<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) (Mark One)
OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) /X/
FOR THE FISCAL YEAR ENDED SEPTEMBER 2, 1995
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) / /
FOR THE TRANSACTION PERIOD FROM TO
COMMISSION FILE NUMBER 0-10815
--------------------------
CERTIFIED GROCERS OF CALIFORNIA, LTD.
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-0615250
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2601 S. EASTERN AVENUE, LOS ANGELES 90040
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (213) 723-7476
--------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE
NONE.
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
CLASS A SHARES
(Title of Class)
CLASS B SHARES
(Title of Class)
--------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes __X__. No ____.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
State the aggregate market value of the voting stock held by non-affiliates
of the registrant. The aggregate market value shall be computed by reference to
the price at which the stock was sold, other average bid and asked prices of
such stock, as of a specified date within 60 days prior to the date of Filing.
(See definition of affiliate in Rule 405, 17 CFR 230.405).
The Company's shares are not publicly traded and therefore market value is
not readily ascertainable.
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
<TABLE>
<S> <C>
Class A 50,300 shares as of December 1, 1995
Class B 384,767 shares as of December 1, 1995
Class C 15 shares as of December 1, 1995
</TABLE>
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by reference and the
part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is
incorporated: (1) Any annual report to security holders; (2) Any proxy or
information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933. The listed documents should be clearly
described for identification purposes (e.g., annual report to security holders
for fiscal year ended December 24, 1980).
None.
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<PAGE>
TABLE OF CONTENTS
PART I
<TABLE>
<CAPTION>
ITEM PAGE
- --------------------------------------------------------- ----
<S> <C> <C>
1. Business.......................................... 3
2. Properties........................................ 13
3. Legal Proceedings................................. 13
4. Submission of Matters to a Vote of Security
Holders.......................................... 14
PART II
5. Market for Registrant's Common Equity and Related
Shareholder Matters.............................. 14
6. Selected Financial Data........................... 14
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............. 14
8. Financial Statements and Supplementary Data....... 19
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.............. 43
PART III
10. Directors and Executive Officers of the
Registrant....................................... 44
11. Executive Compensation............................ 45
12. Security Ownership of Certain Beneficial Owners
and Management................................... 50
13. Certain Relationships and Related Transactions.... 51
PART IV
14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K.............................. 53
Signatures............................................... 59
</TABLE>
2
<PAGE>
PART I
Certified Grocers of California, Ltd. and its consolidated subsidiaries are
hereinafter referred to as "Certified" or the "Company."
ITEM 1. BUSINESS
GENERAL
Certified, a California corporation organized in 1925, is a wholesale
grocery distributor which does business primarily on a cooperative basis with
those patrons who qualify and have been accepted as "member-patrons." Certified
is owned by its member-patrons, which are primarily independent grocers, and is
operated and taxed on a cooperative basis. Certified also does some business on
a cooperative basis with some patrons who are not member-patrons and who are
referred to as "associate patrons." Pursuant to Certified's Bylaws, the net
earnings of Certified on business done on a cooperative basis are distributed as
patronage dividends to member-patrons and associate patrons based on the volume
of such business transacted with the patron. For the fiscal year ended September
2, 1995 declared patronage dividends totalled $11,571,000.
Certified also does business on a nonpatronage basis with other customers
and in some instances with member-patrons and associate patrons. Certified's
subsidiaries do business on a nonpatronage basis with member-patrons, associate
patrons and other customers.
Patrons engaged in the retail grocery business who purchase 350 or more dry
grocery cases weekly (approximately $5,000), or whose combined average weekly
purchases (excluding cigarettes) are $5,000 or more, are required to become
member-patrons. Associate patrons generally purchase 200 or more dry grocery
cases weekly and have combined average weekly purchases of less than $5,000. At
September 2, 1995, Certified had 503 member-patrons operating a total of 2,320
retail food stores and 304 associate patrons operating a total of 725 retail
food stores.
The following table shows the number of patrons and stores operated by such
patrons at the end of each of the respective fiscal years:
<TABLE>
<CAPTION>
FISCAL YEAR
-------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Number of patrons:
Member-patrons...................................................... 503 491 497
Associate patrons................................................... 304 285 380
--------- --------- ---------
807 776 877
--------- --------- ---------
--------- --------- ---------
Stores operated:
Member-patrons...................................................... 2,320 2,372 2,402
Associate patrons................................................... 725 635 886
--------- --------- ---------
3,045 3,007 3,288
--------- --------- ---------
--------- --------- ---------
</TABLE>
STRATEGY
The recent wave of consolidations, mergers and new entrants into the grocery
business has made competition for market share in the California grocery
business more intense than ever before. Meanwhile, vendors are reducing their
costs by curtailing promotions and other allowances that wholesalers have long
relied upon to maintain their margins.
In the past, Certified has reacted to changing business and marketplace
conditions with a series of incremental changes, or small, corrective steps that
were designed to solve the problem at hand. While this type of problem-solution
management style served Certified well for a great many years, the business
climate of the 1990s has forced the Company to take a vastly different approach
to achieve success.
3
<PAGE>
During fiscal 1995, Certified Grocers developed a strategic initiative
designed to "re-invent" the Company and fundamentally change the way it
conducted its business. This initiative is called "C3" -- Certified's Commitment
to Customers. At the heart of the C3 plan is a new corporate mission statement
that will serve as a guide for Certified's progress well into the next century:
TO BE THE MOST EFFECTIVE, QUALITY-DRIVEN COMPANY THAT PROVIDES
WORLD-CLASS SERVICES AND COMPLETE PRODUCT SELECTION BY CREATING A
PARTNERSHIP WITH RETAILERS AND STRATEGIC ALLIANCES WITH SUPPLIERS.
Fundamentally changing the way Certified conducts business, however, will
require much more than creating a mission statement and asking Company personnel
to come up with ways to achieve it. Realizing this, four strategic imperatives
have been developed to help the Company realize the full potential of its
overall mission -- growth, quality, efficiency and superior service.
GROWTH. During fiscal 1995 Certified was successful in adding several new
members/customers to its sales base. For example, Nob Hill Foods, Inc., a
25-store retail chain operating in Northern California, began purchasing several
lines of product which are estimated to increase Certified's annual sales by
over $100 million. Megafoods Stores, Inc., a 19-store chain operating in
Arizona, selected Certified as its primary supplier and its purchases are
estimated to increase Certified's annual sales by over $150 million.
Existing members and customers are being encouraged to buy as many products
and services from Certified as possible, and are given purchase incentives to do
so. This program, which arose from research conducted by one of the original C3
action teams, couples various pricing schedules with different customer segments
to produce significant buying efficiencies for the retailer, and distribution
efficiencies for Certified.
QUALITY. During fiscal 1995 Certified mailed a comprehensive customer
satisfaction survey to approximately 480 of its members. Among all survey
respondents, 60% indicated that they were either "extremely satisfied" or
"generally satisfied" with their relationship with Certified. Certified's
delivery, warehouse, retail pricing, and advertising services were all rated
very high in the survey.
On the other hand, the survey also revealed that the Company needs to
improve its performance in a number of other areas. For example, survey
respondents reported that Certified's sales and service representatives and
retail counselors contact or visit members too infrequently. Others reported
difficulty in making contact with the right person at Certified whenever
problems arise. To respond to these concerns, Certified launched two extensive
training programs, both in conjunction with the ongoing C3 project.
EFFICIENCY. In recent years, Certified has made a strong commitment toward
becoming the low cost provider of goods and services to its members and
customers. This is accomplished by closely examining the process by which work
is handled throughout the Company and then suggesting ways in which costs can be
removed from the overall system without sacrificing product or service quality.
In fiscal 1995, Certified was able to deliver on its cost efficiency promise
by DECREASING prices to customers. This became possible for two reasons:
continued movements by vendors toward every day low pricing, which enabled
Certified to maximize turns and minimize product investment, and a significant
change in the Company's delivery fee schedules, which resulted in DECREASED
transportation fees to the majority of members and customers.
Offering lower priced products and services to Certified's members and
customers, however, requires the Company to be more aggressive in attacking its
cost structure and vigilant in its efforts to control expenses. For example, the
product reclamation program implemented during 1995 ensures the safety and
quality of products sold at retail by providing a system for removing damaged or
unsalable products. The system allows Certified to obtain a credit from the
manufacturer for unused products and also recover costs via sales to salvage
operations.
Another method Certified is utilizing to keep costs low is by streamlining
existing operations and consolidating activities that make strategic and
economic sense. During fiscal 1995, Certified successfully
4
<PAGE>
streamlined its dairy manufacturing operation and greatly increased its overall
efficiency. These changes enabled the dairy to increase the allowances to
customers purchasing dairy products while increasing the level of patronage
dividends on creamery profits.
Other areas in which the Company will be looking to reduce costs in the
future include a planned redesign of Certified's selling structure, the
elimination of non-performing services and assets, a continuing effort to
provide value to services offered by the Company and by forming strategic
alliances with vendors and other wholesalers that would be beneficial to
Certified's members and customers.
SUPERIOR SERVICE. Certified has made substantial progress in its efforts to
boost the variety and quality of services offered to its members and customers.
For example, Certified now offers a complete array of merchandising tools --
everything from retail shelf schematics to advertising groups -- to retailers
who are looking for effective ways to boost sales. Another example is in real
estate services where a newly reorganized department is now offering a host of
new programs and services to members who are looking to expand their operations.
In the area of technology, Certified is working to ensure that the Company
is serving the wide and varied needs of its diverse membership. For example, the
Company is working toward installing affordable retail scanning equipment
available to stores with a limited number of check-out lanes. A similar effort
aimed at electronically automating stores is also progressing by making it
affordable for small stores to participate in such programs as electronic funds
transfer, check authorization, coupon redemption and other similar services.
PRODUCT LINES
The Company's sales by product line, including drop shipments (which are
sales delivered directly to customers from suppliers) for each of the respective
three fiscal years follow:
<TABLE>
<CAPTION>
FISCAL YEAR
----------------------------------------
1995 1994 1993
------------ ------------ ------------
(THOUSANDS OMITTED)
<S> <C> <C> <C>
Dry Grocery............................................. $ 1,030,024 $ 1,035,213 $ 1,095,706
General Merchandise..................................... 209,943 222,574 204,400
Delicatessen............................................ 178,582 180,159 213,388
Meat.................................................... 145,997 138,082 151,643
Frozen Food............................................. 113,208 142,852 173,427
Dairy................................................... 66,399 71,024 68,414
Ice Cream............................................... 20,879 22,071 20,044
Bakery.................................................. 15,839 13,037 13,814
Drop Shipment........................................... 12,662 12,447 12,334
Beans and Rice.......................................... 4,527 6,305 5,721
Other................................................... 24,744 30,108 48,397
------------ ------------ ------------
Total............................................... $ 1,822,804 $ 1,873,872 $ 2,007,288
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The Company, with headquarters in Los Angeles, distributes product from
facilities in Southern and Northern California as well as Hawaii. Certified
sells a full line of branded grocery and nonfood items supplied by unrelated
manufacturers and also sells merchandise under its own private labels, including
the Springfield, Gingham, Special Value, La Corona, and Golden Creme labels.
Certified also operates its own bakery and dairy facilities. Grocers Specialty
Company ("GSC"), a subsidiary, carries a product line consisting of
specialty-type items, such as ethnic and fancy foods, and also carries a general
product line. General merchandise products are primarily sold by another
subsidiary, Grocers General Merchandise Company ("GM").
5
<PAGE>
WHOLESALE DISTRIBUTION
Certified's cooperative wholesale business represented approximately 77% of
fiscal 1995 sales. The wholesale business includes a broad range of branded and
private label products in dry grocery, frozen, delicatessen, boxed meat, service
deli, ice cream, bakery and dairy.
The Company also conducts certain food and related nonfood wholesale
operations through three subsidiary companies, GSC, Hawaiian Grocery Stores,
Ltd. ("HGS") and GM, which collectively accounted for approximately 21% of
fiscal 1995 sales. GSC is a wholesale distributor of specialty items such as
health, ethnic and fancy foods. GSC also supplies general grocery products to
retailers whose volume falls below the minimum required by the cooperative
business. HGS distributes a variety of grocery, frozen and delicatessen products
in the Hawaiian islands. GM distributes a wide variety of general merchandise
items including housewares, hardware and health and beauty care products. GM's
activities are conducted from a highly automated general merchandise facility
located in Fresno, California.
The Fresno facility is operated by a joint venture known as Golden Alliance
Distribution ("GAD"). Golden Alliance was formed in 1992 and is owned 50% by GM
and 50% by Food 4 Less GM, Inc. ("F4LGM"). Fixed costs of operating Golden
Alliance are shared equally by each partner, while variable costs are shared
based on a formula that takes into consideration each partner's volume. The
basic term of the joint venture expires in 2002, but may be terminated earlier
pursuant to other provisions outlined in the joint venture agreement.
During 1995, the parent of F4LGM merged with Ralphs Grocery Company
("Ralphs"). Since the completion of the merger in June 1995, Ralphs has reduced
its weekly purchases from the Fresno warehouse by approximately 50%. To date,
the impact to Certified resulting from this reduction in volume has been minimal
since Ralphs has continued to absorb 50% of the partnership's fixed costs.
Certified is currently in discussions with Ralphs regarding their long-term
plans for utilizing the Fresno facility.
The Company is not dependent upon any single source of supply in any of its
businesses. Management believes that alternative suppliers are available for
substantially all of its products and that the loss of any one supplier would
not have a material adverse effect on the Company's business.
MARKETING AND DISTRIBUTION OF PRODUCTS
The Company distributes its various product lines from four warehouse
complexes and two manufacturing plants (dairy and bakery) located in the Los
Angeles metropolitan area, two warehouses in Stockton, California, one warehouse
in Fresno, California, and one warehouse in Honolulu, Hawaii.
The Company prepares order books biweekly and price bulletins weekly. The
bulletin also shows promotional and advertising allowances available from the
various manufacturers. Most customers order for their stores on at least a
weekly basis and receive deliveries from one to five days a week.
Most customers order their requirements by means of an electronic system
which is rented from the Company. A store employee orders by recording the item
code from the shelf tag into the electronic device. The order is then
transmitted to the Company over regular telephone lines. Substantially all
member-patrons and associate patrons of the Company use this electronic ordering
method to submit their orders for dry grocery, general merchandise, frozen food
and delicatessen products.
Customers not utilizing the electronic ordering method complete the weekly
order book and mail or deliver it to the Company. The Company maintains separate
ordering departments for its bakery, meat, dairy, and ice cream product lines.
Orders for these items are generally placed by telephone.
General merchandise and specialty products are ordered on either a service
or nonservice program. Approximately 10% of general merchandise and
approximately 20% of specialty products are ordered under the service program.
The store is visited by a Company service representative who checks the stock
and determines the order requirement. The order is converted to an electronic
input device and transmitted to the Company. The service representative returns
to the store when the order is delivered and stocks the shelves. The Company
employs service representatives who provide the full service program to
customers who subscribe. There is an additional charge for this service.
6
<PAGE>
The remaining 90% of general merchandise and 80% of specialty products are
ordered by the retailer under the nonservice program. The product is delivered
to the customer's store, and the customer is responsible for stocking shelves.
TRUCKING OPERATIONS
The Company's trucking fleet is used in the transportation of food and
related items from suppliers to the Company and in the delivery of such items to
its customers. These operations are conducted principally in California,
Arizona, Nevada, and Hawaii. The Company's vehicle fleet consists of
approximately 290 tractors, 740 trailers, and 15 pickup vans. Approximately 45%
of the fleet is owned by the Company; the balance is leased. Such leases
generally have initial terms of 8 to 10 years and provide for renewal or
purchase options at fair market value at expiration of the lease.
SUPPORT BUSINESSES
The Company's subsidiary retail support businesses collectively accounted
for approximately 2% of the Company's total sales in fiscal 1995, 1994, and
1993. Principal retail support operations include Grocers Capital Company
("GCC"), which provides financing for inventory purchases, equipment purchases,
store remodeling and new store acquisitions, and Grocers Equipment Company
("GEC"), which provides additional support in store planning and development
services, retail pricing comparisons, scanning support and also sells and leases
equipment to the Company's customers. The Company also provides insurance
brokerage services for retailers through Grocers and Merchants Insurance
Services, Inc. ("GMIS") and underwrites selected insurance risks through two
insurance subsidiaries.
CUSTOMERS
The Company's patrons consist primarily of independent retail grocery store
operators ranging in size from single store operators to multiple store and
chain store operators. The typical patron in Southern California serves a
high-density urban population and the Company's typical Northern California
patron serves a less densely populated area. A typical member-patron retail
grocery store consists of approximately 20,000 square feet.
The Company's ten largest customers accounted for approximately 33% of net
sales in fiscal 1995 and fiscal 1994 and 35% in fiscal 1993. Management believes
there is no single customer whose loss would have a material adverse effect on
the Company's business.
COMPETITION
The food industry is characterized by intense competition and low profit
margins. In order to compete effectively, the Company must provide its patrons
with the capability to meet rapidly fluctuating competitive market prices,
provide a wide range of perishable and nonperishable products, make prompt and
efficient deliveries, and provide the services which are required by modern
market operations. The Company competes with local, regional and national
grocery wholesalers and with a number of major manufacturers which market their
products directly to retailers. The Company's success is dependent upon its
ability to supply food and nonfood products and services to its patrons in a
cost-effective manner and upon the ability of its independent retail customers
to compete with the large chain store operations.
PATRONAGE DIVIDENDS
Certified distributes patronage dividends based upon its net earnings from
patronage business during the fiscal year. Certified's net earnings from
patronage business are distributed to each patron in proportion to the dollar
volume of purchases from each division of Certified by the patron. Patronage
dividends are distributed annually, usually in December, except for dividends on
dairy products which are distributed after the close of each fiscal quarter.
7
<PAGE>
The following table shows the patronage dividend experience of the Company
during the past three fiscal years.
<TABLE>
<CAPTION>
FISCAL YEAR
-------------------------------
1995 1994 1993
--------- --------- ---------
(THOUSANDS OMITTED)
<S> <C> <C> <C>
Dairy......................................................... $ 7,701 $ 8,088 $ 7,746
Dry Grocery................................................... 2,610 1,554 3,107
Delicatessen.................................................. 480 500 726
Frozen Food................................................... 350 351 721
Beans and Rice................................................ 320 250 312
Ice Cream..................................................... 110 94 268
--------- --------- ---------
Total (1)............................................. $ 11,571 $ 10,837 $ 12,880
--------- --------- ---------
--------- --------- ---------
<FN>
- ------------------------
(1) Certified expects to continue to distribute patronage dividends in the
future, although there can be no assurance of the amounts of such
dividends.
</TABLE>
Certified's bylaws provide that patronage dividends may be distributed in
money or in any other form which constitutes a written notice of allocation
under Section 1388 of the Internal Revenue Code. Section 1388 defines the term
"written notice of allocation" to mean any capital stock, revolving fund
certificate, retain certificate, certificate of indebtedness, letter of advice,
or other written notice, which discloses to the recipient the stated dollar
amount allocated to the recipient by Certified and the portion thereof, if any,
which constitutes a patronage dividend.
Certified distributes at least 20% of the patronage dividends in cash and
distributes Class B Shares as a portion of the patronage dividends distributed
to its member-patrons. In addition, under a patronage dividend retention program
authorized by Certified's Board of Directors, Certified retains a portion of the
patronage dividends to be distributed for a fiscal year and issues patronage
certificates ("Patronage Certificates") evidencing its indebtedness respecting
the retained amounts. The program provides for the issuance of Patronage
Certificates to patrons on an annual basis in a portion and at an interest rate
to be determined annually by the Board of Directors. However, as to any
particular patron, if the amount of the retention is less than a specified
minimum (presently $500), then no retention occurs and a Patronage Certificate
is not issued. Patronage Certificates for each year are unsecured general
obligations of Certified, are subordinated to certain other indebtedness of
Certified, and are nontransferable without the consent of Certified. The
Patronage Certificates are subject to redemption, at any time in whole and from
time to time in part, without premium, at the option of Certified, and are
subject to being set off, at the option of Certified, against all or any portion
of the amounts owing to the Company by the holder. Subject to the payment of at
least 20% of the patronage dividend in cash, the portion of the patronage
dividend retained is deducted from each patron's patronage dividend prior to the
issuance of Class B Shares as a portion of such dividend.
In fiscal years 1993 and 1994, the portion of the patronage dividend
retained and evidenced by the issuance of Patronage Certificates was 20% of the
fourth quarter dividend for dairy products in fiscal 1993, 20% of the quarterly
dairy patronage dividends for fiscal 1994 and 40% of the fiscal 1993 and 1994
dividends for non-dairy products. As to patronage dividends to be distributed
with respect to Certified's 1995 fiscal year, Patronage Certificates will be
issued evidencing the allocation of an amount of such dividends equal to 40% of
the patronage dividends of all divisions, except the dairy division, and 20% of
the first and second quarter dairy division patronage dividends. The Patronage
Certificates issued for fiscal 1995 have a seven year term, maturing on December
15, 2002, and will bear interest from the date of issuance at the rate of 7% per
annum, payable annually on December 15 in each year, commencing December 15,
1996.
8
<PAGE>
The following table represents a summary of the Patronage Certificates
issued and their respective terms in fiscal 1993 and 1994, as well as the
intended issuance and its respective terms for fiscal 1995.
<TABLE>
<CAPTION>
AGGREGATE ANNUAL
FISCAL PRINCIPAL INTEREST MATURITY
YEAR AMOUNT RATE DATE
- ------------------------------ ---------- --------- --------
<S> <C> <C> <C>
1993.......................... $2,018,000 7% 12/15/00
1994.......................... $2,426,000 8% 12/15/01
1995.......................... $2,117,000 7% 12/15/02
</TABLE>
In future years, Certified proposes to issue similar certificates in
connection with the distribution of patronage dividends. Certificates issued in
future years will evidence the indebtedness of Certified respecting the portion
of the patronage dividends for such years which have been allocated by Certified
on its books to the required patronage dividend deposit accounts of patrons. The
portion of the patronage dividends to be so allocated in future years will be
determined each year by Certified's Board of Directors. Patronage Certificates
issued in future years will bear interest at a rate determined by the Board of
Directors prior to their issuance, and will be subordinated to the same extent
as existing Patronage Certificates. Patronage Certificates issued in future
years will be unsecured general obligations of Certified and will be
nontransferable without the consent of Certified, which consent Certified will
be under no obligation to give.
ALLOWANCES
The Company provides allowances to patrons based on the quantity and manner
in which goods are ordered. In addition, the Company makes available to patrons
advertising and promotional allowances of suppliers and manufacturers.
PROMOTIONS AND REBATES. The Company's weekly purchasing guide sets forth
advertising allowances and conditions of performance made available by various
suppliers and manufacturers. The allowances are either funded during the
promotional period as a reduction in price or after the promotion. The patron is
required to submit proof of performance based on the specific conditions of each
allowance program.
REFLECTED ALLOWANCES. Manufacturer and supplier allowances which do not
require specific performance are passed to patrons in the form of a reduction in
product price.
ANNUAL VOLUME DISCOUNT. Annual volume discounts are given to accounts who
meet certain purchasing levels.
PALLET INCENTIVE. The Company has a pallet incentive program in the dry
grocery, frozen food and delicatessen divisions. This program is designed to
recognize distribution efficiencies for the Company in selecting full pallet
quantities of product.
TERMS OF SALE
The Company renders to its cooperative members weekly statements of account.
Statements include deliveries through and including the date of the statement.
Members have seven days from date of the statement to pay, and those not paid
within seven days are considered delinquent. Since members have seven days in
which to mail payment, and since additional deliveries occur during this time
which are billed on a subsequent statement, the Company may have receivables
outstanding at any given time which average up to two weeks' sales.
ADDITIONAL CHARGES
The Company currently makes several charges in addition to the listed prices
for merchandise.
SERVICE FEES. In the dry grocery, frozen food, and delicatessen divisions,
as well as GM, service fees are applied to purchases based on dollar amount and
order frequency.
TRANSPORTATION CHARGES. The Company charges its customers for product
delivery based on published schedules. Such schedules charge delivery fees on a
variable basis depending primarily upon the distance
9
<PAGE>
from the Company's supplying warehouse and the amount of cube of the order
relative to a truck load cube quantity. The Company also charges a "dead pile"
charge when a customer does not have power unloading capabilities.
SERVICES AVAILABLE TO PATRONS
The Company provides a variety of services to its patrons to help them
maintain a competitive position within the retail grocery industry. The
Company's services to patrons include:
PRICING SERVICES. Subscribing patrons provide the Company with either the
retail price or the percentage profit margin they wish to maintain on each item,
and such figures are shown on each invoice and on each case of goods delivered.
The patron may update this pricing structure weekly in accordance with changes
in wholesale costs and competitive activity in its particular market area.
ORDERING ASSISTANCE. The Company provides various programs to increase the
speed and efficiency of the order transmittal process. It offers electronic
units which retailers can use to transmit orders electronically by telephone.
POINT OF SALE COMPUTER SERVICES. The Company provides retailers with
assistance and computer services in connection with the use of scanners at the
checkout counter.
VELOCITY REPORTS. The Company provides detailed summaries of all items
ordered by the retailer from the Company, together with historical pricing and
profit margin data.
STORE DEVELOPMENT. GEC assists patrons in equipment procurement, store
engineering and site development activities. For a fee, it provides plot plans,
floor plans, and other drawings for new or remodeled stores, construction cost
estimates and design consultation. In addition, many types of store fixtures and
equipment can be obtained at a price reflecting volume purchase discounts earned
by the Company.
FINANCE PROGRAMS. The Company assists qualified patrons in remodeling and
expanding existing retail locations and developing new retail outlets, as well
as assisting in the financing of inventory and equipment needs. This assistance
is provided primarily through GCC and GEC. GCC provides financing for inventory
and equipment purchases and for store remodeling, expansion, and new store
acquisitions, while GEC sells equipment but does not provide financing.
RETAIL COUNSELING. The Company provides patrons with experienced retail
counselors, knowledgeable in all phases of retail grocery operations to assist
patrons in planning their sales and profit growth. The counselors work closely
with owner/managers to solve problems and identify opportunities for improving
operations. They also advise patrons of current trends and developments in the
retail grocery industry.
RETAIL ADVERTISING. The Company assists in the formation of Retail Ad
Groups consisting of several patrons within a given area. Each group is provided
with an ad group coordinator. The coordinator assists in preparing advertising
layouts, assures that advertising dollars are identified and collected, and
serves as liaison between the ad group and suppliers.
INSURANCE SERVICES. The Company's insurance programs are serviced by GMIS.
GMIS, which is licensed as an insurance agency, acts as agent or broker for
unrelated underwriters, which are the issuers of the insurance policies. Certain
of the insurance companies reinsure limited portions of insured risks pursuant
to reinsurance contracts with Springfield Insurance Company, Limited
("Springfield-Bermuda"), which is incorporated and licensed in Bermuda, or
Springfield Insurance Company, Inc. ("Springfield-California"), which is
incorporated and licensed in California. Both insurance companies are wholly
owned subsidiaries of the Company. GMIS provides an insurance program for
patrons, employees of patrons, and employees of the Company. Under the
commercial store package, coverage includes fire, store liability, automobile,
fidelity, theft, bonds, workers' compensation and business interruption.
Insurance offered by the life and health department includes individual and
group health plans, life insurance, mutual funds, disability income and estate
planning. The personal insurance department offers homeowners, automobile,
motorcycle, motorhome, boat and aircraft coverages.
10
<PAGE>
SITE IDENTIFICATION AND ANALYSIS. The Company assists its retailers who are
growth oriented in identifying potential new store locations. Once the Company
or a retailer has identified a particular site as having potential for new store
development, the Company can commission an independent site feasibility analysis
of the location, which includes a study of the demographics of the general area,
the market competitors located in the primary and secondary trading areas, and
what volume a new store should expect in the location being considered.
DATA PROCESSING. The Company provides data processing services and
customized software programs for its customers using a direct computer link to
many of its customers' stores. The Company can provide a retailer with a product
and price file for virtually every product, with pricing by the appropriate zone
in which a retailer is located. Retailers can also order all inventory directly
from the Company using their store-to-warehouse computer link and an order entry
system.
PATRON DEPOSITS
It is the general policy of the Company to require that its cooperative
patrons maintain a subordinated cash deposit equal to twice the amount of each
patron's average weekly purchases or twice the amount of the patron's average
purchases, whichever is greater. Required deposits are determined twice a year,
at the end of the Company's second and fourth fiscal quarters, based upon a
review of the patron's purchases from certain of the cooperative divisions
during the preceding two quarters.
Member-patrons meeting certain qualifications established by the Board of
Directors may elect to maintain a reduced required deposit of $500,000 or one
and one-quarter weeks' average purchases, whichever is greater. Presently, three
of the Company's largest member-patrons have elected to maintain such reduced
deposits. With the consent of the Company, which may be granted or withheld in
the Company's sole discretion, a qualified member-patron who has elected to
maintain this reduced deposit may later have its deposit increased up to an
amount equal to twice the amount of its average weekly purchases. Following such
increase, the member-patron will not be permitted to reduce its deposit (even
though otherwise eligible to maintain a reduced deposit) for a period of two
years without the Company's consent. Further, in all cases, reduction of the
deposit will be governed by the subordination provisions to which it is subject.
The Company charges interest to those member-patrons who maintain a reduced
deposit. Interest is presently charged at the prime rate established by Bankers
Trust Company, subject to periodic review and change by the Board of Directors.
Interest is charged on the difference between the balance that would have been
maintained based on two weeks' purchases and the balance actually maintained.
Under the Company's Deposit Fund Loan Program, member-patrons whose credit
has been approved by the Company's Loan Committee may finance all or a portion
of their deposit requirement. Payments under this program are billed to the
member-patron on its weekly statement from the Company. Subject to credit
approval, patrons may also deposit an amount equal to one and one-half of the
patron's average weekly purchases or one and one-half of the patron's average
purchases, whichever is greater, and pay the balance of the deposit over a
period of 26 weeks, at no interest, by payments on its weekly statement from the
Company.
Member-patrons holding Class B Shares are presently given credit against the
above described cash deposit requirement based upon the combined, respective
book values of such shares as of the respective fiscal years last ended prior to
their issuance. The Company pays no interest on the required deposits of
patrons. Interest is paid on the above described cash deposits which are in
excess of patrons' required deposits.
In addition, patrons who participate in the Company's price reservation
program are required to maintain a noninterest bearing deposit based upon the
value of the inventory participation in this program. Under the Company's price
reservation program, patrons are permitted to submit price reservations in
advance for their dry grocery, frozen, delicatessen and general merchandise
purchases. For the patron to get the benefit of the price reservation, an actual
order must be placed. The price which the patron will be charged is the price in
effect at the time of the reservation.
11
<PAGE>
The required deposits of patrons are contractually subordinated and subject
to the prior payment in full of certain senior indebtedness of the Company. As a
condition of becoming a patron, each patron is required to execute a
subordination agreement providing for the subordination of the patron's required
deposits. Generally, the subordination is such that no payment can be made by
the Company with respect to the required deposits in the event of an uncured
default by the Company with respect to senior indebtedness, or in the event of
dissolution, liquidation, insolvency or other similar proceedings, until all
senior indebtedness has been paid in full.
Upon request, the Company will return to patrons the amount of cash deposits
which are in excess of the required deposits, provided the patron is not in
default of its obligations to the Company. On termination of membership, patrons
are entitled to a return of deposits, less all amounts that may be owing by the
patron to the Company. In all cases, however, return of that portion of the
patron's cash deposits which consists of required deposits will be governed by
the applicable subordination provisions.
TAX MATTERS
The Company is a corporation operating primarily on a cooperative basis. The
Company is subject to federal and state income and franchise taxes and must pay
other taxes applicable to corporations, such as sales, excise, real and personal
property taxes.
As a corporation operating on a cooperative basis, the Company is subject to
Subchapter T of the Internal Revenue Code ("Subchapter T"). Under Subchapter T,
the Company pays patronage dividends to patrons pertaining to its fiscal year
within 8 1/2 months of the close of such fiscal year. To qualify as patronage
dividends, payments are made on the basis of the value of the business done with
or for patrons, under a pre-existing obligation to make such payment, and with
reference to the net earnings from business done with or for the cooperative's
patrons. Patronage dividends are paid in cash or written notices of allocation.
A written notice of allocation is distributed to the patron and provides notice
of the amount allocated to the patron by the Company and the portion thereof
which constitutes a patronage dividend.
Under Subchapter T, the Company may deduct, in the fiscal year for which
they are paid, the amount of patronage dividends paid in cash and qualified
notices of allocation. A written notice of allocation will be qualified, if the
Company pays at least 20% of the patronage dividend in money, and the patron
consents to take the stated dollar amount of the written notice into income in
the year in which it is received. The Company deducts for tax purposes the
entire amount of its patronage dividends by paying at least 20% in cash and
issuing qualified notices of allocation for the remainder.
The Company intends to make patronage distributions to member-patrons
comprised of money and qualified notices of allocation including its Class B
Shares and Patronage Certificates. At least 20% of patronage dividends will be
paid in cash. The Company will notify patrons of the stated dollar amount
allocated to them and the portion thereof which is a patronage dividend. Patrons
are required to consent to include in their gross income, in the year received,
all cash as well as the stated dollar amount of all qualified notices of
allocation including the Patronage Certificates and the book value of the Class
B Shares distributed to them as patronage dividends.
Patronage Certificates and Class B Shares distributed as part of the
patronage dividend are also subject to state income and corporation franchise
taxes in California and may be subject to such taxes in other states.
The Company is subject to federal income tax and California franchise tax on
net earnings of business with or for patrons which is not distributed as
deductible patronage dividends and on net earnings derived from nonpatronage
business. The Company files consolidated returns with its subsidiaries, none of
which is a cooperative and each of which is therefore subject to tax.
To the extent that Class B Shares are received by the patron as patronage
dividends under Subchapter T, the Internal Revenue Service ("IRS") has held that
if such Class B Shares are redeemed in full or in part or are otherwise disposed
of, there will be included in the computation of the gross income of the patron,
as ordinary income, in the year of redemption or other disposition, the excess
of the amount realized on the redemption or other disposition over the amount
previously included in the computation of gross income.
12
<PAGE>
However, since it is proposed to issue Class B Shares other than as a part of
patronage dividends, it is possible that the IRS could take the position that
the proceeds from a partial redemption of Class B Shares should be taxed as a
dividend. PATRONS ARE STRONGLY URGED TO CONSULT WITH THEIR TAX ADVISORS FOR
FURTHER CLARIFICATION OF THIS ISSUE AND FOR THE IMPACT THE POSITION OF THE IRS
MAY HAVE ON THEIR OWN FEDERAL AND STATE TAX RETURNS.
The Company's subsidiaries do not pay patronage dividends and are not taxed
in accordance with Subchapter T.
EMPLOYEES
The Company employs approximately 2,470 employees, of whom approximately
1,460 are members of one of several unions, the largest being the International
Brotherhood of Teamsters. The contracts with the Teamsters, which cover
approximately 1,380 employees, have various expiration dates. The Stockton and
Southern California warehouse workers' and truck drivers' contract, which covers
approximately 1,150 employees, expires on September 13, 1998. The contract which
covers approximately 180 Fresno warehouse workers and truck drivers expires on
February 2, 1996. The contract which covers approximately 40 mechanical
maintenance workers expires on March 30, 1996. The Company believes its labor
relations to be good.
ENERGY MATTERS
The Company's operations are dependent upon the continued availability of
electric power, diesel fuel, and gasoline. The Company's trucking operations are
extensive. Diesel fuel storage capacity represents approximately two weeks
average usage. A shortage of diesel fuel and gasoline could materially affect
deliveries of merchandise and the activities of the Company's service
representatives and, thus, adversely affect the Company's sales.
ITEM 2. PROPERTIES
FACILITIES
The Company's corporate offices, warehouses (including railroad and truck
docks), retail stores, and manufacturing facilities as of September 2, 1995 are
summarized as follows:
<TABLE>
<CAPTION>
APPROXIMATE
SQUARE FOOTAGE
---------------------
DESCRIPTION OWNED LEASED
- ------------------------------------------------------------------- ---------- ---------
<S> <C> <C>
Corporate offices.................................................. 145,000 123,000
Dry grocery........................................................ 1,731,000 940,000
General merchandise................................................ 312,000
Frozen foods, delicatessen and meat................................ 477,000
Bakery............................................................. 91,000
Dairy and ice cream................................................ 115,000
Retail stores...................................................... 35,000
</TABLE>
The majority of the Company's dry grocery, frozen foods and delicatessen
warehouse facilities are located in Southern California. The Company owns a
643,000 square foot dry grocery warehouse and a 149,000 square foot refrigerated
warehouse in Stockton, California and leases 312,000 square feet of warehouse
space in Fresno, California.
ITEM 3. LEGAL PROCEEDINGS
The Company is a defendant in a number of cases currently in litigation or
potential claims encountered in the normal course of business which are being
vigorously defended. In the opinion of management, the resolutions of these
matters will not have a material adverse effect on the Company's financial
position or results of operations.
The United States Environmental Protection Agency ("EPA") notified the
Company in 1993 that, together with others, it was a potentially responsible
party ("PRP") for the disposal of hazardous substances at a landfill site
located in Monterey Park, California. Cleanup of this site consists of five
phases: site control and monitoring; management and leachate treatment; landfill
gas control and landfill cover; final remedy and ground water treatment; and,
thirty-year post cleanup site control and monitoring. As of August 1995,
13
<PAGE>
the Company's share of cleanup costs for the first three phases is approximately
$380,000 as previously established in July 1994. Payment of this sum will be
demanded by the EPA in the near future. While the Company's share of the cost
for the last two phases of cleanup has not yet been established, based upon
overall estimates of the range of potential cost, the Company believes that its
share of the total cost for all five phases of cleanup will not exceed the
amounts which the Company has reserved. As of September 2, 1995, the total
reserve established with respect to environmental liabilities is $1.6 million.
The Company is pursuing recovery of a portion of its reserve from its insurance
carriers.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
There is no market for the Company's Class A Shares, Class B Shares, or
Class C Shares. As of December 1, 1995, the Company's Class A Shares were held
of record by 503 shareholders, Class B Shares were held of record by 551
shareholders, and the Company's Class C Shares were held of record, one share
each, by the 15 directors of the Company. In the past, the Company has not paid
cash dividends on its stock, and it has no intention to do so in the future.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
FISCAL YEAR
--------------------------------------------------------------------
1995 1994 1993 1992 1991
------------ ------------ ------------ ------------ ------------
(52 WEEKS) (53 WEEKS) (52 WEEKS) (52 WEEKS) (52 WEEKS)
(THOUSANDS OMITTED)
<S> <C> <C> <C> <C> <C>
Net sales.................................. $ 1,822,804 $ 1,873,872 $ 2,007,288 $ 2,377,740 $ 2,767,996
Declared patronage dividends............... 11,571 10,837 12,880 12,977 19,979
Net earnings (loss)........................ 769 94 473 (3,648) (4,682)
Total assets............................... 398,603 398,569 403,979 449,713 469,010
Long-term notes payable.................... 129,686 149,673 158,585 178,702 159,898
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion of the Company's financial condition and results of
operations should be read in conjunction with the Financial Statements and notes
thereto included under Item 8 in this Form 10-K.
RESULTS OF OPERATIONS
The following table sets forth selected financial data of the Company
expressed as a percentage of net sales for the periods indicated below:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------
SEPTEMBER SEPTEMBER
2, 3, AUGUST 28,
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Net sales.............................................. 100.0% 100.0% 100.0%
Cost of sales.......................................... 90.7 90.6 90.8
Distribution, selling and administrative............... 7.8 8.0 7.7
Operating income....................................... 1.5 1.4 1.5
Interest expense....................................... 0.8 0.8 0.8
Other income (expense), net............................ 0.0 (0.1) 0.0
Earnings before patronage dividends, provision for
income taxes and cumulative effect of accounting
change................................................ 0.7 0.5 0.7
Patronage dividends.................................... 0.7 0.6 0.7
Cumulative effect of accounting change................. 0.1
Net earnings........................................... 0.0 0.0 0.0
</TABLE>
14
<PAGE>
FISCAL YEAR ENDED SEPTEMBER 2, 1995 ("FISCAL 1995") COMPARED TO FISCAL YEAR
ENDED SEPTEMBER 3, 1994 ("FISCAL 1994")
NET SALES. Fiscal 1994 included 53 weeks of sales while fiscal 1995
included 52 weeks of sales. Taking this difference into consideration, net sales
during fiscal 1995 remained relatively consistent with net sales during fiscal
1994. During 1995, the Company added two significant customers which contributed
approximately $64 million in net sales, spread among most sales categories. The
Company estimates these new customers will increase net sales by approximately
$250 million on an annualized basis. These sales gains were offset by the loss
of a significant frozen food customer during 1994 and a reduction in
transportation service fees.
COST OF SALES. Cost of sales decreased $45 million (2.7%) to $1.7 billion
in fiscal 1995 as compared to fiscal 1994. Cost of sales, as a percentage of
sales, has remained consistent with fiscal 1994. The decrease in cost of sales
results primarily from the decreased sales discussed above.
DISTRIBUTION, SELLING AND ADMINISTRATIVE. Distribution, selling and
administrative expenses were $141.9 million or 7.8% of net sales in fiscal 1995,
as compared to $149.3 million or 8.0% of net sales in fiscal 1994. The decrease
in total expense was primarily due to the reduction of payroll costs and the
implementation of other programs in the Company's distribution and manufacturing
facilities to increase efficiency. Partially offsetting the benefits of these
cost reduction programs was a one time charge of $1.6 million resulting from the
adoption of Statement of Financial Accounting Standards No. 112 "Employers'
Accounting for Postemployment Benefits" ("SFAS No. 112").
OPERATING INCOME. Operating income increased 6.1% in fiscal 1995, totalling
$27.2 million. This compares to $25.6 million for fiscal 1994. This increase is
a direct result of the reduction in distribution and manufacturing costs
described above.
OTHER INCOME (EXPENSE), NET. In fiscal year 1993, GCC acquired an 81%
investment in Major Market, Inc. ("MMI") for $1.6 million. The investment was
previously consolidated in the Company's financial statements. In fiscal 1995,
GCC sold its preferred stock and 282,600 shares of common stock to MMI. GCC
received proceeds of $120,000 and a note receivable for approximately $2.6
million. GCC now holds approximately 20% of MMI's outstanding common shares and
accounts for the investment using the cost method. GCC recorded a pretax gain of
$511,000 on the sale of this investment.
INTEREST. Interest expense of $15.3 million in fiscal 1995 has remained
relatively consistent with fiscal 1994.
NET EARNINGS. Net earnings increased to $769,000 in fiscal 1995,
representing a 718% increase from fiscal 1994 net earnings of $94,000. Excluding
the impact of adopting SFAS No. 109 in the 1994 period, and SFAS No. 112 in the
1995 period, the Company experienced an improvement in after-tax earnings of
approximately $4.8 million for fiscal 1995 as compared to fiscal 1994.
FISCAL YEAR ENDED SEPTEMBER 3, 1994 ("FISCAL 1994") COMPARED TO FISCAL YEAR
ENDED AUGUST 28, 1993 ("FISCAL 1993")
NET SALES. Net sales decreased $133 million (6.6%) to slightly less than
$1.9 billion in fiscal 1994. This is a result of certain large patrons expanding
their own warehousing and distribution operations. After adjusting for the
anticipated patron self-distribution volume loss, the Company obtained an
additional $31 million of new business from new members, and expanded its
existing customers' sales volume.
COST OF SALES. Cost of sales decreased $124.7 million (6.8%) to $1.7
billion in fiscal 1994 as compared to fiscal 1993. The majority of this decrease
is in response to the lower sales volume as discussed above; however, additional
reduction in cost of sales is reflective of management's efforts to eliminate
unprofitable business and maximize vendor related deal programs.
DISTRIBUTION, SELLING AND ADMINISTRATIVE. Distribution, selling and
administrative expenses were $149.3 million or 8.0% of net sales in fiscal 1994,
as compared to $153.6 million or 7.7% of net sales in fiscal
15
<PAGE>
1993. The decrease in total expenses was primarily due to the reduction of
payroll costs (approximately $5.2 million offset by an incremental increase of
$2.5 million in accrued postretirement benefits for a net payroll decrease of
$2.7 million) and the implementation of other cost reduction efforts.
OPERATING INCOME. Operating income decreased to $25.6 million for fiscal
1994 as compared to $30 million for fiscal 1993. As a percentage of net sales,
operating income for fiscal 1994 was consistent with fiscal 1993 but lower in
total dollars as a result of lower sales volume discussed above.
INTEREST. Interest expense decreased by $0.4 million, to $15.4 million in
fiscal 1994 from $15.8 million in fiscal 1993, as a result of reduced working
capital requirements related to the volume changes.
OTHER EXPENSE, NET. During fiscal 1994, the Company adopted a formal plan
to relocate its Grocers Specialty Company ("GSC") warehouse operations in
Corona, California to the Company's corporate warehouse facilities in Los
Angeles, California. It is anticipated that the warehouse relocation will result
in more effective utilization of Company assets, transportation and warehousing
efficiencies, and enhanced service to GSC customers and members of the
cooperative. In connection with this consolidation plan, the Company recorded a
$1.6 million charge. The charge primarily consists of warehouse and inventory
relocation costs as well as reprogramming costs of certain financial and
operating systems. The warehouse relocation was completed during October 1994.
CUMULATIVE EFFECT OF ACCOUNTING CHANGE. The Company adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No.
109"), effective August 29, 1993. The adoption of this new accounting method
resulted in a positive $2.5 million impact for fiscal 1994.
NET EARNINGS. Net earnings in fiscal 1994 decreased primarily because of a
$1.6 million expense associated with the facility relocation discussed above,
postretirement expenses of $2.5 million, volume losses, and lease related
charges, offset by improved earnings in the insurance subsidiaries and the $2.5
million cumulative effect of adopting SFAS No. 109.
LIQUIDITY AND CAPITAL RESOURCES
The Company relies upon cash flow from operations, patron deposits,
Patronage Certificates, shareholdings and borrowings under the Company's credit
lines, to finance operations. Net cash provided from operating activities
totalled $9.1 million for fiscal 1995 as compared to $18.2 million for fiscal
1994. The Company's cost and expense reductions, revised marketing programs, and
the dividend retention program provide adequate operating cash flow to conduct
the Company's business operations. At September 2, 1995, working capital was
$107.7 million and the current ratio was 1.7 to 1, at the fiscal 1995 and 1994
year end. Working capital varies throughout the year primarily as a result of
seasonal inventory requirements.
Capital expenditures totalled $9.4 million in fiscal 1995 and $5.9 million
in fiscal 1994.
The Company has agreements with certain banks that provide for committed
lines of credit. These credit lines are available for general working capital,
acquisitions, and maturing long-term debt. At the end of fiscal 1995, the
Company had $160 million in committed lines of credit, of which $91.1 million
was not utilized. In March 1994, the Company refinanced its existing $125
million credit line with a new $135 million secured, committed line of credit.
