect of its participating interest in
amounts owing under the Loan Documents to the same extent as if the
amount of its participating interest were owing directly to it as a
Lender under the Loan Documents, provided that each Lender shall
retain the right of setoff provided in Section 11.1 with respect to
the amount of participating interests sold to each Participant. The
Lenders agree to share with each Participant, and each Participant,
by exercising the right of setoff provided in Section 11.1, agrees
to share with each Lender, any amount received pursuant to the
exercise of its right of setoff, such amounts to be shared in
accordance with Section 11.2 as if each Participant were a Lender.
12.3. Assignments.
12.3.1. Permitted Assignments. Any Lender may, in the
ordinary course of its business and in accordance with applicable
law, at any time assign to one or more banks or other entities
("Purchasers") all or any part of its rights and obligations under
the Loan Documents. Such assignment shall be substantially in the
form of Exhibit 12.3.1 or in such other form as may be agreed to by
the parties thereto. The consent of the Borrower, the Agent and the
LC Issuer shall be required prior to an assignment becoming
effective with respect to a Purchaser which is not a Lender or an
Affiliate thereof; provided, however, that if a Default has occurred
and is continuing, the consent of the Borrower shall not be
required. Such consent shall not be unreasonably withheld or
delayed. Each such assignment with respect to a Purchaser which is
not a Lender or an Affiliate thereof shall (unless each of the
<PAGE>
Borrower and the Agent otherwise consents) be in an amount not less
than the lesser of (i) $5,000,000 or (ii) the remaining amount of
the assigning Lender's Commitment (calculated as at the date of such
assignment) or outstanding Loans (if the applicable Commitment has
been terminated).
12.3.2. Effect; Effective Date. Upon (i) delivery to
the Agent of a notice of assignment (the "Notice of Assignment"),
together with any consents required by Section 12.3.1, and (ii)
payment of a $3,500 fee to the Agent for processing such assignment
(unless such fee is waived by the Agent), such assignment shall
become effective on the effective date specified in such assignment.
The Notice of Assignment shall contain a representation by the
Purchaser to the effect that none of the consideration used to make
the purchase of the Commitment and Outstanding Credit Exposure under
the applicable assignment agreement constitutes "plan assets" as
defined under ERISA and that the rights and interests of the
Purchaser in and under the Loan Documents will not be "plan assets"
under ERISA. On and after the effective date of such Notice of
Assignment, such Purchaser shall for all purposes be a Lender party
to this Agreement and any other Loan Document executed by or on
behalf of the Lenders and shall have all the rights and obligations
of a Lender under the Loan Documents, to the same extent as if it
were an original party hereto, and no further consent or action by
the Borrower, the Lenders or the Agent shall be required to release
the transferor Lender with respect to the percentage of the
<PAGE>
Commitment and Outstanding Credit Exposure assigned to such
Purchaser. Upon the consummation of any assignment to a Purchaser
pursuant to this Section 12.3.2, the transferor Lender, the Agent
and the Borrower shall, if the transferor Lender or the Purchaser
desires that its Loans be evidenced by Notes, make appropriate
arrangements so that new Notes or, as appropriate, replacement Notes
are issued to such transferor Lender and new Notes or, as
appropriate, replacement Notes, are issued to such Purchaser, in
each case in principal amounts reflecting their respective
Commitments, as adjusted pursuant to such assignment.
12.4. Dissemination of Information. The Borrower
authorizes each Lender to disclose to any Participant or Purchaser
or any other Person acquiring an interest in the Loan Documents by
operation of law (each a "Transferee") and any prospective
Transferee any and all information in such Lender's possession
concerning the creditworthiness of the Borrower and its
Subsidiaries, including without limitation any information contained
in any Reports; provided that each Transferee and prospective
Transferee agrees to be bound by Section 9.11 of this Agreement.
12.5. Tax Treatment. If any interest in any Loan Document
is transferred to any Transferee which is organized under the laws
of any jurisdiction other than the United States or any State
thereof, the transferor Lender shall cause such Transferee,
concurrently with the effectiveness of such transfer, to comply with
the provisions of Section 3.5(iv).
ARTICLE XIII
NOTICES
-------
13.1. Notices. Except as otherwise permitted by Section
2.14 with respect to borrowing notices, all notices, requests and
other communications to any party hereunder shall be in writing
(including electronic transmission, facsimile transmission or
similar writing) and shall be given to such party: (x) in the case
of the Borrower or the Agent, at its address or facsimile number set
forth on the signature pages hereof, (y) in the case of any Lender,
at its address or facsimile number set forth below its signature
hereto or (z) in the case of any party, at such other address or
facsimile number as such party may hereafter specify for the purpose
by notice to the Agent and the Borrower in accordance with the
provisions of this Section 13.1. Each such notice, request or other
communication shall be effective (i) if given by facsimile
transmission, when transmitted to the facsimile number specified in
this Section and confirmation of receipt is received, (ii) if given
by mail, 72 hours after such communication is deposited in the mails
with first class postage prepaid, addressed as aforesaid, or (iii)
if given by any other means, when delivered (or, in the case of
electronic transmission, received) at the address specified in this
Section; provided that notices to the Agent under Article II shall
not be effective until received.
13.2. Change of Address. The Borrower, the Agent and any
Lender may each change the address for service of notice upon it by
a notice in writing to the other parties hereto.
ARTICLE XIV
COUNTERPARTS
------------
This Agreement may be executed in any number of counterparts,
all of which taken together shall constitute one agreement, and any
<PAGE>
of the parties hereto may execute this Agreement by signing any such
counterpart. This Agreement shall be effective when it has been
executed by the Borrower, the Agent, the LC Issuer and the Lenders
and each party has notified the Agent by facsimile transmission or
telephone that it has taken such action.
ARTICLE XV
CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL
------------------------------------------------------------
15.1. CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE
CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (WITHOUT REGARD TO
THE CONFLICT OF LAWS PROVISIONS) OF THE STATE OF WISCONSIN, BUT
GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
15.2. CONSENT TO JURISDICTION. THE BORROWER HEREBY
IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE UNITED
STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF WISCONSIN OR ANY
CIRCUIT COURT SITTING IN MILWAUKEE, WISCONSIN IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS AND THE
BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF
SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH
COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER
HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT
IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM.
NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT, THE LC ISSUER OR
ANY LENDER TO BRING PROCEEDINGS AGAINST THE BORROWER IN THE COURTS
OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY THE BORROWER
AGAINST THE AGENT, THE LC ISSUER OR ANY LENDER OR ANY AFFILIATE OF
THE AGENT, THE LC ISSUER OR ANY LENDER INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR
CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN
MILWAUKEE, WISCONSIN.
15.3. WAIVER OF JURY TRIAL. THE BORROWER, THE AGENT, THE
LC ISSUER AND EACH LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL
PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER
SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF,
RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP
ESTABLISHED THEREUNDER.
IN WITNESS WHEREOF, the Borrower, the Lenders, the LC Issuer
and the Agent have executed this Agreement as of the date first
above written.
ROUNDY'S, INC.
By: __________________________
Title: ________________________
23000 Roundy Drive
Pewaukee, WI 53072
Attention: Edward G. Kitz
Telephone: (262) 953-7999
FAX: (262) 953-7989
Commitments:
BANK ONE, WISCONSIN
Individually and as LC Issuer and Agent
By: _____________________________
Title:____________________________
111 East Wisconsin Avenue
Milwaukee, WI 53201
Attention: Patrick C. O'Connor
Telephone: (414) 765-2471
FAX: (414) 765-2176
Revolving Loan: $34,000,000
Term Loan: $16,000,000
HARRIS TRUST AND SAVINGS BANK
By: ________________________________
Title: ______________________________
111 West Monroe Street
Chicago, IL 60603
Attention: Julia Buthman
Telephone: (312) 461-2744
FAX: (312) 765-8095
Revolving Loan: $20,400,000
Term Loan: $9,600,000
NATIONAL CITY BANK
By: ________________________________
Title: _____________________________
155 E. Broad Street
Columbus, OH 43251
Attention: Patti Jackson
Telephone: (614) 463-8065
FAX: (614) 463-6770
Revolving Loan: $20,400,000
Term Loan: $9,600,000
M&I MARSHALL & ILSLEY BANK
By: _____________________
Title: __________________
770 North Water Street
Milwaukee, WI 53201
Attention: Eric Thomas
Telephone: (414) 765-7884
FAX: (414) 765-7625
Revolving Loan: $13,600,000
Term Loan: $6,400,000
FIRSTAR BANK N.A.
By: ______________________________
Title: ___________________________
777 East Wisconsin Avenue
Milwaukee, WI 53202
Attention: Paul J. Hennessy
Telephone: (414) 765-6149
FAX: (414) 765-4632
Revolving Loan: $13,600,000
Term Loan: $6,400,000
LASALLE BANK NATIONAL ASSOCIATION
By: _____________________________
Title: ____________________________
411 East Wisconsin Avenue
Milwaukee, WI 53202
Attention: Jim Meyer
Telephone: (414) 224-0380
FAX: (414) 224-0071
Revolving Loan: $13,600,000
Term Loan: $6,400,000
U.S. BANK NATIONAL ASSOCIATION
By: ____________________________
Title: ____________________________
201 West Wisconsin Avenue
Milwaukee, WI 53259
Attention: Mike Miller
Telephone: (414) 227-5969
FAX: (414) 227-5881
Revolving Loan: $13,600,000
Term Loan: $6,400,000
TCF NATIONAL BANK
By: _______________________________
Title: _____________________________
500 W. Brown Deer Road
Milwaukee, WI 53217
Attention: Russ McMinn
Telephone: (414) 351-8383
FAX: (414) 351-8680
Revolving Loan: $10,200,000
Term Loan: $4,800,000
ASSOCIATED BANK MILWAUKEE
By: ______________________________
Title: _____________________________
401 East Kilbourn Avenue
Milwaukee, WI 53202
Attention: Clark Rasmussen
Telephone: (414) 283-2207
FAX: (414) 283-2336
Revolving Loan: $10,200,000
Term Loan: $4,800,000
MARINE BANK
By: _______________________________
Title: ______________________________
250 East Wisconsin Avenue
Milwaukee, WI 53202
Attention: Bill Shaw
Telephone: (414) 273-1500
FAX: (414) 273-1596
Revolving Loan: $10,200,000
Term Loan: $4,800,000
COMERICA BANK
By: ______________________________
Title: _____________________________
500 Woodward Avenue
PO Box 75000 Mailcode 3269
Detroit, MI 48275
Attention: Kathleen Kasperek
Telephone: (313) 222-3808
FAX: (313) 222-9516
Revolving Loan: $10,200,000
Term Loan: $4,800,000
Exhibit 10.11
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into this 31st day of
March, 2000, to be effective as of the 2nd day of April, 2000, by
and between Roundy's, Inc., a Wisconsin corporation (the
"Company") and Gary L. Fryda, an individual ("Employee").
RECITALS:
WHEREAS, the Company is engaged in, among other things, the
business of owning and operating retail grocery stores (the
"Retail Business"); and
WHEREAS, Employee has extensive experience and expertise in
the retail grocery business, including the management of a large
retail grocery store chain known as Mega Marts, Inc. ("Mega
Marts"); and
WHEREAS, the Company desires to employ Employee and Employee
desires to be employed by the Company pursuant to the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the premises set forth
above, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
l. Employment; Duties. During the Employment Period (as
hereinafter defined):
(a) The Company will employ Employee and Employee will
perform services as the Company's Vice-President - Corporate
Retail. Employee will have general responsibility for the
management, oversight and direction of the Retail Business of the
Company, under the direction, supervision and oversight of, and
reporting directly to, the President and Chief Executive Officer
of the Company. In addition, Employee will have such other
duties and responsibilities as the Board of Directors or the
President of the Company reasonably assigns to Employee from time
to time, provided such other duties and responsibilities are
consistent with Employee's position as a senior member of the
Company's management. In the performance of his duties hereunder
Employee will not be required to travel outside of the
metropolitan Milwaukee area (consisting of the Wisconsin counties
of Milwaukee, Ozaukee, Washington, Waukesha, Racine and Kenosha)
for a total of more than sixty days in any one-year period.
(b) Employee will perform his services hereunder
faithfully and to the best of his abilities, and will devote his
best efforts and all of his business time, attention and skill to
the business and affairs of the Company. If Employee is elected
as an officer and/or director of the Company or any of its
subsidiaries or affiliates, or performs services for any
subsidiary or affiliate of the Company, during the term of this
Agreement, Employee will serve in such additional capacities and
perform such additional services without further compensation.
(c) Employee will not act in any manner, which,
directly or indirectly, could damage the Company's business or
adversely affect the good will, reputation or business
relationships of the Company with the public generally or with
any of its employees, customers, suppliers or other persons
having dealings with it. Employee will conduct himself at all
times in accordance with the Company's code of business conduct
and ethics and all other policies in effect from time to time
governing the conduct of the Company's employees or officers.
(d) Nothing contained herein shall preclude Employee
from serving as a director or member of a committee of, or as a
consultant to, any business organization which does not conflict
with the Company or its business, and from engaging in charitable
and community activities, provided that such services and
activities do not materially interfere with the regular
performance of his duties and responsibilities under this
Agreement, and provided further that the Company is notified in
writing in advance of all such services and activities.
2. Compensation; Benefits.
(a) In consideration of the services to be performed
by Employee during the Employment Period pursuant to Section l
hereof and Employee's compliance with the other provisions of
this Agreement, the Company will pay Employee an annual salary in
the amount of $332,500. Such salary will be payable in
accordance with the Company's normal payroll practices from time
to time in effect for its executive employees.
(b) Employee shall be entitled to participate in any
employee benefits and benefit programs which are made available
generally by the Company to its executives from time to time
during the Employment Period, including any life, health, dental,
accident, sickness and disability plans (whether or not insured),
and in any qualified pension or profit sharing plan, savings
plan, stock option plan, stock appreciation rights plan, deferred
compensation plan or any other fringe benefit plan or program
which the Company may from time to time make available to its
executives, in each case in accordance with and subject to the
terms of such plans as the same may be in effect from time to
time. Employee will be entitled to vacations and perquisites in
accordance with the Company's policies as in effect from time to
time for its executives, including the use of a "Class A" vehicle
on the same terms as those on which such vehicles are made
available to other Company executives.