The new credit agreement, which matures March 17, 1997, is collateralized by
accounts receivable, inventory, and certain other assets of Certified Grocers of
California, Ltd. and two of its principal subsidiaries, excluding equipment,
real property and the assets of GCC. In April 1994, GCC refinanced its $25
million credit line with a new $25 million credit line. The new credit
agreement, which matures March 17, 1997, is collateralized primarily by GCC's
loan portfolio. The agreements provide for Eurodollar basis or prime basis
borrowings at the Company's option. As of September 2, 1995, the Company's
outstanding borrowings, including obligations under capital leases of
approximately $6.4 million, amounted to $141.2 million, of which $129.7 million
was classified as noncurrent.
In fiscal 1995, the Company completed a sale leasback transaction involving
an office building used to house the Company's support personnel. Proceeds from
the transaction were $11.5 million. Concurrent with the sale of the real
property, the Company entered into a twenty year lease of the property, with two
ten year extension options.
16
<PAGE>
Certified distributes at least 20% of the patronage dividends in cash and
distributes Class B Shares as a portion of the patronage dividends distributed
to its member-patrons. In addition, under a patronage dividend retention program
authorized by Certified's Board of Directors, Certified retains a portion of the
patronage dividends to be distributed for a fiscal year and issues patronage
certificates ("Patronage Certificates") evidencing its indebtedness respecting
the retained amounts. The program provides for the issuance of Patronage
Certificates to patrons on an annual basis in a portion and at an interest rate
to be determined annually by the Board of Directors. Patronage Certificates for
each year are unsecured general obligations of Certified, are subordinated to
certain other indebtedness of Certified, and are nontransferable without the
consent of Certified. The Patronage Certificates are subject to redemption, at
any time in whole and from time to time in part, without premium, at the option
of Certified, and are subject to being set off, at the option of Certified,
against all or any portion of the amounts owing to the Company by the holder.
Subject to the payment of at least 20% of the patronage dividend in cash, the
portion of the patronage dividend retained is deducted from each patron's
patronage dividend prior to the issuance of Class B Shares as a portion of such
dividend.
The Board of Directors determined that in fiscal years 1993 and 1994, the
portion of the patronage dividend retained and evidenced by the issuance of
Patronage Certificates was 20% of the fourth quarter dividend for dairy products
in fiscal 1993, 20% of the quarterly dairy patronage dividends for fiscal 1994
and 40% of the fiscal 1993 and 1994 dividends for non-dairy products. As to
patronage dividends to be distributed with respect to Certified's 1995 fiscal
year, the Board of Directors approved the issuance of Patronage Certificates
evidencing the allocation of an amount of such dividends equal to 40% of the
patronage dividends of all divisions, except the dairy division, and 20% of the
first and second quarter dairy division patronage dividends. The Patronage
Certificates have a seven year term, maturing on December 15, 2002, and will
bear interest from the date of issuance at the rate of 7% per annum, payable
annually on December 15 in each year, commencing December 15, 1996.
The following table represents a summary of the Patronage Certificates
issued and their respective terms in fiscal 1993 and 1994, as well as the
intended issuance and its respective terms for fiscal 1995.
<TABLE>
<CAPTION>
AGGREGATE ANNUAL
FISCAL PRINCIPAL INTEREST MATURITY
YEAR AMOUNT RATE DATE
- ------------------------------ ---------- --------- --------
<S> <C> <C> <C>
1993.......................... $2,018,000 7% 12/15/00
1994.......................... $2,426,000 8% 12/15/01
1995.......................... $2,117,000 7% 12/15/02
</TABLE>
The Company expects to continue to distribute patronage dividends in the future,
although there can be no assurance of the amounts of such dividends.
Patrons are generally required to maintain subordinated deposits with the
Company and member-patrons purchase shares of stock of the Company. Upon
termination of patron status, the withdrawing patron will be entitled to recover
deposits in excess of its obligations to the Company if permitted by the
applicable subordination provisions, and a member-patron also will be entitled
to have its shares redeemed, subject to applicable legal requirements, Company
policies and credit agreement limitations. The Company's current redemption
policy limits the Class B Shares that the Company is obligated to redeem in any
fiscal year to 5% of the number of Class B Shares deemed outstanding at the end
of the preceding fiscal year. In fiscal 1995, this limitation restricted the
Company's redemption of shares to 19,414 shares for $3,165,064. In fiscal 1996,
the 5% limitation will restrict the Company's redemption of shares to 19,238
shares for $3,190,815. Due to the loss of a number of significant
member-patrons, the number of shares tendered for redemption at September 2,
1995 totalled 87,300 (or approximately $14.5 million, using fiscal 1995 year end
book values), which exceeds the amount that can be redeemed in fiscal 1996.
Consequently, the Company will be required to make redemptions in fiscal 1997,
1998 and 1999, with such redemptions approximating $9.4 million to $9.6 million
based on 1995 year end book values and estimated share issuances for those
years. The redemption price for shares is based upon their book value as of the
end of the year preceding redemption. Cash flow to fund redemption of shares is
provided from operations, patron deposits, Patronage Certificates, current
shareholdings and borrowings under the Company's credit lines.
17
<PAGE>
IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
IMPAIRMENT OF LONG-LIVED ASSETS
The FASB issued Statement of Financial Accounting Standards No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of", which is effective for fiscal years beginning after December
15, 1995. Accordingly, the Company will conform to the new requirements in
fiscal 1997. The Statement establishes guidelines to be used when evaluating
long-lived assets, identifiable intangibles, and related goodwill that an entity
plans to continue to use in operations for impairment and prescribes the
accounting when such assets are determined to be impaired. The Statement also
provides guidance on the accounting for similar assets that a company plans to
dispose of, except for those assets of a discontinued operation. Impairment
losses recorded on assets to be held and used resulting from the initial
application of the Statement are to be reported in operating income in the
period in which the recognition criteria are met, while impairment losses
recorded on assets to be disposed of resulting from the initial application of
the Statement are to be reported as the cumulative effect of a change in
accounting principles. Management estimates that the adoption of this
pronouncement will not have a material effect on the Company's consolidated
financial position and results of operations.
POSTEMPLOYMENT BENEFITS
The FASB issued Statement of Financial Accounting Standards No. 112
"Employers' Accounting for Postemployment Benefits", which is effective for
fiscal years beginning after December 15, 1993. Accordingly, the Company has
conformed to the new requirements in fiscal 1995. The new accounting standard
requires an accrual rather than a pay-as-you-go basis of recognizing expenses
for postemployment benefits (provided by an employer to former or inactive
employees after termination of employment but before retirement). The effect on
its results of operations in fiscal 1995 approximated $1.6 million which it has
accrued as a non-cash expense.
18
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Certified Grocers of California, Ltd.
We have audited the consolidated balance sheets of Certified Grocers of
California, Ltd. and subsidiaries as of September 2, 1995 and September 3, 1994,
and the related consolidated statements of earnings, shareholders' equity, and
cash flows for each of the three fiscal years in the period ended September 2,
1995. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Certified Grocers of California, Ltd. and subsidiaries as of September 2, 1995
and September 3, 1994, and the results of their operations and their cash flows
for each of the three fiscal years in the period ended September 2, 1995, in
conformity with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, the Company
changed its method of accounting for income taxes and postretirement benefits
other than pensions in 1994 and postemployment benefits in 1995.
COOPERS & LYBRAND L.L.P.
Los Angeles, California
November 27, 1995
19
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
SEPTEMBER 2, 1995 AND SEPTEMBER 3, 1994
ASSETS
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Current:
Cash and cash equivalents............................................................ $ 7,329 $ 7,702
Accounts and notes receivable........................................................ 104,249 96,545
Inventories.......................................................................... 149,432 146,869
Prepaid expenses..................................................................... 4,789 3,810
Deferred taxes....................................................................... 2,850 1,204
---------- ----------
Total current assets........................................................... 268,649 256,130
Properties............................................................................. 71,816 86,683
Investments............................................................................ 22,051 20,274
Notes receivable....................................................................... 25,622 23,335
Other assets........................................................................... 10,465 12,147
---------- ----------
TOTAL ASSETS................................................................. $ 398,603 $ 398,569
---------- ----------
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current:
Accounts payable..................................................................... $ 86,159 $ 82,137
Accrued liabilities.................................................................. 51,018 52,335
Notes payable........................................................................ 11,573 2,978
Patrons' excess deposits and declared patronage dividends............................ 12,214 11,541
---------- ----------
Total current liabilities...................................................... 160,964 148,991
Notes payable, due after one year...................................................... 129,686 149,673
Long-term liabilities.................................................................. 12,210 6,566
Commitments and contingencies -- See Notes 11 and 14
Patrons' deposits and certificates:
Patrons' required deposits........................................................... 17,022 17,589
Subordinated patronage dividend certificates......................................... 6,561 4,444
Shareholders' equity
Class A Shares....................................................................... 5,292 4,704
Class B Shares ...................................................................... 56,266 56,593
Retained earnings ................................................................... 10,488 10,313
Net unrealized gain (loss) on appreciation (depreciation) of investments............. 114 (304)
---------- ----------
Total shareholders' equity..................................................... 72,160 71,306
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY................................... $ 398,603 $ 398,569
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these statements.
20
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(DOLLARS IN THOUSANDS)
FOR FISCAL YEARS ENDED SEPTEMBER 2, 1995, SEPTEMBER 3, 1994, AND AUGUST 28, 1993
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Net sales......................................................... $ 1,822,804 $ 1,873,872 $ 2,007,288
Costs and expenses:
Cost of sales................................................... 1,653,660 1,698,930 1,823,592
Distribution, selling and administrative........................ 141,947 149,303 153,656
------------ ------------ ------------
Operating income.................................................. 27,197 25,639 30,040
Interest expense.................................................. (15,260) (15,405) (15,784)
Other income (expense), net....................................... 509 (1,600) (373)
------------ ------------ ------------
Earnings before patronage dividends, provision for income taxes
and cumulative effect of accounting change...................... 12,446 8,634 13,883
Declared patronage dividends...................................... (11,571) (10,837) (12,880)
------------ ------------ ------------
Earnings (loss) before income tax provision and cumulative effect
of accounting change............................................ 875 (2,203) 1,003
Provision for income taxes........................................ 106 203 530
------------ ------------ ------------
Earnings (loss) before cumulative effect of accounting change..... 769 (2,406) 473
Cumulative effect of accounting change............................ 2,500
------------ ------------ ------------
Net earnings...................................................... $ 769 $ 94 $ 473
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these statements.
21
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
FOR FISCAL YEARS ENDED SEPTEMBER 2, 1995, SEPTEMBER 3, 1994, AND AUGUST 28, 1993
<TABLE>
<CAPTION>
NET UNREALIZED
GAIN (LOSS) ON
CLASS A CLASS B APPRECIATION
-------------------- -------------------- RETAINED (DEPRECIATION) OF
SHARES AMOUNT SHARES AMOUNT EARNINGS INVESTMENTS
--------- --------- --------- --------- --------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Balance, August 29, 1992...................... 53,700 $ 4,511 400,713 $ 57,809 $ 11,487
Class A Shares issued....................... 1,900 309
Class A Shares redeemed..................... (5,900) (535) (424)
Class B Shares issued....................... 13,649 2,232
Class B Shares redeemed..................... (20,036) (2,803) (451)
Net earnings................................ 473
--------- --------- --------- --------- ---------
Balance, August 28, 1993...................... 49,700 4,285 394,326 57,238 11,085
Class A Shares issued....................... 6,000 981
Class A Shares redeemed..................... (6,600) (562) (517)
Class B Shares issued....................... 13,676 2,230
Class B Shares redeemed..................... (19,716) (2,875) (349)
Net earnings................................ 94
Net unrealized loss on depreciation of
investments (net of deferred tax of
$157)...................................... $ (304)
--------- --------- --------- --------- --------- -----
Balance, September 3, 1994.................... 49,100 4,704 388,286 56,593 10,313 (304)
Class A Shares issued....................... 7,800 1,271
Class A Shares redeemed..................... (6,600) (683) (393)
Class B Shares issued....................... 15,895 2,637
Class B Shares redeemed..................... (19,414) (2,964) (201)
Net earnings................................ 769
Net unrealized gain on appreciation of
investments (net of deferred tax of
$216)...................................... 418
--------- --------- --------- --------- --------- -----
Balance, September 2, 1995.................... 50,300 $ 5,292 384,767 $ 56,266 $ 10,488 $ 114
--------- --------- --------- --------- --------- -----
--------- --------- --------- --------- --------- -----
</TABLE>
The accompanying notes are an integral part of these statements.
22
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
FOR FISCAL YEARS ENDED SEPTEMBER 2, 1995, SEPTEMBER 3, 1994, AND AUGUST 28, 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
(52 WEEKS) (53 WEEKS) (52 WEEKS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings............................................................ $ 769 $ 94 $ 473
----------- ----------- -----------
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Gain on sale of investment in affiliate............................. (511)
Cumulative effect of accounting change.............................. (2,500)
Depreciation and amortization....................................... 9,982 10,680 11,890
Loss (gain) on disposal of properties............................... 366 (445) 3
Accrued postretirement benefit costs................................ 2,965 2,509
Accrued postemployment benefit costs................................ 1,648
Accrued supplemental retirement benefit costs....................... 1,003 431 853
Accrued environmental liabilities................................... 110 1,100 400
Accrued sublease liability.......................................... (230) 1,228
Facility relocation................................................. 520
Decrease (increase) in assets:
Accounts and notes receivable..................................... (7,757) 3,428 26,454
Inventories....................................................... (3,976) 1,611 20,480
Prepaid expenses.................................................. (1,041) 170 180
Deferred taxes.................................................... (273)
Notes receivable.................................................. 293 2,720 (1,277)
Increase (decrease) in liabilities:
Accounts payable.................................................. 4,825 (2,741) (13,940)
Accrued liabilities............................................... 218 2,584 (7,311)
Patrons' excess deposits and declared patronage dividends......... 673 (3,205)
----------- ----------- -----------
Total adjustments .................................................... 8,295 18,090 37,732
----------- ----------- -----------
Net cash provided by operating activities............................... 9,064 18,184 38,205
----------- ----------- -----------
Cash flows from investing activities:
Purchase of properties................................................ (9,363) (5,921) (8,858)
Proceeds from sales of properties..................................... 12,489 1,295 1,836
(Increase) decrease in other assets................................... (1,793) (244) 43
Investment in preferred stocks, net................................... (163) (2,552)
Investment in long-term bonds, net.................................... (973) (3,102) (2,312)
Investment in common stock............................................ (180) (2,320)
Purchase of intangible assets......................................... (1,540)
Sale of investment in affiliate, net of cash disposed*................ (479)
----------- ----------- -----------
Net cash utilized by investing activities............................... (462) (12,844) (10,831)
----------- ----------- -----------
Cash flows from financing activities:
Additions to long-term notes payable.................................. 331
Reduction of long-term notes payable.................................. (7,534) (5,934) (17,360)
Additions to short-term notes payable................................. 38
Reduction of short-term notes payable................................. (2,658) (3,132) (3,905)
Decrease in members' required deposits................................ (567) (1,312) (5,664)
Issuance of subordinated patronage dividend certificates.............. 2,117 2,421 2,023
Repurchase of shares from members..................................... (4,224) (4,303) (4,213)
Issuance of shares to members......................................... 3,891 3,211 2,541
----------- ----------- -----------
Net cash utilized by financing activities............................... (8,975) (9,049) (26,209)
----------- ----------- -----------
Net (decrease) increase in cash and cash equivalents.................... (373) (3,709) 1,165
Cash and cash equivalents at beginning of year ......................... 7,702 11,411 10,246
----------- ----------- -----------
Cash and cash equivalents at end of year................................ $ 7,329 $ 7,702 $ 11,411
----------- ----------- -----------
----------- ----------- -----------
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest.............................................................. $ 15,006 $ 15,232 $ 15,499
Income taxes ......................................................... 2,388 70 1,155
----------- ----------- -----------
$ 17,394 $ 15,302 $ 16,654
----------- ----------- -----------
----------- ----------- -----------
*Sale of investment in affiliate, net of cash disposed:
Working capital, other than cash...................................... $ (980)
Property, plant and equipment......................................... 1,596
Note receivable....................................................... (2,580)
Other assets.......................................................... 1,857
Proceeds in excess of net assets of affiliate sold, net............... 511
Long-term debt........................................................ (883)
-----------
Net cash effect from sale of investment in affiliate................ $ (479)
-----------
-----------
</TABLE>
The accompanying notes are an integral part of these statements.
23
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of Certified
Grocers of California, Ltd. and all of its subsidiaries ("Certified" or the
"Company"). Intercompany transactions and accounts with subsidiaries have been
eliminated.
NATURE OF BUSINESS:
The Company is a cooperative organization engaged primarily in the
distribution of food products and related nonfood items to retail establishments
owned by shareholders of the Company. All establishments with which directors
are affiliated, as members of the Company, purchase groceries, related products
and store equipment from the Company in the ordinary course of business at
prices and on terms available to members generally.
The Company's fiscal year ends on the Saturday nearest to August 31. Fiscal
years 1995 and 1993 included 52 weeks, while fiscal 1994 included 53 weeks.
RECLASSIFICATIONS:
Certain reclassifications have been made to prior years' financial
statements to present them on a basis comparable with the current year's
presentation.
CASH EQUIVALENTS:
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
INVENTORIES:
Inventories are valued at the lower of cost (first-in, first-out) or market.
DEPRECIATION:
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets which approximate 40 years for buildings and 10 years
for equipment. Expenditures for replacements or major improvements are
capitalized; expenditures for normal maintenance and repairs are charged to
operations as incurred. Upon sale or retirement of properties, the cost and
accumulated depreciation are removed from the accounts, and any gain or loss is
included in operations.
POSTRETIREMENT BENEFITS:
Effective August 29, 1993, the Company implemented Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" ("SFAS No. 106"). This statement requires that the cost of
these benefits, which are primarily for health care and life insurance, be
recognized in the financial statements throughout the employees' active working
careers. The Company's previous practice was to expense these costs on a cash
basis, principally after retirement. The transition obligation is being
amortized on a straight-line basis over twenty years as allowed under SFAS No.
106. The incremental effect on the Company's results of operations for fiscal
1995 and 1994 is approximately $3.0 million and $2.5 million, respectively,
which has been accrued as a non-cash expense.
POSTEMPLOYMENT BENEFITS:
The FASB issued Statement No. 112 "Employers Accounting for Postemployment
Benefits", which is effective for fiscal years beginning after December 15,
1993. Accordingly, the Company conformed to the new requirements in fiscal 1995.
The new accounting standard requires an accrual rather than a pay-as-you-go
basis of recognizing expenses for postemployment benefits (provided by an
employer to former or inactive employees after termination of employment but
before retirement). The effect on the Company's results of operations in fiscal
1995 was $1.6 million which has been accrued as a noncash expense.
24
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
ENVIRONMENTAL COSTS:
The Company expenses, on a current basis, certain recurring costs incurred
in complying with environmental regulations and remediating environmental
pollution. The Company also reserves for certain non-recurring future costs
required to remediate environmental pollution for which the Company is liable
whenever, by diligent legal and technical investigation, the scope or extent of
pollution has been determined, the Company's contribution to the pollution has
been ascertained, remedial measures have been specifically identified as
practical and viable, and the cost of remediation and the Company's
proportionate share can be reasonably estimated.
INCOME TAXES:
Effective August 29, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109"),
which requires the use of the liability method of accounting for deferred income
taxes. The cumulative effect of this change in accounting principle increased
the Company's fiscal 1994 net earnings by $2.5 million.
INVESTMENTS:
Effective September 3, 1994 the Company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" ("SFAS No. 115"). The cumulative effect of such adoption
amounted to an unrealized loss of $304,000, net of deferred taxes of $157,000
and was reported separately in the Consolidated Statements of Shareholders'
Equity. There was no effect on the Consolidated Statements of Earnings. The
gross amount of $461,000 reflects a non-cash investing activity. At September 2,
1995, the Company had an unrealized gain of $114,000, net of deferred taxes of
$59,000 which was reported separately in the Consolidated Statements of
Shareholders' Equity. There was no effect on the Consolidated Statements of
Earnings. The gross amount of $173,000 reflects a non-cash investing activity.
Investment income is recorded in the Consolidated Statements of Earnings when
earned.
Prior to the implementation of SFAS No. 115, investments in fixed maturities
which might, under certain circumstances, be sold prior to their dates of
maturity were classified as investments "held for sale" and such portfolio was
recorded at the lower of cost or market value. Unrealized losses, net of
deferred taxes, on such investments, if any, were recorded as a charge directly
to shareholders' equity. In addition, the Company identified certain investments
in fixed maturities held for trading purposes. Such investments were recorded at
market value and unrealized gains or losses on such investments, net of deferred
taxes, were credited or charged directly to shareholders' equity.
The cost of securities sold is determined by the specific identification
method.
2. PROPERTIES:
Properties at September 2, 1995, and September 3, 1994 stated at cost, are
comprised of:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Land......................................................................... $ 8,856 $ 11,488
Buildings and leasehold improvements......................................... 64,321 71,854
Equipment.................................................................... 65,849 64,637
Equipment under capital leases............................................... 9,259 10,345
---------- ----------
148,285 158,324
Less, accumulated depreciation and
amortization............................................................... 76,469 71,641
---------- ----------
$ 71,816 $ 86,683
---------- ----------
---------- ----------
</TABLE>
25
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. INVESTMENTS:
The amortized cost and fair values of investments available-for-sale were as
follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
SEPTEMBER 2, 1995 COSTS GAINS LOSSES VALUE
- --------------------------------------------------------- ----------- ------------- ------------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Fixed Maturities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies.................. $ 9,941 $ 138 $ 83 $ 9,996
Corporate securities................................... 1,765 57 14 1,808
Mortgage backed securities............................. 933 19 1 951
----------- ----- --- ---------
Sub-total............................................ 12,639 214 98 12,755
Redeemable preferred stock............................... 6,696 58 1 6,753
Equity securities........................................ 2,543 2,543
----------- ----- --- ---------
$ 21,878 $ 272 $ 99 $ 22,051
----------- ----- --- ---------
----------- ----- --- ---------
</TABLE>
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
SEPTEMBER 3, 1994 COST GAINS LOSSES VALUE
- --------------------------------------------------------- ----------- ------------- ------------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Fixed Maturities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies.................. $ 10,102 $ 10 $ 415 $ 9,697
Corporate securities................................... 306 8 298
Mortgage backed securities............................. 1,455 1 49 1,407
----------- --- ----- ---------
Sub-total............................................ 11,863 11 472 11,402
Redeemable preferred stock............................... 6,552 6,552
Equity securities........................................ 2,320 2,320
----------- --- ----- ---------
$ 20,735 $ 11 $ 472 $ 20,274
----------- --- ----- ---------
----------- --- ----- ---------
</TABLE>
26
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Fixed maturity investments are due as follows:
<TABLE>
<CAPTION>
AMORTIZED FAIR
SEPTEMBER 2, 1995 COST VALUE
- -------------------------------------------------------------------------------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Fixed Maturities Available for Sale:
Due in one year or less....................................................... $ 300 $ 304
Due after one year through five years......................................... 4,420 4,438
Due after five years through ten years........................................ 4,475 4,481
Due after ten years........................................................... 3,444 3,532
----------- -----------
$ 12,639 $ 12,755
----------- -----------
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
AMORTIZED FAIR
SEPTEMBER 3, 1994 COST VALUE
- -------------------------------------------------------------------------------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Fixed Maturities Available for Sale:
Due in one year or less....................................................... $ 852 $ 828
Due after one year through five years......................................... 7,292 7,042
Due after five years through ten years........................................ 2,790 2,632
Due after ten years........................................................... 929 900
----------- -----------
$ 11,863 $ 11,402
----------- -----------
----------- -----------
</TABLE>
Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without call
or prepayment penalties. Mortgage-backed securities are shown as being due at
their average expected maturity dates.
Investment income is summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Fixed Maturities................................................................ $ 1,469 $ 1,094 $ 1,267
Preferred Stock................................................................. 563 461 311
Cash and cash equivalents....................................................... 171 95 122
--------- --------- ---------
2,203 1,650 1,700
Less: investment expenses....................................................... (85) (110) (64)
--------- --------- ---------
Net investment income....................................................... $ 2,118 $ 1,540 $ 1,636
--------- --------- ---------
--------- --------- ---------
</TABLE>
Investments carried at fair values of $11,272,000 and $7,625,000 at
September 2, 1995 and September 3, 1994, respectively, are on deposit with
regulatory authorities in compliance with insurance company regulations.
27
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. NOTES PAYABLE:
Notes payable at September 2, 1995 and September 3, 1994 are summarized as
follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Notes payable to banks under revolving credit agreements, expiring March 17,
1997, interest rate at prime (8.75% and 7.75% at September 2, 1995 and
September 3, 1994, respectively) plus 1/2% or Eurodollar (5.88% and 4.81%
at September 2, 1995 and September 3, 1994, respectively) plus 1 1/2%...... $ 53,439 $ 59,352
Note payable to banks under revolving credit agreements, expiring March 17,
1997, interest rate at prime (8.75% and 7.75% at September 2, 1995 and
September 3, 1994, respectively) plus 1/2% or Eurodollar (5.88% and 4.81%
at September 2, 1995 and September 3, 1994, respectively) plus 1 1/2%...... 15,500 18,000
Subordinated note payable to a life insurance company, due April 1, 1999,
interest rate of 10.8%, $8,750,000 due April 1 each year beginning in
1996....................................................................... 35,000 35,000
Senior note payable to a life insurance company, collateralized through an
inter-creditor agreement with banks under the revolving credit agreement of
$135 million, due January 15, 2005, interest rate of 9.55%, $62,500 due
monthly each year beginning in 1992 through 2000 and then $220,833 monthly
until maturity............................................................. 16,500 17,250
Notes payable, collateralized by land and warehouses, payable monthly,
approximately $60,000 plus interest at 9.88%, due February 1, 2006......... 14,462 15,211
Obligations under capital leases............................................. 6,358 7,838
---------- ----------
141,259 152,651
Less, portion due within one year............................................ (11,573) (2,978)
---------- ----------
$ 129,686 $ 149,673
---------- ----------
---------- ----------
</TABLE>
Maturities of long-term debt as of September 2, 1995 are:
<TABLE>
<CAPTION>
(DOLLARS IN
THOUSANDS)
<S> <C>
1996................................................................. $ 11,573
1997................................................................. 80,397
1998................................................................. 11,337
1999................................................................. 11,353
2000................................................................. 4,039
Beyond 2000.......................................................... 22,560
------------
$141,259
------------
------------
</TABLE>
Weighted average interest rates on short-term borrowings for fiscal year
ends 1995, 1994, and 1993 approximated 9.57%, 9.71%, and 9.14%, respectively.
Weighted average interest rates during each fiscal year, calculated on a
quarterly basis, approximated respective year end average rates. The average
amounts of short-term borrowings outstanding during fiscal years 1995, 1994, and
1993 were $5,170,000, $3,147,000, and $3,206,000 respectively. Short-term
borrowings amounted to as much as $11,573,000 in 1995, $3,158,000 in 1994 and
$3,616,000 in 1993.
28
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company has two credit agreements with certain banks that provide for
committed lines of credit. These credit lines are available for general working
capital, acquisitions, and maturing long-term debt. At the end of fiscal year
1995, the Company had $160 million in committed lines of credit, of which $91.1
million was not utilized. The unused portion of these credit lines are subject
to annual commitment fees of 0.375%.
The credit agreements contain various financial covenants pertaining to
working capital, debt-to-equity relationships, tangible net worth, earnings, and
similar provisions. In addition, on the required portion of member deposits and
redemption of Class A and Class B Shares, no payment may be made if there exists
a default with respect to any senior indebtedness, as defined, until such
default has been cured or waived or until such senior indebtedness has been paid
in full.
One credit agreement of $135 million is collateralized by accounts
receivable, inventory and certain other assets, excluding equipment and real
property. The maturity date is March 17, 1997, but is subject to extension by
the mutual consent of the Company and the banks. The agreement provides for
Eurodollar basis or prime basis borrowings at the Company's option.
The other credit agreement for $25 million is collateralized by Grocers
Capital Company's ("GCC") receivables. The maturity date is March 17, 1997, but
is subject to extension by the mutual consent of the Company and the banks. The
agreement provides for prime basis or Eurodollar basis borrowings at the
Company's option.
As a result of maturing long-term debt (a non-cash financing activity), the
Company reclassified from long to short-term debt $11,570,000, $2,978,000 and
$3,088,000 in fiscal 1995, 1994 and 1993, respectively.
The fair values of the Company's notes payable, excluding obligations under
capital leases, approximated $133 million at September 2, 1995. Rates currently
available to the Company for debt with similar terms and remaining maturities
are used to estimate the fair values of notes payable.
5. LEASES:
The Company has entered into both operating and capital leases for certain
warehouse, transportation and data processing computer equipment. The Company
has also entered into operating leases for approximately 36 retail supermarkets.
The majority of these locations are subleased to various member-patrons of the
Company. The operating leases and subleases are noncancellable, renewable,
include purchase options in certain instances, and require payment of taxes,
insurance and maintenance. In addition, the Company is contingently liable with
respect to lease guarantees for certain member-patrons. The total commitment for
such lease guarantees approximates $33.3 million to $37.2 million. The Company's
security respecting these lease guarantees is discussed in Note 12 under
"Concentration of Credit Risk."
Total rent expense was $21,051,000, $22,707,000, and $23,326,000 in 1995,
1994, and 1993 respectively. Sublease rental income was $5,308,000, $4,713,000,
and $4,657,000 in 1995, 1994, and 1993 respectively.
29
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Minimum rentals (exclusive of real estate taxes, insurance, and other
expenses payable under the terms of the leases) as of September 2, 1995, are
summarized as follows:
<TABLE>
<CAPTION>
CAPITAL LEASES OPERATING LEASES
--------------- ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
1996............................................................... $ 2,351 $ 19,807
1997............................................................... 1,036 17,982
1998............................................................... 982 13,186
1999............................................................... 852 10,737
2000............................................................... 852 9,161
Beyond 2000........................................................ 340 54,675
------ --------
Total minimum lease payments..................................... 6,413 $ 125,548
--------
--------
Less, amount representing interest................................. 55
------
Present value of net minimum lease payments........................ 6,358
Less, current portion.............................................. 1,247
------
Total long-term portion.......................................... $ 5,111
------
------
</TABLE>
Minimum sublease rentals (exclusive of real estate taxes, insurance and
other expenses payable under the terms of the leases) as of September 2, 1995,
are summarized as follows:
<TABLE>
<CAPTION>
OPERATING LEASES
--------------------
(DOLLARS IN
THOUSANDS)
<S> <C>
1996.............................................................................. $ 6,404
1997.............................................................................. 6,313
1998.............................................................................. 4,213
1999.............................................................................. 3,624
2000.............................................................................. 3,114
Beyond 2000....................................................................... 22,645
-------
$ 46,313
-------
-------
</TABLE>
In fiscal 1995, the Company completed a sale leaseback transaction with
Trinet Corporate Realty Trust, Inc. ("Trinet"), an unaffiliated third party. The
total sales price for the property was $11,500,000. Concurrent with the sale of
the real property, the Company and Trinet entered into a twenty year lease of
the property, with two ten year extension options. The monthly rental is
approximately $108,000 and is subject to CPI adjustment commencing on the first
day of the sixth, eleventh and sixteenth years. However, such CPI adjustments
shall not exceed four percent per annum on a cumulative basis during each five
year period. The gain on this transaction was $1.2 million of which $41,000 of
the deferred gain was recognized during fiscal 1995 in accordance with SFAS 13.
30
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. INCOME TAXES:
The significant components of income tax expense (benefit) attributable to
continuing operations are summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Federal:
Current tax expense........................................... $ 290 $ 2,049 $ 396
Utilization of net operating loss carryforwards............... (800)
Deferred tax (benefit) expense................................ (72) (1,156) 58
--------- --------- ---------
218 93 454
--------- --------- ---------
State:
Current tax expense........................................... 114 377 57
Deferred tax (benefit) expense................................ (226) (267) 19
--------- --------- ---------
(112) 110 76
--------- --------- ---------
$ 106 $ 203 $ 530
--------- --------- ---------
--------- --------- ---------
</TABLE>
The Company's income taxes currently payable in 1995 and 1994 are in part
due to alternative minimum tax.
The effects of temporary differences and other items that give rise to
deferred tax assets and deferred tax liabilities are presented below:
<TABLE>
<CAPTION>
SEPTEMBER 2, SEPTEMBER 3,
1995 1994
------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Accounts receivable..................................................... $ 2,223 $ 895
Accrued vacation/incentives............................................. 808 299
Closed store reserves................................................... 562 632
Lease reserve........................................................... 483 528
Deferred income......................................................... 597
Insurance reserves...................................................... 1,736 1,789
Postretirement/Postemployment benefits other than pension............... 4,366 505
Alternative minimum tax credits......................................... 1,810 1,948
Tax credits............................................................. 110 277
Net operating loss carryforwards........................................ 93 571
Other................................................................... 1,362 638
------------ ------------
Total gross deferred tax assets....................................... 14,150 8,082
Less valuation allowance................................................ (1,400) (1,400)
------------ ------------
Deferred tax assets................................................... $ 12,750 $ 6,682
------------ ------------
------------ ------------
Deferred tax liabilities:
Property, plant and equipment........................................... $ 4,561 $ 2,029
Capitalized software.................................................... 1,380
Intangible asset........................................................ 1,878
Deferred state taxes.................................................... 349 273
Other................................................................... 341 195
------------ ------------
Total gross deferred tax liabilities.................................. $ 8,509 $ 2,497
------------ ------------
------------ ------------
Net deferred tax asset................................................ $ 4,241 $ 4,185
------------ ------------
------------ ------------
</TABLE>
A valuation allowance is provided to reduce the deferred tax assets to a
level which, more likely than not, will be realized. The remaining balance of
the net deferred tax assets should be realized through future operating results,
and the reversal of taxable temporary differences, and tax planning strategies.
31
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The provision for income taxes at the Company's effective tax rate differed
from the provision for income taxes at the statutory rate as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----- ------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Federal income tax expense (benefit) at the statutory
rate....................................................... $ 297 $ (749) $ 341
State income taxes, net of federal income tax benefit....... (75) 73 50
Loss on insurance subsidiary not recognized for federal
taxes...................................................... 67
Dividend received deduction................................. (128) (105) (74)
Permanent differences....................................... 68 96 68
Alternative minimum tax..................................... 385
Increase in valuation allowance............................. 392
Other, net.................................................. (56) 111 78
----- ------- -----
Provision for income taxes.................................. $ 106 $ 203 $ 530
----- ------- -----
----- ------- -----
</TABLE>
At September 2, 1995, the Company has alternative minimum tax credit
carryforwards of approximately $1.8 million available to offset future regular
income taxes payable to the extent such regular taxes exceed alternative minimum
taxes payable.
7. SUBORDINATED PATRONAGE DIVIDEND CERTIFICATES:
In December 1992, the Company's Board of Directors (the "Board") authorized
a patronage dividend retention program to be effective commencing with the
dividends payable for fiscal 1993, whereby Certified retains a portion of the
patronage dividends and issues Patronage Certificates (the "Certificates")
evidencing its indebtedness respecting the retained amounts. In addition, the
program provides for the issuance of the Certificates to patrons on an annual
basis in a portion and at an interest rate to be determined annually by the
Board of Directors. However, as to any particular patron, if the amount of the
retention is less than a specified minimum (presently $500), then no retention
occurs and a Certificate is not issued. Certificates for each year are unsecured
general obligations of Certified, are subordinated to certain other Certified
indebtedness, and are nontransferable without the consent of Certified. The
certificates are subject to redemption, at any time in whole and from time to
time in part, without premium, at the option of Certified.
The Board of Directors determined that in fiscal years 1993 and 1994, the
portion of the patronage dividend retained and evidenced by the issuance of
Certificates was 20% of the fourth quarter dividend for dairy products in fiscal
1993, 20% of the quarterly dairy patronage dividends for fiscal 1994 and 40% of
the fiscal 1993 and 1994 dividends for non-dairy products. The Board of
Directors approved the patronage dividend retention program for fiscal year
1995. As to patronage dividends to be distributed with respect to Certified's
1995 fiscal year, Certificates will be issued evidencing the allocation of an
amount of such dividends equal to 40% of the patronage dividends of all
divisions, except the dairy division, and 20% of the first and second quarter
dairy division patronage dividends. The Certificates issued for fiscal 1995 have
a seven year term, maturing on December 15, 2002, and will bear interest from
the date of issuance at the rate of 7% per annum, payable annually on December
15 in each year, commencing December 15, 1996.
The following table represents a summary of the Certificates issued and
their respective terms in fiscal 1993 and 1994, as well as the intended issuance
and its respective terms for fiscal 1995.
<TABLE>
<CAPTION>
AGGREGATE ANNUAL
FISCAL PRINCIPAL INTEREST MATURITY
YEAR AMOUNT RATE DATE
- ------------------------------ ---------- --------- --------
<S> <C> <C> <C>
1993.......................... $2,018,000 7% 12/15/00
1994.......................... $2,426,000 8% 12/15/01
1995.......................... $2,117,000 7% 12/15/02
</TABLE>
The Company expects to continue to distribute patronage dividends in the
future, although there can be no assurance of the amounts of such dividends.
32
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. CAPITAL SHARES:
The Company requires that each member-patron hold 100 Class A shares. Each
member-patron must also hold Class B Shares having combined issuance values
equal to the lesser of the amount of the member-patron's required deposit or
twice the member-patron's average weekly purchases (the "Class B Share
requirement"). For this purpose, each Class B Share held by a member-patron has
an issuance value equal to the book value of Certified's outstanding shares as
of the close of the fiscal year last ended prior to the issuance of such Class B
Share.
After payment of at least 20% of the patronage dividend in cash and the
issuance of the Patronage Certificates, Class B Shares are issued as a portion
of each member-patron's patronage dividend and, to the extent necessary to
fulfill the member-patron's Class B Share requirement, by crediting the
member-patron's cash deposit account for the issuance values of such shares.
All shares of a terminated member will be redeemed by the Company (subject
to certain legal limitations, provisions of the Company's redemption policy, and
provisions of certain of the Company's committed lines of credit) at a price
equal to the book value of the shares as of the close of the fiscal year ended
prior to the redemption, less all amounts that may be owing by the member to the
Company. All shares are pledged to the Company to secure the Company's
redemption rights and as collateral for all obligations to the Company. The
Company is not obligated in any fiscal year to redeem more than 5% of the sum of
the number of Class B Shares outstanding as of the close of the preceding fiscal
year and the number of Class B Shares issued as a part of the patronage dividend
for the preceding year (the "5% limit"). Thus, shares tendered for redemption in
a given fiscal year may not necessarily be redeemed in that fiscal year. The 5%
limit for fiscal year 1996 will allow for redemption of 19,238 shares. The
following table summarizes the Class B Shares tendered and presently approved
for redemption, shares redeemed, and the remaining number of shares pending
redemption:
<TABLE>
<CAPTION>
FISCAL
YEAR TENDERED REDEEMED REMAINING
------ ----------- ----------- ----------- BOOK
VALUE
-----------
(DOLLARS IN
THOUSANDS)
<S> <C> <C> <C> <C>
1991........................................... 40,962 20,020 20,942 $ 3,577
1992........................................... 48,543 20,038 49,447 8,031
1993........................................... 29,019 20,036 58,430 9,555
1994........................................... 39,637 19,716 78,351 12,773
1995........................................... 25,511 19,414 84,448 14,007
1996 (through December 1995)................... 2,852 19,238 68,062 11,289
</TABLE>
Because the 5% limit for fiscal year 1996 has been met, the remaining 68,062
shares (or approximately $11.3 million, using fiscal 1995 year end book values)
not redeemed in fiscal year 1996 as well as the redemption of any additional
Class B Shares tendered during fiscal 1996 will require the prior approval of
the Company's Board of Directors. At present, such approvals are not expected to
be given. Accordingly, since the Company's fiscal 1996 5% share redemption
limitation has been met, future redemptions for the 1996 fiscal year will be
postponed. The total of Class B Shares tendered and awaiting redemption has
caused the 5% limit for fiscal 1996, and will cause the limits for fiscal 1997
through 1999 to be met, thereby delaying the redemption of Class B Shares in
excess of such limit. The redemptions required for fiscal years 1997 through
1999 approximate $9.4 million to $9.6 million based on 1995 year end book values
and estimated share issuances for those years. Cash flow to fund redemption of
shares is provided from operations, patron deposits, Patronage Certificates,
current shareholdings and borrowings under the Company's credit lines. Any
additional large tenderings of Class B Shares could also potentially cause
future year 5% limitations to be exceeded. Therefore, the Company's ability to
redeem additional shares in excess of the 5% limit without prior approval of the
Board may also be limited.
33
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
There are 500,000 authorized Class A Shares, of which 50,300 and 49,100 were
outstanding at September 2, 1995 and September 3, 1994, respectively. There are
2,000,000 authorized Class B Shares, of which 384,767 and 388,286 were
outstanding at September 2, 1995 and September 3, 1994, respectively. Once
redeemed, such shares are not available for reissuance to member-patrons.
No member-patron may hold more than one hundred Class A Shares. However, it
is possible that a member may have an interest in another member, or that a
person may have an interest in more than one member, and thus have an interest
in more than one hundred Class A Shares. The Board of Directors is authorized to
accept member-patrons without the issuance of Class A Shares when the Board of
Directors determines that such action is justified by reason of the fact that
the ownership of the patron is the same, or sufficiently the same, as that of
another member-patron holding one hundred Class A Shares. The price for such
shares will be the book value per share of outstanding shares at the close of
the fiscal year last ended.
There are also 15 authorized Class C Shares of which 15 are outstanding.
These shares are valued at $10 per share, and ownership is limited to members of
the Board of Directors with no rights as to dividends or other distributions.
9. BENEFIT PLANS:
The Company has a noncontributory, defined benefit pension plan covering
substantially all of its nonunion employees. The benefits under the plan
generally are based on the employee's years of service and average earnings for
the three highest consecutive calendar years of compensation during the ten
years immediately preceding retirement. The Company makes contributions to the
pension plan in amounts which are at least sufficient to meet the minimum
funding requirements of applicable laws and regulations but no more than amounts
deductible for federal income tax purposes. Benefits under the plan are included
in a trust providing benefits through annuity contracts, and part of the plan
assets are held by a trustee.
34
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The funded status of the plan and the amounts recognized in the balance
sheet are:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligations, including vested
benefits..................................................................... $ 24,416 $ 24,519 $ 22,025
Effect of assumed future increase in compensation
levels....................................................................... 10,319 10,380 10,025
--------- --------- ---------
Projected benefit obligation for services rendered to
date......................................................................... 34,735 34,899 32,050
Plan assets at fair value........................................................ 32,593 31,538 31,185
--------- --------- ---------
Plan assets in deficiency of projected benefit obligations....................... 2,142 3,361 865
Unrecognized net gain............................................................ (6,094) (6,092) (3,544)
Unrecognized transition asset.................................................... 1,839 2,148 2,457
Unrecognized prior service cost.................................................. 342 381 (99)
--------- --------- ---------
Accrued (Prepaid) pension costs at June 1........................................ (1,771) (202) (321)
--------- --------- ---------
Fourth quarter contribution...................................................... -- (321) (382)
Fourth quarter net periodic pension cost......................................... 326 229 338
--------- --------- ---------
Accrued (Prepaid) pension cost at fiscal year end................................ $ (1,445) $ (294) $ (365)
--------- --------- ---------
Net pension cost for the fiscal year ending included the following components:
Service cost -- benefits earned during the period.............................. $ 1,398 $ 1,385 $ 1,447
Interest cost on projected benefit obligation.................................. 2,650 2,425 2,405
Actual return on plan assets................................................... (2,845) (2,628) (2,419)
Net amortization and deferral.................................................. 100 (266) (82)
--------- --------- ---------
Net periodic pension cost...................................................... $ 1,303 $ 916 $ 1,351
--------- --------- ---------
Major assumptions:
Assumed discount rate.......................................................... 7.50% 7.50% 7.50%
Assumed rate of future compensation increases.................................. 5.50% 5.50% 5.50%
Expected rate of return on plan assets......................................... 8.50% 8.50% 8.50%
</TABLE>
The method used to compute the vested benefit obligation is the actuarial
present value of the vested benefits to which the employee is entitled if the
employee separates immediately. The vested benefit obligation was $24,007,000,
$24,029,000, and $21,442,000 in 1995, 1994, and 1993, respectively.
The Company also made contributions of $5,368,000, $4,820,000, and
$5,155,000 in 1995, 1994, and 1993, respectively to collectively bargained,
multiemployer defined benefit pension plans in accordance with the provisions of
negotiated labor contracts. Information from the plans' administrators is not
available to permit the Company to determine its proportionate share of
termination liability, if any.
The Company has an Employees' Sheltered Savings Plan ("SSP"), which is a
defined contribution plan, adopted pursuant to Section 401(k) of the Internal
Revenue Code for its nonunion employees. The Company matches each dollar
deferred up to 4% of compensation and, at its discretion, matches 40% of amounts
deferred between 4% and 8%. At the end of each fiscal year, the Company also
contributes an amount equal to 2% of the compensation of those participants
employed at that date. The Company contributed approximately $2,100,000,
$2,200,000, and $2,200,000 in 1995, 1994, and 1993 respectively.
Also, the Company has an Employee Savings Plan ("ESP"), which is a defined
contribution plan, subject to the provisions of the Employee Retirement Income
Security Act of 1974, for all union and
35
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
nonunion employees hired prior to March 1, 1983. Subsequent to March 1, 1983,
the Company's contribution to the ESP in any fiscal year is based on net
earnings as a percentage of total sales and is applicable to union employees
only. In the event net earnings are less than 1.5% of total sales, no
contribution is required. All corporate (nonunion) employees who had a previous
balance in the ESP Plan had their balances transferred to the SSP Plan effective
first quarter of fiscal 1992. No expense was incurred in fiscal years 1995, 1994
and 1993.
In September 1994, the Board of Directors authorized a new supplemental
executive pension plan (effective January 4, 1995) which provides retirement
income to certain officers based on each participant's final salary and years of
service with the Company. The plan, called the Company's Executive Salary
Protection Plan ("ESPP II"), provides additional post-termination retirement
income based on each participant's final salary and years of service with the
Company. The funding of this benefit will be facilitated through the purchase of
life insurance policies, the premiums of which will be paid by the Company and
participant contributions.
ESPP II supersedes and replaces the Executive Salary Protection Plan I
("ESPP I"). Under ESPP I, Certified purchased life insurance policies for
certain officers. Upon reaching age 65 (or upon termination, if earlier), the
employee was given the cash surrender value of the policy, plus any additional
income taxes incurred by the employee as a result of such distribution.
The plan is unfunded. The amounts recognized in the balance sheet are:
<TABLE>
<CAPTION>
1995
-----------
(DOLLARS IN
THOUSANDS)
<S> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligations, including vested benefits................................ $ 3,026
Effect of assumed future increase in compensation levels.................................. 282
-----------
Projected benefit obligation for services rendered to date................................ 3,308
Plan assets at fair value................................................................... --
-----------
Plan assets in deficiency of projected benefit obligation................................... 3,308
Unrecognized net gain (loss)................................................................ (217)
Unrecognized transition asset...............................................................