(c) The amounts payable to Employee pursuant to this
Section 2 are before any deductions therefrom for any taxes
required to be withheld by federal, state and local governments.
3. Term.
(a) The term of this Agreement pursuant to which
Employee will provide services to the Company hereunder and the
Company will employ Employee (the "Employment Period") will be
for a period of five (5) years commencing on the date hereof,
unless earlier terminated in any of the following ways:
(i) The Employment Period will terminate upon the
written agreement of the parties;
(ii) The Employment Period will terminate upon the
death or permanent disability of Employee. The term
"permanent disability" of Employee means any mental or
physical illness, disability or incapacity which renders
Employee unable to perform his duties hereunder effectively
for a continuous period of One Hundred Eighty (180) days, or
Employee receiving or becoming entitled to receive permanent
disability payments pursuant to the Company's group
disability insurance policy covering Employee. If there is
any dispute as to whether Employee is permanently disabled
within the meaning of this Section 3(a)(ii), such dispute
shall be submitted to a licensed physician acceptable to the
parties who shall conduct an examination of Employee for the
purpose of resolving such dispute. Employee shall submit to
such examination and the determination of such physician as
to whether Employee is permanently disabled within the
meaning of this Section 3(a)(ii) will be binding and
conclusive on the parties.
(iii) The Company may terminate the Employment
Period at any time for "cause." For purposes of this
Agreement, the term "cause" means only (i) the wilful
commission by Employee of a material act of dishonesty or
moral turpitude involving the Company; (ii) Employee's
commission of an act constituting a felony; (iii) Employee's
gross negligence or gross incompetence in the performance of
his duties and responsibilities hereunder or in any other
capacity in which he may be serving the Company; (iv) the
wilful failure of Employee to carry out his duties and
responsibilities hereunder or to follow a specific and
lawful directive of the Board of Directors or President of
the Company (provided such directive is consistent with his
position hereunder) but only if such failure continues for
ten days after Employee has been provided with written
notice of such failure (which notice includes a description
of the nature of the failure); (v) Employee's wilful
disclosure of material proprietary confidential information
of the Company to or for the benefit of a competitor of the
Company, to the extent such information was not available
publicly; (vi) any intentional and material
misrepresentation by Employee to the President, directors or
shareholders of the Company; (vii) Employee's use of illegal
drugs or chronic or habitual use abuse of alcohol; or (viii)
any material breach of this Agreement by Employee, but only
after Employee has been provided with written notice of such
breach (which notice includes a description of the nature of
the breach) and a period of five (5) days after such breach
to cure the same.
(b) Upon termination of the Employment Period, the
Company will pay to Employee the full amount of any unpaid
compensation earned by Employee pursuant to Section 2 of this
Agreement through and including the termination date (and
prorated as appropriate), and the Company will not be obligated
to make any further payments to or for the benefit of Employee.
(c) Employee's obligations set forth in Sections 4
through 9 hereof shall survive the termination of the Employment
Period, regardless of the reason for such termination (including
termination other than as permitted under the preceding
subsection 3(a), whether or not either party is in breach of this
Agreement), except as provided in Sections 4(b) and 4(c) below.
4. Noncompetition.
(a) During the Employment Period and for two (2) years
(the "Restriction Period") after the Employee's employment
hereunder terminates (regardless of the reason for such
termination, except as provided in Sections 4(b) and 4(c) below)
Employee will not, directly or indirectly, as a principal, agent,
consultant, owner, employee, trustee, beneficiary, partner, co-
venturer, officer, director, stockholder (other than as a
stockholder of less than 5% of the stock of a publicly traded
corporation) or in any other capacity, engage in, have an
interest in, provide services or advice to, or become associated
with any entity, firm, business, activity or enterprise which is
engaged in the wholesale or retail distribution or sale of
groceries and which (either directly or through a subsidiary or
affiliate) has a grocery warehouse or distribution facility or a
retail grocery store in the "Proscribed Territory," as that term
is defined below. The "Proscribed Territory" means (i) the area
consisting of the States of Wisconsin, Michigan, Illinois,
Indiana, and Ohio, plus (ii) to the extent not included within
(i), the area encompassed within a radius of four hundred (400)
miles of any warehouse or distribution facility operated by the
Company or any affiliate of the Company.
(b) Notwithstanding the preceding Section 4(a), if the
Employment Period is terminated by the Employer in breach of this
Agreement and without "cause" as provided in Subsection 3(a)(iii)
above, then the duration of the Restriction Period shall be one
(1) year and not two (2) years after the termination of the
Employment Period (but shall not in any event extend beyond the
date on which the five-year period specified in Section 3 above
would have expired).
(c) Notwithstanding the preceding Sections 4(a) and
4(b), Section 4(a) shall not apply after the termination of the
Employment Period in the event the Employment Period terminates
by expiration of the five-year term specified in Section 3(a)
above (and not pursuant to Subsections 3(a)(i) through 3(a)(iii)
nor by Employee's voluntary termination or resignation).
(d) Employee acknowledges and agrees that the
restrictions set forth in this Section 4 are founded on valuable
consideration and are reasonable in duration and geographic area
in view of the circumstances under which this Agreement is
entered into, and that such restrictions are necessary to protect
the legitimate interests of the Company, including, without
limitation, to secure to the Company the full value of its
investment in Mega Marts, Inc., Employee's former employer. In
the event that any provision of this Section 4 is determined to
be invalid by any court of competent jurisdiction, the provisions
of this Section 4 shall be deemed to have been amended and the
parties will execute any documents and take whatever action is
necessary to evidence such amendment, so as to eliminate or
modify any such invalid provision and to carry out the intent of
this Section 4 so to render the terms of this Section 4
enforceable in all respects as so modified.
(e) Employee acknowledges and agrees that irreparable
injury will result to the Company in the event Employee breaches
any covenant or obligation of Employee contained in this Section
4, and that the remedy at law for such breach will be inadequate.
Therefore, if Employee engages or threatens to engage in any act
in violation of the provisions of this Section 4, the Company
shall be entitled, in addition to such other remedies and damages
as may be available to it by law or under this Agreement, to
injunctive or other equitable relief to enforce the provisions of
this Section 4.
5. Confidential Information. As used herein, the term
"Confidential Information" refers to all information and
materials belonging to, used by or in the possession of the
Company relating to its business strategies, products, pricing,
purchasing, vendor relationships, customers, technology,
programs, costs, employee compensation, marketing plans,
developmental plans, computer programs, computer systems,
inventions, developments, formulae, processes, designs, drawings
and trade secrets of every kind and character. "Confidential
Information" also includes confidential information belonging to
other companies and disclosed to Employee by the Company.
"Confidential Information" does not, however, include (a)
information which Employee can demonstrate was in the public
domain or known generally to the industry at the time of its
disclosure to Employee, or (b) information which is disclosed to
Employee after the termination of the Employment Period, without
restriction, by a third party not directly or indirectly
obligated to the Company to maintain the confidentiality of such
information, or (c) information which enters the public domain or
becomes known generally to the industry through no act or failure
to act on the part of Employee. For purposes of this Section 5
and the following Sections 6 through 10, the term "Company"
includes all past, present or future subsidiaries and affiliates
of Roundy's, Inc., including Mega Marts, and "Confidential
Information" includes confidential information of Mega Marts.
6. Ownership. Employee acknowledges that all of the
Confidential Information is and shall continue to be the
exclusive proprietary property of the Company, whether or not
prepared in whole or in part by Employee and whether or not
disclosed to or entrusted to the custody of Employee.
7. Nondisclosure and Nonuse. Employee will not, either
during the Employment Period or at any time thereafter
(regardless of the reason for the termination of the Employment
Period), disclose any Confidential Information, in whole or in
part, to any person or entity (other than to employees of the
Company to whom such disclosure is necessary for the performance
of Employee's duties hereunder), for any reason or purpose,
unless the Company gives its prior written consent to such
disclosure. Employee also will not use any Confidential
Information in any manner for Employee's own purposes or for the
benefit of any person or entity other than the Company, whether
such use consists of duplication, removal, oral communication,
disclosure, transfer or any other unauthorized use thereof,
unless the Company gives its prior written consent to such use.
8. New Developments. Employee will promptly (and in any
event upon the request of the Company) disclose to the Company
any and all improvements, inventions, developments, discoveries,
innovations, systems, techniques, ideas, processes, programs and
other things which may be of assistance or benefit to the
Company, whether or not patentable or otherwise legally
protectable, relating to or arising out of any developments,
services or products of, or pertaining in any manner to, any
aspect of the business of the Company, and made or conceived of
by Employee, alone or with others, during the Employment Period
(collectively the "New Developments"). All New Developments
shall be and remain the sole and exclusive property of the
Company and upon the request of the Company, and without further
compensation, Employee will do all lawful things reasonably
necessary to ensure the Company's ownership of such New
Developments, including, without limitation, the execution of
documents assigning and transferring to the Company or its
assigns all of Employee's right, title and interest in and to
such New Developments, and the rendering of assistance and the
execution of all documents required to enable the Company to file
and obtain patents, trademark or trade name registrations in the
United States and foreign countries on any of such New
Developments and otherwise to register or legally protect its
rights thereto.
9. Surrender of Material Upon Termination. Upon
termination of the Employment Period, for whatever reason,
Employee will immediately surrender to the Company all of the
property and other things of value in his possession, or in the
possession of any person or entity under his control, relating
directly or indirectly to the business of the Company, including,
without limitation, all personal notes, drawings, manuals,
documents, photographs or the like, including copies thereof,
relating directly or indirectly to any Confidential Information
or New Developments.
10. Common Law of Torts or Trade Secrets. Nothing in this
Agreement shall be construed to limit or negate the common law of
torts or trade secrets where such common law provides the Company
with broader protection than the protection provided by this
Agreement.
l1. Expense Reimbursement. The Company will reimburse
Employee for his out-of-pocket expenses reasonably incurred in
connection with the performance of his services hereunder,
subject to the submission of documentation substantiating such
expenses and other compliance with the Company's policies
regarding expense reimbursement.
12. Employee's Representation. Employee hereby represents
and warrants that he is not a party to any agreement (whether
written or oral) with, and he does not have any obligations to,
any person or entity other than the Company that are inconsistent
with or would be breached or violated by the Employee's entering
into this Agreement or providing services to the Company as
contemplated hereby, including, without limitation, obligations
and restrictions relating to noncompetition, nonsolicitation,
confidentiality, intellectual property, or the like.
13. Severability. The invalidity or unenforceability of
any provision of this Agreement shall not affect or impair the
validity or enforceability of any other provision, and this
Agreement shall be construed as if such invalid or unenforceable
provision were not contained herein. Notwithstanding the
preceding sentence, if any arbitrator or court of competent
jurisdiction shall determine that any geographic or time
restraint provided in this Agreement is too broad as to the area
or time covered, such restraint may be reduced to whatever extent
the court deems reasonable and such restraint may be enforced as
reduced.
14. Notice. All notices under this Agreement shall be in
writing and any notice shall be considered to be given and
received in all respects on the day it is personally delivered or
deposited in the United States mail, first class, postage
prepaid, addressed as follows (or to such other address as may be
designated by one party to the other by notice duly given);
provided that written notice given in any other manner will
nonetheless be effective upon its actual receipt by the person or
entity entitled to receive it hereunder:
If to the Company:
Roundy's, Inc.
23000 Roundy Drive
Pewaukee, WI 53072
Attn: President
with a copy to:
Whyte Hirschboeck Dudek S.C.
111 East Wisconsin Avenue
Milwaukee, WI 53202
Attn: John F. Emanuel
If to Employee:
at the then current address for Employee as
contained in the Company's employment records
15. Exclusive Jurisdiction; Attorneys' Fees.
(a) Each of the parties hereby (i) irrevocably
consents and agrees that any action or proceeding arising under,
or in connection with, this Agreement shall be brought
exclusively in any federal or state court within Milwaukee
County, State of Wisconsin, and any court to which an appeal may
be taken in any such litigation, and (ii) by execution and
delivery of this Agreement, irrevocably submits to, and accepts,
with respect to any such action or proceeding, the jurisdiction
of the aforesaid courts, and irrevocably waives any and all
rights such party may now or hereafter have to object to such
jurisdiction under the constitution or laws of the State of
Wisconsin or the Constitution or laws of the United States of
America or otherwise.
(b) In any action hereunder or to enforce any
provision of this Agreement, the prevailing party shall be
reimbursed by the other party for all reasonable legal fees and
expenses, if any, reasonably incurred by such party in the
enforcement of its or his rights under any provisions of this
Agreement.
16. Waiver of Jury Trial. THE PARTIES HERETO HEREBY
VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY
RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE
(WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) BETWEEN OR AMONG
ANY OF THE PARTIES ARISING OUT OF OR IN ANY WAY RELATED TO THIS
AGREEMENT OR THE EMPLOYMENT RELATIONSHIP CONTEMPLATED HEREBY.
17. Waiver. A waiver by a party of any breach by the other
party of any provision of this Agreement shall not be deemed to
be a waiver by such first party of any subsequent breach.
18. Assignment. Employee may not assign, pledge or
encumber this Agreement or any interest herein.
19. Binding Effect. This Agreement shall be binding upon
and inure to the benefit of the parties hereto, the Company's
successors and permitted assigns and Employee's heirs and legal
representatives.
20. Amendment. This Agreement may be amended only by a
written instrument executed by the parties hereto or their
respective successors, assigns, heirs or legal representatives,
as applicable.
21. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of
Wisconsin.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the date first above written.
ROUNDY'S, INC.
By: GERALD F. LESTINA
---------------------------
Gerald F. Lestina, President
and Chief Executive Officer
GARY L. FRYDA
--------------
Gary L. Fryda ("Employee")
Exhibit 99.1
Mega Marts, Inc./Tri City Pick `n Save
Combined Financial Statements
Years ended January 1, 2000, January 2, 1999 and January 3, 1998
Contents
Report of Independent Auditors 1
Combined Financial Statements
Combined Balance Sheets 2
Combined Statements of Income 3
Combined Statements of Changes in Stockholders' and Divisional Equity 4
Combined Statements of Cash Flows 5
Notes to Combined Financial Statements 6
Report of Independent Auditors
The Board of Directors
Mega Marts, Inc.