Unrecognized prior service cost............................................................. (1,659)
-----------
Accrued (prepaid) pension cost as of June 1................................................. 1,432
-----------
Fourth quarter contributions................................................................ (20)
Fourth quarter net periodic pension cost.................................................... 130
Additional minimum liability................................................................ 1,484
-----------
Accrued (prepaid) pension cost at fiscal year end........................................... $ 3,026
-----------
</TABLE>
The additional minimum liability represents the excess of the unfunded
Accumulated Benefit Obligation over previously accrued pension costs. A
corresponding intangible asset was recorded as an offset to this additional
liability as prescribed.
36
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The net periodic pension cost for the fiscal year ending included the
following components:
<TABLE>
<CAPTION>
1995
---------
<S> <C>
Service cost -- benefits attributed to service during the period................................ $ 136
Interest cost on projected benefit obligation................................................... 168
Actual return on plan assets....................................................................
Net amortization and deferral................................................................... 85
---------
Net periodic pension cost....................................................................... $ 389
---------
Major Assumptions:
Assumed discount rate......................................................................... 7.50%
Assumed rate of future compensation increases................................................. 4.00%
Expected rate of return on plan assets........................................................ 8.50%
</TABLE>
The method used to compute the vested benefit obligation is the actuarial
present value of the vested benefits to which the employee is entitled if the
employee separates immediately. The vested benefit obligation was $3,026,000 in
1995.
10. POSTRETIREMENT BENEFIT PLANS OTHER THAN PENSIONS:
The Company sponsors postretirement benefit plans that cover both nonunion
and union employees. Nonunion employees are eligible for a plan providing
medical benefits. A certain group of retired nonunion employees participate in a
plan providing life insurance benefits for which currently active nonunion
employees are no longer eligible. Most union and all nonunion employees have
separate plans providing a lump sum payout for unused days in the sick leave
bank. The postretirement health care plan is contributory for nonunion employees
retiring after January 1, 1990, with the retiree contributions adjusted
annually; the life insurance plan and the sick leave payout plans are
noncontributory.
37
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The plans are unfunded. The amounts recognized in the balance sheet are:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees...................................................................... $ 10,335 $ 11,496
Fully eligible active plan participants....................................... 3,783 4,622
Other active plan participants................................................ 8,927 9,117
---------- ----------
Accumulated postretirement benefit obligation................................... 23,045 25,235
Unrecognized transition obligation.............................................. (20,224) (21,348)
Unrecognized prior service cost.................................................
Unrecognized net gain (loss).................................................... 1,912 (2,013)
---------- ----------
Accrued postretirement benefit cost at June 1................................... 4,733 1,874
Fourth quarter contributions.................................................... (303) (294)
Fourth quarter net periodic postretirement benefit cost......................... 1,044 929
---------- ----------
Accrued postretirement benefit cost............................................. $ 5,474 $ 2,509
---------- ----------
---------- ----------
Net periodic postretirement benefit cost for the fiscal year ending included the
following components:
<CAPTION>
1995 1994
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Service cost -- benefits attributed to service during the period............... $ 867 $ 654
Interest cost on accumulated postretirement benefit obligation................ 2,052 1,915
Amortization of transition obligation over 20 years........................... 1,124 1,124
Net amortization and deferral................................................. 133 21
---------- ----------
Net periodic postretirement benefit cost...................................... $ 4,176 $ 3,714
---------- ----------
---------- ----------
</TABLE>
For measurement purposes, a 9.5 percent annual rate of increase in the per
capita cost of covered health care benefits was assumed for fiscal year 1996;
the rate was assumed to decrease gradually to 6 percent in fiscal 2002 and
remain at the level thereafter. The health care cost trend rate assumption has a
significant effect on the amounts reported. To illustrate, increasing the
assumed health care cost trend rates by 1 percentage point in each year would
increase the accumulated postretirement benefit obligation as of September 2,
1995 by $3,174,000 and the aggregate benefit cost for the year then ended by
$470,000.
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 8 percent.
The Company's union employees participate in a multiemployer plan that
provides health care benefits. Amounts charged to postretirement benefit cost
and contributed to the plan totaled $1.3 million in fiscal year 1995 and 1994.
Prior to the adoption of SFAS No. 106, the Company recognized the cost of
providing those benefits under the insurance agreement by expensing the claims
and administrative fees when paid, which for active and retired employees
totalled $5,890,000 in 1993. The portion of the cost of providing those benefits
for 164 retirees in fiscal 1993 was approximately $1.2 million.
11. CONTINGENCIES:
LITIGATION. The Company is a defendant in a number of cases currently in
litigation or potential claims encountered in the normal course of business
which are being vigorously defended. In the opinion of management, the
resolutions of these matters will not have a material adverse effect on the
Company's financial position or results of operations.
38
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
ENVIRONMENTAL MATTERS. The Company, together with others, was notified by
the Environmental Protection Agency ("EPA") that it was a potentially
responsible party ("PRP") for the disposal of hazardous substances during the
1970s and early 1980s at Operating Industries, Inc. Superfund Site in Monterey
Park, California ("OII Site"). The Company has not disposed of any materials at
the site since and believes its current disposal policies to be in accordance
with federal, state and local governmental laws and regulations. Clean up of
this site will occur in five phases and could entail estimated total clean up
costs of $650 million to $800 million.
The Company appealed the initial findings of the EPA on August 16, 1993
concerning the quantity of disposed waste allocated to the Company. Management
recorded an initial liability of $400,000 for fiscal 1993 for the first three
phases of the five-phase cleanup. The initial liability was based on estimated
cleanup costs of $2 per gallon on approximately 200,000 gallons disposed at the
site. In August 1995, the EPA finalized the Company's allocated share of the
cleanup cost (approximately $380,000) for the first three phases of the cleanup.
The EPA also informed the Company of phases 4 and 5, which include final
remedy and ground water treatment, and a 30 year post-cleanup site control and
monitoring. The estimated costs of these two phases, together with the first
three phases, are reserved in the financial statements. As of September 2, 1995,
the total reserve established in respect to environmental liabilities is $1.6
million. The Company is pursuing recovery of a portion of this amount from its
insurance carriers.
Because of the uncertainties associated with environmental assessment and
remediation activities, future expenses to remediate the currently identified
site could be higher than the accrued liability. Although it is difficult to
estimate the liability of the Company related to these environmental matters,
management believes that these matters will not have a materially adverse effect
on the Company's financial position or consolidated statement of earnings.
12. CONCENTRATION OF CREDIT RISK:
Financial instruments which potentially expose the Company to concentrations
of credit risk consist primarily of trade receivables and lease guarantees for
certain member-patrons. These concentrations of credit risk may be affected by
changes in economic or other conditions affecting the Western United States,
particularly California. However, management believes that receivables are well
diversified and the allowances for doubtful accounts are sufficient to absorb
estimated losses. Obligations of member-patrons to the Company, including lease
guarantees, are generally supported by the Company's right of offset, upon
default, against the member-patrons' cash deposits, shareholdings and Patronage
Certificates, as well as personal guarantees and reimbursement and
indemnification agreements.
13. FAIR VALUE OF FINANCIAL INSTRUMENTS:
Statement of Financial Accounting Standards No. 107, Disclosures about Fair
Value of Financial Instruments ("SFAS No. 107"), requires disclosure of fair
value information about most financial instruments, both on and off the balance
sheet, if it is practicable to estimate. SFAS No. 107 excludes certain financial
instruments, such as certain insurance contracts, and all non-financial
instruments from its disclosure requirements. A financial instrument is defined
as a contractual obligation that ultimately ends with the delivery of cash or an
ownership interest in an entity. Disclosures regarding the fair value of
financial instruments have been derived using external market sources, estimates
using present value or other valuation techniques.
39
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following table presents the carrying values and the estimated fair
values as of September 2, 1995 and September 3, 1994, of the Company's financial
instruments reportable pursuant to SFAS No. 107:
<TABLE>
<CAPTION>
1995 1994
---------------------- ----------------------
<S> <C> <C> <C> <C>
CARRYING ESTIMATED CARRYING ESTIMATED
VALUE FAIR VALUE VALUE FAIR VALUE
---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
Assets:
Cash and cash equivalents............................ $ 7,329 $ 7,329 $ 7,702 $ 7,702
Investments.......................................... 22,051 22,051 20,274 20,274
Notes receivable..................................... 25,622 25,622 23,335 23,335
Liabilities:
Notes payable and Notes payable, due after one
year................................................ $ 141,259 $ 139,496 $ 152,651 $ 148,637
Patrons' excess deposits and declared patronage
dividends........................................... 12,214 12,214 11,541 11,541
Patrons' required deposits........................... 17,022 17,022 17,589 17,589
Subordinated patronage dividend certificates......... 6,561 6,561 4,444 4,444
</TABLE>
The methods and assumptions used to estimate the fair values of the
Company's financial instruments at September 2, 1995 and September 3, 1994 were
based on estimates of market conditions and risks existing at that time. These
values represent an approximation of possible value and may never actually be
realized.
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
CASH AND CASH EQUIVALENTS
The carrying amount approximates fair value due to the short
maturity of these instruments.
INVESTMENTS AND NOTES RECEIVABLE
The fair values for Investments and Notes receivable are based
primarily on quoted market prices for those or similar instruments.
NOTES PAYABLE AND NOTES PAYABLE DUE AFTER ONE YEAR
The fair values for Notes payable and Notes payable, due after one
year are based primarily on rates currently available to the Company for
debt with similar terms and remaining maturities.
PATRONS' EXCESS DEPOSITS AND DECLARED PATRONAGE DIVIDENDS, PATRONS' REQUIRED
DEPOSITS, AND SUBORDINATED PATRONAGE DIVIDEND CERTIFICATES
The carrying amount approximates fair value due primarily to the
limitations imposed on deposit fund redemptions as provided in the
subordinating provisions to which they are subject.
14. RELATED PARTY TRANSACTIONS:
A number of companies with which directors are associated have received
loans from the Company through its regular member loan program and/or obtained
lease guarantees or subleases for certain store locations. In consideration of
lease guarantees and subleases, the Company receives a monthly fee equal to 5%
of the monthly rent under the leases and subleases. Obligations of
member-patrons to the Company, including lease guarantees, are generally
supported by the Company's right of offset, upon default, against the
member-patrons' cash deposits, shareholdings and Patronage Certificates, as well
as personal guarantees and reimbursement and indemnification agreements.
Management believes all such related party transactions are on terms no more
favorable than those which would be available to other similarly sized member-
patrons.
The Company leases certain market premises located in Sacramento and
Vallejo, California, and in turn subleases these premises to SavMax Foods, Inc.
("SavMax") of which director Michael A. Webb is the
40
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
President and a shareholder. The Sacramento sublease provides for a term of 20
years and the Vallejo sublease provides for a term of 10 years. Neither sublease
contains options to extend, although SavMax has the option under each sublease
to acquire the Company's interest under its lease on the condition that the
Company is released from all further liability thereunder. The term of the
Sacramento sublease commenced in September of 1994. The Sacramento premises
consist of approximately 50,000 square feet and annual base rent under the
sublease is at the following per square foot rates: $8.00 during years 1 and 2;
$8.40 during years 3 through 5; $8.82 during years 6 through 10; $9.26 during
years 11 through 15; and, $9.72 during years 16 through 20. The term of the
Vallejo sublease commenced in September of 1995 and annual base rent under the
sublease is $279,000. In addition, under each of these subleases, the Company
receives monthly an additional amount equal to 5% of the base monthly rent.
The Company guarantees certain obligations of SavMax under three leases of
market premises located in Sacramento, San Jose and San Leandro, California.
Each of these guarantees relates to the obligation of SavMax to pay base rent,
common area maintenance charges, real estate taxes and insurance during the
initial 20 year terms of these leases. However, the guarantees are such that the
Company's obligation under each of them is limited to an amount equal to sixty
monthly payments (which need not be consecutive) of the obligations guaranteed.
Base rent is $40,482 per month under the Sacramento lease and $56,756 per month
under the San Jose lease, in each case subject to a 7 1/2% increase at the end
of each five years. Base rent is $42,454 per month under the San Leandro lease,
subject to a 10% increase at the end of each five years. In consideration of
these guarantees, the Company receives a monthly fee from SavMax equal to 5% of
the base monthly rent under these leases. If SavMax were to default under the
leases, the Company's remaining liability under its guarantees would range from
$10.1 million to $11.9 million, assuming other support provided to the Company
by way of offset rights and the reimbursement and indemnification agreements
proved to be of no value to the Company.
The Company guarantees certain obligations of SavMax under two leases of
market premises located in Ceres and Vacaville, California. The leases have
initial terms expiring in January 2005 and April 2007, respectively. Base
monthly rent under the Ceres lease is presently $32,175, increasing to $34,425
in January of 2000. Base monthly rent under the Vacaville lease is presently
$29,167, increasing by $25,000 per year in April of 1997 and 2002. In
consideration of these guarantees, the Company will receive a monthly fee from
SavMax equal to 5% of the base monthly rent under these leases. If SavMax were
to default under the leases, the Company's contingent liability under its
guarantees would approximate $10.4 million, assuming other support provided to
the Company by way of offset rights and the reimbursement and indemnification
agreements proved to be of no value to the Company.
The Company is proposing to lease certain market premises to be constructed
and located in Los Banos, California, which it in turn will sublease to Maxco
Foods, Inc. ("Maxco"), a corporation of which SavMax is a shareholder. The
sublease to Maxco would provide for a term of 20 years, without options to
extend, although Maxco will have the option to acquire the Company's interest
under its lease on the condition that the Company is released from all further
liability thereunder. The premises will consist of approximately 50,000 square
feet and annual base rental under the sublease is as follows: $390,000 during
years 1 through 5; $424,125 during years 6 through 10; $461,236 during years 11
through 15; and, $501,594 during years 16 through 20. In addition, the Company
will receive monthly an additional amount equal to 5% of the base monthly rent.
In connection with this transaction, Maxco will enter into a seven year supply
agreement with the Company whereunder Maxco would be required to purchase a
substantial portion of its merchandise requirements from the Company. The supply
agreement will be subject to earlier termination in certain situations.
In fiscal 1994, Grocers Capital Company ("GCC"), a subsidiary, acquired an
additional 25,000 shares of preferred stock of SavMax. The purchase price was
$100 per share. At the time, GCC owned 40,000 shares of preferred stock of
SavMax which it acquired in fiscal 1992. As part of the new purchase of
preferred stock, the annual cumulative dividend on the 65,000 shares of
preferred stock owned by GCC was increased from $8.25 per share to $8.50 per
share, payable quarterly. Mandatory partial redemption of this stock at a price
of
41
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
$100 per share began in 1994 and will continue annually thereafter for eight
years, at which time the stock is to be completely retired. GCC also purchased
from Mr. Webb and another member of his immediate family, 10% of the common
stock of SavMax for a price of $2.5 million. In connection with this purchase,
Mr. Webb, SavMax and GCC agreed that GCC will have certain preemptive rights to
acquire additional common shares, rights to have its common shares included
proportionately in any transfer of common shares by Mr. Webb, and rights to have
its common shares included in certain registered public offerings of common
stock which may be made by SavMax. In addition, GCC has certain rights, at its
option, to require that SavMax repurchase GCC's shares, and SavMax has certain
rights, at its option, to repurchase GCC's shares. In connection with these
transactions, SavMax entered into a seven year supply agreement with the Company
(to replace an existing supply agreement) whereunder SavMax is required to
purchase a substantial portion of its merchandise requirements from the Company.
The supply agreement is subject to earlier termination in certain situations.
GCC guarantees a portion of a loan made by National Consumer Cooperative
Bank ("NCCB") to K.V. Mart Co., of which director Darioush Khaledi is the
President and a shareholder, and KV Property Company, of which director Darioush
Khaledi is a general partner. The term of the loan is eight years, maturing
January 1, 2002, and the loan bears interest at a floating rate based on the
commercial loan base rate of NCCB. The loan is collateralized by certain real
and personal property. The guarantee by GCC is limited to 10% of the $2.1
million principal amount of the loan. In consideration of its guarantee, GCC
will receive an annual fee from K.V. Mart Co. equal to approximately 5% of the
guarantee amount.
GCC has guaranteed a portion of a $5,000,000 revolving loan made by NCCB to
K.V. Mart Co. in November 1995. The loan has an initial maturity of two years,
with the outstanding balance then converting to a five year term loan. The loan
bears interest at a floating rate based on the commercial loan rate of NCCB. The
loan is collateralized by certain real and personal property of K.V. Mart Co.
The guaranty of GCC is limited to 10% of the outstanding principal amount of the
loan. In consideration of its guaranty, GCC will receive an annual fee from K.V.
Mart Co. equal to 5% of the guaranty amount.
The Company is proposing to enter into a guaranty of rent and certain other
obligations of K.V. Mart Co. under a lease of store premises to be constructed
in Lynwood, California. The guaranty would be for a term of seven years. Annual
rent under the lease will be $408,000. In consideration of its guaranty, the
Company will receive an annual fee from K.V. Mart Co. equal to 5% of the annual
rent.
GCC is proposing to purchase 10% of the common stock of K.V. Mart Co. for a
purchase price of approximately $3,000,000. In connection with this purchase,
K.V. Mart Co., GCC, Mr. Khaledi and the other shareholders of K.V. Mart Co. will
agree that GCC will have certain preemptive rights to acquire additional common
shares, rights to have its common shares included proportionately in any
transfer of common shares by the other shareholders, and rights to have its
common shares included in certain registered public offerings of common stock
which may be made by K.V. Mart Co. In addition, GCC will have certain rights, at
its option, to require that K.V. Mart Co. repurchase GCC's shares, and K.V. Mart
Co. will have certain rights, at its option, to repurchase GCC's shares. In
connection with these transactions, K.V. Mart Co. will enter into a seven year
supply agreement with the Company whereunder K.V. Mart Co. will be required to
purchase a substantial portion of its merchandise requirements from the Company.
The supply agreement will be subject to earlier termination in certain
situations.
The Company has guaranteed the payment by Cala Co., a subsidiary of a
member-patron, of certain promissory notes related to an acquisition of Bell
Markets, Inc. The promissory notes mature in June 1996 and total $8 million;
however, the Company's guaranty obligation is limited to $4 million. In
addition, and in connection with the acquisition, the Company has guaranteed
certain lease obligations of Bell Markets, Inc. during a 20-year period under a
lease relating to two retail grocery stores. Annual rent under the lease is
$327,019. In the event the Company is called upon to perform on this guaranty,
the Company has the right to receive an assignment of the lease relating to the
locations. Accordingly, assuming the leased premises and other support provided
to the Company by way of offset rights and the reimbursement and indemnification
42
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
agreement proved to be of no value to the Company, the Company would be
contingently liable under its lease guarantee for approximately $4.7 million.
Concurrent with the foregoing transactions, Bell Markets, Inc. entered into a
5-year agreement to purchase a substantial portion of its merchandise
requirements from the Company.
The Company has guaranteed a lease for Mar-Val Food Stores, Inc. (whose
President, Mark Kidd, is a director of the Company) on store premises in Valley
Springs, California. The guarantee is for a period of fifteen years and is
limited to the lessee's obligation to pay base rent of $10,080 per month, common
area costs, real estate taxes and insurance. The Company's total obligation
under the guarantee is limited to $736,800. In consideration of the guarantee,
the Company receives a monthly fee from Mar-Val Food Store, Inc. equal to 5% of
the base monthly rent under the lease.
The Company guarantees annual rent and certain other obligations of Willard
R. MacAloney, the Chairman of the Company's Board of Directors, as lessee under
a lease of store premises located in La Puente, California. Annual rent under
the lease is $62,487, and the lease term expires in April 1997. The Company also
guarantees annual rent and certain other obligations of G & M Company, Inc., of
which Mr. MacAloney is a shareholder, under a lease of store premises located in
Santa Fe Springs, California. Annual rent under the lease is $82,544, and the
lease term expires in October 1997. In consideration of its guarantees, the
Company receives a monthly fee from G & M Company, Inc. equal to 5% of the base
monthly rent under each lease.
The Company guarantees certain obligations under a sublease of market
premises located in Pasadena, California, and under which Berberian Enterprises,
Inc., of which Director John Berberian is the President and a shareholder, is
the sublessor. The guaranty is of the obligations of the sublessee to pay
minimum rent, common area costs, real estate taxes and insurance during the
first seven years of the term of the sublease. Minimum rent under the sublease
is $10,000 per month. In consideration of its guaranty, the Company receives a
monthly fee from the sublessee equal to 5% of the monthly amounts guaranteed.
The Company has guarantees remaining on various member-patron leases during
the period of fiscal 1996 through fiscal 1998. In the event the support provided
to the Company by way of offset rights and the reimbursement and indemnification
agreements proved to be of no value, the Company would be contingently liable
under its guarantees for approximately $1.3 million.
In July 1993, the Company entered into an agreement to lease a warehouse to
Joe Notrica, Inc., of which director Morrie Notrica is the President and a
shareholder. The lease period is for five years, July 21, 1993 through July 31,
1998, at a monthly rent of $24,000. The lease has one five year option and makes
provision for inflation adjustments to monthly rent during the option term.
Grocers General Merchandise Company, ("GM"), a subsidiary of the Company,
and Food 4 Less GM, Inc. ("F4LGM"), an indirect subsidiary of Ralph's Grocery
Company, are partners to a joint venture partnership agreement. Under the
agreement, GM and F4LGM are partners operating as Golden Alliance Distribution
("GAD"). The partnership was formed for the purpose of providing for the shared
use of the Company's general merchandise warehouse located in Fresno, California
and each of the partners has entered into a supply agreement with GAD providing
for the purchase of general merchandise products from GAD.
One of the Company's largest customers, Ralphs Grocery Company together with
its affiliated companies, accounted for a combined total of approximately 9.5%
of fiscal 1995 sales. No other customer accounted for as much as 5% of fiscal
1995 sales.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
43
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
BOARD OF DIRECTORS
The Company's Board of Directors is elected annually at the Company's Annual
Meeting of Shareholders, presently held in March of each year. Each director
must be either an employee of the Company, a member-patron, or a member of a
partnership which is a shareholder, or an employee of a corporation which is a
shareholder. Currently, there are no Company employees on the Board of Directors
and all directors represent member-patrons. There is no arrangement or
understanding between any one of the directors and any other person or persons
pursuant to which such director was selected as a director.
The Bylaws provide that the Board of Directors will appoint annually a
committee consisting of three or more of its members to nominate the directors
to act for the ensuing year. The Company's President is an ex-officio member of
the nominating committee. The nominating committee submits its nominations to
the Board, and the nominees so selected are submitted by the Board to the
members to be voted upon at the Annual Meeting of the Company.
The names of the present directors of the Company, their principal
occupations, their ages as of December 31, 1995 and the year such director was
first elected to the Board are set forth in the following table.
<TABLE>
<CAPTION>
YEAR
AGE AT FIRST
NAME OF DIRECTOR DECEMBER 31, 1995 ELECTED PRINCIPAL OCCUPATION
- ---------------------------- ----------------- --------- -----------------------------------------------------
<S> <C> <C> <C>
Louis A. Amen 66 1974 President, Super A Foods, Inc.
John Berberian 44 1991 President, Berberian Enterprises, Inc.,
operating Jons Market
Gene A. Fulton 56 1994 President-Owner, Jensen's Complete Shopping, Inc.,
operating Jensen's Finest Foods
Lyle A. Hughes (1) 58 1987 General Manager, Yucaipa Trading Co., Inc.
Roger Hughes (1) 61 1985 Chairman and Chief Executive Officer, Hughes Markets,
Inc.
Darioush Khaledi 49 1993 Chairman of the Board and Chief Executive Officer,
K.V. Mart Co., dba Top Valu Markets and Valu Plus
Food Warehouse
Mark Kidd 45 1992 President, Mar-Val Food Stores, Inc.
Willard R. MacAloney 60 1981 President and Chief Executive Officer, Mac Ber, Inc.
(Chairman of the Board) operating Jax Market
Jay McCormack 45 1993 Owner-Operator, Alamo Market; Co-owner, Glen Avon
Market
Morrie Notrica 66 1988 President and Chief Operating Officer, Joe Notrica,
Inc., operating The Original 32nd Street Market
Michael A. Provenzano 53 1986 President, Pro & Son's, Inc., operating Southland
Market since 1993; formerly President, Carlton's
Market, Inc.
Allan Scharn 60 1988 President, Gelson's Markets
James R. Stump 57 1982 President, Stump's Market, Inc.
Michael A. Webb 38 1992 President and Chief Executive Officer,
SavMax Foods, Inc.
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
YEAR
AGE AT FIRST
NAME OF DIRECTOR DECEMBER 31, 1995 ELECTED PRINCIPAL OCCUPATION
- ---------------------------- ----------------- --------- -----------------------------------------------------
<S> <C> <C> <C>
Kenneth Young 51 1994 Vice President, Jack Young's Supermarkets; Vice
President, Bakersfield Food City, Inc., dba Young's
Markets
<FN>
- ------------------------
(1) Messrs. Lyle A. Hughes and Roger K. Hughes are unrelated.
</TABLE>
OFFICERS
The Company has nine officers, each selected by and serving at the pleasure
of the Board of Directors. No officer owns either directly or indirectly any
shares of the Company's Class A or Class B Shares. There are no family
relationships between directors or officers, nor between any director and
officer. There is no arrangement or understanding between any one of the
officers and any other person pursuant to which such officer was selected as an
officer.
The following table sets forth certain information about officers of the
Company.
<TABLE>
<CAPTION>
AGE AT DECEMBER 31, BUSINESS EXPERIENCE
OFFICER'S NAME 1995 DURING LAST FIVE YEARS
- ------------------------- ----------------------- -----------------------------------------------------------------
<S> <C> <C>
Alfred A. Plamann 53 Corporate President and Chief Executive Officer since February
1994; previously Senior Vice President-Finance and Chief
Financial Officer.
Daniel T. Bane 48 Senior Vice President and Chief Financial Officer since July
1994; Chief Operating Officer, Spensley Horn Jubas & Lubitz,
December 1993 to July 1994; previously Chief Financial Officer,
Standard Brands Paint Company.
Donald G. Grose 60 Senior Vice President-Human Resources and Labor Relations.
Don W. Hawks 44 Vice President-Marketing and Procurement since June 1995;
previously Vice President of Procurement and Marketing, Super
Store Industries.
Corwin J. Karaffa 41 Vice President-Distribution since January 1995; previously
Facilities Manager, Proctor and Gamble Distribution Co.
Jerald L. Lauer 59 Vice President-Information Services.
Charles J. Pilliter 47 Senior Vice President and President-Northern California since
January 1990; previously Executive Director of Sales and General
Manager of Produce.
Paul D. Rohde 50 Vice President-Human Resources since January 1990; previously
Executive Director-Human Resources.
David A. Woodward 53 Corporate Secretary/Treasurer.
</TABLE>
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal year 1995, the Company's Executive Compensation Committee
consisted of director Darioush Khaledi, Committee Chairman, and directors Louis
A. Amen, Roger Hughes, James R. Stump, and Michael A. Webb, as well as
ex-officio member Willard R. MacAloney, Chairman of the Board.
Except for Mr. MacAloney, no member of the Personnel and Executive
Compensation Committee is, or has been at any time in the past, an officer or
employee of the Company or any of its subsidiaries. As Chairman of the Board,
Mr. MacAloney is an officer under the Bylaws of the Company, although he is not
an employee and does not receive any compensation or expense reimbursement
beyond that to which other directors are entitled.
45
<PAGE>
The Company guarantees annual rent and certain other obligations of Mr.
MacAloney as lessee under a lease of store premises located in La Puente,
California. Annual rent under the lease is $62,487, and the lease term expires
in April 1997. The Company also guarantees annual rent and certain other
obligations of G & M Company, Inc., of which Mr. MacAloney is a shareholder,
under a lease of store premises located in Santa Fe Springs, California. Annual
rent under the lease is $82,544, and the lease term expires in October 1997. In
consideration of its guarantees, the Company receives a monthly fee from G & M
Company, Inc. equal to 5% of the base monthly rent under each lease.
GCC guarantees a portion of a loan made by National Consumer Cooperative
Bank ("NCCB") to K.V. Mart Co., of which director Darioush Khaledi is the
President and a shareholder, and KV Property Company, of which director Darioush
Khaledi is a general partner. The term of the loan is eight years, maturing
January 1, 2002, and the loan bears interest at a floating rate based on the
commercial loan base rate of NCCB. The loan is collateralized by certain real
and personal property. The guarantee by GCC is limited to 10% of the $2.1
million principal amount of the loan. In consideration of its guarantee, GCC
will receive an annual fee from K.V. Mart Co. equal to approximately 5% of the
guarantee amount.
GCC has guaranteed a portion of a $5,000,000 revolving loan made by NCCB to
K.V. Mart Co. in November 1995. The loan has an initial maturity of two years,
with the outstanding balance then converting to a five year term loan. The loan
bears interest at a floating rate based on the commercial loan rate of NCCB. The
loan is collateralized by certain real and personal property of K.V. Mart Co.
The guaranty of GCC is limited to 10% of the outstanding principal amount of the
loan. In consideration of its guaranty, GCC will receive an annual fee from K.V.
Mart Co. equal to 5% of the guaranty amount.
The Company is proposing to enter into a guaranty of rent and certain other
obligations of K.V. Mart Co. under a lease of store premises to be constructed
in Lynwood, California. The guaranty would be for a term of seven years. Annual
rent under the lease will be $408,000. In consideration of its guaranty, the
Company will receive an annual fee from K.V. Mart Co. equal to 5% of the annual
rent.
GCC is proposing to purchase 10% of the common stock of K.V. Mart Co. for a
purchase price of approximately $3,000,000. In connection with this purchase,
K.V. Mart Co., GCC, Mr. Khaledi and the other shareholders of K.V. Mart Co. will
agree that GCC will have certain preemptive rights to acquire additional common
shares, rights to have its common shares included proportionately in any
transfer of common shares by the other shareholders, and rights to have its
common shares included in certain registered public offerings of common stock
which may be made by K.V. Mart Co. In addition, GCC will have certain rights, at
its option, to require that K.V. Mart Co. repurchase GCC's shares, and K.V. Mart
Co. will have certain rights, at its option, to repurchase GCC's shares. In
connection with these transactions, K.V. Mart Co. will enter into a seven year
supply agreement with the Company whereunder K.V. Mart Co. will be required to
purchase a substantial portion of its merchandise requirements from the Company.
The supply agreement will be subject to earlier termination in certain
situations.
The Company guarantees annual rent and certain other obligations of Stump's
Market, Inc., of which director James R. Stump is the President and a
shareholder, as leasee under a lease of store premises located in San Diego,
California. Annual rent under the lease is $26,325, and the lease term expires
in May 1998. The Company also guaranteed annual rent and certain other
obligations of Stump's Market, Inc. as lessee under a lease of store premises at
a second location in San Diego, California. Annual rent under this lease was
$16,350, and the lease term expired in April 1995.
In fiscal 1994, Grocers Capital Company ("GCC"), a subsidiary, acquired
25,000 shares of preferred stock of SavMax Foods, Inc. ("SavMax"), of which
director Michael A. Webb is the President and a shareholder. The purchase price
was $100 per share. At the time, GCC owned 40,000 shares of preferred stock of
SavMax which it acquired in fiscal 1992. As part of the new purchase of
preferred stock, the annual cumulative dividend on the 65,000 shares of
preferred stock owned by GCC was increased from $8.25 per share to $8.50 per
share, payable quarterly. Mandatory partial redemption of this stock at a price
of $100 per share began in 1994 and will continue annually thereafter for eight
years, at which time the stock is to be completely retired. GCC also purchased
from Mr. Webb and another member of his immediate family, 10% of the common
stock of SavMax for a price of $2.5 million. In connection with this purchase,
Mr. Webb,
46
<PAGE>
SavMax and GCC agreed that GCC will have certain preemptive rights to acquire
additional common shares, rights to have its common shares included
proportionately in any transfer of common shares by Mr. Webb, and rights to have
its common shares included in certain registered public offerings of common
stock which may be made by SavMax. In addition, GCC has certain rights, at its
option, to require that SavMax repurchase GCC's shares, and SavMax has certain
rights, at its option, to repurchase GCC's shares. In connection with these
transactions, SavMax entered into a seven year supply agreement with the Company
(to replace an existing supply agreement) whereunder SavMax is required to
purchase a substantial portion of its merchandise requirements from the Company.
The supply agreement is subject to earlier termination in certain situations.
The Company guarantees certain obligations of SavMax under three leases of
market premises located in Sacramento, San Jose and San Leandro, California.
Each of these guaranties relates to the obligation of SavMax to pay base rent,
common area maintenance charges, real estate taxes and insurance during the
initial 20 year terms of these leases. However, the guaranties are such that the
Company's obligation under each of them is limited to an amount equal to sixty
monthly payments (which need not be consecutive) of the obligations guaranteed.
Base rent is $40,482 per month under the Sacramento lease and $56,756 per month
under the San Jose lease, in each case subject to a 7 1/2% increase at the end
of each five years. Base rent is $42,454 per month under the San Leandro lease,
subject to a 10% increase at the end of each five years. In consideration of
these guaranties, the Company receives a monthly fee from SavMax equal to 5% of
the base monthly rent under these leases.
The Company guarantees certain obligations of SavMax under two leases of
market premises located in Ceres and Vacaville, California. The leases have
initial terms expiring in January 2005 and April 2007, respectively. Base
monthly rent under the Ceres lease is presently $32,175, increasing to $34,425
in January of 2000. Base monthly rent under the Vacaville lease is presently
$29,167, increasing by $25,000 per year in April of 1997 and 2002. In
consideration of these guaranties, the Company will receive a monthly fee from
SavMax equal to 5% of the base monthly rent under these leases.
The Company leases certain market premises located in Sacramento and
Vallejo, California, and in turn subleases these premises to SavMax. The
Sacramento sublease provides for a term of 20 years and the Vallejo sublease
provides for a term of 10 years. Neither sublease contains options to extend,
although SavMax has the option under each sublease to acquire the Company's
interest under its lease on the condition that the Company is released from all
further liability thereunder. The term of the Sacramento sublease commenced in
September of 1994. The Sacramento premises consist of approximately 50,000
square feet and annual base rent under the sublease is at the following per
square foot rates: $8.00 during years 1 and 2; $8.40 during years 3 through 5;
$8.82 during years 6 through 10; $9.26 during years 11 through 15; and, $9.72
during years 16 through 20. The term of the Vallejo sublease commenced in
September of 1995 and annual base rent under the sublease is $279,000. In
addition, under each of these subleases, the Company receives monthly an
additional amount equal to 5% of the base monthly rent.
The Company is proposing to lease certain market premises to be constructed
and located in Los Banos, California, which it in turn will sublease to Maxco
Foods, Inc. ("Maxco"), a corporation of which SavMax is a shareholder. The
sublease to Maxco would provide for a term of 20 years, without options to
extend, although Maxco will have the option to acquire the Company's interest
under its lease on the condition that the Company is released from all further
liability thereunder. The premises will consist of approximately 50,000 square
feet and annual base rental under the sublease is as follows: $390,000 during
years 1 through 5; $424,125 during years 6 through 10; $461,236 during years 11
through 15; and, $501,594 during years 16 through 20. In addition, the Company
will receive monthly an additional amount equal to 5% of the base monthly rent.
In connection with this transaction, Maxco will enter into a seven year supply
agreement with the Company whereunder Maxco would be required to purchase a
substantial portion of its merchandise requirements from the Company. The supply
agreement will be subject to earlier termination in certain situations.
With respect to the Los Banos sublease, GCC is proposing to make a seven
year equipment loan in the amount of $1,620,000, a five year inventory loan in
the amount of $675,000 and a five year deposit fund loan in the amount of
$350,000 to Maxco. The equipment and inventory loans will bear interest at prime
plus 3%,
47
<PAGE>
and the deposit fund loan will bear interest at prime plus 2%. The loans will be
secured by a security interest in all of the equipment, fixtures and inventory
at the Los Banos store and by personal guarantees. In addition, in certain
events, SavMax is required to assume the obligations of Maxco under the loans,
the sublease of the Los Banos premises and the obligations of Maxco under its
supply agreement with the Company.
EXECUTIVE OFFICER COMPENSATION
The following table sets forth information respecting the compensation paid
during the Company's last three fiscal years to the President and Chief
Executive Officer (CEO) and to certain other executive officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------------------------------------
OTHER
FISCAL ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($) COMPENSATION($) COMPENSATION($)
- ------------------------------ ------ ------------ -------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Alfred A. Plamann 1995 322,150 205 24,290(3)
President & CEO 1994 236,827 310 31,431
1993 164,800 25,419
Donald W. Dill(2) 1995 147,047 167 175,169(4)
Senior Vice President 1994 163,366 576 38,127
1993 153,346 1,016 37,392
Daniel T. Bane(2) 1995 200,000 195
Senior Vice President & CFO 1994 21,539
1993 1,231(5)
Charles J. Pilliter 1995 172,000 127 13,174(6)
Senior Vice President 1994 167,577 188 20,591
1993 151,924 18,241
Donald G. Grose 1995 147,000 357 11,232(7)
Senior Vice President 1994 143,760 438 31,700
1993 135,116 955 30,372
<FN>
- ------------------------
(1) It should be noted that while the table presents salary information on a
fiscal year basis, salary is determined by the Company on a calendar year
basis. Thus, salary information with respect to any given fiscal year
reflects salary attributable to portions of two calendar year salary
periods of the Company.
(2) Mr. Dill retired July 27, 1995 and Mr. Bane joined the Company July 26,
1994.
(3) Consists of a $6,392 Company contribution to the Company's Employees'
Sheltered Savings Plan, and a $17,898 Company contribution to the Company's
Employees' Excess Benefit Plan and Supplemental Deferred Compensation Plan.
(4) Consists of $162,000 in severance benefits (representing 52 weeks of salary
paid in accordance with the Company's past practices), a $3,466 Company
contribution to the Company's Employees' Sheltered Savings Plan, and a
$9,703 Company contribution to the Company's Employees' Excess Benefit Plan
and Supplemental Deferred Compensation Plan.
(5) Consists of a $385 Company contribution to the Company's Employees'
Sheltered Savings Plan, and a $846 Company contribution to the Company's
Employees' Excess Benefit Plan and Supplemental Deferred Compensation Plan.
(6) Consists of a $3,467 Company contribution to the Company's Employees'
Sheltered Savings Plan, and a $9,707 Company contribution to the Company's
Employee Excess Benefit and Supplemental Deferred Compensation Plan.
</TABLE>
48
<PAGE>
<TABLE>
<S> <C>
(7) Consists of a $7,158 Company contribution to the Company's Employees'
Sheltered Savings Plan, and a $4,074 Company contribution to the Company's
Employees' Excess Benefit Plan and Supplemental Deferred Compensation Plan.
</TABLE>
In September 1994, the Board of Directors authorized a new supplemental
executive pension plan (effective January 4, 1995) which provides retirement
income based on each participant's final salary and years of service with the
Company. The plan, called the Company's Executive Salary Protection Plan ("ESPP
II"), provides additional post-termination retirement income based on each
participant's final salary and years of service with the Company. The funding of
this benefit will be facilitated through the purchase of life insurance
policies, the premiums of which will be paid by the Company and participant
contributions. The Company also has a defined benefit pension plan covering its
non-union and executive employees. Benefits under the defined benefit plan are
equal to credited service times the sum of 95% of earnings up to the covered
compensation amount plus 1.45% of earnings in excess of the covered compensation
amount. The covered compensation is based on IRS Tables.
ESPP II supersedes and replaces the Executive Salary Protection Plan I
("ESPP I"). Under ESPP I, Certified purchased life insurance policies for
certain officers. Upon reaching age 65 (or upon termination, if earlier), the
employee was given the cash surrender value of the policy, plus any additional
income taxes incurred by the employee as a result of such distribution.
The following table sets forth the estimated annual benefits under the
defined benefit plan and the ESPP II plan which qualifying officers with
selected years of service would receive if they had retired on September 2, 1995
at the age of 65.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
----------------------------------------------------------------
REMUNERATION 5 YEARS 10 YEARS 15 YEARS 20 YEARS 25 YEARS 33 YEARS
- ------------------------------------------------ --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
$100,000...................................... $ 26,008 $ 52,016 $ 68,024 $ 69,032 $ 70,040 $ 71,653
125,000....................................... 32,530 65,060 85,090 86,370 87,650 89,697
150,000....................................... 39,052 78,104 89,455 91,007 92,559 95,042
175,000....................................... 45,302 87,904 89,455 91,007 92,559 95,042
200,000....................................... 51,552 87,904 89,455 91,007 92,559 95,042
225,000....................................... 57,802 87,904 89,455 91,007 92,559 95,042
250,000....................................... 64,052 87,904 89,455 91,007 92,559 95,042
300,000....................................... 76,552 87,904 89,455 91,007 92,559 95,042
350,000....................................... 86,352 87,904 89,455 91,007 92,559 95,042
400,000....................................... 86,352 87,904 89,455 91,007 92,559 95,042
450,000....................................... 86,352 87,904 89,455 91,007 92,559 95,042
</TABLE>
The Company's ESPP II is designed to provide a retirement benefit up to 65%
of a participant's final compensation, based on a formula which considers an
executive's final compensation and years of service. Remuneration under ESPP II
is based upon an executive's highest annual base wage during the previous three
completed years, which includes his or her annual salary as determined by the
Board of Directors plus an automobile allowance with a 4% annual increase. The
benefit is subject to an offset of the annual benefit which would be received
from the defined benefit plan, calculated as a single life annuity at age
sixty-two (62). To qualify for participation in the benefit, the executive must
complete three years of service as an officer elected by the Board of Directors
of the Company. Executives will vest at a rate of 5% per year with all years of
continuous service credited. The ESPP II annual benefit upon retirement for
calendar 1995 shall not exceed $84,800 and will be paid over a 15-year certain
benefit. The benefit will increase annually thereafter at the rate of 6%. Lesser
amounts are payable if the executive retires before age sixty-five (65). The
maximum annual amount payable by years of service is reflected within the table
at the compensation level of $450,000. As of September 2, 1995, credited years
of service for named officers are: Mr. Plamann, 6 years; Mr. Bane, 1 year; Mr.
Dill, 37 years; Mr. Gross, 14 years; and Mr. Pilliter, 19 years.
49
<PAGE>
DIRECTOR COMPENSATION
Each director receives a fee of $300 for each regular board meeting
attended, $100 for each committee meeting attended and $100 for attendance at
each board meeting of a subsidiary of the Company on which the director serves.
In addition, directors are reimbursed for Company related expenses.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL SHAREHOLDERS
As of November 15, 1995, the only shareholders known by the Company to own
beneficially more than 5% of the outstanding Class B Shares of the Company were
The Boys Markets, Inc., Cala Co., Bay Area Warehouse Stores, Inc., Alpha Beta
Company and Ralphs Grocery Co., 777 South Harbor Boulevard, La Habra, California
90631 (33,554 Class B Shares or approximately 8.72% of the outstanding Class B
Shares; The Boys Markets, Inc., Cala Co., Alpha Beta Company and Bay Area
Warehouse Stores Inc. are wholly-owned by Ralphs Grocery Co. which is in turn
wholly-owned by The Yucaipa Companies, 10000 Santa Monica Boulevard, Los
Angeles, California 90067) and Hughes Markets, Inc., 14005 Live Oak Avenue,
Irwindale, California 91706 (30,346 Class B Shares or approximately 7.89% of the
outstanding Class B Shares).
The following table sets forth, as of November 15, 1995, the name of each
director of the Company, his position with and name of the member-patron, and
the amount of Class A Shares and Class B Shares of the Company owned by the
member-patron.
<TABLE>
<CAPTION>
SHARES OWNED
--------------------------------------------------
CLASS A SHARES CLASS B SHARES
-------------------------- ----------------------
NAME OF DIRECTOR NO. % OF TOTAL NO. % OF TOTAL
AND MEMBER-PATRON SHARES OUTSTANDING SHARES OUTSTANDING
- ---------------------------------------------------------------------- ----------- ------------- --------- -----------
<S> <C> <C> <C> <C>
Louis A. Amen;
President, Super A Foods, Inc. ..................................... 100 0.20% 9,850 2.56%
John Berberian;
President, Berberian Enterprises, Inc. ............................. 100 0.20% 7,615 1.98%
Gene A. Fulton;
President-Owner, Jensen's Complete Shopping, Inc. .................. 100 0.20% 1,555 0.40%
Lyle A. Hughes;
General Manager, Yucaipa Trading Co., Inc.(1)....................... 100 0.20% 694 0.18%
Roger K. Hughes;
Chairman and Chief Executive Officer,
Hughes Markets, Inc.(1)............................................. 100 0.20% 30,346 7.89%
Darioush Khaledi;
Chairman of the Board and Chief Executive Officer,
K.V. Mart Co. ...................................................... 100 0.20% 13,796 3.59%
Mark Kidd;
President, Mar-Val Food Stores, Inc................................. 100 0.20% 1,787 0.46%
Willard R. MacAloney;
President and Chief Executive Officer, Mac Ber, Inc. ............... 100 0.20% 2,523 0.66%
Jay McCormack;
Owner-Operator, Alamo Market(2)..................................... 100 0.20% 732 0.19%
Morrie Notrica;
President and Chief Operating Officer, Joe Notrica, Inc............. 100 0.20% 8,148 2.12%
Michael A. Provenzano;
President, Pro & Sons, Inc. ........................................ 100 0.20% 672 0.17%
Allan Scharn;
President, Gelson's Markets(3)...................................... 100 0.20% 7,485 1.95%
</TABLE>
50
<PAGE>
<TABLE>
<CAPTION>
SHARES OWNED
--------------------------------------------------
CLASS A SHARES CLASS B SHARES
-------------------------- ----------------------
NAME OF DIRECTOR NO. % OF TOTAL NO. % OF TOTAL
AND MEMBER-PATRON SHARES OUTSTANDING SHARES OUTSTANDING
- ---------------------------------------------------------------------- ----------- ------------- --------- -----------
<S> <C> <C> <C> <C>
James R. Stump;
President, Stump's Market, Inc...................................... 100 0.20% 1,866 0.48%
Michael A. Webb;
President and Chief Executive Officer, SavMax Foods, Inc............ 100 0.20% 8,410 2.19%
Kenneth Young;
Vice President, Jack Young's Supermarkets(4) ....................... 100 0.20% 2,660 0.69%
----- ------ --------- -----------
1,500 3.00% 98,139 25.51%
----- ------ --------- -----------
----- ------ --------- -----------
<FN>
- ------------------------
(1) Messrs. Lyle A. Hughes and Roger K. Hughes are unrelated.
(2) Mr. McCormack also is affiliated with Glen Avon Food, Inc. which owns 100
Class A Shares (0.20% of the outstanding class of shares) and 336 Class B
Shares (0.01% of the outstanding class of shares) and Yucaipa Trading Co.,
Inc. which owns 100 Class A Shares (0.20% of the outstanding class of
shares) and 694 Class B Shares (0.18% of the outstanding class of shares).