We have audited the accompanying combined balance sheets as of
January 1, 2000 and January 2, 1999, of Mega Marts, Inc./Tri City
Pick `n Save (the Company), and the related combined statements of
income, changes in stockholders' and divisional equity and cash flows for
each of the three years in the period ended January 1, 2000. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of the Company at
January 1, 2000 and January 2, 1999, and the combined results of its
operations and its cash flows for each of the three years in the period
ended January 1, 2000, in conformity with accounting principles generally
accepted in the United States.
ERNST & YOUNG LLP
Milwaukee, Wisconsin
February 18, 2000, except for
Note 9, as to which the date is March 31, 2000
<TABLE>
<CAPTION>
Mega Marts, Inc./Tri City Pick'n Save
Combined Balance Sheets
January 1, 2000 January 2, 1999
--------------- ---------------
<S> <C> <C>
Assets
Current assets:
Cash $ 7,437,182 $ 5,425,140
Receivables 10,500,841 9,277,355
Inventories 22,525,953 21,938,479
Deferred income taxes 802,000 773,000
Other current assets 1,367,214 747,303
------------- -------------
Total current assets 42,633,190 38,161,277
Investments 9,087,383 7,362,484
Annual rebate receivable 1,862,979 1,643,918
Receivable from affiliate 178,811
Property and equipment, net 47,114,469 42,858,783
Intangible assets 1,604,567 1,760,819
Deferred charges and other 105,287 104,637
------------ -------------
Total assets $102,586,686 $ 91,891,918
============ ============
Liabilities and stockholders' and divisional equity
Current liabilities:
Accounts Payable $ 24,030,810 $ 21,696,470
Employee compensation 4,621,500 4,088,686
Other accrued expenses 5,352,234 4,438,312
Accrued income taxes 165,691 122,056
Current portion of LT debt 36,140 34,751
------------ ------------
34,206,375 30,380,275
Long-term debt 22,699,610 22,532,725
Payable to affiliate 892,980
Other liabilities 97,521
Deferred income taxes 5,059,000 5,015,000
Commitments
Stockholders' and divisional equity:
Common stock, $.01 par value;
35,800,000 shares authorized;
5,800,000 issued and
outstanding 58,000 58,000
Additional paid in capital 232,000 232,000
Retained earnings/divisional
equity 40,234,180 32,780,938
----------- ------------
Total stockholders' equity 40,524,180 33,070,938
------------ -------------
Total liabilities and
stockholders' equity $102,586,686 $ 91,891,918
============ ============
</TABLE>
<TABLE>
<CAPTION>
Mega Marts, Inc./Tri City Pick 'n Save
Combined Statements of Income
Year ended
January 1, 2000 January 2, 1999 January 3, 1998
--------------- --------------- ---------------
<S> <C> <C> <C>
Net sales $513,145,934 $465,765,956 $451,327,597
Cost of sales 413,033,680 375,380,900 367,638,626
------------ ------------ ------------
Gross margin 100,112,254 90,385,056 83,688,971
Operating expenses 79,460,039 71,500,942 68,946,134
Depreciation and amoritization 6,048,155 5,728,438 5,585,270
Preopening expenses 257,464
------------ ------------ ------------
Operating income 14,346,596 13,155,676 8,662,587
Interest expense,net 1,518,752 1,779,534 1,752,195
------------ ------------ ------------
Income before income taxes and
accouting change 12,827,844 11,376,142 6,910,392
Income tax expense 4,620,000 4,100,000 2,042,000
------------ ----------- ------------
Income before accounting change 8,207,844 7,276,142 4,868,392
Accounting change, net of $311,000
income tax credit(note 1) (484,390)
------------ ----------- ------------
Net income $ 8,207,844 $ 7,276,142 $ 4,384,002
============ =========== ============
</TABLE>
<TABLE>
<CAPTION>
Mega Marts, Inc./Tri City Pick 'n Save
Combined Statements of Changes in Stockholders' and Divisional Equity
Retained Total
Additional Earinings/ Stockholders'
Common Paid-In Divisional and Divisional
Stock Capital Equity Equity
------ ----------- ----------- --------------
<S> <C> <C> <C> <C>
Balance, December 28, 1996 $58,000 $232,000 $26,851,302 $27,141,302
Net income for the year ended
January 3, 1998 4,384,002 4,384,002
Changes in divisional equity (1,172,974) (1,172,974)
------- --------- ----------- ------------
Balance, January 3, 1998 58,000 232,000 30,062,330 30,352,330
Net income for the year ended
January 2,1999 7,276,142 7,276,142
Changes in divisional equity (4,557,534) (4,557,534)
------- --------- ----------- -----------
Balance January 2, 1999 58,000 232,000 32,780,938 33,070,938
Net income for the year ended
January 1, 2000 8,207,844 8,207,844
Changes in divisional equity (754,602) (754,602)
------- --------- ----------- -----------
Balance January 1, 2000 $58,000 $232,000 $40,234,180 $40,524,180
======= ======== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Mega Marts, Inc./Tri City Pick 'n Save
Combined Statements of Cash Flows
Year ended
January 1, 2000 January 2, 1999 Januray 3, 1998
--------------- --------------- ---------------
<S> <C> <C> <C>
Operating activities
Net income $ 8,207,844 $ 7,276,142 $ 4,384,002
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 6,048,155 5,728,438 5,585,270
Amortization of deferred financing costs 22,197 33,768 33,768
Accounting change-inventory valuation 795,390
Deferred income taxes 15,000 317,000 (110,000)
Noncash portion of annual rebates (1,368,784) (1,167,165) (1,260,391)
Other (43,479)
Changes in operating assets and liabilities
Receivables (1,223,486) (2,242,280) (2,130,021)
Inventories (587,474) 810,188 (2,255,527)
Other current assets (619,911) (247,285) 633,998
Accounts payable 2,334,340 1,174,803 855,659
Income taxes 43,635 505,650 (410,866)
Other current liabilities 1,446,736 (87,358) 1,757,779
------------ ----------- -----------
Net cash provided by operating activities 14,274,773 12,101,181 7,879,061
Investing activities
Purchase of property and equipment (10,133,104) (5,500,885) (9,529,536)
Purchase of investments (575,722) (521,485)
Other 104,214 16,605 129,000
----------- ----------- -----------
Net cash used in investing activities (10,604,612) (6,005,765) (9,400,536)
Financing activities
Borrowings under term loans 5,179,000
Net borrowings under revolving credit facility 203,697 3,689,766 3,626,888
Payment of term loans and other (35,423) (6,397,362) (3,981,020)
Net cash activity with affiliate (1,826,393) (2,660,312) (1,795,746)
----------- ----------- -----------
Net cash provided by (used in) financing (1,658,119 (5,367,908) 3,029,122
----------- ----------- -----------
Increase in cash 2,012,042 727,508 1,507,647
Cash at beginning of year 5,425,140 4,697,632 3,189,985
----------- ----------- -----------
Cash at end of year $ 7,437,182 $ 5,425,140 $ 4,697,632
=========== =========== ===========
Additional cash flow information:
Interest paid $ 1,548,894 $ 2,037,926 $ 1,893,977
Income taxes 4,561,365 3,277,350 2,251,866
</TABLE>
Mega Marts, Inc./Tri City Pick 'n Save
Notes to Combined Financial Statements
1. Organization, Basis of Presentation and Significant Accounting Policies
Basis of Presentation and Description of the Company
The accompanying financial statements include the combined grocery store
operations of Mega Marts, Inc. (Mega Marts) and the Tri City Pick `n Save
Mega Food Center (Tri City Pick `n Save), a division of NDC, Inc. (NDC)
(collectively, the Company). Mega Marts and NDC are commonly controlled by
the same principal stockholders. All significant intercompany transactions
have been eliminated in combination.