(3) These shares are owned by Arden Mayfair, Inc., the parent company of
Gelson's Markets.
(4) Mr. Young also is affiliated with Bakersfield Food City Inc. dba Young's
Markets which owns 100 Class A Shares (0.20% of the outstanding class of
shares) and 355 Class B Shares (0.01% of the outstanding class of shares).
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
All firms with which directors are affiliated, as members of the Company,
purchase groceries, related products and store equipment from the Company in the
ordinary course of business at prices and on terms available to members
generally. As members, firms with which directors are affiliated, may receive
benefits for which all members are eligible, including patronage dividends,
allowances and retail support services. See, "Item 1. BUSINESS" for a general
description of benefits and services available to patrons. One customer
accounted for in excess of 5% of the Company's consolidated sales during fiscal
1995. Ralphs Grocery Co. together with its affiliated companies, accounted for a
combined total of approximately 9.5%. No other director of the Company (nor the
firms with which such director is affiliated) accounted for in excess of 5% of
the Company's consolidated sales during fiscal 1995.
In September 1992, the Company guaranteed the obligations of Mar-Val Food
Stores, Inc., of which director Mark Kidd is the President and a shareholder,
under a lease of market premises located in Valley Springs, California. The
guarantee is of the obligations of Mar-Val Food Stores, Inc. to pay base rent,
common area costs, real estate taxes and insurance during the initial fifteen
year term of the lease. Base rent under the lease is $10,080 per month. The
Company's total obligation under the guarantee, however, is limited to the sum
of $736,800. In consideration of its guarantee, the Company receives a monthly
fee from Mar-Val Food Store, Inc. equal to 5% of the base monthly rent under the
lease.
The Company leases its produce warehouse to Joe Notrica, Inc., of which
director Morrie Notrica is the President and a shareholder. The lease is for a
term of five years expiring in November 1998 and contains an option to extend
for an additional five year period. Monthly rent during the initial term is
$24,000. If the option to extend is exercised, rent during the option period
will be the lesser of fair rental value or the monthly rent during the initial
term as adjusted to reflect the change in the Customer Price Index during the
initial term.
Cala Co. (a patron affiliated with Alpha Beta Company) acquired the stock of
Bell Markets, Inc. in June 1989. The Company guaranteed the payment by Cala Co.
of certain promissory notes in favor of the selling shareholders. The promissory
notes mature in June 1996 and total $8 million; however, the Company's guaranty
obligation is limited to $4 million. In addition, and in connection with the
acquisition, the Company guaranteed the lease obligations of Bell Markets, Inc.
during a 20-year period under a lease relating to two
51
<PAGE>
retail grocery stores located in San Francisco, California. Annual rent under
the lease is $327,019. In the event the Company's guaranty is ever called upon,
the Company has the right to receive an assignment of the lease relating to the
locations. Concurrently with the foregoing transactions, Bell Markets, Inc.
entered into a 5-year agreement to purchase a substantial portion of its
merchandise requirements from the Company.
Grocers General Merchandise Company ("GM"), a subsidiary, and Food 4 Less
GM, Inc. ("F4LGM"), an indirect subsidiary of Food 4 Less Supermarkets, Inc.,
are parties to a joint venture agreement. Under the agreement, GM and F4LGM are
partners in a joint venture partnership known as Golden Alliance Distribution
("GAD"). The partnership was formed for the purpose of providing for the shared
use of the Company's general merchandise warehouse located in Fresno,
California, and each of the partners has entered into a supply agreement with
Golden Alliance Distribution providing for the purchase of general merchandise
products from Golden Alliance Distribution.
The Company guarantees certain obligations under a sublease of market
premises located in Pasadena, California, and under which Berberian Enterprises,
Inc., of which Director John Berberian is the President and a shareholder, is
the sublessor. The guaranty is of the obligations of the sublessee to pay
minimum rent, common area costs, real estate taxes and insurance during the
first seven years of the term of the sublease, which commenced in September
1995. Minimum rent under the sublease is $10,000 per month. In consideration of
its guaranty, the Company receives a monthly fee from the sublessee equal to 5%
of the monthly amounts guaranteed.
On February 1, 1995, GCC made a loan of $69,000 to Corwin J. Karaffa, the
Company's Vice President-Distribution. The loan was for the purpose of assisting
Mr. Karaffa in acquiring a home in connection with his becoming employed by the
Company. The loan bears interest at 8% per annum and is secured by a second deed
of trust on the home. The loan has a term of eight years, with interest only
payable during the first five years.
Certain other transactions involving other directors of the Company are
described in Item 11 under the caption "Compensation Committee Interlocks and
Insider Participation."
52
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) Financial Statements
Report of Independent Accountants.
Consolidated Balance Sheets as of September 2, 1995 and September 3,
1994.
Consolidated Statements of Earnings for the Fiscal Years Ended September
2, 1995, September 3, 1994, and August 28, 1993.
Consolidated Statements of Shareholders' Equity for the Fiscal Years
Ended September 2, 1995, September 3, 1994, and August 28, 1993.
Consolidated Statements of Cash Flows for the Fiscal Years Ended
September 2, 1995, September 3, 1994, and August 28, 1993.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fiscal year ended September
2, 1995.
(c) Exhibits
3.1 Articles of Incorporation of the Registrant (as amended through June
21, 1994) (incorporated by reference to Exhibit 3.1 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
September 3, 1994, File No. 0-10815).
3.2 Bylaws of the Registrant (as amended through June 21, 1994)
(incorporated by reference to Exhibit 4.2 to Post-Effective Amendment
No. 6 to Form S-2 Registration Statement of the Registrant filed on
December 15, 1994, File No. 33-38152).
4.1 Retail Grocer Application and Agreement for Continuing Service
Affiliation With Certified Grocers of California, LTD. And Pledge
Agreement (incorporated by reference to Exhibit 4.7 to Amendment No. 2
to Form S-1 Registration Statement of the Registrant filed on December
31, 1981, File No. 2-70069).
4.2 Retail Grocer Application And Agreement For Service Affiliation With
And The Purchase Of Shares Of Certified Grocers Of California, LTD.
And Pledge Agreement (incorporated by reference to Exhibit 4.2 to
Post-Effective Amendment No. 7 to Form S-2 Registration Statement of
the Registrant filed on December 13, 1989, File No. 33-19284).
4.3 Agreement respecting directors' shares (incorporated by reference to
Exhibit 4.9 to Amendment No. 2 to Form S-1 Registration Statement of
the Registrant filed on December 31, 1981, File No. 2-70069).
4.4 Subordination Agreement (Existing Member-Patron) (incorporated by
reference to Exhibit 4.4 to Post-Effective Amendment No. 4 to Form S-2
Registration Statement of the Registrant filed on July 15, 1988, File
No. 33-19284).
4.5 Subordination Agreement (Existing Associate Patron) (incorporated by
reference to Exhibit 4.5 to Post-Effective Amendment No. 4 to Form S-2
Registration Statement of the Registrant filed on July 15, 1988, File
No. 33-19284).
4.6 Subordination Agreement (New Member-Patron) (incorporated by reference
to Exhibit 4.6 to Post-Effective Amendment No. 4 to Form S-2
Registration Statement of the Registrant filed on July 15, 1988, File
No. 33-19284).
4.7 Subordination Agreement (New Associate Patron) (incorporated by
reference to Exhibit 4.7 to Post-Effective Amendment No. 4 to Form S-2
Registration Statement of the Registrant filed on July 15, 1988, File
No. 33-19284).
53
<PAGE>
<TABLE>
<C> <S>
4.8 Form of Class A Share Certificate (incorporated by reference to
Exhibit 4.5 to Post-Effective Amendment No. 6 to Form S-2 Registration
Statement of the Registrant filed on December 15, 1994, File No.
33-38152).
4.9 Form of Class B Share Certificate (incorporated by reference to
Exhibit 4.6 to Post-Effective Amendment No. 6 to Form S-2 Registration
Statement of the Registrant filed on December 15, 1994, File No.
33-38152).
</TABLE>
4.10.1 Articles FIFTH and SIXTH of the Registrant's Articles of Incorporation
(See Exhibit 3.1).
4.10.2 Article I, Section 5, and Article VII of the Registrant's Bylaws (See
Exhibit 3.2).
4.11 Indenture between the Registrant and First Interstate Bank of
California, as Trustee, relating to $3,000,000 Subordinated Patronage
Dividend Certificates Due December 15, 2000 (incorporated by reference
to Exhibit 4.3 to Amendment No. 1 to Form S-2 Registration Statement
of the Registrant filed on September 27, 1993, File No. 33-68288).
4.12 Indenture between the Registrant and First Interstate Bank of
California, as Trustee, relating to $5,000,000 Subordinated Patronage
Dividend Certificates due December 15, 2001 (incorporated by reference
to Exhibit 4.3 to Form S-2 Registration Statement of the Registrant
filed on October 12, 1994, File No. 33-56005).
4.13 Indenture between the Registrant and First Interstate Bank of
California, as Trustee, relating to $3,000,000 Subordinated Patronage
Dividend Certificates due December 15, 2002 (incorporated by reference
to Exhibit 4.3 to Form S-2 Registration Statement of the Registrant
filed on October 13, 1995, File No. 33-63383).
4.14 $135,000,000 Amended and Restated Loan and Security Agreement dated as
of March 17, 1994 between Certified Grocers of California, Ltd.,
Grocers General Merchandise Company, Grocers Specialty Company, and BT
Commercial Corporation, as agent, Union Bank, as co-agent, and First
National Bank of Boston as co-agent; and Amendment Number One dated as
of November 1, 1994 (incorporated by reference to Exhibit 4.13 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
September 3, 1994, File No. 0-10815).
4.14.1 Amendment Number Two to Amended and Restated Loan and Security
Agreement date as of December 3, 1994, between Certified Grocers of
California, Ltd., Grocers General Merchandise Company, Grocers
Specialty Company, and BT Commercial Corporation, as agent, Union
Bank, as co-agent, and First National Bank of Boston, as co-agent.
4.15 $25,000,000 Credit Agreement Dated as of April 25, 1994, between
Grocers Capital Company and BT Commercial Corporation and National
Cooperative Bank as co-agents; and Amendment Number One Dated as of
August 12, 1994 (incorporated by reference to Exhibit 4.14 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
September 3, 1994, File No. 0-10815).
4.16 Subordinated Note Agreement dated March 27, 1989 between Certified
Grocers of California, Ltd. and Aetna Life Insurance Company regarding
$35,000,000 10.80% subordinated notes due April 1, 1999; and letter
amendment dated January 30, 1992 (incorporated by reference to Exhibit
4.15 to the Registrant's Annual Report on Form 10-K for the fiscal
year ended August 28, 1993 filed on November 26, 1993, File No.
0-10815).
4.16.1 Amendment to Subordinated Note Agreement dated as of March 17, 1994
between Certified Grocers of California, Ltd. and Aetna Life Insurance
Company (incorporated by reference to Exhibit 4.15.1 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
September 3, 1994, File No. 0-10815).
4.17 Note Purchase Agreement dated January 15, 1990 between Certified
Grocers of California, Ltd. and Massachusetts Mutual Life Insurance
Company regarding $20,000,000 9.55% Senior Notes due January 15, 2005;
and Amendment Dated January 30, 1991, First Amendment
54
<PAGE>
<TABLE>
<C> <S>
dated September 4, 1991, and Amendment No. 2 dated October 19, 1993
(incorporated by reference to Exhibit 4.16 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended August 28, 1993 filed on
November 26, 1993, File No. 0-10815).
4.17.1 Amendment No. 3 to Note Purchase Agreement dated as of March 17, 1994,
and Amendment No. 4 to Note Purchase Agreement dated as of September
29, 1994, each between Certified Grocers of California, Ltd. and
Massachusetts Mutual Life Insurance Company (incorporated by reference
to Exhibit 4.16.1 to the Registrant's Annual Report on Form 10-K for
the fiscal year ended September 3, 1994, File No. 0-10815).
4.18 $18,700,000 Loan Agreement dated August 23, 1979 between Certified
Grocers of California, Ltd., First Interstate Bank of California, as
Trustee, and the other Lenders named therein; Secured Promissory Notes
dated August 23, 1979; Deed of Trust and Assignment of Rents dated
August 23, 1979; and, Assignment of Rents and Leases dated August 23,
1979 (incorporated by reference to Exhibit 4.17 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended August 28, 1993
filed on November 26, 1993, File No. 0-10815).
10.1 Comprehensive Amendment to Retirement Plan for Employees of Certified
Grocers of California, Ltd. (incorporated by reference to Exhibit 10.1
to Form S-2 Registration Statement of the Registrant filed on October
12, 1994, File No. 33-56005).
10.2 Incentive Compensation Plan (incorporated by reference to Exhibit 10.2
of the Form S-2 Registration Statement of the Registrant filed on
December 28, 1987, File No. 33-19284).
10.3 Comprehensive Amendment to Certified Grocers of California, Ltd.
Employees' Sheltered Savings Plan (incorporated by reference to
Exhibit 10.3 to the Form S-2 Registration Statement of the Registrant
filed on September 2, 1993, File No. 33-68288).
</TABLE>
10.4 Certified Grocers of California, Ltd., Executive Salary Protection
Plan II ("ESPP II"), Master Plan Document, effective January 4, 1995.
10.5 Master Trust Agreement For Certified Grocers of California, Ltd.
Executive Salary Protection Plan II, dated as of April 28, 1995.
10.6 Certified Grocers of California, Ltd. Executive Insurance Plan
Split-dollar Agreement and Schedule of Executive Officers party
thereto.
10.7 Comprehensive Amendment to Certified Grocers of California, Ltd.
Employees' Excess Benefit Plan (incorporated by reference to Exhibit
10.6.1 to Form S-2 Registration Statement of the Registrant filed on
October 12, 1994, File No. 33-56005).
10.8 Comprehensive Amendment to Certified Grocers of California, Ltd.
Employees' Supplemental Deferred Compensation Plan (incorporated by
reference to Exhibit 10.5.3 to Form S-2 Registration Statement of the
Registrant filed on December 10, 1990, File No. 33-38152).
10.9 Comprehensive Amendment to Certified Grocers of California, Ltd.
Employee Savings Plan (incorporated by reference to Exhibit 10.4 to
Form S-2 Registration Statement of the Registrant filed on September
2, 1993, File No. 33-68288).
10.9.1 First Amendment to Certified Grocers of California, Ltd. Employee
Savings Plan (incorporated by reference to Exhibit 10.4.1 to Form S-2
Registration Statement of the Registrant filed on October 12, 1994,
File No 33-56005).
10.10 Joint Venture Agreement of Golden Alliance Distribution, dated as of
April 8, 1992, between Food 4 Less GM, Inc. and Grocers General
Merchandise Company (incorporated by reference to Exhibit 10.7 to Form
S-2 Registration Statement of the Registrant filed on September 2,
1993. File No. 33-68288.
10.11 Lease, dated as of December 23, 1986, between Cercor Associates and
Grocers Specialty Company (incorporated by reference to Exhibit 10.8
to Form S-2 Registration Statement of the Registrant filed on
September 2, 1993. File No. 33-68288).
55
<PAGE>
<TABLE>
<C> <S>
10.12 Expansion Agreement, dated as of May 1, 1991, and Industrial Lease,
dated as of May 1, 1991, between Dermody Properties and the Registrant
(incorporated by reference to Exhibit 10.9 to Form S-2 Registration
Statement of the Registrant filed on September 2, 1993. File No.
33-68288).
10.12.1 Lease Amendment, dated June 20, 1991, between Dermody Properties and
the Registrant (incorporated by reference to Exhibit 10.9.1 to Form
S-2 Registration Statement of the Registrant filed on September 2,
1993. File No. 33-68288).
10.12.2 Lease Amendment, dated October 18, 1991, between Dermody Properties
and the Registrant (incorporated by reference to Exhibit 10.9.2 to
Form S-2 Registration Statement of the Registrant filed on September
2, 1993. File No. 33-68288).
10.13 Preferred Stock Purchase Agreement by and between Food-4-Less of
Modesto, Inc. and Grocers Capital Company, dated as of July 1, 1992
(incorporated by reference to Exhibit 10.10 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended August 28, 1993 filed on
November 26, 1993, File No. 0-10815).
10.14 Preferred Stock Purchase Agreement by and between SavMax Foods, Inc.
and Grocers Capital Company, dated as of December 17, 1993
(incorporated by reference to Exhibit 10.11 to Post-Effective
Amendment No. 6 to Form S-2 Registration Statement of the Registrant
filed on December 15, 1994, File No. 33-38152).
10.15 Common Stock Purchase Agreement by and between Michale A. Webb and
Grocers Capital Company, dated as of December 17, 1993 (incorporated
by reference to Exhibit 10.12 to Post-Effective Amendment No. 6 to
Form S-2 Registration Statement of the Registrant filed on December
15, 1994, File No. 33-38152).
10.16 Agreement Regarding Common Stock by and between Michale A. Webb,
SavMax Foods, Inc. and Grocers Capital Company, dated as of December
17, 1993 (incorporated by reference to Exhibit 10.13 to Post-Effective
Amendment No. 6 to Form S-2 Registration Statement of the Registrant
filed on December 15, 1994, File No. 33-38152).
10.17 Commercial Lease-Net dated December 6, 1994 between TriNet Essential
Facilities XII and the Registrant.
10.18 Purchase Agreement dated November 21, 1994 between the Registrant and
TriNet Corporate Realty Trust, Inc.
22.1 Subsidiaries of the Registrant.
27. Financial Data Schedule.
</TABLE>
(d) Financial Statement Schedules
All required schedule information is presented in the financial
statements or notes thereto. Other schedule information is either not
applicable or not material.
56
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ ---------- ----------------------
<S> <C> <C>
/s/ WILLARD R. MACALONEY
------------------------------------------- Director November 30, 1995
Willard R. MacAloney
(Chairman of the Board)
/s/ MICHAEL A. WEBB
------------------------------------------- Director November 30, 1995
Michael A. Webb
(1st Vice Chairman)
/s/ DARIOUSH KHALEDI
------------------------------------------- Director November 30, 1995
Darioush Khaledi
(2nd Vice Chairman)
/s/ LOUIS A. AMEN
------------------------------------------- Director November 30, 1995
Louis A. Amen
/s/ JOHN BERBERIAN
------------------------------------------- Director November 30, 1995
John Berberian
------------------------------------------- Director
Gene Fulton
/s/ LYLE A. HUGHES
------------------------------------------- Director November 30, 1995
Lyle A. Hughes
/s/ ROGER K. HUGHES
------------------------------------------- Director November 30, 1995
Roger K. Hughes
/s/ MARK KIDD
------------------------------------------- Director November 30, 1995
Mark Kidd
/s/ JAY MCCORMACK
------------------------------------------- Director November 30, 1995
Jay McCormack
------------------------------------------- Director
Morrie Notrica
------------------------------------------- Director
Michael A. Provenzano
/s/ ALLAN SCHARN
------------------------------------------- Director November 30, 1995
Allan Scharn
</TABLE>
57
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ ---------- ----------------------
<S> <C> <C>
/s/ JAMES R. STUMP
------------------------------------------- Director November 30, 1995
James R. Stump
------------------------------------------- Director
Kenneth Young
</TABLE>
58
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CERTIFIED GROCERS OF CALIFORNIA, LTD.
By /s/ ALFRED A. PLAMANN
------------------------------------
Alfred A. Plamann
President and
Chief Executive Officer
By /s/ DANIEL T. BANE
------------------------------------
Daniel T. Bane
Senior Vice President and
Chief Financial Officer
By /s/ RANDALL G. SCOVILLE
------------------------------------
Randall G. Scoville
Corporate Controller
Date: December 1, 1995
59
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
- ------ ---------------------------------------------------------------------- ----------
<C> <S> <C>
3.1 Articles of Incorporation of the Registrant (as amended through June
21, 1994) (incorporated by reference to Exhibit 3.1 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
September 3, 1994, File No. 0-10815).
3.2 Bylaws of the Registrant (as amended through June 21, 1994)
(incorporated by reference to Exhibit 4.2 to Post-Effective Amendment
No. 6 to Form S-2 Registration Statement of the Registrant filed on
December 15, 1994, File No. 33-38152).
4.1 Retail Grocer Application and Agreement for Continuing Service
Affiliation With Certified Grocers of California, LTD. And Pledge
Agreement (incorporated by reference to Exhibit 4.7 to Amendment No. 2
to Form S-1 Registration Statement of the Registrant filed on December
31, 1981, File No. 2-70069).
4.2 Retail Grocer Application And Agreement For Service Affiliation With
And The Purchase Of Shares Of Certified Grocers Of California, LTD.
And Pledge Agreement (incorporated by reference to Exhibit 4.2 to
Post-Effective Amendment No. 7 to Form S-2 Registration Statement of
the Registrant filed on December 13, 1989, File No. 33-19284).
4.3 Agreement respecting directors' shares (incorporated by reference to
Exhibit 4.9 to Amendment No. 2 to Form S-1 Registration Statement of
the Registrant filed on December 31, 1981, File No. 2-70069).
4.4 Subordination Agreement (Existing Member-Patron) (incorporated by
reference to Exhibit 4.4 to Post-Effective Amendment No. 4 to Form S-2
Registration Statement of the Registrant filed on July 15, 1988, File
No. 33-19284).
4.5 Subordination Agreement (Existing Associate Patron) (incorporated by
reference to Exhibit 4.5 to Post-Effective Amendment No. 4 to Form S-2
Registration Statement of the Registrant filed on July 15, 1988, File
No. 33-19284).
4.6 Subordination Agreement (New Member-Patron) (incorporated by reference
to Exhibit 4.6 to Post-Effective Amendment No. 4 to Form S-2
Registration Statement of the Registrant filed on July 15, 1988, File
No. 33-19284).
4.7 Subordination Agreement (New Associate Patron) (incorporated by
reference to Exhibit 4.7 to Post-Effective Amendment No. 4 to Form S-2
Registration Statement of the Registrant filed on July 15, 1988, File
No. 33-19284).
4.8 Form of Class A Share Certificate (incorporated by reference to
Exhibit 4.5 to Post-Effective Amendment No. 6 to Form S-2 Registration
Statement of the Registrant filed on December 15, 1994, File No.
33-38152).
4.9 Form of Class B Share Certificate (incorporated by reference to
Exhibit 4.6 to Post-Effective Amendment No. 6 to Form S-2 Registration
Statement of the Registrant filed on December 15, 1994, File No.
33-38152).
</TABLE>
4.10.1 Articles FIFTH and SIXTH of the Registrant's Articles of Incorporation
(See Exhibit 3.1).
4.10.2 Article I, Section 5, and Article VII of the Registrant's Bylaws (See
Exhibit 3.2).
4.11 Indenture between the Registrant and First Interstate Bank of
California, as Trustee, relating to $3,000,000 Subordinated Patronage
Dividend Certificates Due December 15, 2000 (incorporated by reference
to Exhibit 4.3 to Amendment No. 1 to Form S-2 Registration Statement
of the Registrant filed on September 27, 1993, File No. 33-68288).
4.12 Indenture between the Registrant and First Interstate Bank of
California, as Trustee, relating to $5,000,000 Subordinated Patronage
Dividend Certificates due December 15, 2001 (incorporated by reference
to Exhibit 4.3 to Form S-2 Registration Statement of the Registrant
filed on October 12, 1994, File No. 33-56005).
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
- ------ ---------------------------------------------------------------------- ----------
<C> <S> <C>
4.13 Indenture between the Registrant and First Interstate Bank of
California, as Trustee, relating to $3,000,000 Subordinated Patronage
Dividend Certificates due December 15, 2002 (incorporated by reference
to Exhibit 4.3 to Form S-2 Registration Statement of the Registrant
filed on October 13, 1995, File No. 33-63383).
4.14 $135,000,000 Amended and Restated Loan and Security Agreement dated as
of March 17, 1994 between Certified Grocers of California, Ltd.,
Grocers General Merchandise Company, Grocers Specialty Company, and BT
Commercial Corporation, as agent, Union Bank, as co-agent, and First
National Bank of Boston as co-agent; and Amendment Number One dated as
of November 1, 1994 (incorporated by reference to Exhibit 4.13 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
September 3, 1994, File No. 0-10815).
4.14.1 Amendment Number Two to Amended and Restated Loan and Security Agree-
ment date as of December 3, 1994, between Certified Grocers of
California, Ltd., Grocers General Merchandise Company, Grocers
Specialty Company, and BT Commercial Corporation, as agent, Union
Bank, as co-agent, and First National Bank of Boston, as co-agent.
4.15 $25,000,000 Credit Agreement Dated as of April 25, 1994, between
Grocers Capital Company and BT Commercial Corporation and National
Cooperative Bank as co-agents; and Amendment Number One Dated as of
August 12, 1994 (incorporated by reference to Exhibit 4.14 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
September 3, 1994, File No. 0-10815).
4.16 Subordinated Note Agreement dated March 27, 1989 between Certified
Grocers of California, Ltd. and Aetna Life Insurance Company regarding
$35,000,000 10.80% subordinated notes due April 1, 1999; and letter
amendment dated January 30, 1992 (incorporated by reference to Exhibit
4.15 to the Registrant's Annual Report on Form 10-K for the fiscal
year ended August 28, 1993 filed on November 26, 1993, File No.
0-10815).
4.16.1 Amendment to Subordinated Note Agreement dated as of March 17, 1994
between Certified Grocers of California, Ltd. and Aetna Life Insurance
Company (incorporated by reference to Exhibit 4.15.1 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
September 3, 1994, File No. 0-10815).
4.17 Note Purchase Agreement dated January 15, 1990 between Certified
Grocers of California, Ltd. and Massachusetts Mutual Life Insurance
Company regarding $20,000,000 9.55% Senior Notes due January 15, 2005;
and Amendment Dated January 30, 1991, First Amendment dated September
4, 1991, and Amendment No. 2 dated October 19, 1993 (incorporated by
reference to Exhibit 4.16 to the Registrant's Annual Report on Form
10-K for the fiscal year ended August 28, 1993 filed on November 26,
1993, File No. 0-10815).
4.17.1 Amendment No. 3 to Note Purchase Agreement dated as of March 17, 1994,
and Amendment No. 4 to Note Purchase Agreement dated as of September
29, 1994, each between Certified Grocers of California, Ltd. and
Massachusetts Mutual Life Insurance Company (incorporated by reference
to Exhibit 4.16.1 to the Registrant's Annual Report on Form 10-K for
the fiscal year ended September 3, 1994, File No. 0-10815).
4.18 $18,700,000 Loan Agreement dated August 23, 1979 between Certified
Grocers of California, Ltd., First Interstate Bank of California, as
Trustee, and the other Lenders named therein; Secured Promissory Notes
dated August 23, 1979; Deed of Trust and Assignment of Rents dated
August 23, 1979; and, Assignment of Rents and Leases dated August 23,
1979 (incorporated by reference to Exhibit 4.17 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended August 28, 1993
filed on November 26, 1993, File No. 0-10815).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
- ------ ---------------------------------------------------------------------- ----------
<C> <S> <C>
10.1 Comprehensive Amendment to Retirement Plan for Employees of Certified
Grocers of California, Ltd. (incorporated by reference to Exhibit 10.1
to Form S-2 Registration Statement of the Registrant filed on October
12, 1994, File No. 33-56005).
10.2 Incentive Compensation Plan (incorporated by reference to Exhibit 10.2
of the Form S-2 Registration Statement of the Registrant filed on
December 28, 1987, File No. 33-19284).
10.3 Comprehensive Amendment to Certified Grocers of California, Ltd.
Employees' Sheltered Savings Plan (incorporated by reference to
Exhibit 10.3 to the Form S-2 Registration Statement of the Registrant
filed on September 2, 1993, File No. 33-68288).
</TABLE>
10.4 Certified Grocers of California, Ltd., Executive Salary Protection
Plan II ("ESPP II"), Master Plan Document, effective January 4, 1995.
10.5 Master Trust Agreement For Certified Grocers of California, Ltd.
Executive Salary Protection Plan II, dated as of April 28, 1995.
10.6 Certified Grocers of California, Ltd. Executive Insurance Plan
Split-dollar Agreement and Schedule of Executive Officers party
thereto.
10.7 Comprehensive Amendment to Certified Grocers of California, Ltd.
Employees' Excess Benefit Plan (incorporated by reference to Exhibit
10.6.1 to Form S-2 Registration Statement of the Registrant filed on
October 12, 1994, File No. 33-56005).
10.8 Comprehensive Amendment to Certified Grocers of California, Ltd.
Employees' Supplemental Deferred Compensation Plan (incorporated by
reference to Exhibit 10.5.3 to Form S-2 Registration Statement of the
Registrant filed on December 10, 1990, File No. 33-38152).
10.9 Comprehensive Amendment to Certified Grocers of California, Ltd.
Employee Savings Plan (incorporated by reference to Exhibit 10.4 to
Form S-2 Registration Statement of the Registrant filed on September
2, 1993, File No. 33-68288).
10.9.1 First Amendment to Certified Grocers of California, Ltd. Employee
Savings Plan (incorporated by reference to Exhibit 10.4.1 to Form S-2
Registration Statement of the Registrant filed on October 12, 1994,
File No 33-56005).
10.10 Joint Venture Agreement of Golden Alliance Distribution, dated as of
April 8, 1992, between Food 4 Less GM, Inc. and Grocers General
Merchandise Company (incorporated by reference to Exhibit 10.7 to Form
S-2 Registration Statement of the Registrant filed on September 2,
1993. File No. 33-68288.
10.11 Lease, dated as of December 23, 1986, between Cercor Associates and
Grocers Specialty Company (incorporated by reference to Exhibit 10.8
to Form S-2 Registration Statement of the Registrant filed on
September 2, 1993. File No. 33-68288).
10.12 Expansion Agreement, dated as of May 1, 1991, and Industrial Lease,
dated as of May 1, 1991, between Dermody Properties and the Registrant
(incorporated by reference to Exhibit 10.9 to Form S-2 Registration
Statement of the Registrant filed on September 2, 1993. File No.
33-68288).
10.12.1 Lease Amendment, dated June 20, 1991, between Dermody Properties and
the Registrant (incorporated by reference to Exhibit 10.9.1 to Form
S-2 Registration Statement of the Registrant filed on September 2,
1993. File No. 33-68288).
10.12.2 Lease Amendment, dated October 18, 1991, between Dermody Properties
and the Registrant (incorporated by reference to Exhibit 10.9.2 to
Form S-2 Registration Statement of the Registrant filed on September
2, 1993. File No. 33-68288).
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
- ------ ---------------------------------------------------------------------- ----------
<C> <S> <C>
10.13 Preferred Stock Purchase Agreement by and between Food-4-Less of
Modesto, Inc. and Grocers Capital Company, dated as of July 1, 1992
(incorporated by reference to Exhibit 10.10 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended August 28, 1993 filed on
November 26, 1993, File No. 0-10815).
10.14 Preferred Stock Purchase Agreement by and between SavMax Foods, Inc.
and Grocers Capital Company, dated as of December 17, 1993
(incorporated by reference to Exhibit 10.11 to Post-Effective
Amendment No. 6 to Form S-2 Registration Statement of the Registrant
filed on December 15, 1994, File No. 33-38152).
10.15 Common Stock Purchase Agreement by and between Michale A. Webb and
Grocers Capital Company, dated as of December 17, 1993 (incorporated
by reference to Exhibit 10.12 to Post-Effective Amendment No. 6 to
Form S-2 Registration Statement of the Registrant filed on December
15, 1994, File No. 33-38152).
10.16 Agreement Regarding Common Stock by and between Michale A. Webb,
SavMax Foods, Inc. and Grocers Capital Company, dated as of December
17, 1993 (incorporated by reference to Exhibit 10.13 to Post-Effective
Amendment No. 6 to Form S-2 Registration Statement of the Registrant
filed on December 15, 1994, File No. 33-38152).
10.17 Commercial Lease-Net dated December 6, 1994 between TriNet Essential
Facilities XII and the Registrant.
10.18 Purchase Agreement dated November 21, 1994 between the Registrant and
TriNet Corporate Realty Trust, Inc.
22.1 Subsidiaries of the Registrant.
27. Financial Data Schedule.
</TABLE>
<PAGE>
AMENDMENT NUMBER TWO
TO
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
This AMENDMENT NUMBER TWO TO AMENDED AND RESTATED LOAN AND SECURITY
AGREEMENT (this "Amendment"), dated as of December 3, 1994, is entered into
by and among CERTIFIED GROCERS OF CALIFORNIA, LTD., a California corporation
("CerGro"), GROCERS GENERAL MERCHANDISE COMPANY, a California corporation
("GGMC"), and GROCERS SPECIALTY COMPANY, a California corporation ("GSC")
(CerGro, GGMC, and GSC are jointly and severally referred to herein as
"Borrower"), on the one hand, and the financial institutions which are
signatories hereto (hereinafter collectively referred to as the "Lenders" and
individually as a "Lender"), BT COMMERCIAL CORPORATION, a Delaware
corporation ("BTCC"), as agent, UNION BANK, a California banking corporation
("Union"), as co-agent and FIRST NATIONAL BANK OF BOSTON, National
Association ("First National"), as co-agent (BTCC, Union and First National
are hereinafter, in such capacities, together with any successors thereto in
such capacities, referred to collectively as "Agents") for Lenders, on the
other hand, in light of the following facts:
RECITALS
A. The parties hereto have previously entered into that certain Amended
and Restated Loan and Security Agreement, dated as of March 17, 1994, as
amended by that certain Amendment Number One to Amended and Restated Loan and
Security Agreement, dated as of November 1, 1994 (collectively, the
"Agreement");
B. The parties hereto desire to amend the Agreement in accordance with
the terms of this Amendment.
AGREEMENT
NOW THEREFORE, the parties hereto agree as follows:
1. DEFINED TERMS. All initially capitalized terms used but not defined
herein shall have the meanings assigned to such terms in the Agreement.
1
<PAGE>
2. AMENDMENT TO SECTION 6 13(a)(iv). Clause (iv) of Section 6.13(a) of
the Agreement is amended in its entirety as follows:
"(iv) a Fixed Charge Coverage Ratio not less than 1.60:1.00 for each
of the first three fiscal quarters of Borrower's fiscal year ending in
1995, and not less than 1.80: 1.00 thereafter."
3. AMENDMENT TO SECTION 6.13(a)(v). Clause (v) of Section 6.13(a) of
the Agreement is amended in its entirety as follows:
"(v) an Interest Charge Coverage Ratio not less than 2.10:1.00 for
each of the first three fiscal quarters of Borrower's fiscal year ending
in 1995, and not less than 2.50: 1.00 thereafter."
4. AMENDMENT TO SECTION 6.13(b)(ii). Clause (ii) of Section 6.13(b) of
the Agreement is amended in its entirety as follows:
"(ii) Borrower's Net Income shall not be less than Zero Dollars
($0) for Borrower's fiscal year ending in 1995, and One Million Dollars
($1,000,000) for each fiscal year thereafter."
5. AMENDMENT FEE. Concurrently with the execution of this Amendment,
Borrower shall pay to BTCC a fee (the "Amendment Fee"), in an amount equal to
one fourth of one percent (0.25%) of the Commitment as in effect the date of
this Amendment, for the account of Lenders, pro-rata in accordance with each
Lender's share of the Commitment; PROVIDED, HOWEVER, that if any Lender fails
to execute this Amendment, such Lender shall forfeit its pro-rata share of
the Amendment Fee which would have been for the account of such Lender and
instead, such pro-rata share of the Amendment Fee shall be refunded to
Borrower.
6. CONDITIONS PRECEDENT. The obligations of Lenders under this Amendment
are subject to and conditioned upon the fulfillment of each and all of the
following conditions precedent:
(a) BTCC shall have received this Amendment duly executed by
Borrower and Required Lenders;
2
<PAGE>
(b) BTCC shall have received an affirmation letter duly executed by
each guarantor under the Guaranties, indicating the consent by each such
guarantor to the execution and delivery by Borrower of this Amendment; and
(c) BTCC shall have received the Amendment Fee.
7. COUNTERPARTS; EFFECTIVENESS. This Amendment may be executed in any
number of counterparts and by different parties on separate counterparts,
each of which when so executed and delivered shall be deemed to be an
original. All such counterparts, taken together, shall constitute but one and
the same Amendment. This Amendment shall become effective upon (i) the
execution of a counterpart of this Amendment by each of CerGro, GGMC and GSC,
and BTCC and Required Lenders, (ii) receipt by BTCC of the Amendment Fee,
(iii) receipt by BTCC of all Agents Expenses incurred in connection with the
negotiation, preparation and execution of this Amendment and (iv) the
fulfillment of all of the conditions set forth in Section 6 hereof.
8. REAFFIRMATION OF THE AGREEMENT. Except as specifically amended by
this Amendment, the Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed at Los Angeles, California as of the date first hereinabove written.
CERTIFIED GROCERS OF CALIFORNIA,
LTD., a California corporation
By /s/ David A. Woodward
-------------------------------------
David A. Woodward
Title: Corporate Secretary--Treasurer
---------------------------------
GROCERS GENERAL MERCHANDISE COMPANY,
a California corporation
By /s/ David A. Woodward
-------------------------------------
David A. Woodward
Title: Corporate Secretary--Treasurer
---------------------------------
3
<PAGE>
GROCERS SPECIALTY COMPANY,
a California corporation
By /s/ David A. Woodward
-------------------------------------
David A. Woodward
Title: Corporate Secretary--Treasurer
---------------------------------
BT COMMERCIAL CORPORATION, a
Delaware corporation, individually
and as Agent
By /s/ TOM VENTLING
-------------------------------------
Title: Sr. VP
---------------------------------
THE FIRST NATIONAL BANK OF BOSTON,
a National Association, individually
and as Co-Agent
By /s/ SUSAN J. MULHOLLAND
-------------------------------------
Title: Division Executive
---------------------------------
UNION BANK, a California banking
corporation, individually and as Co-Agent
By /s/ PATRICK M. CASSIDY
-------------------------------------
Title: Vice President
---------------------------------
4
<PAGE>
DG BANK, a German bank acting through
its New York branch.
By /s/ Robert B. Herber
-------------------------------------
Title Vice President
---------------------------------
By /s/ KAREN A. BRINKMAN
------------------------------------
Title: Vice President
---------------------------------
DRESDNER BANK, AG, Los Angeles agency
and Grand Cayman Branch, as a bank
By /s/ SIDNEY S. JORDAN
------------------------------------
Title: Vice President
---------------------------------
By /s/ DENNIS G. BLANK
------------------------------------
Title: Vice President
---------------------------------
NATIONAL CANADA CORPORATION, a
Delaware corporation
By /s/ MARK LOCKER
------------------------------------
Title: AVP
---------------------------------
By /s/ THOMAS HOPKINS
------------------------------------
Title: Vice President
---------------------------------
5
<PAGE>
SANWA BANK CALIFORNIA, a California
banking corporation
By /s/ MARY KING
-------------------------------------
Title: Vice President
---------------------------------
SANWA BUSINESS CREDIT CORPORATION, a
Delaware corporation
By /s/ VICTOR ALFIRAVIC
------------------------------------
Title Vice President
---------------------------------
THE BANK OF CALIFORNIA, N.A.
By /s/ J.D. WATSON
------------------------------------
Title: Corporate Banking Officer
---------------------------------
THE DAI-ICHI KANGYO BANK, LIMITED, a
Japanese bank acting through its Los
Angeles agency
By /s/ TOMOHIRO NOZAKI
------------------------------------
Title: Senior Vice President
---------------------------------
By
------------------------------------
Title:
---------------------------------
6
<PAGE>
THE SAKURA BANK, LIMITED, a Japanese
bank acting through its Los Angeles
agency
By /s/ FERNANDO BUESA
-------------------------------------
Title: Vice President
---------------------------------
By /s/ OFUSA SATO
------------------------------------
Title: Senior Vice President &
Assistant General Manager
---------------------------------
7
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD.
Executive Salary Protection Plan II (ESPP II)
MASTER PLAN DOCUMENT
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD.
Executive Salary Protection Plan II (ESPP II)
MASTER PLAN DOCUMENT
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
----
ARTICLE 1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 3 Eligibility. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.1 Eligibility. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 4 Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.1 Amounts of Benefits. . . . . . . . . . . . . . . . . . . . . . . . 3
4.2 Amount of Benefits Payable Prior to Age 62. . . . . . . . . . . . 4
4.3 Alternative Forms of Benefit Payments. . . . . . . . . . . . . . . 4
4.4 Commencement of Benefit Payments.. . . . . . . . . . . . . . . . . 5
4.5 Change of Form of Benefit Payments. . . . . . . . . . . . . . . . 5
4.6 Benefit Payments to Beneficiaries. . . . . . . . . . . . . . . . . 5
4.7 Forfeiture of Benefits. . . . . . . . . . . . . . . . . . . . . . 5
4.8 Benefits Unfunded. . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 5 Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.1 Establishment of the Trust. . . . . . . . . . . . . . . . . . . . 6
5.2 Interrelationship of the Plan and the Trust. . . . . . . . . . . . 6
ARTICLE 6 Administration . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6.1 Duties of Administrator. . . . . . . . . . . . . . . . . . . . . . 6
6.2 Claims Procedure. . . . . . . . . . . . . . . . . . . . . . . . . 6
6.3 Finality of Decisions. . . . . . . . . . . . . . . . . . . . . . . 7
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CERTIFIED GROCERS OF CALIFORNIA, LTD.
Executive Salary Protection Plan II (ESPP II)
MASTER PLAN DOCUMENT
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ARTICLE 7 Amendment and Termination. . . . . . . . . . . . . . . . . . . . . 7
7.1 Amendment and Termination. . . . . . . . . . . . . . . . . . . . . 7
7.2 Contractual Obligation.. . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 8 Accelerated Payments . . . . . . . . . . . . . . . . . . . . . . . 7
8.1 Accelerated Distribution in Certain Events.. . . . . . . . . . . . 7
ARTICLE 9 Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
9.1 No Employment Rights.. . . . . . . . . . . . . . . . . . . . . . . 8
9.2 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
9.3 Law Applicable. . . . . . . . . . . . . . . . . . . . . . . . . . 8
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ii
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD.
Executive Salary Protection Plan II (ESPP II)
MASTER PLAN DOCUMENT
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- -------------------------------------------------------------------------------
This agreement executed by CERTIFIED GROCERS OF CALIFORNIA, LTD., a corporation
organized under the laws of the State of California, evidences the terms of the
Certified Grocers of California, Ltd. Executive Salary Protection Plan II
("Plan") that is effective January 4, 1995.
ARTICLE 1
INTRODUCTION
------------
1.1 NAME. The Plan evidenced by the terms hereof shall be known as the
"Certified Grocers of California Ltd. Executive Salary Protection Plan II."
1.2 PURPOSES. Prior hereto the Company had adopted the Executive Salary
Protection Plan ("Plan I"). This Plan supersedes and replaces Plan I for
any participant of Plan I who on the effective date of this Plan was an
employee of the Company and who elects not to continue to participate in
Plan I. In addition to replacing Plan I, this Plan is designed to provide
retirement and other benefits to each eligible Employee and the
beneficiaries of such Employee. The Plan is intended to be a "top hat"
plan providing benefits to a select group of management or highly
compensated employees within the meaning of Section 201(2) of the Employee
Retirement Income Security Act of 1974 ("ERISA").
ARTICLE 2
DEFINITIONS
-----------
When used herein, the following terms shall have the following meanings unless a
different meaning is clearly required by the context of the Plan.
2.1 The "Administrator" shall mean the benefits committee appointed by the
Board to administer the Plan.
2.2 "Beneficiary" means the person or persons designated by the Employee as
beneficiary, or if no beneficiary is so designated, then the Employee's
spouse, or if there is no spouse, then the Employee's estate.
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1
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD.
Executive Salary Protection Plan II (ESPP II)
MASTER PLAN DOCUMENT
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2.3 The "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
2.4 The "Company" shall mean Certified Grocers of California, Ltd., any
corporation following the Company's written approval which subsequently
adopts the Plan as a whole or as to one or more of its divisions, and any
successor corporation which continues the Plan.
2.5 "Employee" shall mean any person who renders services to the Company (or
renders services to any other employer that is a member of a controlled
group under Section 414(b) or 414(c) of the Code of which the Company is a
part) in the status of an employee as that term is defined in Section
3121(d) of the Code.
2.6 "Final Pay" shall mean a Participant's highest annualized base wage within
the three (3) calendar years preceding the Participant's Separation from
Service plus annual car allowance determined as $12,000 for a Separation
from Service occurring in 1994 and increased 4% for each year thereafter.
2.7 "Officer" shall mean any Employee of the Company elected by the Board of
Directors of the Company and serving in the capacity as a Vice President or
higher officer of the Company.
2.8 "Plan" shall mean Certified Grocers of California, Ltd. Executive Salary
Protection Plan II.
2.9 "Participant" shall mean any Employee entitled to receive benefits under
the Plan.
2.10 "Separation from Service" shall mean the date that a Participant ceases to
be an Employee because of a voluntary or involuntary quit, layoff, or
termination or in the event of death.
2.11 The "Retirement Plan" shall mean the Retirement Plan for Employees of
Certified Grocers of California, Ltd.
2.12 "Year of Service" shall mean each full year in which a Participant has been
employed by the Company. For purposes of this definition, a full year of
employment shall be a 365 day period (or 366 day period in the case of a
leap year) that, for the first year of employment, commences on the
Employee's date of hiring and that, for any subsequent
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2
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD.
Executive Salary Protection Plan II (ESPP II)
MASTER PLAN DOCUMENT
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year, commences on an anniversary of that hiring date. If an Employee
incurs a Separation from Service and is subsequently rehired by the
Company, then any employment prior to such rehire date shall be disregarded
for purposes of determining the Employee's Years of Service. Any partial
year of employment shall not be counted. For purposes of this definition,
employment shall be deemed to end six (6) months following the date the
Employee becomes disabled, upon commencement of a long-term disability
benefit from a Company sponsored plan, or upon Separation from Service,
whichever is earliest.
ARTICLE 3
ELIGIBILITY
-----------
3.1 ELIGIBILITY. All Officers who have three or more Years of Service as an
Officer on December 1, 1994, shall be eligible to be a Participant and to
receive benefits under this Plan in accordance with Section 4.1 of this
Plan. Any Officer who thereafter has three (3) Years of Service as an
Officer shall become a Participant on the date on which such Officer
satisfies such requirements. In the event any Officer who has met the
eligibility requirements hereof subsequently is no longer an Officer, such
Employee shall not accrue additional Years of Service for purposes of
calculating the benefit under Section 4.1.
ARTICLE 4
BENEFITS
--------
4.1 AMOUNTS OF BENEFITS. If a Participant incurs a Separation from Service on
or after attaining age 62, he or she will be entitled to a benefit that is
paid in the form of a 15 year term certain with annual payments in an
amount equal to (a) minus (b) as follows:
(a) The product of:
(i) The number of the Participant's Years of Service, including Years
of Service prior to becoming an Officer (but in no event in
excess of thirteen (13) Years of Service);
(ii) The Participant's Final Pay; and
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3
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD.
Executive Salary Protection Plan II (ESPP II)
MASTER PLAN DOCUMENT
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(iii) Five percent (5%).
(b) An amount equal to the annual payment that would be paid if the
Participant qualified for the Normal Retirement Benefit under the
Retirement Plan and he or she elected a single life annuity form of
payment, which annual benefit was actuarially adjusted as though the
benefit were payable at such time as the Participant attains age 62
even if the Participant's actual age at Separation of Service is older
than age 62.
Notwithstanding the foregoing, the benefit calculated under this Section
4.1 in no event will exceed the maximum annual benefit. The maximum annual
benefit for each Participant is the amount in effect during the calendar
year in which the Participant incurs a Separation from Service, and is
$80,000 annually for the year ending in 1995; and is for each subsequent
year an amount that is 106% of the Maximum Limitation for the previous
year.
4.2 AMOUNT OF BENEFITS PAYABLE PRIOR TO AGE 62. If a Participant incurs a
Separation of Service before attaining age 62, he or she will be entitled
to a benefit that is calculated in the manner set forth in Section 4.1
above, but each annual payment shall be reduced by 3% for each year (or pro
rata for any partial year) that benefit payments commence prior to the
Participant attaining age 62.
4.3 ALTERNATIVE FORMS OF BENEFIT PAYMENTS.
(a) Any time prior to one (1) year prior to Separation from Service, a
Participant may elect that the actuarial equivalent of his benefit
under Section 4.1 or 4.2, as applicable, shall be payable in one of
the following forms:
(i) In the form of a period certain for five (5) years; or
(ii) In the form of a period certain for ten (10) years.
For purposes hereof, the actuarial equivalent of a Participant's
benefit shall be determined by using as an interest rate the rate for
immediate annuities used by the Pension Benefit Guaranty Corporation
in determining the present value of the lump
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4
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD.
Executive Salary Protection Plan II (ESPP II)
MASTER PLAN DOCUMENT
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sum equivalent on Plan termination that is in effect on the first day
of the month preceding the month in which the Participant's
distribution commences.
(b) Notwithstanding the provisions of paragraph (a), if a Participant
elects prior to (but within one (1) year of) Separation from Service
to receive benefits in the form as provided in paragraph (a)(i) or
(a)(ii), the Participant's benefit shall be paid in the form elected,
but shall be reduced by ten (10%) percent.
4.4 COMMENCEMENT OF BENEFIT PAYMENTS.
(a) As soon as administratively feasible, but in no event later than
ninety (90) days, following the Participant's Separation from Service,
such Participant shall be entitled to receive the benefits due under
Section 4.1 or 4.2, as applicable.
(b) Notwithstanding the provisions of paragraph (a), any time prior to one
(1) year prior to Separation from Service, a Participant may elect to
defer his benefit commencement to any future date.
4.5 CHANGE OF FORM OF BENEFIT PAYMENTS. At any time following three (3) full
years following the time that a Participant commences to receive benefits
as provided in Section 4.4(a) or (b), a Participant may elect to receive
the amount yet to be paid in the form of a lump sum calculated as the
present value (using as an annual interest rate the same rate as provided
in Section 4.3(b) for determining the actuarial equivalent of a
Participant's benefit) of the benefit yet to be paid to the Participant,
but further reduced by ten (10%) percent.
4.6 BENEFIT PAYMENTS TO BENEFICIARIES.
(a) In the event of the death of a Participant, after benefit payments to
the Participant have begun, the amount remaining to be paid shall be
paid to the Participant's Beneficiaries in the same form, and payable
at the same time, as if the Participant were still living, or as
provided in Section 4.3(b) as soon as administratively feasible
following the Beneficiaries' election.
(b) In the event of the death of a Participant prior to such time as
benefit payments have begun, then the Participant's Beneficiary may
receive benefits as provided in
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5
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD.
Executive Salary Protection Plan II (ESPP II)
MASTER PLAN DOCUMENT
- -------------------------------------------------------------------------------
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Section 4.1 or 4.3(a) if applicable, or as provided in Section 4.3(b)
as soon as administratively feasible following the Participant's
death.
4.7 FORFEITURE OF BENEFITS. If a Participant engages, directly or indirectly
(either as principal, agent, employee, consultant, stockholder, partner, or
in any other individual or representative capacity), in any business
activity within the Company's area of business which is competitive with
any business conducted by the Company as of the date of Separation from
Service with the Company, and if in the opinion of the Administrator the
Participant would reasonably be expected to utilize any confidential
information (such as Company trade secrets including business records,
actual and prospective customer and supplier lists, and the like)
concerning the Company in connection with such business activity, then any
payments due to the Participant from the Plan shall be forfeited, and as a
result neither the Company, the Administrator nor the Trustee shall be
liable to pay the Participant, or any Beneficiary of such Participant, any
benefit under the Plan.
4.8 BENEFITS UNFUNDED. The benefits payable under the Plan shall be paid by
the Company out of its general assets and shall not be otherwise
specifically funded in any manner. Nothing herein contained shall preclude
the creation of a bookkeeping or other reserve for benefits payable through
the use of a Trust.
ARTICLE V
TRUST
-----
5.1 ESTABLISHMENT OF THE TRUST. The Company shall establish the Trust, and
shall transfer over to the Trust such assets as it determines, in its sole
discretion, are necessary to provide for the Company's future liabilities
created under this Plan.
5.2 INTERRELATIONSHIP OF THE PLAN AND THE TRUST. The provisions of the Plan
shall govern the rights of a Participant to receive distributions pursuant
to the Plan. The provisions of the Trust shall govern the rights of the
Participants and the creditors of the Company to the assets transferred to
the Trust. The Company shall at all times remain liable to carry out its
obligations under the Plan. The Company's obligations under the Plan may
be satisfied with Trust assets distributed pursuant to the terms of the
Trust, and any such distribution shall reduce the Company's obligations
under this Agreement.
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6
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD.
Executive Salary Protection Plan II (ESPP II)
MASTER PLAN DOCUMENT
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ARTICLE VI
ADMINISTRATION
--------------
6.1 DUTIES OF ADMINISTRATOR. The Plan shall be administered by the
Administrator in accordance with its terms and purposes. The Administrator
shall determine the amount and manner of payment of the benefits due to or
on behalf of each Employee from the Plan and shall attempt to cause them to
be paid by the Company accordingly.
6.2 CLAIMS PROCEDURE. In case the claim of any Participant or Beneficiary for
benefits under the Plan is denied, the Administrator shall provide adequate
notice in writing to such claimant, setting forth the specific reasons for
such denial. The notice shall be written in a manner calculated to be
understood by the claimant. The Administrator shall afford a Participant
or Beneficiary, whose claim for benefits has been denied, 60 days from the
date notice of such denial is delivered or mailed in which to appeal the
decision in writing to the Administrator. If the Participant or
Beneficiary appeals the decision in writing within 60 days, the
Administrator shall review the written comments and any submissions of the
Participant or Beneficiary and render its decision regarding the appeal,
all within 60 days of such appeal.
6.3 FINALITY OF DECISIONS. The decisions made by and the actions taken by the
Administrator in the administration of the Plan shall be final and
conclusive as to all persons, and the Administrator shall not be subject to
individual liability with respect to the Plan. Without limiting the
generality of this Section 6.2, the Administrator shall have the
discretionary authority to determine eligibility for benefits and to
construe the terms of the Plan.
ARTICLE 7
AMENDMENT AND TERMINATION
-------------------------
7.1 AMENDMENT AND TERMINATION. While the Company intends to maintain the Plan
for as long as necessary, the Company reserves the right to amend and/or
fully or partially terminate the Plan at any time for whatever reasons the
Company may deem appropriate.
7.2 CONTRACTUAL OBLIGATION. Notwithstanding Section 7.1, the Company hereby
makes a contractual commitment to pay the benefits accrued under the Plan.
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7
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD.
Executive Salary Protection Plan II (ESPP II)
MASTER PLAN DOCUMENT
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- -------------------------------------------------------------------------------
ARTICLE 8
ACCELERATED PAYMENTS
--------------------
8.1 ACCELERATED DISTRIBUTION IN CERTAIN EVENTS.
(a) If, for any reason, all or any portion of a Participant's benefit
under this Plan becomes taxable to the Participant prior to receipt, a
Participant may petition the Committee for a distribution of that
portion of his benefit that has become taxable. Upon the grant of
such a petition, the Participant shall receive an amount equal to the
taxable portion of his benefit which amount shall not exceed a
Participant's unpaid Benefit under the Plan. If the petition is
granted, the tax liability distribution shall be made within ninety
(90) days of the date when the Participant's petition is granted.
Such a distribution shall affect and reduce the benefits to be paid
under this Plan.
(b) If the Trust terminates and benefits are distributed from the Trust to
a Participant in accordance with the Trust, the Participant's benefits
under this Plan shall be reduced to the extent of such distributions.
ARTICLE 9
MISCELLANEOUS
-------------
9.1 NO EMPLOYMENT RIGHTS. Nothing contained in the Plan shall be construed as a
contract of employment between the Company and an Employee, or as a right
of any Employee to be continued in the employment of the Company, or as a
limitation of the right of the Company to discharge any of its Employees,
with or without cause.
9.2 ASSIGNMENT. The benefits payable under this Plan to any Participant or
Beneficiary are not subject in any manner to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance and are not subject to any
claim, attachment, garnishment or levy by any creditor.
9.3 LAW APPLICABLE. This Plan shall be governed by the laws of the State of
California, except to the extent pre-empted by federal law.
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8
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD.
Executive Salary Protection Plan II (ESPP II)
MASTER PLAN DOCUMENT
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Executed at Los Angeles, California, this 4 day of January, 1995.
CERTIFIED GROCERS OF CALIFORNIA, LTD.
By: /s/
----------------------------------------------
Alfred A. Plamann, Chief Executive Officer
By: /s/
----------------------------------------------
David A. Woodward, Secretary-Treasurer
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9
<PAGE>
MASTER TRUST AGREEMENT
FOR
CERTIFIED GROCERS OF CALIFORNIA, LTD.
EXECUTIVE SALARY PROTECTION PLAN II
<PAGE>
MASTER TRUST AGREEMENT
Table of Contents
Article Page
I NAME, INTENTIONS, IRREVOCABILITY, DEPOSIT AND DEFINITIONS . . . . . . . . 1
Section 1.1 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Intentions . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.3 Irrevocability; Creditor Claims. . . . . . . . . . . . . . 1
Section 1.4 Initial Deposit. . . . . . . . . . . . . . . . . . . . . . 2
Section 1.5 Additional Definitions . . . . . . . . . . . . . . . . . . 2
Section 1.6 Grantor Trust. . . . . . . . . . . . . . . . . . . . . . . 3
II GENERAL ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.1 Committee Directions . . . . . . . . . . . . . . . . . . . 4
Section 2.2 Administration Upon Change in Control. . . . . . . . . . . 4
Section 2.3 Contributions. . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.4 Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.5 Distribution of Excess Trust Fund to
Employer . . . . . . . . . . . . . . . . . . . . . . . . . 5
III POWERS AND DUTIES OF TRUSTEE. . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.1 Investment Directions. . . . . . . . . . . . . . . . . . . 5
Section 3.2 Investment Upon Change in Control. . . . . . . . . . . . . 6
Section 3.3 Management of Investments. . . . . . . . . . . . . . . . . 6
Section 3.4 Securities . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.5 Substitution . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.6 Distributions. . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.7 Trustee Responsibility Regarding Payments
on Insolvency. . . . . . . . . . . . . . . . . . . . . . .11
Section 3.8 Costs of Administration. . . . . . . . . . . . . . . . . .13
Section 3.9 Trustee Compensation and Expenses. . . . . . . . . . . . .13
Section 3.10 Professional Advice. . . . . . . . . . . . . . . . . . . .13
Section 3.11 Payment on Court Order . . . . . . . . . . . . . . . . . .13
Section 3.12 Protective Provisions. . . . . . . . . . . . . . . . . . .13
Section 3.13 Indemnifications . . . . . . . . . . . . . . . . . . . . .14
IV INSURANCE CONTRACTS . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Section 4.1 Types of Contracts . . . . . . . . . . . . . . . . . . . .14
Section 4.2 Ownership. . . . . . . . . . . . . . . . . . . . . . . . .14
Section 4.3 Restrictions on Trustee's Rights . . . . . . . . . . . . .15
V TRUSTEE'S ACCOUNTS. . . . . . . . . . . . . . . . . . . . . . . . . . . .15
Section 5.1 Records. . . . . . . . . . . . . . . . . . . . . . . . . .15
Section 5.2 Annual Accounting; Final Accounting. . . . . . . . . . . .15
Section 5.3 Valuation. . . . . . . . . . . . . . . . . . . . . . . . .16
Section 5.4 Delegation of Duties . . . . . . . . . . . . . . . . . . .16
VI RESIGNATION OR REMOVAL OF TRUSTEE . . . . . . . . . . . . . . . . . . . .16
Section 6.1 Resignation; Removal . . . . . . . . . . . . . . . . . . .16
i
<PAGE>
MASTER TRUST AGREEMENT
Table of Contents
Article Page
Section 6.2 Successor Trustee. . . . . . . . . . . . . . . . . . . . .17
Section 6.3 Settlement of Accounts . . . . . . . . . . . . . . . . . .17
VII CONTROVERSIES, LEGAL ACTIONS AND COUNSEL. . . . . . . . . . . . . . . . .17
Section 7.1 Controversy. . . . . . . . . . . . . . . . . . . . . . . .17
Section 7.2 Joinder of Parties . . . . . . . . . . . . . . . . . . . .17
Section 7.3 Employment of Counsel. . . . . . . . . . . . . . . . . . .18
VIII INSURERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Section 8.1 Insurer Not a Party. . . . . . . . . . . . . . . . . . . .18
Section 8.2 Authority of Trustee . . . . . . . . . . . . . . . . . . .18
Section 8.3 Contract Ownership . . . . . . . . . . . . . . . . . . . .18
Section 8.4 Limitation of Liability. . . . . . . . . . . . . . . . . .18
Section 8.5 Change of Trustee. . . . . . . . . . . . . . . . . . . . .18
IX AMENDMENT AND TERMINATION . . . . . . . . . . . . . . . . . . . . . . . .19
Section 9.1 Amendment. . . . . . . . . . . . . . . . . . . . . . . . .19
Section 9.2 Final Termination. . . . . . . . . . . . . . . . . . . . .20
X MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Section 10.1 Directions Following Change in Control . . . . . . . . . .20
Section 10.2 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . .21
Section 10.3 Third Persons. . . . . . . . . . . . . . . . . . . . . . .21
Section 10.4 Nonassignability; Nonalienation. . . . . . . . . . . . . .21
Section 10.5 The Plan . . . . . . . . . . . . . . . . . . . . . . . . .21
Section 10.6 Applicable Law . . . . . . . . . . . . . . . . . . . . . .21
Section 10.7 Notices and Directions . . . . . . . . . . . . . . . . . .21
Section 10.8 Successors and Assigns . . . . . . . . . . . . . . . . . .22
Section 10.9 Gender and Number. . . . . . . . . . . . . . . . . . . . .22
Section 10.10 Headings . . . . . . . . . . . . . . . . . . . . . . . . .22
Section 10.11 Counterparts . . . . . . . . . . . . . . . . . . . . . . .22
Section 10.12 Beneficial Interest. . . . . . . . . . . . . . . . . . . .22
Section 10.13 The Trust and Plan . . . . . . . . . . . . . . . . . . . .22
Section 10.14 Effective Date . . . . . . . . . . . . . . . . . . . . . .23
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
ii
<PAGE>
MASTER TRUST AGREEMENT
FOR
CERTIFIED GROCERS OF CALIFORNIA, LTD.
EXECUTIVE SALARY PROTECTION PLAN II
THIS MASTER TRUST AGREEMENT ("Master Trust Agreement") is made and
entered into as of April 28, 1995, between Certified Grocers of California,
Ltd., a California corporation (the "Company"), and Imperial Trust Company, a
California corporation (the "Trustee"), to evidence the master trust (the
"Trust") to be established, pursuant to the Certified Grocers of California,
Ltd. Executive Salary Protection Plan II (the "Plan") of the Company now or
hereafter existing that require the establishment of a trust, for the benefit of
a select group of management and highly compensated employees who contribute
materially to the continued growth, development and business success of the
Company that participate in the Plan.
ARTICLE I
NAME, INTENTIONS, IRREVOCABILITY, DEPOSIT AND DEFINITIONS
Section 1.1 NAME. The name of the Trust created by this Agreement
(the "Trust") shall be:
MASTER TRUST AGREEMENT FOR
CERTIFIED GROCERS OF CALIFORNIA, LTD.
EXECUTIVE SALARY PROTECTION PLAN II
Section 1.2 INTENTIONS. The Company wishes to establish the Trust and
to contribute to the Trust assets that shall be held therein, subject to the
claims of the Company's creditors in the event of their Insolvency, as herein
defined, until paid to Participants and their Beneficiaries in such manner and
at such times as specified in the Plan. It is the intention of the parties that
this Trust shall constitute an unfunded arrangement and shall not affect the
status of the Plan as an unfunded plan maintained for the purpose of providing
supplemental compensation for a select group of management and highly
compensated employees for purposes of Title I of ERISA (as defined below). In
addition, it is the intention of the Company to make contributions to the Trust
to provide a source to assist in the meeting of its liabilities under the Plan.
Section 1.3 IRREVOCABILITY; CREDITOR CLAIMS. The Trust hereby
established shall be irrevocable. Except as otherwise provided in Section 2.5
and 9.2, the principal of the Trust, and any earnings thereon, shall be held
separate and apart from other funds of the Company and shall be used exclusively
for the uses and purposes of the Participants and general creditors of the
Company as herein set forth. The Participants and their Beneficiaries shall
have no preferred claim on, or any beneficial ownership interest in, any assets
of the Trust. Any rights created under the Plan and this Master Trust Agreement
shall be mere unsecured contractual rights of the Participants and their
Beneficiaries against the Company. Any assets held by the Trust will be subject
to the claims of the Company's general creditors under federal and state law in
the event the Company becomes Insolvent (as defined below).
1
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Section 1.4 INITIAL DEPOSIT. The Company hereby deposits with the
Trustee in trust $100, which shall become the principal of the Trust to be held,
administered and disposed of by the Trustee as provided in this Master Trust
Agreement.
Section 1.5 ADDITIONAL DEFINITIONS. In addition to the definitions
set forth above, for purposes hereof, unless otherwise clearly apparent from the
context, the following terms have the following indicated meanings:
(a) "Beneficiary" shall mean one or more persons, trusts,
estates or other entities, designated in accordance with a Plan, that are
entitled to receive benefits under a Plan upon the death of a Participant.
(b) "Board" shall mean the board of directors of the Company.
(c) "Change in Control" shall mean the first to occur of any
of the following events:
(1) Any "person" (as that term is used in Section 13
and 14(d)(2) of the Securities Exchange Act of 1934 ("Exchange Act"))
becomes the beneficial owner (as that term is used in Section 13(d) of
the Exchange Act), directly or indirectly, of 50% or more of the
Company's capital stock entitled to vote in the election of directors;
(2) During any period of not more than two consecutive
years, not including any period prior to the adoption of this Trust,
individuals who at the beginning of such period constitute the board of
directors of the Company, and any new director (other than a director
designated by a person who has entered into an agreement with the Company
to effect a transaction described in clause (1), (3), (4) or (5) of this
Section 1.5(c)) whose election by the board of directors or nomination
for election by the Company's stockholders was approved by a vote of at
least three-fourths (3/4ths) of the directors then still in office who
either were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason
to constitute at least a majority thereof;
(3) The shareholders of the Company approve any
consolidation or merger of the Company other than a consolidation or
merger of the Company in which the holders of the common stock of the
Company immediately prior to the consolidation or merger hold more than
50% of the common stock of the surviving corporation immediately after
the consolidation or merger;
(4) The shareholders of the Company approve any plan
or proposal for the liquidation or dissolution of the Company; or
(5) Substantially all of the assets of the Company are
sold or otherwise transferred to parties that are not within a
"controlled group of corporations" (as defined in Section 1563 of the
Internal Revenue Code of 1986, as amended) in which the Company is a
member.
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(d) "Committee" shall mean the Benefits Committee appointed by
the Company to administer this Trust.
(e) "Director" shall mean any member of the board of directors
of the Company.
(f) "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as may be amended from time to time.
(g) "Insolvent" shall have the meaning set forth in
Section 3.7(a) below.
(h) "IRS" shall mean the Internal Revenue Service.
(i) "Participant" shall mean a person who is a participant in
the Plan in accordance with its terms and conditions.
(j) "Payment Schedule" shall have the meaning set forth in
Section 3.6(b) below.
(k) "Plan" shall mean the Certified Grocers of California,
Ltd. Executive Salary Protection Plan II.
(l) "Plan Year" shall mean the Plan Year chosen for this
Master Trust Agreement by the Board, or if none is chosen, then Plan Year shall
mean the year ending each December 31st.
(m) "Trust Fund" shall mean the assets held by the Trustee
pursuant to the terms of this Master Trust Agreement and for the purposes of the
Plan.
Section 1.6 GRANTOR TRUST. The Trust is intended to be a "grantor
trust," of which the Company are the grantors, within the meaning of subpart E,
part I, subchapter J, chapter 1, subtitle A of the Internal Revenue Code of
1986, as amended, and the Trust shall be construed accordingly.
ARTICLE II
GENERAL ADMINISTRATION
Section 2.1 COMMITTEE DIRECTIONS. Until a Change in Control has
occurred, this Section 2.1 shall be effective and the Committee shall direct the
Trustee as to the administration of the Trust in accordance with the following
provisions:
(a) The Committee shall be identified to the Trustee by a copy
of the resolution of the Board appointing the Committee. In the absence
thereof, the Board shall be the Committee. Persons authorized to give
directions to the Trustee on behalf of the Committee shall be identified to the
Trustee by written notice from the Committee, and such notice shall contain
specimens of the authorized signatures. The Trustee shall be entitled to rely
on such written notice as evidence of the identity and authority of the persons
appointed until
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a written cancellation of the appointment, or the written appointment of a
successor, is received by the Trustee.
(b) Directions by the Committee, or its delegate, to the
Trustee shall be in writing and signed by the Committee or persons authorized by
the Committee, or may be made by such other method as is acceptable to the
Trustee.
(c) The Trustee may conclusively rely upon directions from the
Committee in taking any action with respect to this Master Trust Agreement,
including the making of payments from the Trust Fund and the investment of the
Trust Fund pursuant to this Master Trust Agreement. The Trustee shall have no
liability for actions taken, or for failure to act, on the direction of the
Committee. The Trustee shall have no liability for failure to act in the
absence of proper written directions.
(d) The Trustee may request instructions from the Committee
and shall have no duty to act or liability for failure to act if such
instructions are not forthcoming from the Committee. If requested instructions
are not received within a reasonable time, the Trustee may, but is under no duty
to, act on its own discretion to carry out the provisions of this Master Trust
Agreement in accordance with this Master Trust Agreement and the Plan.
Section 2.2 ADMINISTRATION UPON CHANGE IN CONTROL. In the event of a
Change in Control, the authority of the Committee to administer the Trust and
direct the Trustee, as set forth in Section 2.1 above, shall cease, and the
Trustee shall have complete authority to administer the Trust.
Section 2.3 CONTRIBUTIONS. Except as provided in the Plan, the
Company may at any time, or from time to time, make additional deposits of cash
or other property in trust with the Trustee to augment the principal to be held,
administered and disposed of by the Trustee as provided in this Master Trust
Agreement. Neither the Trustee nor any Participant or Beneficiary shall have
any right to compel such additional deposits. The Trustee shall have no duty to
collect or enforce payment to it of any contributions or to require that any
contributions be made, and shall have no duty to compute any amount to be paid
to it nor to determine whether amounts paid comply with the terms of the Plan.
Section 2.4 TRUST FUND. The contributions received by the Trustee
from the Company shall be held and administered pursuant to the terms of this
Master Trust Agreement as a single fund without distinction between income and
principal and without liability for the payment of interest thereon except as
expressly provided in this Master Trust Agreement. During the term of this
Trust, all income received by the Trust, net of expenses and taxes, shall be
accumulated and reinvested.
Section 2.5 DISTRIBUTION OF EXCESS TRUST FUND TO EMPLOYER. In the
event that the Committee, prior to a Change in Control, or the Trustee in its
sole and absolute discretion, after a Change in Control, determines that the
Trust Fund exceeds 125 percent of the anticipated benefit obligations and
administrative expenses that are to be paid under the Plan, the Trustee, at the
direction of the Committee prior to a Change in Control, or in its sole and
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absolute discretion after a Change in Control, shall distribute to the Company
such excess portion of the Trust Fund.
ARTICLE III
POWERS AND DUTIES OF TRUSTEE
Section 3.1 INVESTMENT DIRECTIONS. Except as provided in Section 3.2,
the Committee shall provide the Trustee with all investment instructions. The
Trustee shall neither affect nor change investments of the Trust Fund, except as
directed in writing by the Committee, and shall have no right, duty or
responsibility to recommend investments or investment changes; provided, that
the Trustee may (i) deposit cash on hand from time to time in any bank savings
account, certificate of deposit, or other instrument creating a deposit
liability for a bank, including the Trustee's own banking department if the
Trustee is a bank, without such prior direction, or (ii) invest in government
securities, bonds with specific ratings, or stock of "Fortune 500" companies,
all within broad investment guidelines established by the Committee from time to
time.
Section 3.2 INVESTMENT UPON CHANGE IN CONTROL. In the event of a
Change in Control, the authority of the Committee to direct investments of the
Trust Fund shall cease and the Trustee shall have complete authority to direct
investments of the Trust Fund. The Chief Executive Officer of the Company shall
notify the Trustee in writing when a Change in Control has occurred. The
Trustee has no duty to inquire whether a Change in Control has occurred and may
rely on notification by the Chief Executive Officer of the Company of a Change
in Control; provided, however, that if any officer, former officer, director or
former director of the Company (other than the Chief Executive Officer of the
Company), or any Participant notifies the Trustee that there has been or there
may be a Change in Control, the Trustee shall have the duty to satisfy itself as
to whether a Change in Control has in fact occurred. The Company shall
indemnify and hold harmless the Trustee for any damages or costs (including
attorneys' fees) that may be incurred because of reliance on the Chief Executive
Officer's notice or lack thereof.
Section 3.3 MANAGEMENT OF INVESTMENTS. Subject to Section 3.1 above,
the Trustee shall have, without exclusion, all powers conferred on the Trustee
by applicable law, unless expressly provided otherwise herein, and all rights
associated with assets of the Trust shall be exercised by the Trustee or the
person designated by the Trustee, and shall in no event be exercisable by or
rest with Participants. The Trustee shall have full power and authority to
invest and reinvest the Trust Fund in any investment permitted by law,
exercising the judgment and care that persons of prudence, discretion and
intelligence would exercise under the circumstances then prevailing, considering
the probable income and safety of their capital, including, without limiting the
generality of the foregoing, the power:
(a) To invest and reinvest the Trust Fund, together with the
income therefrom, in common stock, preferred stock, convertible preferred stock,
mutual funds, bonds, debentures, convertible debentures and bonds, mortgages,
notes, time certificates of deposit, commercial paper and other evidences of
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indebtedness (including those issued by the Trustee or any of its affiliates),
other securities, policies of life insurance, annuity contracts, options to buy
or sell securities or other assets, and other property of any kind (personal,
real, or mixed, and tangible or intangible); provided, however, that in no event
may the Trustee invest in securities (including stock or rights to acquire
stock) or obligations issued by the Company, other than a de minimis amount held
in common investment vehicles in which the Trustee invests;
(b) To deposit or invest all or any part of the assets of the
Trust Fund in savings accounts or certificates of deposit or other deposits
which bear a reasonable interest rate in a bank, including the commercial
department of the Trustee, if such bank is supervised by the United States or
any State;
(c) To hold, manage, improve, repair and control all property,
real or personal, forming part of the Trust Fund and to sell, convey, transfer,
exchange, partition, lease for any term, even extending beyond the duration of
this Trust, and otherwise dispose of the same from time to time in such manner,
for such consideration, and upon such terms and conditions as the Trustee shall
determine;
(d) To have, respecting securities, all the rights, powers and
privileges of an owner, including the power to give proxies, pay assessments and
other sums deemed by the Trustee to be necessary for the protection of the Trust
Fund, to vote any corporate stock either in person or by proxy, with or without
power of substitution, for any purpose; to participate in voting trusts, pooling
agreements, foreclosures, reorganizations, consolidations, mergers and
liquidations, and in connection therewith to deposit securities with and
transfer title to any protective or other committee under such terms as the
Trustee may deem advisable; to exercise or sell stock subscriptions or
conversion rights; and, regardless of any limitation elsewhere in this
instrument relative to investment by the Trustee, to accept and retain as an
investment any securities or other property received through the exercise of any
of the foregoing powers;
(e) To hold in cash, without liability for interest, such
portion of the Trust Fund which, in its discretion, shall be reasonable under
the circumstances, pending investments, or payment of expenses, or the
distribution of benefits;
(f) To take such actions as may be necessary or desirable to
protect the Trust Fund from loss due to the default on mortgages or deeds of
trust held in the Trust including the appointment of agents or trustees in such
other jurisdictions as may seem desirable, to transfer property to such agents
or trustees, to grant such powers as are necessary or desirable to protect the
Trust or its assets, to direct such agents or trustees, or to delegate such
power to direct, and to remove such agents or trustees;
(g) To employ such agents including custodians and counsel as
may be reasonably necessary and to pay them reasonable compensation; to settle,
compromise or abandon all claims and demands in favor of or against the Trust
assets;
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(h) To cause title to property of the Trust to be issued, held
or registered in the individual name of the Trustee, or in the name of its
nominee(s) or agents, or in such form that title will pass by delivery;
(i) To exercise all of the further rights, powers, options and
privileges granted, provided for, or vested in trustees generally under the laws
of the State of California, so that the powers conferred upon the Trustee herein
shall not be in limitation of any authority conferred by law, but shall be in
addition thereto;
(j) To borrow money from any source (including the Trustee)
and to execute promissory notes, mortgages or other obligations and to pledge or
mortgage any Trust assets as security;
(k) To lend certificates representing stocks, bonds, or other
securities to any brokerage or other firm selected by the Trustee;
(l) To institute, compromise and defend actions and
proceedings; to pay or contest any claim; to settle a claim by or against the
Trustee by compromise, arbitration, or otherwise; to release, in whole or in
part, any claim belonging to the Trust to the extent that the claim is
uncollectible;
(m) To use securities depositories or custodians and to allow
such securities as may be held by a depository or custodian to be registered in
the name of such depository or its nominee or in the name of such custodian or
its nominee;
(n) To invest the Trust Fund from time to time in one or more
investment funds, which funds shall be registered under the Investment Company
Act of 1940; and
(o) To do all other acts necessary or desirable for the proper
administration of the Trust Fund, as if the Trustee were the absolute owner
thereof. However, nothing in this section shall be construed to mean the
Trustee assumes any responsibility for the performance of any investment made by
the Trustee in its capacity as trustee under the operations of this Master Trust
Agreement.
Notwithstanding any powers granted to the Trustee pursuant to this Master Trust
Agreement or to applicable law, the Trustee shall not have any power that could
give this Trust the objective of carrying on a business and dividing the gains
therefrom, within the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Internal Revenue Code of
1986, as amended.
Section 3.4 SECURITIES. Voting or other rights in securities shall be
exercised by the person or entity responsible for directing such investments,
and the Trustee shall have no duty to exercise voting or proxy or other rights
relating to any investment managed or directed by the Committee. If any foreign
securities are purchased pursuant to the direction of the Committee, it shall be
the responsibility of the person or entity responsible for directing such
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investments to advise the Trustee in writing of any laws or regulations, either
foreign or domestic, that apply to such foreign securities or to the receipt of
dividends or interest on such securities.
Section 3.5 SUBSTITUTION. Notwithstanding any provision of any Plan
or the Trust to the contrary, the Company shall at all times have the power to
reacquire the Trust Fund by substituting readily marketable securities (other
than stock, an obligation or other security issued by the Company) and/or cash
of an equivalent value and such other property shall, following such
substitution, constitute the Trust Fund.
Section 3.6 DISTRIBUTIONS.
(a) The establishment of the Trust and the payment or delivery
to the Trustee of money or other property shall not vest in any Participant or
Beneficiary any right, title, or interest in and to any assets of the Trust. To
the extent that any Participant or Beneficiary acquires the right to receive
payments under any of the Plan, such right shall be no greater than the right of
an unsecured general creditor of the Company and such Participant or Beneficiary
shall have only the unsecured promise of the Company that such payments shall be
made.
(b) Concurrent with the establishment of this Trust, the
Company shall deliver to the Trustee a schedule (the "Payment Schedule") that
indicates the amounts payable in respect of each Participant (and his or her
Beneficiaries) by the Plan, provides a formula or formulas or other instructions
acceptable to the Trustee for determining the amounts so payable, specifies the
form in which such amount is to be paid (as provided for or available under the
Plan), and the time of commencement for payment of such amounts. The Payment
Schedule shall be updated from time to time as is necessary. Except as
otherwise provided herein, prior to a Change in Control the Trustee shall make
payments to the Participants and their Beneficiaries in accordance with such
Payment Schedule. Despite the foregoing, after a Change in Control, the Trustee
shall make payments in accordance with the terms and provisions of the Plan and
related plan agreements. The Trustee, at the direction of the Committee or,
after a Change in Control, on its own volition, may make any distribution
required to be made by it hereunder by delivering:
(i) Its check payable to the person to whom such
distribution is to be made, to the person, or, if prior to a Change in
Control, to the Company for redelivery to such person; provided that
before a Change in Control, the Committee may direct the Trustee to
deliver one or more lump sum checks payable to the Company, and the
Company shall prepare and deliver individual checks for each Participant
or Beneficiary; or
(ii) Its check payable to an insurer for the benefit of
such person, to the insurer, or, if prior to a Change in Control, to the
Company for redelivery to the insurer; or
(iii) Contracts held on the life of the Participant to
whom or with respect to whom the distribution is being made, to the
Participant
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or Beneficiary, or, if prior to a Change in Control, to the Company for
redelivery to the person to whom such distribution is to be made; or
(iv) If a distribution is being made, in whole or in
part, of other assets, assignments or other appropriate documents or
certificates necessary to effect a transfer of title, to the Participant
or Beneficiary, or, if prior to a Change in Control, to the Company for
redelivery to such person.
(c) If the principal of the Trust, and any earnings thereon,
are not sufficient to make payments of benefits in accordance with the terms of
the Plan, the Company shall make the balance of each such payment as it falls
due. The Trustee shall notify the Company when principal and earnings are not
sufficient.
(d) The Company may make payment of benefits directly to
Participants or their Beneficiaries as they become due under the terms of the
Plan. The Company shall notify the Trustee of their decisions to make payment
of benefits directly prior to the time amounts are payable to Participants or
their Beneficiaries.
(e) Notwithstanding anything contained in this Master Trust
Agreement to the contrary, if at any time the Trust is finally determined by the
IRS not to be a "grantor trust" with the result that the income of the Trust
Fund is not treated as income of the Company pursuant to Sections 671 through
679 of the Internal Revenue Code of 1986, as amended, or if a tax is finally
determined by the IRS to be payable by one or more Participants or Beneficiaries
with respect to any interest in the Plan or the Trust Fund prior to payment of
such interest to such Participant or Beneficiary, then the Trust shall
immediately terminate, the Trustee shall immediately determine each
Participant's share of the Trust Fund in accordance with the Plan, and the
Trustee shall immediately distribute such share in a lump sum to each
Participant or Beneficiary entitled thereto, regardless of whether such
Participant's employment has terminated and regardless of form and time of
payments specified in or pursuant to the Plan. Any remaining assets (less any
expenses or costs due under Sections 3.8 and 3.9 of this Master Trust Agreement)
shall then be paid by the Trustee to the Company in such amounts, and in the
manner instructed by the Committee. Prior to a Change in Control, the Trustee
shall rely solely on the directions of the Committee with respect to the
occurrence of the foregoing events and the resulting distributions to be made,
and the Trustee shall not be responsible for any failure to act in the absence
of such direction.
(f) The Trustee shall make provision for the reporting and
withholding of any federal, state or local taxes that may be required to be
withheld with respect to the payment of benefits pursuant to the terms of the
Plan and shall pay amounts withheld to the appropriate taxing authorities or
determine that such amounts have been reported, withheld and paid by the
Company.
(g) Prior to a Change in Control, payments by the Trustee
shall be delivered or mailed to addresses supplied by the Committee and the
Trustee's obligation to make such payments shall be satisfied upon such delivery
or mailing. Prior to a Change in Control, the Trustee shall have no obligation
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to determine the identity of persons entitled to benefits or their mailing
addresses. After a Change in Control, the Trustee shall have such obligations.
(h) Prior to a Change in Control, the entitlement of a
Participant or his or her Beneficiaries to benefits under the Plan shall be
determined by the Company or such party as they shall designate under the Plan,
and any claim for such benefits shall be considered and reviewed under the
procedures set out in the Plan.
Section 3.7 TRUSTEE RESPONSIBILITY REGARDING PAYMENTS ON INSOLVENCY.
(a) The Trustee shall cease payment of benefits to
Participants and their Beneficiaries if the Company is Insolvent. The Company
shall be considered "Insolvent" for purposes of this Master Trust Agreement if:
(i) the Company is unable to pay its debts as they
become due, or
(ii) the Company is subject to a pending proceeding as a
debtor under the United States Bankruptcy Code.
For purposes of this Section 3.7, the insolvency of a subsidiary will not cause
the Company to be deemed Insolvent.
(b) At all times during the continuance of this Trust, as
provided in Section 1.3 above, the principal and income of the Trust shall be
subject to claims of the general creditors of the Company under federal and
state law as set forth below:
(i) The Board and the Chief Executive Officer of the
Company shall have the duty to inform the Trustee in writing of the
Company's Insolvency. If a person claiming to be a creditor of the
Company alleges in writing to the Trustee that the Company has become
Insolvent, the Trustee shall determine whether the Company is Insolvent
and, pending such determination, the Trustee shall discontinue payment of
benefits to the Company's Participants or their Beneficiaries. Prior to
a Change in Control, the Trustee may conclusively rely on any
determination it receives from the Board or the Chief Executive Officer
of the Company with respect to the Insolvency of the Company.
(ii) Unless the Trustee has actual knowledge of the
Company's Insolvency, or has received notice from the Company or a person
claiming to be a creditor alleging that the Company is Insolvent, the
Trustee shall have no duty to inquire whether the Company is Insolvent.
The Trustee may in all events rely on such evidence concerning the
Company's solvency as may be furnished to the Trustee and that provides
the Trustee with a reasonable basis for making a determination concerning
the Company's solvency. In this regard, the Trustee may rely upon a
letter from the Company's auditors as to the Company's financial status.
(iii) If at any time the Trustee has determined that the
Company is Insolvent, the Trustee shall discontinue payments to the
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Company's Participants or their Beneficiaries, and shall hold the portion
of the assets of the Trust allocable to the Company for the benefit of
the Company's general creditors. Nothing in this Master Trust Agreement
shall in any way diminish any rights of Participants or their
Beneficiaries to pursue their rights as general creditors of the Company
with respect to benefits due under the Plan or otherwise.
(iv) The Trustee shall resume the payment of benefits to
Participants or their Beneficiaries in accordance with this Article 3 of
this Master Trust Agreement only after the Trustee has determined that
the alleged Company is not Insolvent (or is no longer Insolvent).
(c) Provided that there are sufficient assets, if the Trustee
discontinues the payment of benefits from the Trust pursuant to Section 3.7(b)
hereof and subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to
Participants or their Beneficiaries under the terms of the Plan for the period
of such discontinuance, less the aggregate amount of any payments made to
Participants or their Beneficiaries by the Company in lieu of the payments
provided for hereunder during any such period of discontinuance. Prior to a
Change in Control, the Committee shall instruct the Trustee as to such amounts,
and after a Change in Control, the Trustee shall determine such amounts in
accordance with the terms and provisions of the Plan.
Section 3.8 COSTS OF ADMINISTRATION. The Trustee is authorized to
incur reasonable obligations in connection with the administration of the Trust,
including attorneys' fees, administrative fees and appraisal fees. Such
obligations shall be paid by the Company. The Trustee is authorized to pay such
amounts from the Trust Fund if the Company fails to pay them within 60 days of
presentation of a statement of the amounts due.
Section 3.9 TRUSTEE COMPENSATION AND EXPENSES. The Trustee shall be
entitled to reasonable compensation for its services as from time to time agreed
upon between the Trustee and the Company. If the Trustee and the Company fail
to agree upon a compensation, or following a Change in Control, the Trustee
shall be entitled to compensation at a rate equal to the rate charged by the
Trustee for similar services rendered by it during the current fiscal year for
other trusts similar to this Trust. The Trustee shall be entitled to
reimbursement for expenses incurred by it in the performance of its duties as
the Trustee, including reasonable fees for legal counsel. The Trustee's
compensation and expenses shall be paid by the Company. The Trustee is
authorized to withdraw such amounts from the Trust Fund if the Company fails to
pay them within 60 days of presentation of a statement of the amounts due.
Section 3.10 PROFESSIONAL ADVICE. The Company specifically acknowledge
that the Trustee may find it desirable or expedient to retain legal counsel (who
may also be legal counsel for the Company generally) or other professional
advisors to advise it in connection with the exercise of any duty under this
Master Trust Agreement, including, but not limited to, any matter relating to or
following a Change in Control or the Insolvency of the Company. The Trustee
shall be fully protected in acting upon the advice of such legal counsel or
advisors.
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Section 3.11 PAYMENT ON COURT ORDER. To the extent permitted by law,
the Trustee is authorized to make any payments directed by court order in any
action in which the Trustee has been named as a party. The Trustee is not
obligated to defend actions in which the Trustee is named, but shall notify the
Company or Committee of any such action and may tender defense of the action to
the Company, Committee or Participant or Beneficiary whose interest is affected.
The Trustee may in its discretion defend any action in which the Trustee is
named, and any expenses incurred by the Trustee shall be paid by the Company.
The Trustee is authorized to pay such amounts from the Trust Fund if the Company
fail to pay them within sixty (60) days of presentation of a statement of the
amounts due.
Section 3.12 PROTECTIVE PROVISIONS. Notwithstanding any other
provision contained in this Master Trust Agreement to the contrary, the Trustee
shall have no obligation to (i) determine the existence of any conversion,
redemption, exchange, subscription or other right relating to any securities
purchased of which notice was given prior to the purchase of such securities and
shall have no obligation to exercise any such right unless the Trustee is
advised in writing by the Committee both of the existence of the right and the
desired exercise thereof within a reasonable time prior to the expiration of the
right to exercise, or (ii) advance any funds to the Trust. Furthermore, the
Trustee is not a party to the Plan.
Section 3.13 INDEMNIFICATIONS.
(a) The Company shall indemnify and hold the Trustee harmless
from and against all loss or liability (including expenses and reasonable
attorneys' fees) to which it may be subject by reason of its execution of its
duties under this Trust, or by reason of any acts taken in good faith in
accordance with any directions, or acts omitted in good faith due to absence of
directions, from the Company, the Committee or a Participant, unless such loss
or liability is due to the Trustee's gross negligence or willful misconduct.
The indemnity described herein shall be provided by the Company.
(b) In the event that the Trustee is named as a defendant in a
lawsuit or proceeding involving one or more of the Plan or the Trust Fund, the
Trustee shall be entitled to receive on a current basis the indemnity payments
provided for in this Section, provided however that if the final judgment
entered in the lawsuit or proceeding holds that the Trustee is guilty of gross
negligence or willful misconduct with respect to the Trust Fund, the Trustee
shall be required to refund the indemnity payments that it has received.
(c) All releases and indemnities provided in this Master Trust
Agreement shall survive the termination of this Master Trust Agreement.
ARTICLE IV
INSURANCE CONTRACTS
Section 4.1 TYPES OF CONTRACTS. To the extent that the Trustee is
directed by the Committee prior to a Change in Control to invest part or all of
the Trust Fund in insurance contracts, the type and amount thereof shall be
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specified by the Committee. The Trustee shall be under no duty to make inquiry
as to the propriety of the type or amount so specified.
Section 4.2 OWNERSHIP. Each insurance contract issued shall provide
that the Trustee shall be the owner thereof with the power to exercise all
rights, privileges, options and elections granted by or permitted under such
contract or under the rules of the insurer. The exercise by the Trustee of any
incidents of ownership under any contract shall, prior to a Change in Control,
be subject to the direction of the Committee.
Section 4.3 RESTRICTIONS ON TRUSTEE'S RIGHTS. The Trustee shall have
no power to name a beneficiary of the policy other than the Trust, to assign the
policy (as distinct from conversion of the policy to a different form) other
than to a successor Trustee, or to loan to any person the proceeds of any
borrowing against such policy. Despite the foregoing, the Trustee may (i) loan
to the Company the proceeds of any borrowing against an insurance policy held in
the Trust Fund or (ii) assign all, or any portion, of a policy to the Company if
under other provisions of this Master Trust Agreement the Company is entitled to
receive assets from the Trust.
ARTICLE V
TRUSTEE'S ACCOUNTS
Section 5.1 RECORDS. The Trustee shall maintain accurate records and
detailed accounts of all investments, receipts, disbursements and other
transactions hereunder. Such records shall be available at all reasonable times
for inspection by the Company or its authorized representative. The Trustee, at
the direction of the Committee, shall submit to the Committee and to any insurer
such valuations, reports or other information as the Committee may reasonably
require and, in the absence of fraud or bad faith, the valuation of the Trust
Fund by the Trustee shall be conclusive.
Section 5.2 ANNUAL ACCOUNTING; FINAL ACCOUNTING.
(a) Within 60 days following the end of each Plan Year and
within 60 days after the removal or resignation of the Trustee or the
termination of the Trust, the Trustee shall file with the Committee a written
account setting forth a description of all properties purchased and sold, all
receipts, disbursements and other transactions effected by it during the Plan
Year or, in the case of removal, resignation or termination, since the close of
the previous Plan Year, and listing the properties held in the Trust Fund as of
the last day of the Plan Year or other period and indicating their values. Such
values shall be either cost or market as directed by the Committee in accordance
with the terms of the Plan.
(b) The Committee may approve such account either by written
notice of approval delivered to the Trustee or by its failure to express written
objection to such account delivered to the Trustee within 60 days after the date
of which such account was delivered to the Committee.
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(c) The approval by the Committee of an accounting shall be
binding as to all matters embraced in such accounting on all parties to this
Master Trust Agreement and on all Participants and Beneficiaries, to the same
extent as if such accounting had been settled by a judgment or decree of a court
of competent jurisdiction in which the Trustee, the Committee, the Company and
all persons having or claiming any interest in any Plan or the Trust Fund were
made parties.
(d) Despite the foregoing, nothing contained in this Master
Trust Agreement shall deprive the Trustee of the right to have an accounting
judicially settled, if the Trustee, in the Trustee's sole discretion, desires
such a settlement.