The Company operates seventeen food stores located throughout southeastern
Wisconsin and northern Illinois. The food stores are operated as Pick `n
Save Mega Food Centers under separate Purchase Agreements and License
Agreements (Agreements) with Roundy's, Inc. (Roundy's). Roundy's granted
the Company the right to use the trademark and tradename "Pick `n Save"
in connection with the conduct of its food merchandising business at the
locations. In return, the Company has agreed to purchase, on an aggregate
basis, at least 50% of its merchandise held for sale from Roundy's as long
as the Roundy's merchandise is competitively priced. No license fees were
required to be paid to Roundy's for the rights granted and the term of the
Agreements for ten stores, including the Tri City Pick `n Save, is ten
years expiring December 31, 2004. The term for the remaining stores is the
same as the current term of each store's building lease.
The Company's purchases from Roundy's were approximately $330,687,000,
$293,406,000 and $268,557,000 in 1999, 1998 and 1997, respectively.
Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues
and expenses during the fiscal year. Actual results could differ from those
estimates.
Year-End
The Company uses a 52 - 53 week fiscal year ending on the Saturday closest
to December 31. The year ended January 1, 2000 (1999) included 52 weeks,
the year ended January 2, 1999 (1998) included 52 weeks and the year ended
January 3, 1998 (1997) included 53 weeks.
1. Organization, Basis of Presentation and Significant Accounting
Policies (continued)
Revenue Recognition
Revenue from sales of the Company's goods is recognized at the time of sale.
Advertising
The Company expenses the costs of advertising as incurred. Total
advertising expense was $3,500,252, $3,361,026 and $3,019,849 in 1999,
1998 and 1997, respectively.
Inventories
Merchandise inventories are valued at the lower of cost or market. Mega
Mart determines cost using the last-in, first-out (LIFO) retail inventory
method whereas, Tri City Pick `n Save determines cost using the first-in,
first-out (FIFO) retail inventory method. Approximately 90% and 91% of the
Company's inventory is valued using the LIFO method in 1999 and 1998,
respectively.
1999 1998
Merchandise inventories at FIFO cost $26,235,584 $24,911,834
LIFO reserve (3,709,631) (2,973,355)
----------- -----------
$22,525,953 $21,938,479
=========== ===========
Effective December 29, 1996, the Company revised its method for determining
the cost complement applied to its retail inventories to reduce their value
to cost. The new method more accurately reflects the impact of markups on
purchases and promotional markdowns. The impact of the change in accounting
was to reduce the value of LIFO inventory at December 29, 1996, by
$795,390 ($484,390, net of $311,000 income tax credit).
Property and Equipment
Property and equipment are carried at cost. Provisions for depreciation and
amortization have been computed using the straight-line method for financial
reporting purposes over estimated useful lives of 20 to 40 years for
buildings and improvements, 5 to 30 years for leasehold improvements,
and 5 to 15 years for equipment.
1. Organization, Basis of Presentation and Significant Accounting
Policies (continued)
Intangible Assets
Intangible assets include acquired leasehold rights, covenants not-to-
compete and goodwill. The leasehold rights are being amortized on a
straight-line basis over the remaining terms of the assumed leases,
including renewal periods. The covenants not-to-compete are being amortized
on a straight-line basis over the periods covered by the noncompete
agreements. Goodwill is being amortized on a straight-line basis over 20
years. Accumulated amortization was $2,713,453 and $2,557,201 at January 1,
2000 and January 2, 1999, respectively.
Deferred Charges
Costs incurred in obtaining financing or the purchase of license
agreements have been deferred and are amortized over the term of the
related agreements.
Preopening Costs
The Company charges all preopening costs to expense as incurred.
Derivative Financial Instruments
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting
for Derivative Instruments and Hedging Activities," which was amended
by SFAS No. 137, and which is required to be adopted by the Company
effective December 31, 2000. The Statement will require the Company
to recognize all derivatives, including interest rate swaps, on
the balance sheet at fair value. If the derivative is a hedge, such
as an interest rate swap, changes in the fair value of derivatives
will be recognized in other comprehensive income. The Company estimates
that the effect of the adoption will not be material to its financial
position, results of operations or cash flows.
Comprehensive Income
Net income for all years presented is the same as comprehensive income.
2. Investments
Investments consisted of the following at January 1, 2000 and
January 2, 1999:
1999 1998
Roundy's, Inc. stock $8,794,389 $7,068,945
Other 292,994 293,539
---------- ----------
$9,087,383 $7,362,484
========== ==========
Roundy's is a cooperative and the Company receives annual patronage
dividends, of which a portion is received in the form of Roundy's stock.
The investment is carried at cost. The Company purchased 5,015 shares
and 5,037 shares in 1999 and 1998, respectively, of Roundy's stock
directly from Roundy's for $575,722 and $521,485 in 1999 and 1998,
respectively, based on the reported book value of Roundy's stock. The
value of the investment using the reported book value of the Roundy's
stock as of January 1, 2000 and January 2, 1999, was approximately
$17,291,000 and $13,549,000, respectively. The stock is not publicly traded.
3. Property and Equipment
Property and equipment consisted of the following at January 1, 2000 and
January 2, 1999:
1999 1998
Land and improvements $ 1,740,134 $ 1,708,490
Buildings and improvements 12,626,333 12,612,074
Leasehold improvements 16,946,054 11,968,484
Equipment 52,457,493 47,356,920
Property and equipment
under construction 23,454 308,894
----------- -----------
83,793,468 73,954,862
Less accumulated depreciation 36,678,999 31,096,079
----------- -----------
$47,114,469 $42,858,783
=========== ===========
Depreciation expense for property and equipment totaled $5,877,418,
$5,485,782 and $5,209,461 for 1999, 1998 and 1997, respectively.
4. Long-Term Debt and Guarantee
Long-term debt consisted of the following at January 1, 2000 and
January 2, 1999:
1999 1998
Bank revolving credit facility $22,644,000 $22,440,303
Other 91,750 127,173
----------- -----------
22,735,750 22,567,476
Less current portion 36,140 34,751
----------- -----------
$22,699,610 $22,532,725
=========== ===========
In February 1999, Mega Marts entered into a five-year bank credit
agreement that provides for a revolving loan commitment of $34,000,000
through January 15, 2004. The maximum amount available under the
commitment declines by $3,000,000 annually beginning January 15, 2000.
Borrowings under the bank credit agreement are secured by substantially
all of Mega Marts' assets. Interest rates on borrowings under the bank
credit agreement are, at Mega Marts option, either at the bank's
reference rate less a performance margin ranging from .25% to 1.00% or
at LIBOR rates plus a performance margin ranging from .75% to 1.75%.
The respective performance margins are determined based on a ratio of
debt to operating cash flow. The current borrowing rates are the
reference rate less .75% (effectively 7.75%) and LIBOR plus 1.00%.
In November 1998, Mega Marts entered into a five-year interest rate
swap agreement with the bank under which Mega Marts pays a fixed rate
of 5.85% and receives a floating LIBOR rate. The effect of the interest
rate swap agreement is to fix the rate on $15,000,000 of borrowings at
5.85% plus the LIBOR rate performance margin (effectively 6.85% as of
January 1, 2000). At January 1, 2000, the fair value of the interest
rate swap agreement was $212,600.
The bank credit agreement requires Mega Marts to maintain specified debt
to operating cash flow and fixed charge coverage ratios and minimum
tangible net worth, and limits, among other things, capital expenditures,
additional debt, dividends and redemption of common stock.
Mega Marts has also guaranteed NDC bank debt totaling $33,230,827 at
January 1, 2000.
4. Long-Term Debt and Guarantee (continued)
Maturities of debt for the five years subsequent to January 1, 2000, are as
follows:
2000 $ 36,140
2001 36,869
2002 18,741
2003 644,000
2004 22,000,000
5. Lease Commitments
The Company leases sixteen of its stores under operating leases (ten
from outside third parties and six from NDC). The lease agreements
include renewal options (usually in five-year increments) that generally
provide for a total extended term of 20 to 30 years. The Company is
required to pay utilities, real estate taxes, insurance and maintenance
expenses on the leased properties. Lease agreements for twelve of the
store locations contain a provision for additional rent based on a
percentage of the store's sales in excess of a stipulated amount.
Rental expense under operating leases for the years ended January 1,
2000, January 2, 1999 and January 3, 1998, was as follows:
1999 1998 1997
Minimum rentals $ 6,983,423 $ 6,790,594 $ 6,404,648
Contingent rentals 291,473 198,309 197,693
Sublease income (2,373,787) (2,153,251) (1,821,478)
----------- ----------- -----------
Totals $ 4,901,109 $ 4,835,652 $ 4,780,863
=========== =========== ===========
5. Lease Commitments (continued)
Future minimum lease payments required for all noncancelable operating
leases with outside third parties and NDC and related sublease income
having remaining terms in excess of one year at January 1, 2000, are
as follows:
Outside Third
Parties NDC Subleases
2000 $ 2,938,448 $ 3,840,479 $1,408,167
2001 2,938,868 3,840,479 1,285,295
2002 3,036,572 3,840,479 890,202
2003 3,114,213 3,840,479 652,726
2004 3,182,989 3,840,479 462,640
Thereafter 15,661,585 33,176,547 209,232
----------- ----------- ----------
$30,872,675 $52,378,942 $4,908,262
=========== =========== ==========
6. Income Taxes
NDC has elected to be subject to the provisions of Subchapter S of the
Internal Revenue Code. The liabilities for federal and state income
taxes under Subchapter S provisions are the responsibility of the
stockholders individually. Accordingly, the combined financial
statements include no provision for income taxes for the Tri City
Pick `n Save, which is a division of NDC. Mega Marts is a "C" Corporation
whose deferred income taxes reflect the net tax effects of temporary
differences between the asset and liability amounts recognized for
financial reporting purposes and the amounts used for income tax
purposes.
Income before income taxes and accounting change attributable to
the taxable and nontaxable entities is as follows:
1999 1998 1997
Income attributable to taxable entities $11,893,662 $10,580,690 $5,566,875
Income attributable to Tri City
Pick `n Save 934,182 795,452 1,343,517
Combined income before income taxes
and accounting change ----------- ------------ ---------
$12,827,844 $11,376,142 $6,910,392
=========== =========== ==========
6. Income Taxes (continued)
The components of the provision for income taxes are as follows:
1999 1998 1997
Current federal $3,657,000 $3,002,000 $1,517,000
Current state 948,000 781,000 324,000
Deferred 15,000 317,000 201,000
---------- ---------- ---------
$4,620,000 $4,100,000 $2,042,000
The provision for income taxes for the taxable entities differs from
the amount that would be provided by applying the statutory U.S.
corporate tax rate due to the follow items:
1999 1998 1997
Provision at statutory rate 34.1% 34.0% 34.0%
State income taxes, net of federal benefit 5.3 5.3 4.0
Other (0.6) (0.6) (1.3)
------- ----- ------
Effective tax rate 38.8% 38.7% 36.7%
Deferred income taxes consist of the following:
1999 1998
Deferred tax assets:
Inventory differences $ 459,000 $ 541,000
Compensation related accruals 384,000 274,000
Other 31,000 41,000
------------ -------------
874,000 856,000
Deferred tax liabilities:
Accumulated depreciation (4,370,000) (4,404,000)
Annual rebate receivable (690,000) (604,000)
Other (71,000) (90,000)
------------ ------------
(5,131,000) (5,098,000)
Net deferred income tax ------------- ------------
liabilities $(4,257,000) $(4,242,000)
============= ============
7. Profit-Sharing Plan
Mega Marts and NDC have a noncontributory, defined-contribution profit-
sharing plan (the Plan) that covers all nonunion employees of the Company
meeting minimum eligibility requirements. Contributions to the Plan are
discretionary, determined by a resolution of each entity's Board of
Directors and are generally based on a percentage of the participants'
compensation for the year. Mega Marts also has a noncontributory,
defined-contribution profit-sharing plan that covers union employees of
Mega Marts meeting minimum eligibility requirements. Total contributions
to the plans were approximately $877,000, $774,000 and $650,000 in 1999,
1998 and 1997, respectively.
8. Related Party Transactions
NDC owns and operates several divisions which provide various administrative
and construction services to the Company.
The following amounts were charged to the Company by NDC for these services:
1999 1998 1997
Administrative services $1,260,000 $1,260,000 $1,260,000
Maintenance and construction services
(including amounts capitalized) 1,683,903 1,290,251 1,181,290
The Company leases six of its stores from NDC. Total rent expense was
$3,840,480, $3,781,291 and $3,413,777 in 1999, 1998 and 1997, respectively.
The principal stockholders of Mega Marts and NDC are also the principal
shareholders of Tri City Bankshares Corporation (the Bank), which
operates numerous banks in the Milwaukee metropolitan area. The Bank
has branch offices in certain of the Company's food stores. The Company
received rental income from the Bank of $227,153, $216,216 and $193,641
in 1999, 1998 and 1997, respectively.
The affiliate balance reflects NDC's participation in Mega Mart's cash
management program. Amounts outstanding under the program bear
interest at the bank reference rate under the companies' revolving
credit facilities. The Company earned $10,190, $91,638 and $68,995
of interest income on the affiliate balance during 1999, 1998 and 1997,
respectively.
Interest expense was allocated to the Tri City Pick `n Save from NDC based
on the borrowings which were used to fund inventories and related purchases.
9. Sale of the Company
On March 31, 2000, the shareholders of Mega Marts sold all shares of
outstanding Mega Marts capital stock to Roundy's for approximately
$123,900,000, subject to adjustment as provided in the stock purchase
agreement. Concurrently, NDC sold all of the assets of its Tri City
Pick `n Save to Roundy's for approximately $11,200,000 subject to
adjustment as provided in the asset purchase agreement. In addition,
certain executives of the Company entered into noncompetition agreements
for aggregate consideration of $1,000,000.
In connection with these transactions, Mega Marts was released of its
guarantee of NDC's bank debt as described in Note 4.