Section 5.3 VALUATION. The assets of the Trust Fund shall be valued
at their respective fair market values on the date of valuation, as determined
by the Trustee based upon such sources of information as it may deem reliable,
including, but not limited to, stock market quotations, statistical valuation
services, newspapers of general circulation, financial publications, advice from
investment counselors, brokerage firms or insurance companies, or any
combination of sources. Prior to a Change in Control, the Committee shall
instruct the Trustee as to the value of assets for which market values are not
readily obtainable by the Trustee. If the Committee fails to provide such
values, the Trustee may take whatever action it deems reasonable, including
employment of attorneys, appraisers, life insurance companies or other
professionals, the expense of which shall be an expense of administration of the
Trust Fund and payable by the Company. The Trustee may rely upon information
from the Company, the Committee, appraisers or other sources and shall not incur
any liability for an inaccurate valuation based in good faith upon such
information.
Section 5.4 DELEGATION OF DUTIES. The Company or the Committee, or
both, may at any time employ the Trustee as their agent to perform any act, keep
any records or accounts and make any computations that are required of the
Company or the Committee by this Master Trust Agreement or the Plan. The
Trustee may be compensated for such employment and such employment shall not be
deemed to be contrary to the Trust. Nothing done by the Trustee as such agent
shall change or increase its responsibility or liability as Trustee hereunder.
ARTICLE VI
RESIGNATION OR REMOVAL OF TRUSTEE
Section 6.1 RESIGNATION; REMOVAL. The Trustee may resign at any time
by written notice to the Company, which shall be effective 60 days after receipt
of such notice unless the Company and the Trustee agree otherwise. Prior to a
Change in Control, the Trustee may be removed by the Company on 60 days notice
or upon shorter notice accepted by the Trustee. After a Change in Control, the
Trustee may be removed by a majority vote of the Participants, and if a
Participant is dead, his or her Beneficiaries (who collectively shall have one
vote among them and shall vote in place of such deceased Participant), on 60
days notice or upon shorter notice accepted by the Trustee.
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Section 6.2 SUCCESSOR TRUSTEE. If the Trustee resigns or is removed,
a successor shall be appointed by the Company, in accordance with this
Section, by the effective date of the resignation or removal under Section 6.1
above. The successor shall be a bank, trust company, or similar independent
third party that is granted corporate trustee powers under state law. After the
occurrence of a Change in Control, a successor Trustee may not be appointed
without the consent of a majority of the Participants. If no such appointment
has been made, the Trustee may apply to a court of competent jurisdiction for
appointment of a successor or for instructions. All expenses of the Trustee in
connection with the proceeding shall be allowed as administrative expenses of
the Trust.
Section 6.3 SETTLEMENT OF ACCOUNTS. Upon resignation or removal of
the Trustee and appointment of a successor Trustee, all assets shall
subsequently be transferred to the successor Trustee. The transfer shall be
completed within 90 days after receipt of notice of resignation, removal or
transfer, unless the Company extends the time limit. Upon the transfer of the
assets, the successor Trustee shall succeed to all of the powers and duties
given to the Trustee in this Master Trust Agreement. The resigning or removed
Trustee shall render to the Committee an account in the form and manner and at
the time prescribed in Section 5.2. The approval of such accounting and
discharge of the Trustee shall be as provided in such Section.
ARTICLE VII
CONTROVERSIES, LEGAL ACTIONS AND COUNSEL
Section 7.1 CONTROVERSY. If any controversy arises with respect to
the Trust, the Trustee shall take action as directed by the Committee or, in the
absence of such direction or after a Change in Control, as it deems advisable,
whether by legal proceedings, compromise or otherwise. The Trustee may retain
the funds or property involved without liability pending settlement of the
controversy. The Trustee shall be under no obligation to take any legal action
of whatever nature unless there shall be sufficient property in the Trust to
indemnify the Trustee with respect to any expenses or losses to which it may be
subjected.
Section 7.2 JOINDER OF PARTIES. In any action or other judicial
proceedings affecting the Trust, it shall be necessary to join as parties the
Trustee, the Committee, and the Company. No Participant or other person shall
be entitled to any notice or service of process. Any judgment entered in such a
proceeding or action shall be binding on all persons claiming under the Trust.
Nothing in this Master Trust Agreement shall be construed as to deprive a
Participant or Beneficiary of his or her right to seek adjudication of his or
her rights by administrative process or by a court of competent jurisdiction.
Section 7.3 EMPLOYMENT OF COUNSEL. The Trustee may consult with legal
counsel (who may be counsel for the Company) and shall be fully protected with
respect to any action taken or omitted by it in good faith pursuant to the
advice of counsel.
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ARTICLE VIII
INSURERS
Section 8.1 INSURER NOT A PARTY. No insurer shall be deemed to be a
party to the Trust and an insurer's obligations shall be measured and determined
solely by the terms of contracts and other agreements executed by it.
Section 8.2 AUTHORITY OF TRUSTEE. An insurer shall accept the
signature of the Trustee to any documents or papers executed in connection with
such contracts. The signature of the Trustee shall be conclusive proof to the
insurer that the person on whose life an application is being made is eligible
to have a contract issued on his or her life and is eligible for a contract of
the type and amount requested.
Section 8.3 CONTRACT OWNERSHIP. An insurer shall deal with the
Trustee as the sole and absolute owner of any insurance contracts and shall have
no obligation to inquire whether any action or failure to act on the part of the
Trustee is in accordance with or authorized by the terms of the Plan or this
Master Trust Agreement.
Section 8.4 LIMITATION OF LIABILITY. An insurer shall be fully
discharged from any and all liability for any action taken or any amount paid in
accordance with the direction of the Trustee and shall have no obligation to see
to the proper application of the amounts so paid. An insurer shall have no
liability for the operation of the Trust or the Plan, whether or not in
accordance with their terms and provisions.
Section 8.5 CHANGE OF TRUSTEE. An insurer shall be fully discharged
from any and all liability for dealing with a party or parties indicated on its
records to be the Trustee until such time as it shall receive at its home office
written notice of the appointment and qualification of a successor Trustee.
ARTICLE IX
AMENDMENT AND TERMINATION
Section 9.1 AMENDMENT. Subject to the limitations set forth in this
Section 9.1, this Master Trust Agreement may be amended by a written instrument
executed by the Trustee and the Company. Notwithstanding the foregoing, no such
amendment shall conflict with the terms of the Plan or shall make the Trust
revocable after it has become irrevocable in accordance with Section 1.3 above.
Any amendment, change or modification shall be subject to the following rules:
(a) GENERAL RULE. Subject to Sections 9.1(b), (c) and (d)
below, this Master Trust Agreement may be amended:
(i) By the Company and the Trustee, provided, however,
that if an amendment would in any way adversely affect the rights accrued
under the Plan in the Trust Fund by any Participant or Beneficiary, each
and every Participant and Beneficiary whose rights in
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the Trust Fund would be adversely affected must consent to the amendment
before this Master Trust Agreement may be so amended; and
(ii) By the Company and the Trustee as may be necessary
to comply with laws which would otherwise render the Trust void, voidable
or invalid in whole or in part.
(b) LIMITATION. Notwithstanding that an amendment may be
permissible under Section 9.1(a) above, this Master Trust Agreement shall not be
amended by an amendment that would:
(i) Cause any of the assets of the Trust to be used for
or diverted to purposes other than for the exclusive benefit of
Participants and Beneficiaries as set forth in the Plan, except as is
required to satisfy the claims of the Company's general creditors; or
(ii) Be inconsistent with the terms of the Plan,
including the terms of the Plan regarding termination, amendment or
modification of the Plan.
(c) WRITING AND CONSENT. Any amendment to this Master Trust
Agreement shall be set forth in writing and signed by the Company and the
Trustee and, if consent of any Participant or Beneficiary is required under
Section 9.1(a), the Participant or Beneficiary whose consent is required. Any
amendment may be current, retroactive or prospective, in each case as provided
therein.
(d) THE COMPANY AND TRUSTEE. In connection with the exercise
of the rights under this Section 9.1:
(i) prior to a Change in Control, the Trustee shall
have no responsibility to determine whether any proposed amendment
complies with the terms and conditions set forth in Sections 9.1(a)
and (b) above and may conclusively rely on the directions of the
Committee with respect thereto, unless the Trustee has knowledge of a
proposed transaction or transactions that would result in a Change in
Control; and
(ii) after a Change in Control, the power of the
Company to amend this Master Trust Agreement shall cease, and the power
to amend that was previously held by the Company shall, instead, be
exercised by a majority of the Participants and, if a Participant is
dead, his or her Beneficiaries (who collectively shall have one vote
among them and shall vote in place of such deceased Participant), with
the consent of the Trustee, provided that such amendment otherwise
complies with the requirements of Sections 9.1(a), (b) and (c) above.
(e) TAXATION. This Master Trust Agreement shall not be
amended, altered, changed or modified in a manner that would cause the
Participants and/or Beneficiaries under any Plan to be taxed on the benefits
under any Plan in a year other than the year of actual receipt of benefits.
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Section 9.2 FINAL TERMINATION. The Trust shall not terminate until
the date on which Participants and their Beneficiaries are no longer entitled to
benefits pursuant to the terms of the Plan, and on such date the Trust shall
terminate. Upon termination of the Trust, any assets remaining in the Trust
shall be returned to the Company. Such remaining assets shall be paid by the
Trustee to the Company in such amounts and in the manner instructed by the
Company, whereupon the Trustee shall be released and discharged from all
obligations hereunder. From and after the date of termination and until final
distribution of the Trust Fund, the Trustee shall continue to have all of the
powers provided herein as are necessary or expedient for the orderly liquidation
and distribution of the Trust Fund.
ARTICLE X
MISCELLANEOUS
Section 10.1 DIRECTIONS FOLLOWING CHANGE IN CONTROL. Despite any other
provision of this Master Trust Agreement that may be construed to the contrary,
following a Change in Control, all powers of the Committee, the Company and the
Board to direct the Trustee under this Master Trust Agreement shall terminate,
and the Trustee shall act on its own discretion to carry out the terms of this
Master Trust Agreement in accordance with the Plan and this Master Trust
Agreement.
Section 10.2 TAXES. The Company shall from time to time pay taxes of
any and all kinds whatsoever that at any time are lawfully levied or assessed
upon or become payable in respect of the Trust Fund, the income or any property
forming a part thereof, or any security transaction pertaining thereto. To the
extent that any taxes lawfully levied or assessed upon the Trust Fund are not
paid by the Company, the Trustee shall have the power to pay such taxes out of
the Trust Fund and shall seek reimbursement from the Company. Prior to making
any payment, the Trustee may require such releases or other documents from any
lawful taxing authority as it shall deem necessary. The Trustee shall contest
the validity of taxes in any manner deemed appropriate by the Company or its
counsel, but at the Company's expense, and only if it has received an indemnity
bond or other security satisfactory to it to pay any such expenses. Prior to a
Change in Control, the Trustee (i) shall not be liable for any nonpayment of tax
when it distributes an interest hereunder on directions from the Committee, and
(ii) shall have no obligation to prepare or file any tax return on behalf of the
Trust Fund, any such return being the sole responsibility of the Committee. The
Trustee shall cooperate with the Committee in connection with the preparation
and filing of any such return.
Section 10.3 THIRD PERSONS. All persons dealing with the Trustee are
released from inquiring into the decisions or authority of the Trustee and from
seeing to the application of any moneys, securities or other property paid or
delivered to the Trustee.
Section 10.4 NONASSIGNABILITY; NONALIENATION. Benefits payable to
Participants and their Beneficiaries under this Master Trust Agreement may not
be anticipated, assigned (either at law or in equity), alienated, pledged,
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encumbered or subjected to attachment, garnishment, levy, execution or other
legal or equitable process.
Section 10.5 THE PLAN. The Trust and the Plan are parts of a single,
integrated employee benefit plan system and shall be construed together. In the
event of any conflict between the terms of this Master Trust Agreement and the
agreements that constitute the Plan, such conflict shall be resolved in favor of
this Master Trust Agreement.
Section 10.6 APPLICABLE LAW. Except to the extent, if any, preempted
by ERISA, this Master Trust Agreement shall be governed by and construed in
accordance with the laws of the State of California. Any provision of this
Master Trust Agreement prohibited by law shall be ineffective to the extent of
any such prohibition, without invalidating the remaining provisions hereof.
Section 10.7 NOTICES AND DIRECTIONS. Whenever a notice or direction is
given by the Committee to the Trustee, it shall be in the form required by
Section 2.1. Actions by the Company shall be by the Board or a duly authorized
officer, with such actions certified to the Trustee by an appropriately
certified copy of the action taken. The Trustee shall be protected in acting
upon any such notice, resolution, order, certificate or other communication
believed by it to be genuine and to have been signed by the proper party or
parties.
Section 10.8 SUCCESSORS AND ASSIGNS. This Master Trust Agreement shall
be binding upon and inure to the benefit of the Company and the Trustee and
their respective successors and assigns.
Section 10.9 GENDER AND NUMBER. Words used in the masculine shall
apply to the feminine where applicable, and when the context requires, the
plural shall be read as the singular and the singular as the plural.
Section 10.10 HEADINGS. Headings in this Master Trust Agreement are
inserted for convenience of reference only and any conflict between such
headings and the text shall be resolved in favor of the text.
Section 10.11 COUNTERPARTS. This Master Trust Agreement may be executed
in an original and any number of counterparts, each of which shall be deemed to
be an original of one and the same instrument.
Section 10.12 BENEFICIAL INTEREST. The Company are the true
beneficiaries hereunder in that the payment of benefits, directly or indirectly
to or for a Participant or Beneficiary by the Trustee, is in satisfaction of the
Company's liability therefor under the Plan. Nothing in this Master Trust
Agreement shall establish any beneficial interest in any person other than the
Company.
Section 10.13 THE TRUST AND PLAN. This Trust and the Plan are part of
and constitute a single, integrated employee benefit plan and trust, shall be
construed together as the entire agreement between the Company, the Trustee, the
Participants and the Beneficiaries with regard to the subject matter thereof,
and shall supersede all previous negotiations, agreements and commitments with
respect thereto.
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Section 10.14 EFFECTIVE DATE. The effective date of this Master Trust
Agreement shall be December 1, 1994.
IN WITNESS WHEREOF the Company and the Trustee have signed this Master
Trust Agreement as of the date first written above.
TRUSTEE: THE COMPANY:
IMPERIAL TRUST COMPANY CERTIFIED GROCERS OF CALIFORNIA
LTD., a California corporation,
By: /s/ JOHN C. HENRY By: /s/ DAVID A. WOODWARD
------------------------ --------------------------------------
Title: Vice President Title: Corporate Secretary-Treasurer
---------------- -----------------------------
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CERTIFIED GROCERS OF CALIFORNIA, LTD.
Executive Insurance Plan
SPLIT-DOLLAR AGREEMENT
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TABLE OF CONTENTS
1. Acquisition of Policy. . . . . . . . . . . . . . . . . . . . . . . 1
2. Payment of Premiums; Additional Compensation.. . . . . . . . . . . 1
3. Employer's Interest in Policy. . . . . . . . . . . . . . . . . . . 2
(a) Employer's Interest.. . . . . . . . . . . . . . . . . . . . . 2
(b) Termination of Agreement. . . . . . . . . . . . . . . . . . . 2
(c) Death of Insured. . . . . . . . . . . . . . . . . . . . . . . 2
(d) Definitions.. . . . . . . . . . . . . . . . . . . . . . . . . 2
4. Rights in the Policy.. . . . . . . . . . . . . . . . . . . . . . . 3
(a) Employee's Rights. . . . . . . . . . . . . . . . . . . . . . 3
(b) Employer's Rights.. . . . . . . . . . . . . . . . . . . . . . 3
(c) Conflict. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
5. Death of the Employee. . . . . . . . . . . . . . . . . . . . . . . 3
(a) Employer's Recovery.. . . . . . . . . . . . . . . . . . . . . 3
(b) Beneficiary's Recovery. . . . . . . . . . . . . . . . . . . . 4
(c) Collection of Death Proceeds. . . . . . . . . . . . . . . . . 4
6. Termination of Agreement.. . . . . . . . . . . . . . . . . . . . . 4
(a) Termination Events. . . . . . . . . . . . . . . . . . . . . . 4
(b) Disposition of Policy Following a Termination Event.. . . . . 5
7. Provisions Regarding the Insurer.. . . . . . . . . . . . . . . . . 5
(a) Bound Only by Policy. . . . . . . . . . . . . . . . . . . . . 5
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CERTIFIED GROCERS OF CALIFORNIA, LTD.
Executive Insurance Plan
SPLIT-DOLLAR AGREEMENT
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(b) Discharge.. . . . . . . . . . . . . . . . . . . . . . . . . . 5
(c) Insurer Not a Party.. . . . . . . . . . . . . . . . . . . . . 5
8. Special Provisions.. . . . . . . . . . . . . . . . . . . . . . . . 5
(a) Named Fiduciary. . . . . . . . . . . . . . . . . . . . . . . 6
(b) Funding.. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(c) ERISA Claims Procedures.. . . . . . . . . . . . . . . . . . . 6
9. Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
10. Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
11. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
12. Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . 7
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CERTIFIED GROCERS OF CALIFORNIA, LTD.
Executive Insurance Plan
SPLIT-DOLLAR AGREEMENT
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THIS AGREEMENT is made as of the ________ day of ________________, 19 ___, by
and between Certified Grocers of California, Ltd. (the "Employer") and ________
______________ (the "Employee").
A. WHEREAS, the Employer is a corporation duly organized and validly
existing under the laws of the state of its incorporation.
B. WHEREAS, the Employer wishes to benefit the Employee by entering into
a split-dollar life insurance arrangement in accordance with the terms
and conditions of this Agreement.
C. WHEREAS, the split-dollar arrangements provided for in this Agreement,
which the parties intend to satisfy the requirements of Rev.
Rul. 64-328, 1964-2 C.B. 11, relates to a life insurance policy
(the "Policy") with policy number ________________ to be issued by
Security Life of Denver Insurance Company (the "Insurer") on the life
of the Employee to be owned by the Employer subject to an endorsement
in favor of the Employee.
NOW, THEREFORE, the parties mutually agree as follows:
1. ACQUISITION OF POLICY. The parties shall cooperate in applying for and
obtaining the Policy. The Policy shall be issued to the Employer as owner
with an endorsement granting to the Employee the rights described in
Article 4 below.
2. PAYMENT OF PREMIUMS; ADDITIONAL COMPENSATION. The Employer shall pay all
of the premiums due on the Policy. In addition, the Employer shall pay to
the Employee each year, as additional compensation, an amount that is equal
to the difference between (i) the Economic Benefit (as defined below)
multiplied by a fraction, the numerator of which is one and the denominator
of which is one minus 40% (i.e., 1/(1-40%)) and (ii) the Economic Benefit.
For purposes of this Section 2, "Economic Benefit" shall mean each year an
amount that is equal to the value, as determined for federal and state
income tax purposes, of the "economic benefit" derived by the Employee from
the Policy's life insurance protection (i.e., the lower of the P.S. 58 cost
or the lowest term cost of the insurance carrier).
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CERTIFIED GROCERS OF CALIFORNIA, LTD.
Executive Insurance Plan
SPLIT-DOLLAR AGREEMENT
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3. EMPLOYER'S INTEREST IN POLICY.
(a) EMPLOYER'S INTEREST. In consideration of the Employer's premium
payments under the split-dollar arrangement, the Employer's Interest
in the Policy shall at all times equal the amount determined in
accordance with the following provisions. The Employer shall be
entitled to recover the Employer's Interest in the Policy in
accordance with the terms and conditions of this Agreement. In no
event, however, shall the Insurer be obligated to pay any amounts in
excess of its obligations under the terms of the Policy.
(b) TERMINATION OF AGREEMENT. Upon the termination of this Agreement, the
Employer's Interest in the Policy shall be an amount equal to the Cash
Surrender Value of the Policy (as hereinafter defined) at such time.
(c) DEATH OF INSURED. Upon the death of the Insured, the Employer's
Interest in the Policy shall be an amount equal to the total death
benefit proceeds payable under the policy less the amounts payable to
the Beneficiary of the Employee under Section 4(a).
(d) DEFINITIONS. For purposes of this Agreement:
(i) The Cash Surrender Value of the Policy at any time equals at such
time the cash value set forth in the Policy's table of values,
less any policy loans to the Employer and accrued interest
thereon at such time.
(ii) Final Pay means a Participant's highest annualized base wage
within the three (3) calendar years preceding the Participant's
Separation from Service plus annual car allowance determined as
$12,000 for a Separation from Service occurring in 1994 and
increased 4% for each year thereafter.
(iii) Officer means any Employee of the Company elected by the Board of
Directors of the Company and serving in the capacity as a Vice
President or higher officer of the Company.
(iv) Separation from Service means the date that a Participant ceases
to be an
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CERTIFIED GROCERS OF CALIFORNIA, LTD.
Executive Insurance Plan
SPLIT-DOLLAR AGREEMENT
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Employee because of a voluntary or involuntary quit, layoff, or
termination.
4. RIGHTS IN THE POLICY.
(a) EMPLOYEE'S RIGHTS. The Employee shall be entitled to designate the
beneficiary and elect a settlement option, and to change such
designations or elections at any time and from time to time, with
respect to that portion of the death proceeds, if any,
(i) equal to 300% of Final Pay in the event of the death of the
Employee prior to Separation from Service; and
(ii) equal to 150% of Final Pay in the event of the death of the
Employee after the Employee's Separation from Service, if the
Employee has five or more Years of Service and three or more
Years of Service as an Officer.
The Policy shall contain an endorsement (the "Endorsement"), in a form
acceptable to the parties and the insurer, granting the Employee such
rights.
(b) EMPLOYER'S RIGHTS. Except for those rights granted to the Employee in
the Endorsement, the Employer shall have all of the rights of the
owner under the Policy and the Employer shall be entitled to exercise
all of such rights, options and privileges without the consent of the
Employee; provided, however, the Employer agrees not to exercise the
right to surrender the Policy except following a Termination Event and
in compliance with the provisions of Article 6 below.
(c) CONFLICT. As between the parties hereto, in the event of any conflict
between the terms of the Endorsement and this Agreement, the terms of
this Agreement shall prevail. The Insurer shall be bound, however,
only by the terms of the Policy and any endorsements thereto.
5. DEATH OF THE EMPLOYEE. In the event of the Employee's death prior to a
Termination Event:
(a) EMPLOYER'S RECOVERY. The Employer shall be entitled to recover out of
the
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CERTIFIED GROCERS OF CALIFORNIA, LTD.
Executive Insurance Plan
SPLIT-DOLLAR AGREEMENT
proceeds of the Policy an amount equal to the Employer's Interest in
the Policy as determined under Article 3 above.
(b) BENEFICIARY'S RECOVERY. That portion of the proceeds of the Policy,
if any, in excess of the Employer's Interest in the Policy shall be
paid to the beneficiary designated by the Employee under the Policy.
(c) COLLECTION OF DEATH PROCEEDS. Promptly following the Employee's
death, the parties shall cooperate in the filing of a death claim in
accordance with the Insurer's claims procedures and shall request
distribution to the beneficiary designated by the Employee of the
Employee's Interest in the Policy and the balance of the death
proceeds, if any, shall be paid by the Insurer to the Employer under
the Policy.
6. TERMINATION OF AGREEMENT.
(a) TERMINATION EVENTS. Subject to fulfillment of the obligations arising
upon termination hereinafter set forth, this Agreement shall terminate
on the first to occur of the following events (each referred to herein
as a "Termination event"):
(i) Delivery of written notice of termination of this Agreement by
the Employer to the Employee.
(ii) Delivery of written notice of termination of this Agreement by
the Employee to the Employer.
(iii) Separation from Service with the Employer for any reason, by
either the Employer or the Employee, with or without cause;
provided, however, Separation from Service of an Employee
eligible for a benefit under Article 4(a)(ii) shall not be a
Termination Event under this paragraph (iii).
(iv) If a Participant engages, directly or indirectly (either as
principal, agent, employee, consultant, stockholder, partner, or
in any other individual or representative capacity), in any
business activity within the Employer's area
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CERTIFIED GROCERS OF CALIFORNIA, LTD.
Executive Insurance Plan
SPLIT-DOLLAR AGREEMENT
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of business which is competitive with any business conducted by
the Employer as of the date of Separation from Service with the
Employer, and if in the opinion of the Employer the Participant
would reasonably be expected to utilize any confidential
information (such as Employer trade secrets including business
records, actual and prospective customer and supplier lists, and
the like) concerning the Employer in connection with such
business activity.
(b) DISPOSITION OF POLICY FOLLOWING A TERMINATION EVENT. Following a
Termination Event (except a Termination Event under Article 6(a)(iv))
the Employee shall have the option, for fifteen (15) business days
thereafter, to pay to the Employer in cash an amount equal to the
Employer's Interest in the Policy as determined under Article 3 above.
Upon receipt of such payment, the Employer shall transfer all of its
right, title and interest in and to the Policy to the Employee.
If the Employee fails to exercise this option or if a Termination
Event under Article 6(a)(iv) occurs, the Employer shall be entitled to
surrender the Policy or to remove the Endorsement from the Policy and
thereafter to deal with the Policy as the Employer sees fit. The
Employee hereby authorizes the Employer to act on the Employee's
behalf to sign all documents and to take any other action required by
the Insurer to remove the Endorsement following a Termination Event.
The Insurer shall be entitled to rely on the Employer's authority upon
submission by the Employer of a photocopy of this signed Agreement.
The Employer shall cooperate in effecting any full or partial policy
surrender or policy loan requested by the Employee related to the
Employee's exercise of any option provided hereunder; provided,
however, that the Employer's Interest in the Policy is paid to the
Employer in connection with such a transaction.
7. PROVISIONS REGARDING THE INSURER. The parties acknowledge and agree as
follows:
(a) BOUND ONLY BY POLICY. The Insurer shall be bound only by the
provisions of the Policy and any endorsement thereto.
(b) DISCHARGE. Any payment made or actions taken by the Insurer in
accordance with the provisions of the Policy and any endorsement
thereto shall fully discharge the Insurer from all claims, suits and
demands of all persons whatsoever.
- -------------------------------------------------------------------------------
5
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD.
Executive Insurance Plan
SPLIT-DOLLAR AGREEMENT
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(c) INSURER NOT A PARTY. The Insurer shall not be deemed a party to, or
to have notice of, this Agreement or the provisions hereof and shall
have no obligation to see to the performance of the obligations of the
parties hereunder.
8. SPECIAL PROVISIONS. In compliance with the requirements of the Employee
Retirement Income Security Act of 1974, as amended, the parties hereby
confirm:
(a) NAMED FIDUCIARY. The Employer is the named fiduciary of the split-
dollar life insurance plan of which this Agreement is the written
instrument.
(b) FUNDING. The funding policy of the split-dollar life insurance plan
is that the Employer will pay that portion of the premiums under the
Policy required under Article 2 above.
(c) ERISA CLAIMS PROCEDURES. The following claims procedure shall be
utilized:
(i) The claimant shall file a claim for benefits by notifying the
Employer in writing. If the claim is wholly or partially denied,
the Employer shall provide a written notice within ninety (90)
days specifying the reason for the denial, the provisions of this
Agreement on which the denial is based, and additional material
or information, if any, necessary for the claimant to receive
benefits. Such written notice shall also indicate the steps to
be taken by the claimant if a review of the denial is desired.
(ii) If a claim is denied and review is desired, the claimant shall
notify the Employer in writing within sixty (60) days after
receipt of written notice of a denial of a claim. In requesting
a review, the claimant may review plan documents and submit any
written issues and comments the claimant feels are appropriate.
The Employer shall then review the claim and provide a written
decision within sixty (60) days of receipt of a request for
review. This decision shall state the specific reasons for the
decision and shall include references to specific provisions of
this Agreement, if any, upon which the decision is based.
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6
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD.
Executive Insurance Plan
SPLIT-DOLLAR AGREEMENT
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(iii) In no event shall the Employer's liability under this
Agreement exceed the amount of proceeds from the policy.
9. AMENDMENT. This Agreement may be altered, amended or modified, including
the addition of any extra policy provisions, but only by a written
instrument signed by all of the parties.
10. ASSIGNMENT. A party may assign such party's interests and obligations
under this Agreement at any time subject to the terms and conditions of
this Agreement.
11. GOVERNING LAW. To the extent not preempted by ERISA, this Agreement shall
be governed by the laws of the State of California.
12. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement of the
parties with respect to the subject matter hereof. Any and all prior
agreements or understandings with respect to such matters are hereby
superseded.
IN WITNESS WHEREOF, the parties have signed and sealed this Agreement as of the
day and year first above written.
EMPLOYER:
CERTIFIED GROCERS OF CALIFORNIA, LTD.
----------------------------------------
(Committee Member Signature)
----------------------------------------
(Print Name)
- -------------------------------------------------------------------------------
7
<PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD.
Executive Insurance Plan
SPLIT-DOLLAR AGREEMENT
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
EMPLOYEE:
----------------------------------------
(Signature)
----------------------------------------
(Print Name)
- -------------------------------------------------------------------------------
8
<PAGE>
SCHEDULE TO EXHIBIT 10.6
The foregoing Executive Insurance Plan Split-dollar Agreement has been
entered into in substantially identical form by the following executive officers
of the Registrant on the following dates:
Alfred A. Plamann - December 29, 1994
Daniel T. Bane - January 31, 1995
Donald W. Dill - January 31, 1995
Donald G. Grose - January 23, 1995
Charles J. Pilliter - January 10, 1995
<PAGE>
COMMERCIAL LEASE - NET
----------------------
(Single Tenant Building)
BASIC LEASE INFORMATION
-----------------------
Date: December 6, 1994
Landlord: TriNet Essential Facilities XII, Inc., a Maryland corporation
Tenant: Certified Grocers of California, Ltd., a California corporation
Premises (section 1.1): See Exhibit A; Address: 5200 Sheila Street, City
of Commerce, County of Los Angeles State of California, consisting of
a four-story building (the "Office Building") and a one-story building
(the "Cafeteria")
Term (section 2.1): Twenty (20) years, plus, if the Commencement Date is
not the first day of a calendar month, the partial month from the
Commencement Date to the end of the calendar month in which the
Commencement Date occurs.
Extension Terms (section 2.4): Two (2) ten (10) year extension terms.
Commencement Date (section 2.1): December 6, 1994
Expiration Date (section 2.1): December 5, 2014
Initial Base Rent (section 3.1(a)): $107,812.50 per month.
Use (section 6.1): As to the Office Building, for office purposes; and as
to the Cafeteria, for office, large meeting and/or cafeteria purposes
for Tenant's employees only.
Liability Insurance (section 10.3): $2,000,000 aggregate; $1,000,000 per
occurrence
Insuring Party for Property Insurance (section 10.4): Tenant.
Landlord's Address (section 23.1): Four Embarcadero Center, Suite 3150,
San Francisco, CA 94111, Attn: Mr. James R. Reinhart, Facsimile No.:
415-391-6259.
Copy to: TriNet Corporate Realty Trust, Inc.
7406 Fullerton Street, Suite 105, Jacksonville, FL 32256,
Attn: Ms. Jo Ann Chitty, Facsimile No.: 904-363-1260
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<PAGE>
Tenant's Address (section 23.1): 2601 S. Eastern Avenue, Los Angeles, CA
90040, Attn: Corporate Secretary, Facsimile No.: 213-888-2915.
Exhibits and Addenda (section 24.3): Exhibit A - Legal Description of the
Land; Exhibit B - Form of Subordination Agreement; Exhibit C - Form of
Estoppel Certificate; Exhibit D - Memorandum of Lease.
The foregoing BASIC LEASE INFORMATION is incorporated in and made a part of
the Lease to which it is attached. If there is any conflict between the BASIC
LEASE INFORMATION and the Lease, the Lease shall control.
Landlord: Tenant:
TriNet Essential Facilities CERTIFIED GROCERS OF
XII, INC., a Maryland CALIFORNIA, LTD., a
corporation California corporation
By /s/ James R. Reinhart By
-------------------------- ---------------------------
James R. Reinhart
Executive Vice President Its
-----------------------
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<PAGE>
Tenant's Address (section 23.1): 2601 S. Eastern Avenue, Los Angeles, CA
90040, Attn: Corporate Secretary, Facsimile No.: 213-888-2915.
Exhibits and Addenda (section 24.3): Exhibit A - Legal Description of the
Land; Exhibit B - Form of Subordination Agreement; Exhibit C - Form of
Estoppel Certificate; Exhibit D - Memorandum of Lease.
The foregoing BASIC LEASE INFORMATION is incorporated in and made a part of
the Lease to which it is attached. If there is any conflict between the BASIC
LEASE INFORMATION and the Lease, the Lease shall control.
Landlord: Tenant:
TriNet Essential Facilities CERTIFIED GROCERS OF
XII, INC., a Maryland CALIFORNIA, LTD., a
corporation California corporation
By By Daniel T. Bane
-------------------------- ---------------------------
Mark S. Whiting
President Its CFO
-----------------------
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<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
Article
- -------
1 Premises. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2 Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3 Rent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4 Property Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5 Other Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6 Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
7 Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
8 Maintenance and Repairs . . . . . . . . . . . . . . . . . . . . . . . 8
9 Alterations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
10 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
11 Compliance With Legal Requirements. . . . . . . . . . . . . . . . . . 18
12 Assignment or Sublease. . . . . . . . . . . . . . . . . . . . . . . . 19
13 Entry by Landlord . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14 Events of Default and Remedies. . . . . . . . . . . . . . . . . . . . 22
15 Damage or Destruction . . . . . . . . . . . . . . . . . . . . . . . . 25
16 Eminent Domain. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
17 Subordination, Merger and Sale. . . . . . . . . . . . . . . . . . . . 30
18 Estoppel Certificate. . . . . . . . . . . . . . . . . . . . . . . . . 31
19 Holding Over. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
20 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . 32
21 Hazardous Materials . . . . . . . . . . . . . . . . . . . . . . . . . 32
22 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
23 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
24 Trade Names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
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<PAGE>
25 Memorandum of Lease . . . . . . . . . . . . . . . . . . . . . . . . . 36
26 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
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<PAGE>
LEASE
THIS LEASE, made as of the date specified in the BASIC LEASE INFORMATION,
is by and between the landlord specified in the BASIC LEASE INFORMATION
("Landlord"), and the tenant specified in the BASIC LEASE INFORMATION
("Tenant"),
W I T N E S S E T H:
ARTICLE I.
PREMISES
1.1 Landlord hereby leases to Tenant, and Tenant hereby leases from
Landlord, for the term and subject to the covenants hereinafter set forth, to
all of which Landlord and Tenant hereby agree, (a) the land described in Exhibit
A hereto, together with all easements and other appurtenances thereto (the
"Land), (b) all improvements now or hereafter located on the Land (the
"Improvements"), including the two buildings described in the Basic Lease
Information, (c) all of Landlord's right, title and interest in and to all
fixtures and heating, ventilating, air conditioning, electrical, mechanical,
plumbing, life safety and other building systems affixed or attached to the Land
or the Improvements (collectively, the "Equipment"), and (d) all of Landlord's
right, title and interest in and to the personal property described on Schedule
I attached hereto (the "Personal Property"). The Land, Improvements, Equipment
and Personal Property are collectively referred to herein as the "Premises."
Landlord hereby grants to Tenant an exclusive license (the "License,,) to use
the following: (a) the contracts described on Schedule II attached hereto (the
"Contracts"); and the permits described in Schedule III attached hereto (the
"Permits"). The License is coupled with an interest, irrevocable and assignable
or sublicensable by Tenant in connection with any permitted assignment or
sublease of this Lease. The License shall automatically terminate, without
notice to Tenant, upon the termination of this Lease, whether upon expiration of
the Lease term or earlier. Tenant hereby assumes and agrees to perform, at
Tenant's sole expense, all obligations of Landlord under the Contracts and
Permits during the term of this Lease. Tenant further agrees during the entire
term of the License to (x) keep the Contracts in full force and effect, unless
Landlord otherwise consents in writing (which consent may be withheld in
Landlord's sole discretion), until the expiration of any Contract by its own
terms (other than as a result of a default by Tenant thereunder), and (y) keep
the Permits in full force and effect until the expiration of the Lease term.
Tenant shall maintain the Personal Property in good condition and repair, except
that Tenant may replace the Personal Property with personal property of
comparable quality when consistent with prudent business practices.
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<PAGE>
ARTICLE II.
TERM
2.1 The term of this Lease shall be the term specified in the BASIC LEASE
INFORMATION, which shall commence on the commencement date specified in the
BASIC LEASE INFORMATION (the "Commencement Date") and, unless sooner terminated
as hereinafter provided, shall end on the expiration dte specified in the BASIC
LEASE INFORMATION (the "Expiration Date").
2.2 If the Commencement Date is not the first day of a calendar month,
Tenant shall pay to Landlord the Base Rent payable under section 3.1, calculated
on a per diem basis, for the period from the Commencement Date until the first
day of the next full calendar month. Tenant shall pay the Base Rent in respect
of such period to Landlord on the Commencement Date.
2.3 Tenant shall accept the Premises "as is" on the Commencement Date.
Landlord shall have no obligation to construct or install any improvements in
the Premises. Tenant acknowledges that, prior to the Commencement Date, Tenant
occupied the Premises. Tenant's possession of the Premises shall constitute
Tenant's acknowledgment that the Premises are in all respects in the condition
in which Landlord is required to deliver the Premises to Tenant under this Lease
and that Tenant has examined the Premises and is fully informed to Tenant's
satisfaction of the physical and environmental condition and the utility of the
Premises. Tenant acknowledges that Landlord, its agents and employees and other
persons acting on behalf of Landlord have made no representation or warranty of
any kind in connection with any matter relating to the physical or environmental
condition, value, fitness, use or zoning of the Premises upon which Tenant has
relied directly or indirectly for any purpose.
2.4 Tenant shall have the option to renew this Lease for two (2)
additional terms of ten (10) years each. Tenant shall be conclusively deemed to
have exercised each such option unless Landlord receives written notice from
Tenant that Tenant has elected not to exercise such option at least twelve (12)
months before the expiration of the then-existing term of the Lease. Unless
Landlord timely receives Tenant's notice electing not to exercise an option, the
term of this Lease shall be automatically extended for the applicable ten (10)
year period and Tenant shall continue to lease the Premises on all of the terms
and conditions of this Lease, except that: (a) the Base Rent payable by Tenant
during each renewal term shall be as set forth in section 3.1(b); and (b) after
the second renewal term, Tenant shall have no further renewal options under this
Lease.
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<PAGE>
ARTICLE III.
RENT
3.1 Tenant shall pay to Landlord the following amounts as rent for the
Premises:
(a) During the first five (5) years of the initial term of this
Lease, Tenant shall pay to Landlord, as base monthly rent, the amount of monthly
rent specified in the BASIC LEASE INFORMATION (the "Base Rent"). Commencing on
the first day of the sixth, eleventh and sixteenth years of the initial term of
this Lease (each, an "Adjustment Date"), the Base Rent shall be increased by the
percentage increase in the Index (as defined below) during the period commencing
on the first day of the immediately preceding five (5) year period and ending on
the applicable Adjustment Date under this section 3.1(a); provided, however,
Base Rent shall not be increased more than four percent (4%) per annum on a
cumulative basis during each such five (5) year period (i.e., not more than
twenty percent (20%) for each such five (5) year period). As used in this
Lease, the term "Index" shall mean the United States Department of Labor, Bureau
of Labor Statistics, Consumer Price Index for All Urban Consumers (all items for
the Los Angeles-Long Beach-Anaheim area, 1982-1984=100). If the data from the
Department of Labor for the Index are not yet available on any Adjustment Date,
then Tenant shall continue to pay the Base Rent in effect on that Adjustment
Date, until such time as the data for the Index become available. Once the data
become available so that the Base Rent can be increased in accordance with this
section 3.1(a) or section 3.1(b), Tenant shall pay to Landlord, with the next
succeeding installment of Base Rent, the increase in Base Rent that Tenant would
have paid had the Index been revised on the applicable Adjustment Date. If the
Index is no longer published, another generally recognized index shall be
substituted by agreement of the parties. If they are unable to agree within
thirty (30) days after demand by either party, the substitute index shall on
application of either party be selected by the chief officer of the San
Francisco Regional Office of the Bureau of Labor Statistics or its successor.
(b) Commencing on the first day of the first and sixth years of each
renewal term of this Lease (each of which shall also be deemed an Adjustment
Date), the Base Rent shall be increased by the percentage increase in the Index
during the period commencing on the first day of the immediately preceding five
(5) year period and ending on the applicable Adjustment Date under this section
3.1(b); provided, however, Base Rent shall not be increased by less than three
percent (3%) per annum, nor more than four percent (4%) per annum, on a
cumulative basis during each such five (5) year period (i.e., not less than
fifteen percent (15%), nor more than twenty percent (20%), for each such five
(5) year period).
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<PAGE>
(c) In the event that Landlord advances the Improvement Allowance (as
defined in Section 9.4), for the period from and after the date of such advance
through and including the Expiration Date, the monthly Base Rent shall be
increased by an amount equal to one-twelfth of (i) the amount of the Improvement
Allowance actually disbursed to Tenant, multiplied by (ii) the Annual Payment
Multiple (as defined below). The term "Annual Payment Multiple" shall mean (1)
eleven and twenty-five hundredths percent (11.25%) if the Improvement Allowance
is advanced prior to the first anniversary of the Commencement Date, (2) eleven
and forty-five hundredths percent (11.45%) if the Improvement Allowance is
advanced after the first anniversary and prior to the second anniversary of the
Commencement Date, (3) eleven and sixty-eight hundredths percent (11.68%) if the
Improvement Allowance is advanced after the second anniversary and prior to the
third anniversary of the Commencement Date, (4) eleven and ninety-four
hundredths percent (11.94%) if the Improvement Allowance is advanced after the
third anniversary and prior to the fourth anniversary of the Commencement Date,
and (5) twelve and twenty-four hundredths percent (12.24%) if the Improvement
Allowance is advanced after the fourth anniversary of the Commencement Date.
(d) Throughout the term of this Lease, Tenant shall pay, as
additional rent, all other amounts of money and charges required to be paid by
Tenant under this Lease, whether or not such amounts of money or charges are
designated "additional rent." As used in this Lease, "rent" shall mean and
include all Base Rent and additional rent payable by Tenant in accordance with
this Lease.
3.2 It is the intention of Landlord and Tenant that the Base Rent payable
by Tenant to Landlord during the entire term of this Lease shall be absolutely
net of all costs and expenses incurred in connection with the management,
operation, maintenance and repair of the Premises in accordance with this Lease.
Landlord shall have no obligations or liabilities whatsoever with respect to the
management, operation, maintenance or repair of the Premises during the term of
this Lease, and Tenant shall manage, operate, maintain and repair the Premises
in accordance with this Lease and shall pay all costs and expenses incurred in
connection therewith before such costs or expenses become delinquent. Without
limiting the generality of the foregoing, throughout the entire term of this
Lease, Tenant shall pay, as additional rent (whether payable to Landlord or the
applicable third parties), all premiums for all property and liability insurance
covering the Premises carried by Landlord or Tenant, all Property Taxes (as
defined in section 4.1) and all Other Taxes (as defined in section 5.1) that
accrue during or are allocable to the term of this Lease.
3.3 Tenant shall pay all Base Rent to Landlord, in advance, on or before
the first day of each and every calendar month during the term of this Lease.
Tenant shall pay all
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<PAGE>
additional rent owing to Landlord on or before the third business day following
written demand therefor given in accordance with section 23.1. Tenant shall pay
all Base Rent and additional rent to Landlord without notice, demand, deduction
or offset, in lawful money of the United States of America, by wire transfer to
an account specified in writing by Landlord from time to time, or to such other
person, by such other method or at such other place as Landlord may from time to
time designate in writing, provided that any change in the method of payment
shall be subject to Tenant's reasonable approval.
3.4 Tenant acknowledges that the late payment by Tenant of any Base Rent
or additional rent payable to Landlord (including the items described in section
3.2 to the extent owed to Landlord) will cause Landlord to incur costs and
expenses, the exact amount of which is extremely difficult and impractical to
fix. Such costs and expenses will include administration and collection costs
and processing and accounting expenses. Therefore, if any Base Rent or
additional rent owed to Landlord is not received by Landlord within three (3)
business days after Landlord gives written notice thereof (by facsimile or other
method of notice permitted by section 23.1) to Tenant, Tenant shall immediately
pay to Landlord a late charge equal to six percent (6%) of such delinquent
amount; provided, however, that after the second such failure in a calendar
year, no notice shall be required, and such late charge shall be due and payable
on the due date if Base Rent or additional rent is not received by Landlord on
the date due. Landlord and Tenant agree that such late charge represents a
reasonable estimate of such costs and expenses and is fair compensation to
Landlord for the loss suffered by Tenant's failure to make timely payment. In
no event shall such late charge be deemed to grant to Tenant a grace period or
extension of time within which to pay any rent or prevent Landlord from
exercising any right or enforcing any remedy available to Landlord upon Tenant's
failure to pay all rent due under this Lease in a timely fashion, including the
right to terminate this Lease. All amounts of money payable by Tenant to
Landlord hereunder, if not paid when due, shall bear interest from the due date
until paid at the Prime Rate (as hereinafter defined) plus five percent (5%) per
annum. "Prime Rate" shall mean the reference rate announced from time to time
by Bank of America NT & SA at its headquarters location.
3.5 Notwithstanding the foregoing, Tenant shall not be deemed to be in
default under this Lease as the result of (a) any failure to pay any Property
Taxes, Other Taxes or other obligation of any nature (including construction
costs) owed to any party other than Landlord, or (b) any failure to comply with
any applicable law, regulation or other applicable legal requirement, so long
as, in each case, (i) such tax, other obligation, law or other legal requirement
is being diligently contested in good faith, and (ii) Tenant has provided
Landlord with assurances reasonably acceptable to Landlord that such
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<PAGE>
failure to pay or comply, pending the outcome of such contest, could not
materially impair Landiord's rights and interests with respect to the Premises
(including assurance that the applicable contest proceeding will operate during
the pendency thereof to prevent or stay any sale, forfeiture or loss of all or
any portion of the Premises). The right to contest third party obligations and
legal requirements granted to Tenant in this paragraph (subject to the
provisions of this Section 3.5) shall be referred to herein as the "Right to
Contest."
3.6 In the event that Tenant desires from time to time to contest any tax
or other law applicable to the Premises or to commence any lawsuit or other
proceeding relating to the Premises, and in the event that Landlord's
participation is legally required, Landlord shall reasonably cooperate with
Tenant in connection therewith so long as Tenant reimburses Landlord, within ten
(10) business days following written demand from time to time (but no more than
once in any calendar month), for all costs incurred by Landlord as a result of
such cooperation, but only to the extent that such costs exceed any direct
economic benefits to Landlord which result from the final determination of the
applicable contest or proceeding. Landlord shall refund all appropriate amounts
within ten (10) business days following receipt of demand therefor in the event
that any such direct economic benefits make it evident, following any such final
determination, that Landlord was over-reimbursed by Tenant prior to such
determination.
ARTICLE IV.