Exibit 99.2
Unaudited Pro Forma Combined Financial Statements of the Company
For Year Ended January 1, 2000
<TABLE>
<CAPTION>
Mega Marts, Inc. Proforma
Roundy's, Inc. /Tri City Combined Adjust- Balance
1999 1999 1999 ments Sheet
<S> <C> <C> <C> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 68,385,800 $ 7,437,200 $ 75,823,000 $ 75,823,000
Notes and accounts receivable 87,659,000 10,500,800 98,159,800 98,159,800
Merchandise inventories 166,514,000 22,525,900 189,039,900 3,810,000(1) 192,849,900
Prepaid expenses 5,362,000 1,367,200 6,729,200 6,729,200
Future income tax benefits 8,026,800 802,000 8,828,800 8,828,800
------------ ------------ ------------ ---------- ------------
Total current assets 335,947,600 42,633,100 378,580,700 3,810,000 382,390,700
------------ ------------ ------------ ---------- ------------
Other Assets:
Investments 9,087,400 9,087,400 (9,087,400)(2)
Annual rebate receivable 1,863,000 1,863,000 (1,863,000)(3)
Receivable from affiliate 178,800 178,800 178,800
Notes receivable 10,650,600 10,650,600 10,650,600
Other real estate 5,705,000 5,705,000 5,705,000
Deferred income tax benefit 3,782,000 105,300 3,887,300 3,887,300
Goodwill and other assets 9,532,000 1,604,600 11,136,600 82,000,000 (4) 93,136,600
------------ ------------ ------------ ---------- ------------
Total other assets 29,669,600 12,839,100 42,508,700 71,049,600 113,558,300
------------ ------------ ------------ ---------- ------------
Property and equipment - net 131,707,500 47,114,500 178,822,000 3,500,000 (5) 182,322,000
------------ ------------ ------------ ---------- ------------
$497,324,700 $102,586,700 $599,911,400 $78,359,600 $678,271,000
============ ============ ============ =========== ============
Liabilities and Stockholders' Equity
Current Liabilities:
Current maturities of lt debt $ 24,734,500 $ 36,100 $ 24,770,600 (16,770,600)(6) 8,000,000
Accounts payable 174,893,000 28,652,300 203,545,300 (951,400)(7)202,593,900
Accrued expenses 62,981,000 5,352,200 68,333,200 (2,024,000)(8) 66,309,200
Income taxes 5,402,600 165,700 5,568,300 5,568,300
------------ ------------- ------------ ----------- -----------
Total current liabilities 268,011,100 34,206,300 302,217,400 (19,746,000) 282,471,400
------------ ------------- ------------ ------------ ------------
Long-Term Debt, Less Curr Maturities 48,563,600 22,699,600 71,263,200 150,561,100(6)221,824,300
Deferred Income Taxes 5,059,000 5,059,000 5,265,000(9) 1,889,710
Other Liabilities 26,830,600 97,600 26,928,200 26,928,200
------------ ------------ ------------ ------------ ------------
Total liabilities 343,405,300 62,062,500 405,467,800 136,080,100 541,547,900
------------ ------------ ------------ ------------ ------------
Redeemable Common Stock 9,948,800 9,948,800 9,948,800
------------ ------------ ------------ ------------ ------------
Stockholders' Equity:
Common stock
Voting 15,000 15,000 15,000
Non-voting 1,356,600 58,000 1,414,600 (58,000) 1,356,600
------------ ------------ ----------- ------------ ------------
Total common stock 1,371,600 58,000 1,429,600 (58,000) 1,371,600
Patronage dividends payable in
common stock 3,078,000 3,078,000 3,078,000
Additional paid-in capital 36,305,800 232,000 36,537,800 (232,000) 36,305,800
Reinvested earnings 104,346,400 40,234,200 144,580,600 (40,234,200 104,346,400
------------ ------------- ------------ ----------- ------------
145,101,800 40,524,200 185,626,000 (40,524,200) 145,101,800
Less:
Treasury stock, at cost 1,131,200 1,131,200 17,196,300(10)18,327,500
------------ ------------- ------------ ----------- ------------
Total stockholders' equity 143,970,600 40,524,200 184,494,800 (57,720,500) 126,774,300
------------- ------------ ------------ ----------- ------------
$497,324,700 $102,586,700 $599,991,400 $78,359,600 $678,271,000
============ ============ ============ =========== ============
</TABLE>
Unaudited Pro Forma Combined Financial Statements of the Company
For Year Ended January 1, 2000
<TABLE>
<CAPTION>
Mega Marts, Inc. Proforma
Roundy's /Tri City Combined Adjust- Income
1999 1999 1999 ments Statement
<S> <C> <C> <C> <C> <C>
Revenues:
Net sales and service fees $2,717,216,400 $ 513,145,900 $3,230,362,300 $ (330,686,800) $2,899,675,500
Other - net 10,117,900 10,117,900 10,117,900
-------------- -------------- -------------- -------------- --------------
2,727,334,300 513,145,900 3,240,480,200 (330,686,800) 2,909,793,400
-------------- -------------- -------------- -------------- --------------
Costs and Expenses:
Cost of sales 2,450,462,300 413,033,700 2,863,496,000 (328,823,800)(11)2,534,672,200
Operating and administrative 234,302,800 85,765,600 320,068,400 4,224,300 (12) 324,292,700
Interest 6,503,600 1,518,800 8,022,400 13,000,000 (13) 21,022,400
-------------- -------------- -------------- -------------- --------------
2,691,268,700 500,318,100 3,191,586,800 (311,599,500) 2,879,987,300
-------------- -------------- -------------- -------------- --------------
Earnings Before Patronage Dividends 36,065,600 12,827,800 48,893,400 (19,087,300) 29,806,100
Patronage Dividends 6,446,900 6,446,900 (1,863,000) 4,583,900
-------------- -------------- -------------- -------------- --------------
Earnings Before Income Taxes 29,618,700 12,827,800 42,446,500 (17,224,300) 25,222,200
Provision (Credit) for Income Taxes: 12,009,300 4,620,000 16,629,300 (5,297,500) 11,331,800
-------------- -------------- -------------- -------------- --------------
Net Earnings $ 17,609,400 $ 8,207,800 $ 25,817,200 $ (11,926,800) $ 13,890,400
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Note to Unaudited Proforma Financial Statements
(1) Reversal of LIFO reserve.
(2) Write-up of shares of Roundy's, Inc. stock held by Mega Marts, Inc.
Balance then reclassed to Treasury shares-see note 11.
(3) Eliminate the Mega and NDC Patronage dividend receivable; and
eliminate the Roundy's patronage dividend.
(4) Record the estimate of goodwill and non-compete agreement.
(5) Record the estimate of the write-up of fixed assets to FMV.
(6) Adjust for debt restructuring.
(7) Eliminate the NDC accounts payable balance which is not assumed.
(8) Eliminate the NDC accrued liabilities balance which in not assumed.
See also note 3.
(9) Deferred Taxes on the aset write-ups to fair market value.
(10) FMV of Roundy's stock owned by Mega Marts, Inc.- now Treasury shares.
(11) Sales/COS elimination offset by patronage dividend income.
(12) Estimate of additional goodwill amortization and fixed asset depreciation
(est. of $84.5MM over 20 year life).
(13) Estimate of interest expense.