PROPERTY TAXES
4.1 "Property Taxes" shall mean all taxes, assessments, excises, levies,
fees and charges (and any tax, assessment, excise, levy, fee or charge levied
wholly or partly in lieu thereof or as a substitute therefor or as an addition
thereto) of every kind and description, general or special, ordinary or
extraordinary, foreseen or unforeseen, secured or unsecured, whether or not now
customary or within the contemplation of Landlord and Tenant, that are levied,
assessed, charged, confirmed or imposed by any public or government authority on
or against, or otherwise with respect to, the Premises or any part thereof or
any personal property used in connection with the Premises. Unless and until
the Premises receives its own tax parcel identification number, "Property Taxes"
shall also mean all taxes, assessments and other charges included in the
definition of Property Taxes with respect to any real property that is part of
the same tax parcel as any part of the Premises. Property Taxes shall not
include net income (measured by the income of Landlord from all sources or from
sources other than solely rent), franchise, inheritance or capital stock taxes
of Landlord, unless levied or assessed against Landlord in whole or
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<PAGE>
in part in lieu of, as a substitute for, or as an addition to any Property
Taxes.
ARTICLE V.
OTHER TAXES
5.1 "Other Taxes" shall mean all taxes, assessments, excises, levies, fees
and charges, including all payments related to the cost of providing facilities
or services, whether or not now customary or within the contemplation of
Landlord and Tenant, that are levied, assessed, charged, confirmed or imposed by
any public or government authority upon, or measured by, or reasonably
attributable to (a) the Premises, (b) the cost or value of Tenant's equipment,
furniture, fixtures and other personal property located in the Premises or the
cost or value of any leasehold improvements made in or to the Premises by or for
Tenant, regardless of whether title to such improvements is vested in Tenant or
Landlord, (c) any rent payable under this Lease, including any gross income tax
or excise tax levied by any public or government authority with respect to the
receipt of any such rent, (d) the possession, leasing, operation, management,
maintenance, alteration, repair, use or occupancy by Tenant of the Premises, or
(e) this transaction or any document to which Tenant is a party creating or
transferring an interest or an estate in the Premises. Other Taxes shall not
include net income (measured by the income of Landlord from all sources or from
sources other than solely rent), franchise, inheritance or capital stock taxes
of Landlord, unless levied or assessed against Landlord in whole or in part in
lieu of, as a substitute for, or as an addition to any Other Taxes.
ARTICLE VI.
USE
6.1 The Premises shall be used only for the purpose specified in the BASIC
LEASE INFORMATION and no other purpose without Landlord's prior written consent,
which consent shall not be unreasonably withheld or delayed; provided, however,
Landlord's withholding of consent shall be conclusively presumed reasonable if
the proposed use would substantially increase the wear and tear on or the risk
of damage to the Premises above levels or risks resulting from Tenant's use as
of the date of this Lease or the proposed use is for an illegal purpose. For
purposes of this Lease, "office purposes" shall include incidental uses related
to office purposes, including without limitation printing and reprographic
services incidental to Tenant's business, computer operations for Tenant's
business, quality testing for Tenant's in-house food brand and food preparation
training for the employees of Tenant and Tenant's clients; provided, however,
that any material increase in the
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<PAGE>
square footage used for any such incidental use shall be deemed to be a change
in use requiring Landlord's consent as provided above, if such increase in
square footage will overburden or unduly strain the Premises or will exceed the
recommended capacity or impair the operation of any building systems. Tenant
shall not do or permit to be done in, on or about the Premises, nor bring or
keep or permit to be brought or kept therein, anything which is prohibited by or
will in any way conflict with any law, ordinance, rule, regulation or order now
in force or which may hereafter be enacted, or which is prohibited by any
insurance policy for the Premises or will cause a cancellation of any insurance
for the Premises. Tenant shall not do or permit anything to be done in, on or
about the Premises which will in any way obstruct or interfere with the rights
of Landlord. Tenant shall not maintain or permit any nuisance in, on or about
the Premises or commit or suffer to be committed any waste in, on or about the
Premises.
ARTICLE VII.
SERVICES
7.1 Tenant shall, at Tenant's sole cost and expense, supply the Premises
with electricity, heating, ventilating and air conditioning, water, natural gas,
lighting replacement for all lights, restroom supplies, telephone service,
window washing, security service, janitor, scavenger and disposal services, and
such other services as Tenant determines to furnish to the Premises. Landlord
shall not be in default hereunder or be liable for any damage or loss directly
or indirectly resulting from, nor shall the rent be abated or a constructive or
other eviction be deemed to have occurred by reason of, the installation, use or
interruption of use of any equipment in connection with the furnishing of any of
the foregoing services, any failure to furnish or delay in furnishing any such
services, whether such failure or delay is caused by accident or any condition
beyond the control of Landlord or Tenant or by the making of repairs or
improvements to the Premises, or any limitation, curtailment, rationing or
restriction on use of water, electricity, gas or any form of energy serving the
Premises, whether such results from mandatory governmental restriction or
voluntary compliance with governmental guidelines. Tenant shall pay the full
cost of all of the foregoing services to the applicable third parties as
additional rent.
ARTICLE VIII.
MAINTENANCE AND REPAIRS
8.1 (a) Tenant shall, at all times during the term of this Lease and at
Tenant's sole cost and expense, maintain and
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repair the Premises and every part thereof and all grounds, landscaping, parking
areas, lighting, roof, walls, foundations, signs, heating, ventilating and air
conditioning, mechanical, electrical, plumbing, sprinkler and life safety
systems, equipment, fixtures, alterations, additions and improvements therein or
thereon and keep all of the foregoing clean and in good order and operating
condition (including, without limitation, painting the exterior of the Premises
as often as reasonably needed to keep such exterior in a good, well painted
condition, cleaning interior and exterior doors, windows and glass, and
repairing and replacing any exterior windows and glass that is broken, cracked
or damaged). Tenant may use qualified employees of Tenant to perform routine
maintenance and routine repairs of the Premises. For all other maintenance and
all non-routine repair services on the heating, ventilating and air
conditioning, mechanical, electrical, plumbing, sprinkler and life safety
systems and equipment in the Premises, Tenant shall engage a duly licensed
independent contractor; provided, however, that Tenant may use its qualified
employees to perform such other maintenance and non-routine repairs with
Landlord's consent, which consent may be withheld if, in Landlord's reasonable
determination, there is a substantial possibility of an increased risk of damage
to the Premises or any systems or equipment located therein if such other
maintenance or repair is performed by Tenant's employee instead of by a licensed
independent contractor. If Landlord does not disapprove Tenant's use of a
designated employee for a particular repair or maintenance project within five
(5) business days after Tenant's notice requesting such approval (which notice
shall be accompanied by an accurate description of the project and the
designated employee's relevant qualifications), Landlord shall be deemed to have
approved such employee's work on such project.
(b) Landlord and its consultants or contractors shall have the right
to inspect the Premises to determine Tenant's compliance with this section 8.1,
and Tenant shall promptly complete any maintenance or repair work reasonably
required by Landlord or its consultants or contractors as a result of any such
inspection. Tenant shall reimburse the Landlord, as additional rent, the costs
incurred by Landlord in engaging Eckland Engineers or another consultant or
contractor to perform such inspections and provide a report thereof, provided
that Tenant's above-described reimbursement obligation shall be limited to the
cost of one such inspection and report in any calendar year and provided that
Tenant shall not be required to reimburse Landlord more than one thousand five
hundred dollars ($1,500) per year during the first five (5) years of the Lease
term or more than two thousand dollars ($2,000) per year thereafter for such
inspection and report. Tenant hereby waives all rights to make repairs at the
expense of Landlord or in lieu thereof to vacate the Premises. Subject to
section 9.3, Tenant shall, at the end of the term of this Lease, surrender to
Landlord the Premises and all alterations, additions, fixtures and improvements
therein or thereto in the same condition as when received,
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ordinary wear and tear and damage thereto by fire or other casualty excepted.
8.2 Notwithstanding the foregoing, during the last five (5) years of the
Lease term, excluding any extension term, if Tenant is required by the terms of
section 8.1 to perform any substantial repair or replacement the cost of which
would be treated as a capital expense in accordance with generally accepted
accounting principles (a "Capital Repair"), Landlord shall reimburse to Tenant,
by a rent credit applied at the end of the Lease term, an amount equal to
(a) the cost of the Capital Repair, multiplied by (b) a fraction (i) the
numerator of which is the number of years beyond the Lease term the useful life
of the Capital Repair is anticipated to extend, and (ii) the denominator of
which is the total anticipated useful life of the Capital Repair, provided that
each of the following conditions is satisfied: the cost of such Capital Repair
exceeds one hundred thousand dollars ($100,000) (the "Cost-Share Threshold");
fifty percent (50%) or more of the anticipated useful life of the Capital Repair
extends beyond the Lease term; Tenant has not exercised its option, if any, to
extend the Lease term; the anticipated useful life of the Capital Repair is ten
(10) years or more; and Landlord approves the plans and specifications and the
budget for the completion of the Capital Repair. The Cost-Share Threshold shall
be increased annually during the Lease term, including extensions, by an amount
equal to the percentage increase in the Index during the preceding year. Any
rent credit that Landlord is required to give Tenant under this Section 8.2
shall bear interest at the Prime Rate plus two percent (2%) per annum. If
Tenant exercises its right to extend the Lease term, Landlord shall be relieved
of any obligation to reimburse Tenant pursuant to this Section 8.2.
ARTICLE IX.
ALTERATIONS
9.1 Except as specifically permitted in section 9.2, Tenant shall not make
any alterations, additions or improvements in or to the Premises or any part
thereof, or attach any fixtures or equipment thereto, without Landlord's prior
written consent. In no event shall Tenant be permitted to install underground
storage tanks or fuel systems on the Premises. Landlord's refusal to consent to
the installation of an underground tank or fuel system shall be conclusively
presumed to be reasonable. Except as specifically permitted in section 9.2, all
alterations, additions and improvements in or to the Premises to which Landlord
consents shall be made by Tenant at Tenant's sole cost and expense as foilows:
(a) Tenant shall submit to Landlord, for Landlord's written approval,
complete plans and specifications for all work to be done by Tenant. Such plans
and specifications shall be
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prepared by the licensed architect(s) and engineer(s), shall comply with all
applicable codes, laws, ordinances, rules and regulations, shall not adversely
affect the structural elements of the Premises, shall be in a form sufficient to
secure the approval of all government authorities with jurisdiction over the
Premises, and shall be otherwise satisfactory to Landlord in Landlord's
reasonable discretion.
(b) Landlord shall notify Tenant promptly in writing whether Landlord
approves or disapproves such plans and specifications and, if Landlord
disapproves such plans and specifications, Landlord shall describe the reasons
for disapproval. Tenant may submit to Landlord revised plans and specifications
for Landlord's prior written approval. Tenant shall pay all costs, including
the fees and expenses of the licensed architect(s) and engineer(s), in preparing
such plans and specifications. If Landlord fails to notify Tenant within thirty
(30) days of Landlord's receipt of the plans and specifications for the work to
be done by Tenant and all other information reasonably required by Landlord
regarding such work, then Landlord shall be deemed to have consented to such
work. With respect to alterations or improvements requiring Landlord's consent,
Landlord shall have the right to condition its consent on Tenant's agreement to
remove such alterations or improvements from the Premises upon the termination
of the Lease; provided, however, that Landlord shall only be permitted to
require Tenant to remove such alterations or improvements if failure to remove
them, in Landlord's reasonable opinion, would adversely affect the value of the
Premises or Landlord's ability to lease the Premises to a new tenant for office
purposes.
(c) All changes in the plans and specifications approved by Landlord
shall be subject to Landlord's prior written approval. If Tenant wishes to make
any such change in such approved plans and specifications, Tenant shall have
such architect(s) and engineer(s) prepare plans and specifications for such
change and submit them to Landlord for Landlord's written approval. Landlord
shall notify Tenant in writing promptly whether Landlord approves or disapproves
such change and, if Landlord disapproves such change, Landlord shall describe
the reasons for disapproval. Tenant may submit to Landlord revised plans and
specifications for such change for Landlord's written approval. After
Landlord's written approval of such change, such change shall become part of the
plans and specifications approved by Landlord.
(d) Tenant shall obtain and comply with all building permits and
other governmental permits and approvals required in connection with the work.
Tenant shall, through Tenant's licensed contractor, perform the work
substantially in accordance with (i) the plans and specifications approved in
writing by Landlord, (ii) the permits obtained by Tenant, and (iii) all
applicable codes, laws, ordinances, rules and regulations. Notwithstanding the
foregoing sentence, Tenant may
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use its qualified employees to perform such work, instead of a licensed
contractor, with Landiord's consent, which consent may be withheld by Landlord
if, in Landlord's reasonable determination, there is a substantial risk that the
work performed by Tenant's employees would be of lesser quality than work
performed by a licensed of contractor. Tenant shall pay the applicable third
parties, as additional rent, the entire cost of all work (including the cost of
all utilities, permits, fees, taxes, and property and liability insurance
premiums in connection therewith) required to make the alterations, additions
and improvements, subject to the Right to Contest. Under no circumstances shall
Landlord be liable to Tenant for any damage, loss, cost or expense incurred by
Tenant on account of any plans and specifications, contractors or
subcontractors, design of any work, construction of any work, or delay in
completion of any work, except to the extent that the same results from a breach
by Landlord of its obligations under this Lease.
(e) Tenant shall give written notice to Landlord of the date on which
construction of any work will be commenced at least ten (10) days prior to such
date; provided that no such notice shall be required for work to be performed by
Tenant's qualified employees as permitted under Section 9.1(d) if such work does
not require the issuance of a building permit under applicable codes. Subject
to the Right to Contest, Tenant shall keep the Premises free from mechanics',
materialmen's and all other liens arising out of any work performed, labor
supplied, materials furnished or other obligations incurred by Tenant. Subject
to the Right to Contest, Tenant shall promptly and fully pay and discharge all
claims on which any such lien could be based. Landlord shall have the right to
post and keep posted on the Premises any notices that may be provided by law or
which Landlord may deem to be proper for the protection of Landlord and the
Premises from such liens, and to take any other action Landlord deems necessary
to remove or discharge liens or encumbrances at the expense of Tenant.
9.2 Tenant may make such alterations, additions or improvements without
Landlord's consent only if the total cost of such alterations, additions or
improvements is two hundred fifty thousand dollars ($250,000) (increased
annually by an amount equal to the percentage increase in the Index during the
preceding year) or less for any project or series of related projects and such
alterations, additions or improvements will not affect in any way the
structural, exterior or roof elements of the Premises and will not materially
impair the mechanical, electrical, plumbing, utility or life safety systems of
the Premises, but Tenant shall give Landlord prior written notice of any such
alterations, additions or improvements; provided that no such notice shall be
required for alterations, additions or improvements to be performed by Tenant's
qualified employees as permitted under Section 9.1(d) if such work does not
require the issuance of a building permit under applicable codes. In addi-
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tion, Landlord acknowledges that Tenant intends to construct non-structural,
interior improvements on the fourth floor of the Office Building. Tenant agrees
to complete such improvements before the end of fifth year of the initial term
of this Lease; provided, however, that if Landlord's mortgagee or a third party
purchaser acquires the Premises through a foreclosure sale, deed in lieu of
foreclosure or similar transfer, and such mortgagee or third party purchaser
refuses to agree in writing, after request from Tenant, to fund the Improvement
Allowance (as hereinafter defined) in accordance with Section 9.4, Tenant shall
not be obligated to complete such improvements until the end of the tenth year
of the initial term of this Lease. Provided that such improvements (i) are
substantially similar to the nature and quality of the improvements on the
first, second and third floors of the Office Building and (ii) will not affect
in any way the structural, exterior or roof elements of the Premises, and will
not materially impair the mechanical, electrical, plumbing, utility or life
safety systems of the Premises, then Landlord agrees it shall not have the right
to approve Tenant's plans and specifications for such improvements. For all
alterations, additions and improvements performed in accordance with this
Section 9.2, Tenant shall comply with all provisions of section 9.1 other than
those provisions requiring Landlord's consent to plans and specifications in
constructing such improvements.
9.3 All alterations, additions, fixtures and improvements, whether
temporary or permanent in character, made in or to the Premises by Tenant, shall
become part of the Premises and Landlord's property excluding, however,
underground tanks which shall remain the property of Tenant and shall be
registered in the name of Tenant so long as this Lease remains in effect. Upon
termination of this Lease, Landlord shall have the right, at Landlord's option,
by giving written notice to Tenant at any time before or within ten (10) days
after such termination with respect to any alterations, additions, fixtures or
improvements to which Landlord did not consent or with respect to which
Landlord's consent was conditioned on Tenant's removal of such alteration,
addition, fixture or improvement from the Premises upon termination of the
Lease, to retain all such alterations, additions, fixtures and improvements in
the Premises, without compensation to Tenant, or (if failure to remove such
alterations or improvements would, in Landlord's reasonable opinion, adversely
affect the value of the Premises or Landlord's ability to lease the Premises to
a new tenant for office purposes) to remove all such alterations, additions,
fixtures and improvements from the Premises, repair all damage caused by any
such removal, and restore the Premises to the condition in which the Premises
existed before such alterations, additions, fixtures and improvements were made,
and in the latter case Tenant shall pay to Landlord, upon billing by Landlord,
the cost of such removal, repair and restoration (including a reasonable charge
for Landlord's overhead and profit). All movable furniture, equipment, trade
fixtures and other personal property shall
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remain the property of Tenant. Upon termination of this Lease, Tenant shall, at
Tenant's expense, remove all such movable furniture, equipment, trade fixtures
other personal property from the Premises and repair all damage caused by any
such removal. Termination of this Lease shall not affect the obligations of
Tenant pursuant to this section 9.3 to be performed after such termination.
9.4 Subject to the terms and conditions of this Section 9.4, Landlord
shall provide Tenant an allowance (the "Improvement Allowance") in an amount
requested by Tenant, but not exceeding five hundred thousand dollars ($500,000),
to reimburse Tenant for costs incurred in constructing the interior improvements
on the fourth floor of the Office Building as described in Section 9.2 (the
"Fourth Floor Work"). Landlord shall disburse the Improvement Allowance to
Tenant in one lump sum, within thirty (30) days after notice from Tenant
requesting such disbursement and specifying the requested amount, which notice
shall be accompanied by paid invoices for labor and materials in connection with
the Fourth Floor Work and final unconditional lien releases from the contractor,
all subcontractors and all suppliers providing labor or materials for the Fourth
Floor Work. Notwithstanding the preceding sentence, if Tenant is unable to
provide Landlord with an unconditional lien release for reasons other than that
the work is not substantially completed, and provided all other conditions set
forth in this Section 9.4 are satisfied, Landlord shall disburse the Improvement
Allowance LESS two times the amount or amounts to which the missing lien
releases correspond (the "Hold Back"), and when Landlord has received all
unconditional lien releases (or the last day for filing the applicable lien
passes and, on the tenth (10th) day thereafter, no lien has been filed and/or
Tenant has removed any lien that is filed, by bonding or otherwise), Landlord
will disburse the Hold Back in one lump sum. Landlord's obligation to disburse
the Improvement Allowance is conditioned upon Landlord's receipt prior to the
fifth anniversary of the Commencement Date (the "Improvement Completion
Deadline") of (a) a certificate of Tenant's architect or engineer, in form
reasonably satisfactory to Landlord, certifying that the Fourth Floor Work has
been substantially completed, was constructed in compliance with all applicable
codes, laws, ordinances, rules and regulations and is free of material defects
(other than latent defects), and (b) a certificate of occupancy with respect to
the Fourth Floor Work. The Improvement Completion Deadline shall be extended by
one (1) day for each day that Tenant or Tenant's contractor, subcontractors or
suppliers are prevented from providing labor or materials for the Fourth Floor
Work for reasons beyond the reasonable control of the party from whom
performance is required, such as acts of nature, a strike or other labor
disturbance, war or riots; provided, however, that the Improvement Completion
Deadline shall in no event be extended more than one hundred eighty (180) days.
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ARTICLE 10
INSURANCE
10.1 Landlord shall not be liable to Tenant for any damage to or loss or
theft of any property or for any bodily or personal injury, illness or death of
any person in, on or about the Premises arising at any time and from any cause
whatsoever, except to the extent caused by the gross negligence or willful
misconduct of Landlord. Tenant waives all claims against Landlord arising from
any liability described in this section 10.1, except to the extent caused by the
gross negligence or willful misconduct of Landlord.
10.2 Tenant shall indemnify and defend Landlord against and hold Landlord
harmless from all claims, demands, liabilities, damages, losses, costs and
expenses, including reasonable attorneys' fees and disbursements, arising from
or related to any use or occupancy of the Premises, or any condition of the
Premises, or any default in the performance of Tenant's obligations, or any
damage to any property (including property of employees and invitees of Tenant)
or any bodily or personal injury, illness or death of any person (including
employees and invitees of Tenant) occurring in, on or about the Premises or any
part thereof or any part of the building or the land containing the Premises
arising at any time and from any cause whatsoever (except to the extent caused
by the gross negligence or willful misconduct of Landlord) or occurring outside
the Premises when such damage, bodily or personal injury, illness or death is
caused by any act or omission of Tenant or its agents, officers, employees,
contractors, invitees or licensees. This section 10.2 shall survive the
termination of this Lease with respect to any damage, bodily or personal injury,
illness or death occurring prior to such termination.
10.3 Tenant shall, at all times during the term of this Lease and at
Tenant's sole cost and expense, obtain and keep in force comprehensive general
liability insurance, including contractual liability (covering this Lease),
cross liability, and premises operations, all on an "occurrence" policy form,
with a minimum combined single limit in the amount specified in the BASIC LEASE
INFORMATION per occurrence for bodily or personal injury to, illness of, or
death of persons and damage to property occurring in, on or about the Premises,
such insurance shall name the Landlord and any other parties designated by
Landlord as additional insureds. Tenant shall, at Tenant's sole cost and
expense, be responsible for insuring Tenant's furniture, equipment, fixtures,
computers, office machines and personal property, to the extent Tenant elects to
do so.
10.4 Tenant shall, at all times during the term of this Lease and at
Tenant's sole cost and expense, obtain and keep in force Worker's compensation
and employer's liability insurance in all states in which the Premises and any
other operations of
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the Tenant are located and any other state in which the Tenant or its
contractors or subcontractors may be subject to any statutory or other liability
arising in any manner whatsoever out of the actual or alleged employment of
others. The total limits of the employer's liability coverage required
hereunder shall not be less than the amounts specified in section 10.3.
10.5 The insuring party for property insurance specified in the Basic
Lease Information shall, at all times during the term of this Lease, at such
party's sole cost and expense, obtain and keep in force (a) insurance against
loss or damage to the Premises by fire and all other risks of physical loss
covered by insurance of the type now known as "all risk," including coverage
for flood (if the Premises is located in an area identified as an area having
special flood hazards) and earthquake (subject to the limitations set forth
in the following sentence), with difference in conditions coverage, in an
amount not less than the full replacement cost of the Premises (without
deduction for depreciation), including the cost of debris removal and such
endorsements as Landlord may reasonably require, and containing the
"Replacement Cost Endorsement"; (b) boiler and machinery insurance covering
pressure vessels, air tanks, boilers, machinery, pressure piping, heating,
ventilation and air conditioning equipment, and elevator and escalator
equipment, provided the Premises contain equipment of such nature and
insurance against loss of occupancy or use arising from any breakdown of any
such items, in such amounts as Landlord may reasonably determine; and (c)
plate glass insurance in such amounts as Landlord may reasonably determine if
the Premises contain plate glass. Tenant shall only be required to maintain
earthquake insurance on the Premises if the annual premium (or the allocated
premium if Tenant's earthquake insurance policy insures property in addition
to the Premises) does not exceed twenty thousand five hundred dollars
($20,500), increased annually during the Lease term, including extensions, by
an amount equal to the percentage increase in the Index during the preceding
year (as increased, the "Premium Cap"). If for any year the annual premium
for the earthquake insurance exceeds the Premium Cap, Tenant shall not be
obligated to carry earthquake insurance, but if Landlord elects to cover the
Premises under an earthquake insurance policy, including a blanket policy,
carried by Landlord for any such year, Tenant shall pay to the Landlord for
that year the lesser of (a) the Premium Cap, or (b) the portion of the
earthquake insurance premium paid by Landlord allocable to the Premises. If
Landlord elects to carry earthquake insurance on the Premises in accordance
herewith, then upon request by Tenant, Landlord shall furnish Tenant with
evidence of Landlord's premium allocation.
10.6 All insurance required to be maintained by Tenant under this
Article 10 and all renewals thereof shall be issued by good and responsible
companies qualified to do and doing business in the state where the Premises
are located and having
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a rating in Best's Insurance Guide of at least A-IX. No deductible amount
under any such insurance policy shall exceed twenty-five thousand dollars
($25,000), except for the deductible for Tenant's earthquake insurance
policy, which deductible shall not exceed five percent (5%) of the value of
the Premises. Each policy to be maintained by Tenant shall expressly provide
that the policy shall not be canceled or altered without sixty (60) days'
prior written notice to Landlord and shall remain in effect notwithstanding
any such cancellation or alteration until such notice shall have been given
to Landlord and such period of sixty (60) days shall have expired. All
insurance under this Article 10 to be maintained by Tenant shall name
Landlord and any other parties designated by Landlord as an additional
insured, shall be primary and noncontributing with any insurance which may be
carried by Landlord, shall afford coverage for all claims based on any act,
omission, event or condition that occurred or arose (or the onset of which
occurred or arose) during the policy period, and shall expressly provide that
Landlord, although named as an insured, shall nevertheless be entitled to
recover under the policy for any loss, injury or damage to Landlord. Upon the
issuance of each such policy to be maintained by Tenant, Tenant shall deliver
each such policy or a certified copy and a certificate thereof to Landlord
for retention by Landlord. The insurance required to be maintained by Tenant
under this Article 10 may be provided for in the form of a blanket policy or
policies of insurance, provided all of the requirements of this Article 10
are satisfied by such blanket policy or policies. If Tenant fails to insure
or fails to furnish to Landlord upon notice to do so any policy to be
maintained by Tenant or certified copy and certificate thereof as required,
Landlord shall have the right from time to time to effect such insurance for
the benefit of Tenant and Landlord or both of them and all premiums paid by
Landlord shall be payable by Tenant as additional rent on demand. Tenant
shall pay to Landlord, immediately upon demand all costs incurred by Landlord
as a result of Tenant's failure to obtain and maintain in effect the policies
of insurance required under this Article 10.
10.7 Tenant waives on behalf of all insurers under all policies of
property, liability and other insurance (excluding workers' compensation) now
or hereafter carried by Tenant insuring or covering the Premises, or any
portion or any contents thereof, or any operations therein, all rights of
subrogation which any insurer might otherwise, if at all, have to any claims
of Tenant against Landlord. Landlord waives on behalf of all insurers under
all policies of property, liability and other insurance (excluding workers'
compensation) now or hereafter carried by Landlord insuring or covering the
Premises or any portion or any contents thereof, or any operations therein,
all rights of subrogation which any insurer might otherwise, if at all, have
to any claims of Landlord against Tenant. Tenant shall, prior to or
immediately after the date of this Lease, procure from each of the insurers
under all policies
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of property, liability and other insurance (excluding workers, compensation) now
or hereafter carried by Tenant insuring or covering the Premises, or any portion
or any contents thereof, or any operations therein, a waiver (of all rights of
subrogation which the insurer might otherwise, if at all, have to any claims of
Tenant against Landlord as required by this section 10.6.
ARTICLE 11
COMPLIANCE WITH LEGAL REQUIREMENTS
11.1 Subject to the Right to Contest, Tenant shall, at Tenant's sole
cost and expense, promptly comply with all laws, ordinances, rules,
regulations, orders and other requirements of any government or public
authority now in force or which may hereafter be in force with all
requirements of any board of fire underwriters or other similar body now or
hereafter constituted, and with all directions and certificates of occupancy
issued pursuant to any law by any governmental agency or officer, insofar as
any thereof relate to or are required by the condition, use or occupancy of
the Premises or the operation, use or maintenance of any personal property,
fixtures, machinery, equipment or improvements in the Premises.
11.2 Notwithstanding the foregoing, during the last five (5) years of the
Lease term, excluding any extension term, if Tenant is required, pursuant to
section 11.1, to make any substantial repair or improvement to the Premises the
cost of which would be treated as a capital expense in accordance with generally
accepted accounting principles (a "Required Improvement"), Landlord shall
reimburse to Tenant, by a rent credit applied at the end of the Lease term, an
amount equal to (a) the cost of the Required Improvement, multiplied by (b) a
fraction (i) the numerator of which is the number of years beyond the Lease term
the useful life of the Required Improvement is anticipated to extend, and
(ii) the denominator of which is the total anticipated useful life of the
Required Improvement, provided that each of the following conditions is
satisfied: the cost of such Required Improvement exceeds the Cost-Share
Threshold, as adjusted pursuant to Section 8.2; fifty percent (50%) or more of
the anticipated useful life of the Required Improvement extends beyond the Lease
term; Tenant has not exercised its option, if any, to extend the Lease term; the
anticipated useful life of the Required Improvement is ten (10) years or more;
and Landlord approves the plans and specifications and the budget for the
construction or installation of the Required Improvement. If Tenant exercises
its right to extend the Lease term, Landlord shall be relieved of any obligation
to reimburse Tenant pursuant to this Section 11.2.
11.3 Landlord shall reasonably cooperate with Tenant from time to time,
upon Tenant's request and at Tenant's expense, to the extent that Landlord's
signature, consent or participation
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(or any other action of Landlord) is legally required in connection with
(a) petitions, or other applications for changes to, laws, taxes, assessments or
other monetary impositions relating to the Premises, (b) applications for,
modifications of, disputes with respect to, or other actions, proceedings or
negotiations relating to permits, licenses and/or other authorizations relating
to the Premises, (c) existing easements, covenants, conditions and/or
restrictions relating to the Premises (or modifications thereto) or supplemental
or additional agreements of such type, (d) dedications or transfers of
unimproved portions of the Premises for road or other public purposes,
(e) petitions to have the Premises annexed to any utility or service district or
other similar entity, and/or (f) any other agreements, transactions, disputes,
proceedings or other matters, whether involving governmental or quasi-
governmental authorities or private parties, with respect to which Landlord's
cooperation is legally required; provided that Landlord may refuse to cooperate
as set forth herein (i) in the event that the activity with respect to which
Tenant is seeking such cooperation is prohibited by this Lease, or (ii) in the
event that all of the following are true: (A) the activity with respect to which
Tenant is seeking such cooperation is not expressly permitted by this Lease,
(B) no other provision of this Lease would obligate Landlord to provide such
cooperation, and (C) Landlord reasonably determines that the result that Tenant
is seeking to accomplish would materially and adversely affect Landlord's
interests with respect to the Premises.
ARTICLE 12
ASSIGNMENT OR SUBLEASE
12.1 Tenant shall not, directly or indirectly, without the prior
written consent of Landlord (which consent shall not be unreasonably
withheld), assign this Lease or any interest herein or sublease the Premises
or any part thereof (except as provided in section 12.4), or permit the use
or occupancy of the Premises by any person or entity other than Tenant. This
Lease shall not, nor shall any interest herein, be assignable as to the
interest of Tenant involuntarily or by operation of law without the prior
written consent of Landlord. Any of the foregoing acts without such prior
written consent of Landlord shall be void and shall, at the option of
Landlord, constitute a default that entitles Landlord to terminate this
Lease. Tenant agrees that the instrument, by which any assignment to which
Landlord consents or which is permitted by section 12.4 is accomplished,
shall expressly provide that the assignee will perform all of the covenants
to be performed by Tenant under this Lease as and when performance is due
after the effective date of the assignment and that Landlord will have the
right to enforce such covenants directly against such assignee. Tenant
agrees that the instrument, by which any sublease to which Landlord consents
or which is permitted by section 12.4 is accomplished, shall
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expressly provide that it is subject and subordinate to the Lease. Any
purported assignment or sublease without an instrument containing the
foregoing provisions shall be void. Tenant shall in all cases remain liable
for the performance by any assignee or subtenant of all such covenants.
12.2 If Landlord consents in writing, Tenant may complete the intended
assignment or sublease, provided, however, that no assignment or sublease
shall be valid and no assignee or subtenant shall take possession of the
Premises or any part thereof until an executed duplicate original of such
assignment or sublease, in compliance with section 12.1, has been delivered
to Landlord.
12.3 No assignment or sublease whatsoever shall release Tenant from
Tenant's obligations and liabilities under this Lease or alter the primary
liability of Tenant to pay all rent and to perform all obligations to be paid
and performed by Tenant during the term of this Lease, including all
extension terms (whether or not Tenant consents to such extension by an
assignee). The acceptance of rent by Landlord from any other person or
entity shall not be deemed to be a waiver by Landlord of any provision of
this Lease. Consent to one assignment or sublease shall not be deemed
consent to any subsequent assignment or sublease. If any assignee, subtenant
or successor of Tenant defaults in the performance of any obligation to be
performed by Tenant under this Lease, Landlord may proceed directly against
Tenant without the necessity of exhausting remedies against such assignee,
subtenant or successor. Landlord may consent to subsequent assignments or
subleases or amendments or modifications to this Lease with assignees,
subtenants or successors of Tenant, without notifying Tenant or any successor
of Tenant and without obtaining any consent thereto from Tenant or any
successor of Tenant, and such action shall not release Tenant from liability
under this Lease; provided, however, that if Landlord and Tenant's assignee
agree to increase Base Rent in excess of the amount of Base Rent otherwise
payable under section 3.1, then Tenant shall not be liable to Landlord for
payment of such excess Base Rent.
12.4 Tenant may sublease all or any portion of the Premises to its
Affiliates, and may sublease less than ten thousand (10,000) square feet of
the Office Building to any person or entity, without Landlord's prior-written
consent so long as such subtenant's proposed use of the Premises: (a) shall
be permitted hereunder and under all legal and other requirements described
in Article 11; (b) shall not substantially increase the wear and tear on or
the risk of damage to the Premises above levels or risks resulting from
Tenant's use as of the date of this Lease; and (c) is not for any illegal
purpose. All provisions of this Article 12 applicable to subletting, other
than the requirement of obtaining Landlord's prior consent, shall apply to
any subletting under this 12.4. As used in this Lease, the term "Affiliates"
means an entity which
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controls, is controlled by or is under common control with Tenant.
12.5 Notwithstanding anything to the contrary set forth in this Article 12,
Landlord's consent shall not be required to (a) any temporary, rent-free use of
up to twenty thousand (20,000) square feet of the Premises by Tenant's
suppliers, customers or other persons with whom Tenant conducts business,
provided that Tenant retains the right to terminate each such persons' use of
the Premises at any time and Tenant shall use diligent efforts to assure that
such users comply with all of the applicable terms and provisions of this Lease;
(b) a consolidation or merger of Tenant or a sale of all or substantially all of
Tenant's assets, provided the tangible net worth of Tenant's successor
immediately after such consolidation, merger or sale is equal to or greater than
Tenant's tangible net worth immediately prior to such consolidation, merger or
sale, all as evidenced by audited balance sheets; (c) any sublease of the
Cafeteria for a period of one (1) week or less; or (d) any cafeteria operating
agreement (in the event that any such agreement is construed to constitute a
sublease).
ARTICLE 13
ENTRY BY LANDLORD
13.1 Landlord shall have the right, following no less than one (1) business
day's advance notice (except in emergencies), to enter the Premises at any
reasonable time to (a) inspect the Premises, (b) exhibit the Premises to
prospective purchasers, to lenders, or during the last twelve (12) months of the
term of this Lease to tenants, (c) determine whether Tenant is performing all of
Tenant's obligations, (d) perform any obligations of Tenant in accordance with
section 14.5, (e) post notices of nonresponsibility, "For sale", and during the
last twelve (12) months of the term of this Lease "For lease" signs, in and
about the Premises, (f) make any repairs to the Premises which Landlord is
entitled to make and (g) investigate and perform tests to determine Tenant's
compliance with Article 21. Tenant waives all claims for damages for any injury
or inconvenience to or interference with Tenant's business, any loss of
occupancy or quiet enjoyment of the Premises or any other loss occasioned by
such entry. Tenant shall be entitled to have one of its agents or other
representatives accompany Landlord at all times during any such entry (except in
emergencies), and Landlord shall reasonably cooperate with Tenant to minimize
any unavoidable disruption of Tenant's operations resuiting from any such entry.
If Landlord removes any existing underground tanks and fueling system from the
Premises, Landlord shall have no obligation to replace them or provide alternate
tanks or a fueling system. Landlord shall at ail times have a key to unlock all
such doors and Landlord shall have the right to use
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any and all means which Landlord may deem proper to open such doors in an
emergency to obtain entry to the Premises. Any entry to the Premises obtained
by Landlord by any of such means shall not under any circumstances be construed
or deemed to be a forcible or unlawful entry into or a detainer of the Premises
or an eviction, actual or constructive, of Tenant from the Premises or any
portion thereof.
ARTICLE 14
EVENTS OF DEFAULT AND REMEDIES
14.1 The occurrence of any one or more of the following events ("Event of
Default") shall constitute a breach of this Lease by Tenant:
(a) Tenant fails to pay any Base Rent and such failure continues for more
than three (3) business days after Landlord gives written notice thereof to
Tenant; provided, however, that after the second such failure in a calendar
year, only the passage of time, but no further notice shall be required to
establish an Event of Default in the same calendar year; or
(b) Tenant fails to pay any additional rent or other amount of money or
charge payable by Tenant hereunder as and when such additional rent or amount or
charge becomes due and payable and such failure continues for more than ten (10)
days after Landlord gives written notice thereof to Tenant; provided, however,
that after the second such failure in a calendar year, only the passage of time,
but no further notice, shall be required to establish an Event of Default in the
same calendar year; or
(c) Tenant fails to perform or breaches any other agreement or covenant of
this Lease to be performed or observed by Tenant as and when performance or
observance is due (subject to the Right to Contest) and such failure or breach
continues for more than ten (10) days after Landlord gives written notice
thereof to Tenant; provided, however, that if, by the nature of such agreement
or covenant, such failure or breach cannot reasonably be cured within such
period of ten (10) days, an Event of Default shall not exist as long as Tenant
commences with due diligence and dispatch the curing of such failure or breach
within such period of ten (10) days and, having so commenced, thereafter
prosecutes with diligence and dispatch and completes the curing of such failure
or breach within a reasonable time; or
(d) Tenant (i) files, or consents by answer or otherwise to the filing
against it of, a petition for relief or reorganization or arrangement or any
other petition in bankruptcy or for liquidation or to take advantage of any
bankruptcy, insolvency or other debtors' relief law of any jurisdiction, (ii)
makes an
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assignment for the benefit of its creditors, (iii) consents to the appointment
of a custodian, receiver, trustee or other officer with similar powers of Tenant
or of any substantial part of Tenant's property, or (iv) takes action for the
purpose of any of the foregoing; or
(e) Without consent by Tenant, a court or government authority enters an
order, and such order is not vacated within sixty (60) days, (i) appointing a
custodian, receiver, trustee or other officer with similar powers with respect
to Tenant or with respect to any substantial part of Tenant's property, or (ii)
constituting an order for relief or approving a petition for relief or
reorganization or arrangement or any other petition in bankruptcy or for
liquidation or to take advantage of any bankruptcy, insolvency or other debtors'
relief law of any jurisdiction, or (iii) ordering the dissolution, winding-up or
liquidation of Tenant; or
(f) This Lease or any estate of Tenant hereunder (other than particular
items of Equipment whose aggregate value does not exceed one hundred thousand
dollars ($100,000)) is levied upon under any attachment or execution and such
attachment or execution is not vacated within sixty (60) days; or
(g) Tenant abandons the Premises.
14.2 If an Event of Default occurs, Landlord shall have the right at any
time to give a written termination notice to Tenant and, on the date specified
in such notice, Tenant's right to possession shall terminate and this Lease
shall terminate. Upon such termination, Landlord shall have the right to
recover from Tenant:
(a) The worth at the time of award of all unpaid rent which had been earned
at the time of termination;
(b) The worth at the time of award of the amount by which all unpaid rent
which would have been earned after termination until the time of award exceeds
the amount of such rental loss that Tenant proves could have been reasonably
avoided;
(c) The worth at the time of award of the amount by which all unpaid rent
for the balance of the term of this Lease after the time of award exceeds the
amount of such rental loss that Tenant proves could be reasonably avoided; and
(d) All other amounts necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform all of Tenant's
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom. The "worth at the time of award" of the amounts
referred to in clauses (a) and (b) above shall be computed by allowing interest
at the maximum annual interest rate allowed by law for business loans (not
primarily for personal, family or household
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purposes) not exempt from the usury law at the time of termination or, if there
is no such maximum annual interest rate, at the rate of eighteen percent (18%)
per annum. The "worth at the time of award" of the amount referred to in clause
(c) above shall be computed by discounting such amount at the discount rate of
the Federal Reserve Bank located nearest the Premises at the time of award plus
one percent (1%). For the purpose of determining unpaid rent under clauses (a),
(b) and (c) above, the rent reserved in this Lease shall be deemed to be the
total rent payable by Tenant under Articles 3 and 5 hereof.
14.3 Even though Tenant has breached this Lease, this Lease shall continue
in effect for so long as Landlord does not terminate Tenant's right to
possession, and Landlord shall have the right to enforce all its rights and
remedies under this Lease, including the right to recover all rent as it becomes
due under this Lease. Acts of maintenance or preservation or efforts to relet
the Premises or the appointment of a receiver upon initiative of Landlord to
protect Landlord's interest under this Lease shall not constitute a termination
of Tenant's right to possession unless written notice of termination is given by
Landlord to Tenant.
14.4 The remedies provided for in this Lease are in addition to all other
remedies available to Landlord at law or in equity by statute or otherwise.
14.5 All agreements and covenants to be performed or observed by Tenant
under this Lease shall be at Tenant's sole cost and expense and without any
abatement of rent. If Tenant fails to pay any sum of money to be paid by Tenant
or to perform any other act to be performed by Tenant under this Lease, Landlord
shall have the right, but shall not be obligated, and without waiving or
releasing Tenant from any obligations of Tenant, to make any such payment or to
perform any such other act on behalf of Tenant in accordance with this Lease.
All sums so paid by Landlord and all necessary incidental costs shall be deemed
additional rent hereunder and shall be payable by Tenant to Landlord on demand,
together with interest on all such sums from the date of expenditure by Landlord
to the date of repayment by Tenant at the maximum annual interest rate allowed
by law for business loans (not primarily for personal, family or household
purposes) not exempt from the usury law at the date of expenditure or, if there
is no such maximum annual interest rate, at the rate of eighteen percent (18%)
per annum. Landlord shall have, in addition to all other rights and remedies of
Landlord, the same rights and remedies in the event of the nonpayment of such
sums plus interest by Tenant as in the case of default by Tenant in the payment
of rent.
14.6 If Tenant abandons or surrenders the Premises, or is dispossessed by
process of law or otherwise, any movable furniture, equipment, trade fixtures or
personal property belonging to Tenant and left in the Premises shall be deemed
to be
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abandoned, at the option of Landlord, and Landlord shall have the right to sell
or otherwise dispose of such personal property in any commercially reasonable
manner.
ARTICLE 15
DAMAGE OR DESTRUCTION
15.1 Landlord and Tenant acknowledge that, pursuant to Section 19.03.093
(as the same may be amended from time to time and together with any successor
section, the "Use Section") of the Zoning Ordinance of the City of Commerce,
California (as the same may be amended from time to time and together with any
successor ordinance, the "Zoning Ordinance"), if the Premises are "destroyed"
(as such term is used in the Use Ordinance) and not replaced within a specified
period of time, the use of the Premises for office purposes could cease to be a
permitted nonconforming use ("Permitted Use Termination") under the Zoning
Ordinance. If the Premises, or any part thereof, is damaged by fire or other
casualty during the term of this Lease and neither Landlord nor its Lender
reasonably determine that such damage is of such nature and or/magnitude that,
under all of the circumstances, there is a material risk that a Permitted Use
Termination could result pursuant to the Use Section, then Tenant shall restore
the Premises, and insurance proceeds shall be made available to Tenant
therefor, pursuant to Section 15.2 hereof. If the Premises, or any part
thereof, is damaged by fire or other casualty during the term of this Lease and
Landlord or its Lender determine, in their reasonable judgment, that such damage
is of such nature and/or magnitude that, under all of the circumstances, there
is a material risk that a Permitted Use Termination could result pursuant to the
Use Section, then Tenant shall diligently seek to obtain "reasonably
satisfactory assurances" (as hereinafter defined) that the Premises' permitted
office use pursuant to the Zoning Ordinance will continue after restoration of
the Premises. If Tenant does obtain "reasonably satisfactory assurances" within
sixty (60) days after the casualty event, then Tenant shall restore the
Premises, and insurance proceeds shall be made available to Tenant therefor,
pursuant to Section 15.2 hereof. If Tenant does not obtain "reasonably
satisfactory assurances" within sixty (60) days after the casualty event, then
Landlord shall have the right to elect, by giving Tenant written notice of such
election within one hundred five (105) days after the casualty event, to either:
(a) continue the Lease in effect, in which case Tenant shall restore the
Premises, and insurance proceeds shall be made available therefore, pursuant to
Section 15.2 hereof; or (b) terminate the Lease and reconvey the Premises to
Tenant "as is." If Landlord elects, pursuant to subsection (b) of the preceding
sentence, to reconvey the Premises to Tenant (a "Landlord Put"), then Landlord
shall deliver to Tenant a grant deed and a bill of sale conveying the Premises,
an assigranent of the Contracts and Permits and an assigranent of any unpaid
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casualty insurance proceeds relating to the Premises to which Landlord is
entitied, within sixty (60) days after Tenant receives Landlord's election
notice, in exchange for the following: (x) if Landlord has received casualty
insurance proceeds on account of such casualty cn or before the reconveyance
date, Landlord shall retain such proceeds and Tenant shall pay to Landlord the
difference, if any, between the applicable amount (the "Total Stipulated
Amount") set forth on the Stipulated Amount Schedule attached hereto as Schedule
IV and the casualty insurance proceeds actually received by Landlord; or (y) if
Landlord has not received any casualty insurance proceeds on account of such
casualty on or before the reconveyance date, Tenant shall pay to Landlord the
applicable Total Stipulated Amount. In the case of a Landlord Put, Landlord
shall reconvey the Premises to Tenant free and clear of all monetary liens, and
Tenant shall be solely responsible for any transfer taxes and all other closing
costs (except Landlord's attorney's fees) as sociated with the reconveyance.
"Reasonably satisfactory assurances" means written assurance from the
responsible city authorities (or other reasonably equivalent assurances)
indicating, to the reasonable satisfaction of Landlord and its lender, that no
Permitted Use Termination will result from the casualty and that the permitted
office use of the Premises pursuant to the Zoning Ordinance shall continue in
effect after restoration of the Premises notwithstanding any delays that may
cause restoration to be completed after expiration of the time period specified
in the Use Section. "Reasonably satisfactory assurances" may include an
extension of the time period referred to in the Use Section, so long as such
extension is sufficient to leave no reasonable possibility that the restoration
will not be completed within the extended time. Reasonably satisfactory
assurances" may include satisfactory written confirmation that the casualty
damage was not of such nature and/or magnitude as to constitute "destruction" of
the Premises (as such term is used in the Use Section).
15.2 If under Section 15.1 of this Lease Tenant is required to restore the
Premises following a fire or other casualty event, then Tenant shall repair such
damage and restore the Premises to substantially the same or better condition as
existed before the occurrence of such fire or other casualty, Tenant shall
repair and replace all furniture, equipment, trade fixtures and personal
property of Landlord (or, in lieu of the foregoing repair and replacement,
Tenant shall construct and install other Improvements and Equipment in
accordance with the requirements of Article 9), and this Lease shall remain in
full force and effect. Such repair and replacement by Tenant shall be done in
accordance with Article 9. Tenant's obligation to rebuild, and Tenant's
obligation to pay the full rent specified in this Lease, as herein provided
shall not be affected in any way by such damage or destruction even if the
casualty results in the loss of the permitted non-conforming use status of the
Premises that allows the Premises to be used as an office
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building; provided, however, that in such event Landlord shall not unreasonably
withhold consent to (x) a modification of the use provisions of this Lease to
the extent necessary to allow Tenant (or its permitted assignees or subtenants)
to make reasonable beneficial use of the Premises in accordance with applicable
land use restrictions, and (y) changes to the Improvements reasonably necessary
to facilitate any such change in use, subject to the applicable terms and
provisions of Article 9 of this Lease. In no event shall rent abate. Provided
Tenant is not in default under this Lease (and no event has occurred which, with
the passage of time, the giving of notice, or both, would constitute a default),
and provided Tenant has (i) delivered to Landlord plans and specifications and a
budget for such repair and restoration (all of which Landlord shall have
approved pursuant to Article 9), and (ii) deposited with Landlord cash in the
sum equal to the excess, if any, of the total cost set forth in such approved
budget (the "Estimated Repair Cost") over the amount of insurance proceeds
received on account of such casualty (the "Insurance Proceeds"), then Landlord
shall make available to Tenant all insurance proceeds actually received by
Landlord on account of such casualty, for application to the costs of such
approved repair and restoration, as follows:
(a) No more frequently than once per calendar month, Tenant may request
that Landlord either (at Tenant's option) reimburse Tenant for costs incurred by
Tenant or pay Tenant's contractors or subcontractors directly for work in place
to repair and restore the Premises during the immediately preceding calendar
month. Tenant's request shall certify that all work for which payment is
requested was performed in compliance with the plans and specifications approved
by Landlord pursuant to Article 9 and all applicable codes, laws, ordinances,
rules and regulations, and shall include reasonably satisfactory evidence of the
costs incurred by Tenant or due to Tenant's contractors or subcontractors, as
the case may be, and lien releases in form and substance required by applicable
law executed by all mechanics, materialmen, laborers, suppliers and contractors
who performed any portion of the repair work or supplied materials.
(b) within five (5) business days after receiving Tenant's request,
Landlord shall approve or disapprove Tenant's request, which approval shall not
be unreasonably withheld, by written notice to Tenant. If Landlord approves all
or any portion of a request and Landlord has received (and not previously
disbursed) insurance proceeds, then Landlord's approval shall include a check in
the amount approved by Landlord. If Landlord disapproves all or any portion of
a request, then Landlord's notice shall state the reasons for that disapproval.
Landlord's failure to deliver a notice approving or disapproving a request shall
be conclusively deemed Landlord's approval of the request. In addition,
Landlord shall have the right to impose other conditions upon disbursement so
long as they are consistent with customary construction loan disbursement
practices.
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If, after all repair and restoration has been completed, the total actual cost
to complete such repair and restoration (the "Actual Repair Cost") is less than
the Estimated Repair Cost and Tenant was required to deposit cash with Landlord
to make up the difference between the Estimated Repair Cost and the Insurance
Proceeds pursuant to this section 15.2, Landlord shall return to Tenant the
lesser of (i) the difference between the Estimated Repair Cost and the Actual
Repair Cost and (ii) the amount of the cash deposited by Tenant with Landlord.
15.3 In addition to Landlord's rights under Section 15.1 hereof, if the
Premises, or any part thereof, is damaged by fire or other casualty and (a) such
fire or other casualty occurs during the last twelve (12) months of the term of
this Lease and the repair and restoration work to be performed by Tenant in
accordance with section 15.2 cannot, as reasonably estimated by Landlord, be
completed within two (2) months after the occurrence of such fire or other
casualty, or (b) the insurance proceeds received by Landlord and Tenant in
respect of such damage are not adequate to pay the entire cost, as reasonably
estimated by Landlord, of the repair and restoration work to be performed by
Tenant in accordance with section 15.2 and Tenant does not deposit such
shortfall with Landlord, then, in any such event, Landlord shall have the right,
by giving written notice to Tenant within forty-five (45) days after the
occurrence of such fire or other casualty, to terminate this Lease as of the
date of such notice, in which case all insurance proceeds on account of such
casualty shall be paid to Landlord. If Landlord does not exercise the right to
terminate this Lease in accordance with this section 15.3, Tenant shall repair
such damage and restore the Premises in accordance with section 15.2 and this
Lease shall remain in full force and effect.
ARTICLE 16
EMINENT DOMAIN
16.1 If a substantial portion of the Premises is taken and the remaining
portion of the Premises is not reasonably suitable for Tenant's purposes, or if
a portion of the Premises is taken resulting in loss of access to and from the
Premises without reasonable substitute access being available, Landlord and
Tenant each shall have the right, by giving written notice to the other within
thirty (30) days after the date of such taking, to terminate this Lease. If
either Landlord or Tenant exercises such right to terminate this Lease in
accordance with this section 16.1, this Lease shall terminate as of the date of
such taking. If neither Landiord nor Tenant exercises such right to terminate
this Lease in accordance with this section 16.1, this Lease shall terminate as
to the portion of the Premises so taken as of the date of such taking and shall
remain in full force and effect as to the portion of the Premises not so taken,
Tenant shall restore the portion of the Premises not so taken to an
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integrated architectural unit in accordance with Article 9 and the Base Rent
shall be reduced as of the date of such taking in the proportion that the
rentable area of the Premises so taken bears to the total rentable area of the
Premises. If all of the Premises is taken by exercise of the power of eminent
domain before the Commencement Date or during the term of this Lease, this Lease
shall terminate as of the date of such taking.
16.2 If all or any part of the Premises is taken by exercise of the power
of eminent domain, all awards, compensation, damages, income, rent and interest
payable in connection with such taking shall, except as expressly set forth in
this section 16.2, be paid to and become the property of Landlord, and Tenant
hereby assigns to Landlord all of the foregoing. Without limiting the
generality of the foregoing, Tenant shall have no claim against Landlord or the
entity exercising the power of eminent domain for the value of the leasehold
estate created by this Lease or any unexpired term of this Lease. Tenant shall
have the right to claim and receive directly from the entity exercising the
power of eminent domain only the share of any award determined to be owing to
Tenant for the taking of improvements installed in the portion of the Premises
so taken by Tenant at Tenant's sole cost and expense based on the unamortized
cost actually paid by Tenant for such improvements, for the taking of Tenant's
movable furniture, equipment, trade fixtures and personal property, for loss of
goodwill, for interference with or interruption of Tenant's business, or for
removal and relocation expenses.
16.3 In the event of any taking other than a taking referred to in section
16.1, this Lease shall continue in full force and effect, Tenant shall continue
to pay all of the rent and to perform all of the covenants of Tenant in
accordance with this Lease and Tenant shall restore the Premises to an
integrated architectural unit in accordance with Article 9. Provided Tenant is
not in default under this Lease (and no event has occurred which, with the
passage of time, the giving of notice, or both, would constitute a default), and
provided Tenant has (i) delivered to Landlord plans and specifications and a
budget for such repair and restoration (all of which Landlord shall have
approved pursuant to Article 9), and (ii) deposited with Landlord cash in the
sum equal to the excess, if any, of the total cost set forth in such approved
budget (the "Estimated Restoration Cost") over the amount of condemnation award
proceeds received on account of such taking (the "Condemnation Proceeds"), then
Landlord shall make available to Tenant all condemnation award proceeds actually
received by Landlord on account of such taking, for application to the costs of
such approved repair and restoration, as follows:
(a) No more frequently than once per calendar month, Tenant may request
that Landlord either (at Tenant's option) reimburse Tenant for costs incurred by
Tenant or pay Tenant's
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contractors or subcontractors directly for work in place to repair and restore
the Premises during the immediately preceding calendar month. Tenant's request
shall certify that all work for which payment is requested was performed in
compliance with the plans and specifications approved by Landlord pursuant to
Article 9 and all applicable codes, laws, ordinances, rules and regulations, and
shall include reasonably satisfactory evidence of the costs incurred by Tenant
and lien releases in fo= and substance required by applicable law executed by
all mechanics, materialmen, laborers, suppliers and contractors who performed
any portion of the repair work or supplied materials.
(b) Within five (5) business days after receiving Tenant's request,
Landlord shall approve or disapprove Tenant's request, which approval shall not
be unreasonably withheld, by written notice to Tenant. If Landlord approves all
or any portion of a request and Landlord has received (and not previously
disbursed) condemnation award proceeds, then Landlord's approval shall include a
check in the amount Approved by Landlord. If Landlord disapproves all or any
portion of a request, then Landlord's notice shall state the reasons for that
disapproval. Landlord's failure to deliver a notice approving or disapproving a
request shall be conclusively deemed Landlord's approval of the request. In
addition, Landlord shall have the right to impose other conditions upon
disbursement so long as they are consistent with customary construction loan
disbursement practices.
If, after all repair and restoration has been completed, the total actual cost
to complete such repair and restoration (the "Actual Restoration Cost") is less
than the Estimated Restoration Cost and Tenant was required to deposit cash with
Landlord to make up the difference between the Estimated Restoration Cost and
the Condemnation Proceeds pursuant to this section 16.3, Landlord shall return
to Tenant the lesser of (i) the difference between the Estimated Restoration
Cost and the Actual Restoration Cost, and (ii) the amount of cash deposited by
Tenant with Landlord.
16.4 As used in this Article 16, a "taking" means the acquisition of all or
part of the Premises for a public use by exercise of the power of eminent domain
(or a sale of any or all of the Premises in lieu, or under threat, thereof) and
the taking shall be considered to occur as of the earlier of the date on which
possession of the Premises (or part so taken) by the entity exercising the power
of eminent domain is authorized as stated in an order for possession or the date
on which title to the Premises (or part so taken) vests in the entity exercising
the power of eminent domain.
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ARTICLE 17
SUBORDINATION, MERGER AND SALE
17.1 This Lease shall be subject and subordinate at all times to the lien
of all mortgages and deeds of trust securing any amount or amounts whatsoever
which may now exist or hereafter be placed on or against the Premises or on or
against Landlord's interest or estate therein, all without the necessity of
having further instruments executed by Tenant to effect such subordination.
Notwithstanding the foregoing, in the event of a foreclosure of any such
mortgage or deed of trust or of any other action or proceeding for the
enforcement thereof, or of any sale thereunder, this Lease shall not be
terminated or extinguished, nor shall the rights and possession of Tenant
hereunder be disturbed (except that, at any time when an Event of Default exists
under this Lease, any person who acquires Landlord's interest hereunder shall
have all of the rights and remedies provided under Article 14), and Tenant shall
attorn to the person who acquires Landlord's interest hereunder through any such
mortgage or deed of trust. Tenant agrees to execute, acknowledge and deliver
upon demand such further instruments evidencing such subordination of this Lease
to the lien of all such mortgages and deeds of trust as may reasonably be
required by Landlord, but Tenant's covenant to subordinate this Lease to
mortgages or deeds of trust hereafter executed is conditioned upon each such
senior mortgage or deed of trust, or a separate subordination agreement,
containing the commitments specified in the preceding sentence. Without
limiting the generality of the foregoing, Tenant agrees to enter into a
subordination, nondisturbance and attornment agreement substantially in the form
attached hereto as Exhibit B.
17.2 The voluntary or other surrender of this Lease by Tenant, or a mutual
cancellation thereof, shall not work a merger and shall, at the option of
Landlord, terminate all or any existing subleases or subtenancies or operate as
an assignment to Landlord of any or all such subleases or subtenancies.
17.3 If the original Landlord hereunder, or any successor owner of the
Premises, sells or conveys the Premises, all liabilities and obligations on
the part of the original Landlord, or such successor owner, under this Lease
accruing after such sale or conveyance shall terminate and the original
Landlord, or such successor owner, shall automatically be released therefrom,
and thereupon all such liabilities and obligations shall be binding upon the
new owner, and such new owner shall be deemed to have assumed all such
liabilities and obligations. Tenant agrees to attorn to such new owner.
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ARTICLE 18
ESTOPPEL CERTIFICATE
18.1 At any time and from time to time, Tenant shall, within ten (10) days
after written request by Landlord, execute, acknowledge and deliver to Landlord
a certificate, in the form attached as Exhibit C, certifying: (a) that this
Lease is unmodified and in full force and effect (or, if there have been
modifications, that this Lease is in full force and effect as modified, and
stating the date and nature of each modification); (b) the Commencement Date and
the Expiration Date determined in accordance with Article 2 and the date, if
any, to which all rent and other sums payable hereunder have been paid; (c) that
no notice has been received by Tenant of any default by Tenant hereunder which
has not been cured, except as to defaults specified in such certificate; (d)
that Landlord is not in default under this Lease, except as to defaults
specified in such certificate; and (e) such other matters as may be reasonably
requested by Landlord or any actual or prospective purchaser or mortgage lender.
Any such certificate may be relied upon by Landlord and any actual or
prospective purchaser or mortgage lender of the Premises or any part thereof.
18.2 Landlord shall execute and deliver to Tenant, within ten (10) days
following written request by Tenant, a certificate, in a form reasonably
acceptable to Landlord, pursuant to which Landlord certifies and agrees, for the
benefit of an assignee or subtenant of Tenant, except as otherwise expressly set
forth in such certificate: (a) that attached to the certificate is a true and
comelete copy of this Lease and all modifications thereto, each of which is in
full force and effect and which constitute all of the agreements presently in
effect between Landlord and Tenant with respect to the Premises; (b) that, to
the best of Landlord's knowledge, Tenant is not materially in default with
respect to this Lease; and (c) all other certifications and agreements
reasonably required by Tenant that do not impair Landlord's rights hereunder or
under any other agreement.
ARTICLE 19
HOLDING OVER
19.1 If, without objection by Landlord, Tenant holds possession of the
Premises after expiration of the term of this Lease, Tenant shall become a
tenant from month to month upon the terms herein specified but at a Base Rent
equal to one hundred fifty percent (150%) of the Base Rent in effect at the
expiration of the term of this Lease pursuant to Article 3, payable in advance
on or before the first day of each month. Such month to month tenancy may be
terminated by either Landlord or Tenant by
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giving thirty (30) days' written notice of termination to the other at any time.
ARTICLE 20
FINANCIAL STATEMENTS
20.1 On or before April 1 of each year, Tenant shall deliver to Landlord
Tenant's audited financial statements ("Financial Statements") for the previous
fiscal year of Tenant, which Financial Statements shall include an audited
consolidated balance sheet of Tenant and its consolidated subsidiaries as at the
end of such fiscal year, a consolidated statement of operations of Tenant and
its consolidated subsidiaries for such fiscal year, and a certificate of
Tenant's auditor (which shall be a recognized national independent accounting
firm) to the effect that such Financial Statements were prepared in accordance
with generally accepted accounting principals consistently applied and fairly
present the financial condition and operations of Tenant and its consolidated
subsidiaries for and as at the end of such fiscal year. Tenant's fiscal year
ends on the Saturday falling closest to August 31.
ARTICLE 21
HAZARDOUS MATERIALS
21.1 As used herein, the term "Hazardous Material" means any hazardous
or toxic substance, material or waste, or any pollutant or contaminant, or
words of similar import, which is or becomes regulated by any local
governmental authority, the state in which the Premises are located, or the
United States Government. The term "Hazardous Material" includes, but is not
limited to, any material or substance which is, (i) designated as a
"hazardous substance" pursuant to section 311 of the Federal Water Pollution
Control Act (33 U.S.C. section 1317), (ii) defined as a "hazardous waste"
pursuant to section 1004 of the Federal Resource Conservation and Recovery
Act, 42 U.S.C. section 6901, et seq. (42 U.S.C. section 6903), (iii)
defined as a "hazardous substance" pursuant to section 101 of the
Comprehensive Environmental Response Compensation and Liability Act (42
U.S.C. section 9601, et seq.), (iv) asbestos, (v) petroleum (including crude
oil or any fraction thereof, natural gas, natural gas liquids, liquified
natural gas, or synthetic gas natural usable for fuel, or any mixture
thereof), (vi) petroleum products, (vii) polychlorinated biphenyls, (viii)
urea formaldehyde, (ix) radon gas, (x) radioactive matter, (xi) medical
waste, and (xii) chemicals which may cause cancer or reproductive toxicity.
21.2 As used herein, the term "Environmental Requirements" means all laws,
ordinances, rules, regulations, orders and other
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requirements of any government or public authority now in force or which may
hereafter be in force relating to protection of human health or the environment
from Hazardous Material, including all requirements pertaining to reporting,
licensing, permitting, investigation and remediation of emissions, discharges,
storage, disposal or releases of Hazardous Materials and all requirements
pertaining to the protection of the health and safety of employees or the public
with respect to Hazardous Material.
21.3 Tenant shall not permit or conduct the handling, use, generation,
treatment, storage or disposal on, in or about the Premises of any Hazardous
Material without prior written notice to Landlord. Any such notice by Tenant to
Landlord shall be in writing and shall demonstrate to the reasonable
satisfaction of Landlord that such Hazardous Material is necessary to the
business of Tenant and will be handled, used, generated, treated, stored or
disposed of in a manner that complies with all Environmental Requirements. Any
such handling, use, generation, treatment, storage or disposal of any Hazardous
Material permitted by Landlord hereunder shall be in compliance with all
Environmental Requirements.
21.4 Tenant shall, within five (5) days after the receipt thereof, give
written notice to Landlord of any notice or other communication regarding any
(a) actual or alleged violation of Environmental Requirements by Tenant or with
respect to the Premises, (b) actual or threatened migration of Hazardous
Material from the Premises, or (c) the existence of Hazardous Material in or on
the Premises or regarding any actual or threatened investigation, inquiry,
lawsuit, claim, citation, directive, summons, proceeding, complaint, notice,
order, writ or injunction relating to any of the foregoing.
21.5 Tenant shall indemnify and defend Landlord against and hold Landlord
harmless from all claims, demands, liabilities, damages, fines, encumbrances,
liens, losses, costs and expenses, including reasonable attorneys' fees and
disbursements, and costs and expenses of investigation, arising from or related
to the existence on or after the Commencement Date of Hazardous Material in or
on the Premises or the actual or threatened migration on or after the
Commencement Date of Hazardous Material from the Premises or the existence on or
after the Commencement Date of a violation of Environmental Requirements by
Tenant or with respect to the Premises. Notwithstanding the foregoing, Tenant
shall not be required to indemnify, defend or hold harmless Landlord with
respect to Hazardous Materials brought or migrating onto the Premises after the
Lease term expires or for violations of Environmental Requirements with respect
to the Premises that occur after the Lease term expires, unless Tenant or its
successor or assign is responsible for bringing the Hazardous Materials onto the
Premises, for causing the migration or for the violation of Environmental
Requirements. The obligations of Tenant under
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this section 21.5 shall not be affected by any investigation by or on behalf of
Landlord or by any information which Landlord may have or obtain with respect
thereto. Tenant shall, to the reasonable satisfaction of Landlord, perform all
remedial actions necessary to remove any Hazardous Material in or on the
Premises on or after the Commencement Date or to remedy actual or threatened
migration from the Premises of any Hazardous Material or to remedy any actual or
threatened violation of Environmental Requirements, provided such remedial
action is required under Environmental Requirements. This section 21.5 shall
survive termination of this Lease.
21.6 If, at any time when the term of this Lease (including any renewal
term) would expire but for the terms of this section 21.6, a Hazardous Material
exists in, on, about or under the Premises, then the term of this Lease shall
automatically be extended and this Lease shall remain in effect until the
earlier of (i) the completion of all remedial action required under section
21.5, or (ii) the date specified in a written notice from Landlord to Tenant
terminating this Lease. During any such extension period, Tenant shall perform
all of its obligations under this Lease including payments of all rent due
hereunder (for which purpose the monthly Base Rent shall remain unchanged).
21.7 Notwithstanding the foregoing, Landlord acknowledges and agrees that
Tenant shall be permitted to store and use on the Premises from time to time
certain Hazardous Material whose nature and quantities are customary in
connection with the office, cafeteria and other permitted uses of the Premises
(and in connection with any permitted Alterations performed by Tenant), and that
Tenant shall not be required to provide Landlord with specific notice of any
such storage or use; provided that Tenant shall at all times comply with all
Environmental Requirements pertaining to any such Hazardous Material.
ARTICLE 22
WAIVER
22.1 The waiver by Landlord or Tenant of any breach of any covenant in this
Lease shall not be deemed to be a waiver of any subsequent breach of the same or
any other covenant in this Lease, nor shall any custom or practice which may
grow up between Landlord and Tenant in the administration of this Lease be
construed to waive or to lessen the right of Landlord or Tenant to insist upon
the performance by Landlord or Tenant in strict accordance with this Lease. The
subsequent acceptance of rent hereunder by Landlord or the payment of rent by
Tenant shall not waive any preceding breach by Landlord or Tenant of any
covenant in this Lease, nor cure any Event of Default, nor waive any forfeiture
of this Lease or unlawful detainer action, other than the failure of Tenant to
pay the particular rent so
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accepted, regardless of Landlord's or Tenant's knowledge of such preceding
breach at the time of acceptance or payment of such rent.
ARTICLE 23
NOTICES
23.1 All requests, approvals, consents, notices and other communications
given by Landlord or Tenant under this Lease shall be properly given only if
made in writing and either deposited in the United States mail, postage prepaid,
certified with return receipt requested, or delivered by hand (which may be
through a messenger or recognized delivery or courier service), or by electronic
facsimile transmission and addressed as follows: To Landlord at the address of
Landlord specified in the BASIC LEASE INFORMATION, or at such other place as
Landlord may from time to time designate in a written notice to Tenant; and to
Tenant, before the Commencement Date, at the address of Tenant specified in the
BASIC LEASE INFORMATION, and after the Commencement Date, at the Premises, or at
such other place as Tenant may from time to time designate in a written notice
to Landlord. Such requests, approvals, consents, notices and other
communications shall be effective on the date of receipt (evidenced by the
certified mail receipt) if mailed or on the date of delivery if hand delivered.
ARTICLE 24
TRADE NAMES
24.1 All trade names used by Tenant from time to time in connection with
its operations in the Premises, all patents and other intellectual property
rights of Tenant, and all other intangible personal property of Tenant used or
arising in connection with Tenant's operations in the Premises shall not be
subject to any lien or claim of ownership by Landlord. Tenant may use any trade
name(s) that it chooses in connection with its operations in the Premises and
may change such trade name(s) from time to time.
ARTICLE 25
MEMORANDUM OF LEASE
25.1 Concurrently with the execution of this Lease, Landlord shall execute
and deliver to Tenant a memorandum of lease, in the form attached hereto as
Exhibit D.
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ARTICLE 26
MISCELLANEOUS
26.1 The words "Landlord" and "Tenant" as used herein shall include the
plural as well as the singular. The words "include," "includes" and "including"
shall be deemed to be followed by the phrase "without limitation." Tenant shall
indemnify and defend Landlord against and hold Landlord harmless from all
claims, demands, liabilities, damages, losses, costs and expenses, including
reasonable attorneys' fees and disbursements, arising out of or resulting from
any failure by Tenant to perform any of its obligations or any breach by Tenant
of any of its representations or warranties in accordance with this Lease. If
there is more than one Tenant, the obligations hereunder imposed upon Tenant
shall be joint and several. Time is of the essence of this Lease and each and
all of its provisions. Submission of this instrument for examination or
signature by Tenant does not constitute a reservation of or option for lease,
and it is not effective as a lease or otherwise until execution and delivery by
both Landlord and Tenant. Subject to Article 12, this Lease shall benefit and
bind Landlord and Tenant and the personal representatives, heirs, successors and
assigns of Landlord and Tenant. If any provision of this Lease is determined to
be illegal or unenforceable, such determination shall not affect any other
provision of this Lease and all such other provisions shall remain in full force
and effect. This Lease shall be governed by and construed in accordance with
the laws of the state where the Premises are located.
26.2 If there is any legal action or proceeding between Landlord and Tenant
to enforce this Lease or to protect or establish any right or remedy under this
Lease, the unsuccessful party to such action or proceeding shall pay to the
prevailing party all costs and expenses, including reasonable attorneys' fees
and disbursements, incurred by such prevailing party in such action or
proceeding and in any appeal in connection therewith. If such prevailing party
recovers a judgment in any such action, proceeding or appeal, such costs,
expenses and attorneys' fees and disbursements shall be included in and as a
part of such judgment.
26.3 The exhibits and addenda, if any, specified in the BASIC LEASE
INFORMATION are attached to and made a part of this Lease.
26.4 Tenant warrants and represents to Landlord that Tenant and has not
authorized or employed, or acted by implication to authorize or to employ, any
real estate broker or salesman to act for Tenant in connection with this Lease.
26.5 Tenant and each person executing this Lease on behalf of Tenant
represents and warrants to Landlord that (a) Tenant is a corporation, duly
organized and validly existing under the
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laws of the State of California, (b) Tenant is qualified to do business in the
state where the Premises is located, (c) Tenant has full right, power and
authority to enter into this Lease and to perform all of Tenant's obligations
hereunder, and (d) each person signing this Lease on behalf of Tenant is duly
and validly authorized to do so. Landlord and each person executing this Lease
on behalf of Landlord represents and warrants to Tenant that (a) Landlord is a
corporation duly organized and validly existing under the laws of the State of
Maryland, (b) Landlord is (to the extent so required) qualified to do business
in California, (c) Landlord has full right, power and authority to enter into
this Lease and to perform all of Landlord's obligations hereunder, and (d) each
person signing this Lease on behalf of Landlord is duly and validly authorized
to do so.
26.6 There are no oral agreements between Landlord and Tenant affecting
this Lease, alnd this Lease supersedes and cancels any and all previous
negotiations, arrangements, brochures, offers, agreements and understandings,
oral or written, if any, between Landlord and Tenant or displayed by Landlord to
Tenant with respect to the subject matter of this Lease or the Premises. There
are no representations between Landlord and Tenant or between any real estate
broker and Tenant other than those expressly set forth in this Lease and all
reliance with respect to any representations is solely upon representations
expressly set forth in this Lease. This Lease may not be amended or modified in
any respect whatsoever except by an instrument in writing signed by Landlord and
Tenant.
26.7 Except for determinations expressly described as being in the "sole"
or "absolute" discretion of the applicable party (or other similar words or
phrases), neither Landlord nor Tenant shall unreasonably withhold or delay any
consent,
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approval or other determination provided for hereunder, and determinations
subject to sole or absolute discretion (or other similar words or phrases) shall
not be unreasonably delayed.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the
date first hereinabove written.
Landlord: Tenant:
TriNet Essential Facilities XII, CERTIFIED GROCERS OF CALIFORNIA,
INC., a Maryland corporation LTD., a California corporation
By /s/ James R. Reinhart By
---------------------------------- --------------------------------
Its Executive Vice President Its
------------------------------ -----------------------------
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approval or other determination provided for hereunder, and determinations
subject to sole or absolute discretion (or other similar words or phrases) shall
not be unreasonably delayed.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the
date first hereinabove written.
Landlord: Tenant:
TriNet Essential Facilities XII, CERTIFIED GROCERS OF CALIFORNIA,
INC., a Maryland corporation LTD., a California corporation
By By /s/ Daniel T. Bane
--------------------------------- --------------------------------
Its Its CFO
------------------------------ ---------------------------
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LEGAL DESCRIPTION OF THE LAND
All of the real property located in the City of Commerce, County of
Los Angeles, State of California, described as follows:
PARCEL 1:
PARCELS 2 AND 3 OF PARCEL MAP NO. 11171, IN THE CITY OF COMMERCE, IN THE COUNTY
OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP FILED IN BOOK 113, PAGE 7 OF
PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
EXCEPTING THEREFROM THAT PORTION OF PARCEL 3 DESCRIBED AS FOLLOWS:
BEGINNING AT THE MOST WESTERLY CORNER OF SAID PARCEL 3; THENCE ALONG THE
NORTHWESTERLY LINE OF SAID PARCEL NORTH 22 DEG. 23' 00", EAST 361.13 FEET;
THENCE LEAVING SAID NORTHWESTERLY LINE SOUTH 67 DEG. 37' 12" EAST 396.81 FEET
TO A POINT ON THE SOUTHEASTERLY LINE OF SAID PARCEL 3; SAID POINT BEING
DISTANT NORTH 22 DEG. 16' 55" EAST 360.65 FEET FROM THE MOST SOUTHERLY CORNER
OF SAID PARCEL; THENCE ALONG SAID SOUTHEASTERLY LINE SOUTH 22 DEG. 16' 55"
WEST 360.65 FEET TO THE MOST SOUTHERLY CORNER OF SAID PARCEL; THENCE ALONG
THE SOUTHWESTERLY LINE OF SAID PARCEL NORTH 67 DEG. 41' 22" WEST 397.44 FEET
TO THE POINT OF BEGINNING.
ALSO EXCEPTING THE ENTIRE MINERAL ESTATE IN THE PROPERTY DESCRIBED LYING NOT
LESS THAN 500 FEET BENEATH THE NATURAL SURFACE; FOR THE PURPOSES OF THIS
RESERVATION THE MINERAL ESTATE SHALL INCLUDE ALL SUBSTANCES WHICH HAVE BEEN
DISCOVERED OR WHICH MAY IN THE FUTURE BE DISCOVERED UPON OR UNDER THE PROPERTY
DESCRIBED, WHICH ARE NOW OR MAY IN THE FUTURE BE VALUABLE, AND WHICH ARE NOW OR
MAY BE IN THE FUTURE ENJOYED THROUGH EXTRACTION FROM THE PROPERTY DESCRIBED,
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, THE MINERAL ESTATE SHALL
INCLUDE ALL FORMS OF GENERALITY OF THE FOREGOING, THE MINERAL ESTATE SHALL
INCLUDE ALL FORMS OF THE GEOTHERMAL ENERGY, ALL COAL, ALL GASES, ALL HYDROCARBON
SUBSTANCES, ALL FISSIONABLE MATERIALS, ALL METALLIC MINERALS, AND ALL
NON-METALLIC MINERALS.
NOTWITHSTANDING OWNERSHIP OF THE MINERAL ESTATE, NEITHER GRANTOR NOR ITS
SUCCESSORS OR ASSIGNS SHALL HAVE THE RIGHT TO ENTER UPON THE SURFACE OF THE
PROPERTY DESCRIBED FOR THE PURPOSE OF EXTRACTING ANY CONSTITUENTS OF THE MINERAL
ESTATE. GRANTOR RESERVES THE RIGHT, ON BEHALF OF ITSELF, ITS SUCCESSOR AND
ASSIGNS, (1) TO EXTRACT THE CONSTITUENTS OF THE MINERAL ESTATE FROM THE PROPERTY
DESCRIBED BY MEANS OF WELLS, SHAFTS, TUNNELS, OR OTHER SUBSURFACE ACCESSES WHICH
MAY BE CONSTRUCTED, DRILLED OR DUG ON OR FROM OTHER LAND AND WHICH MAY PENETRATE
INTO THE PROPERTY DESCRIBED BELOW A DEPTH OF 500 FEET, AND (2) TO EXCAVATE,
CONSTRUCT, MAINTAIN, AND OPERATE SUBSURFACE FACILITIES BELOW A DEPTH OF 500 FEET
OF THE PROPERTY DESCRIBED FOR THE EXTRACTION OF THE CONSTITUENTS OF THE MINERAL
ESTATE SO LONG AS THE SUBSURFACE FACILITIES DO NOT UNREASONABLY INTERFERE WITH
THE USE AND ENJOYMENT OF THE SURFACE ESTATE IN THE PROPERTY DESCRIBED, AS
RESERVED BY SANTA FE PACIFIC REALTY CORPORATION, SUCCESSOR BY MERGER WITH SANTA
FE LAND IMPROVEMENT COMPANY, IN DEED RECORDED AUGUST 15, 1989 AS INSTRUMENT NO.
89-1309080, OFFICIAL RECORDS.
EXHIBIT A
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PARCEL 2
AN EASEMENT FOR LANDSCAPING, UTILITIES, AND OPEN SPACE ON, OVER AND ACROSS A
STRIP OF LAND 10.00 FEET IN WIDTH BY 174.25 FEET IN LENGTH AS SHOWN ON PARCEL
MAP NO. 11171 AS PER MAP FILED IN BOOK 113 PAGE 7 OF PARCEL MAPS.
EXHIBIT A
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Recording Requested By, and
When Recorded, Mail to:
Schulte Roth & Zabel
900 Third Avenue
New York, NY 10022
Attn: Connie Rodriguez, Esq.
- -------------------------------------------------------------------------------
(Space above line for recorder's use)
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
-------------------------------------------------------
THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT (the
"Agreement"), made as of____________, 1994 by and among BANKERS TRUST COMPANY
("Trustee"), as trustee for NOMURA ASSET CAPITAL CORPORATION, a Delaware
corporation ("NACC"), having an office in care of Bankers Trust Company of
California, N.A., 3 Park Plaza, 16th Floor, Irvine, California 92714, CERTIFIED
GROCERS OF CALIFORNIA, LTD., a California corporation ("Tenant"), having an
office at 2601 S. Eastern Avenue, Los Angeles, California 90040, Attn: Mr.
Alfred A. Plamann, and TriNet Essential Facilities XII, INC., a Maryland
corporation ("TriNet"), having an office at Four Embarcadero Center, Suite 3150,
San Francisco, CA 94111, Attn: Mr. James R. Reinhart.
W I T N E S S E T H:
WHEREAS, Tenant is the tenant under that certain Commercial Lease-Net,
dated as of ____________, 1994 (the "Lease"), between TriNet as landlord
(together with its successors and assigns, the "Landlord"), and Tenant, as
tenant, which Lease demises certain premises (the "Premises") known by the
street address _________________________________________________ in the City of
Commerce, County of Los Angeles, State of California, as more particularly
described in Exhibit A annexed hereto;
WHEREAS, NACC has made a mortgage loan (the "Loan") to Landlord, which Loan
is secured by, among other things, a certain mortgage, mortgage deed or deed of
trust (the "Mortgage") encumbering the Premises;
WHEREAS, Trustee and Tenant wish to confirm the subordination of the Lease
to the Mortgage on the terms hereinafter set forth; and
WHEREAS, Tenant wants to be assured of the continued possession of the
Premises.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, Trustee and Tenant hereby agree as follows:
EXHIBIT B
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1. The Lease and any extensions, renewals, replacements or modifications
thereof and all of the right, title and interest of Tenant thereunder in and to
the Premises (including, without limitation, any and all options to purchase the
Premises and rights of first refusal or offer held by Tenant with respect to the
Premises) shall be subject and subordinate to the lien of the Mortgage, and to
all of the terms and conditions of the Mortgage, and to all renewals,
modifications, consolidations, replacements and extensions thereof. Tenant
hereby consents to, and waives any right of first refusal or offer which may
exist under the Lease with respect to, any transfer of title to the Premises to
Trustee in connection with the Loan and related transactions.
2. So long as Tenant shall not be in default under the Lease, Trustee
shall not name or join Tenant as a party defendant in any action or proceeding
to foreclose the Mortgage for the purpose of terminating the Lease or
otherwise affecting Tenant's rights thereunder unless Tenant or any person
claiming through or under Tenant is deemed a necessary party by the court, in
which event such party may be named or joined but such naming or joining shall
not otherwise be in derogation of the rights of Tenant set forth in this
Agreement. Tenant's quiet enjoyment of the Premises will not be disturbed by
Trustee, NACC or a purchaser of the Premises, except that any time a default
exists under the Lease, any person who acquires Landlord's interest thereunder
shall have all of the rights and remedies provided under Article 14 of the
Lease.
3. If Trustee or NACC shall succeed to the interest of Landlord, whether
through possession or foreclosure action or a deed in lieu of foreclosure, or if
the Premises shall be sold as a result of any action or proceeding to foreclose
the Mortgage or deed in lieu thereof,
(i) The Lease shall continue in full force and effect as a direct
lease between Tenant and Trustee, NACC or the purchaser of the Premises,
as the case may be,
(ii) Provided that Trustee, NACC or such purchaser of the Premises
assumes in writing (subject to the provisions of this Agreement) the
obligations of landlord accruing on or after the date Trustee, NACC or
such purchaser acquired title to the Premises, Tenant shall and does
hereby attorn to and recognize Trustee, NACC or the purchaser of the
Premises, as the case may be, as Tenant's landlord under the Lease, and
Trustee, NACC or such purchaser shall, subject to the terms hereof, accept
such attornment and recognize Tenant as Trustee's, NACC's or such
purchaser's tenant under the Lease, said attornment to be effective and
self-operative without the execution of any further instruments on the
part of any of the parties hereto
EXHIBIT B
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immediately upon Trustee, NACC or such purchaser succeeding to the interest
of Landlord in the Premises. Tenant agrees, however, upon the election of
and written demand of Trustee, NACC or such purchaser within twenty (20)
days after Trustee, NACC or such purchaser receives title to the Premises,
to execute an instrument received in confirmation of the foregoing
provisions, satisfactory to Trustee, NACC or such purchaser in which Tenant
shall acknowledge such attornment and set forth the terms and conditions of
its tenancy, provided that Trustee, NACC or such purchaser shall include in
such instrument a nondisturbance provision as set forth in paragraph 2
hereof,
(iii) In the event that any security deposit has been delivered to the
prior landlord in the form of a letter of credit or other instrument,
Tenant agrees to amend or have reissued such letter of credit or other
instrument for the benefit of Trustee or such purchaser, and
(iv) Trustee, NACC or such purchaser shall not:
(a) be bound by any prepayment of more than one calendar month's
rent,
(b) be bound by any modification of the Lease made without the
written consent of Trustee,
(c) be subject to any offsets or defenses against any prior
landlord, including Landlord, or be liable for any previous act or
omission of any prior landlord, including Landlord, under the Lease;
provided, however, that Trustee, NACC or such purchaser, as
applicable, shall be obligated to cure any continuing nonmonetary
default by any prior landlord (including Landlord) that is
reasonably susceptible of cure by Trustee, NACC or such purchaser, as
applicable, within a reasonable time following its acquisition of the
Premises, unless the applicable landlord obligation is of a type for
which Trustee, NACC or such purchaser is expressly relieved of
liability pursuant to the other provisions of this Agreement,
(d) be required to repair, restore, rebuild or replace the
Premises or any part thereof in the event of damage or destruction by
fire or other casualty or in the event of condemnation,
EXHIBIT B
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<PAGE>
(e) be required to make any capital improve ments to the
Premises, or to construct, erect, or complete any construction or
renovation of all or any portion of the improvements at the Premises
which the Landlord may have agreed to make but has not commenced or
completed, or to perform any work, or provide any services, to
prepare the Premises for occupancy by Tenant,
(f) be bound by any notice of termination, other than a notice
of termination as a result of Tenant's default under the Lease, given
by Land lord or any prior landlord to Tenant without Trustee's
concurrent written consent thereto,
(g) be personally liable under the Lease, and Trustee's, NACC's
or such purchaser's liabil ity under the Lease ' shall be limited to
its ownership interest in the Premises, or
(h) be bound to any obligation of Landlord to make any payments
or contributions to Tenant, other than attorneys' fees, letter of
credit fees referenced in paragraph 7 of the Agreement re Letter of
Credit dated as of the date hereof (the "Letter of Credit
Agreement"), between Landlord and Tenant and any insurance or
condemnation proceeds and Tenant-deposited funds that Landlord would
be required to disburse to Tenant pursuant to Section 15.2 or 16.3 of
the Lease.
4. Tenant shall provide Trustee with copies of all written notices sent to
Landlord pursuant to the Lease simultaneously with transmission of such notices
to Landlord. Tenant shall not cancel the Lease or claim a partial or total
eviction or any abatement of the rents, additional rents or other sums payable
under the Lease, or a set-off against Tenant's obligation for any such rent,
additional rent or other sums, and agrees that, notwithstanding any provisions
of the Lease to the contrary, Tenant will not exercise any such right or make
any such claim, until (i) it has given written notice to Trustee of the act or
omission which would entitle Tenant to exercise such right or make such claim,
and (ii) a reasonable period (but in no event less than thirty (30) days) for
remedying such act or omission shall have elapsed following the giving of such
notice and provided Trustee shall, with reasonable diligence, give Tenant notice
of intention to, and commence and continue to, remedy such act or omission or
cause the same to be remedied, following the time when Trustee shall have
obtained possession of the Premises and/or otherwise become entitled under the
Mortgage to remedy the same (which shall in no event be less than the period to
which Landlord would be entitled under the Lease to effect such remedy).
Notwithstanding the preceding sentence, if Trustee must obtain
EXHIBIT B
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<PAGE>
possession of the Premises to remedy such act or omission, and Trustee ceases to
diligently pursue obtaining possession of the Premises, then Tenant shall have
the right to exercise any right or remedy to which Tenant is entitled. Under no
circumstances shall Trustee be obligated to remedy such act or omission.
5. Notwithstanding any provisions of the Lease to the contrary, Tenant
agrees and acknowledges that while the Premises are encumbered by the Mortgage
each and every right of Landlord under the Lease to terminate or cancel the
Lease or to release the Tenant from any liability thereunder shall be subject to
the prior written consent of Trustee and that any attempt by Landlord to
terminate or cancel the Lease or release the Tenant from any liability
thereunder, without the prior written consent of Trustee, shall be null and void
between Tenant and Landlord. In situations where the notice of termination must
be delivered to Tenant within a specified time period, the termination shall not
be effective unless Tenant has received a notice of termination from Landlord
and trustee within such time period.
6. Notwithstanding any provisions of the Lease to the contrary, Tenant
hereby agrees not to settle or compromise any claim for insurance proceeds or
condemnation awards without the prior written approval of Trustee; provided,
however, Tenant may settle or compromise any such claim with respect to Tenant's
personal property or fixtures without Trustee's prior written approval.
7. All notices, consents and other communications required or permitted
pursuant to the provisions of this Agreement shall be in writing and fhall be
sent by registered or certified mail, return receipt requested, postage prepaid,
or by hand-delivery or overnight courier, and shall be deemed given when
received if sent by hand-delivery, one (1) day after delivered to the courier
service if sent by overnight courier or three (3) days after postmarked if
mailed and properly addressed as follows:
If to Trustee:
At the address hereinabove designated to the
attention of Mr. Victor Woodworth.
with a copy to:
Schulte Roth & Zabel
900 Third Avenue
New York, NY 10021
Attn: Connie Rodriguez, Esq.
EXHIBIT B
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<PAGE>
and to:
Nomura Asset Capital Corporation
2 World Financial Center
Building B
New York, NY 10281
Attn: Mr. Wayne M. Brandt
If to Tenant:
At the address hereinabove designated.
with a copy to:
Sheppard, Mullin, Richter & Hampton
333 S. Hope Street
48th Floor
Los Angeles, CA 90071
Attn: Mark T. Okuma, Esq.
If to Landlord:
At the address hereinabove designated.
with a copy to:
Pillsbury Madison & Sutro
235 Montgomery Street, 14th Floor
San Francisco, CA 94104
Attn: Glenn Q. Snyder, Esq.
Each party may designate a change of address by notice to the other
parties, given in the manner provided for in th'-s Paragraph, which notice shall
be given at least fifteen (15) days before such change of address is to become
effective.
8. The provisions of this Agreement shall bind and inure
to the benefit of the parties hereunder and their successors and
assigns.
9. Tenant hereby agrees that, in the event that Trustee delivers to Tenant
a notice (i) stating that an Event of Default (as defined in the Mortgage) has
occurred under the Mortgage and (ii) requesting that all rent and additional
rent due to Landlord under the Lease be thereafter paid to Trustee, Tenant shall
pay such rent and additional rent directly to Trustee. Delivery to Tenant of
the aforedescribed notice from Trustee shall be conclusive evidence of the right
of Trustee to receive such rents and payment of the rents by Tenant to Trustee
pursuant to such notice shall constitute performance in full of Tenant's
obligation under the Lease to pay such rents to Landlord. If and to the extent
that the Lease or any provision of law shall entitle Tenant to notice of any
mortgage, Tenant acknowledges and agrees that this Agreement shall constitute
such notice to
EXHIBIT B
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<PAGE>
Tenant of the existence of the Mortgage. Tenant acknowledges that it has notice
that the Lease and the rents and aii other sums due thereunder have been
assigned to Trustee as part of the security for the Loan Documents (as defined
in the Mortgage).
10. Tenant represents and warrants to Trustee that, as of the date hereof,
there are no agreements other than the Lease in existence or contemplated
between Landlord and Tenant relating to the Tenant's occupancy of the Premises,
other than the Letter of Credit Agreement.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date and year first above written.
CERTIFIED GROCERS OF CALIFORNIA,
LTD., a California corporation, as
Tenant
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
BANKERS TRUST COMPANY, as trustee for
NOMURA ASSET CAPITAL CORPORATION, as
Trustee
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
TriNet Essential Facilities XII,
INC.,
a Maryland corporation
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
EXHIBIT B
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<PAGE>
STATE OF CALIFORNIA, )
) ss.
County of Los Angeles. )
On ______________, 1994, before me, _____________________________________,
a Notary Public in and for the State of California, personally appeared ______
___________________________, personally known to me (or proved to me on the
basis of satisfactory evidence) to be the person whose name is subscribed to the
within instrument, and acknowledged to me that he executed the within instrument
in his authorized capacity and that, by his signature on the within instrument,
the person or entity upon behalf of which he acted executed the within
instrument.
WITNESS my hand and official seal.
Signature (Seal)
---------------------------
EXHIBIT B
-8-
<PAGE>
STATE OF CALIFORNIA, )
) ss.
County of Orange. )
On ______________, 1994, before me, _____________________________________,
a Notary Public in and for the State of California, personally appeared ______
________________________________, personally known to me (or proved to me on the
basis of satisfactory evidence) to be the person whose name is subscribed to the
within instrument, and acknowledged to me that he executed the within instrument
in his authorized capacity and that, by his signature on the within instrument,
the person or entity upon behalf of which he acted executed the within
instrument.
WITNESS my hand and official seal.
Signature (Seal)
---------------------------
EXHIBIT B
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<PAGE>
STATE OF CALIFORNIA, )
) ss.
County of San Francisco. )
On ____________, 1994, before me, ______________________________________,
a Notary Public in and for the State of California, personally appeared ______
____________________________, personally known to me (or proved to me on the
basis of satisfactory evidence) to be the person whose name is subscribed to the
within instrument, and acknowledged to me that he executed the within instrument
in his authorized capacity and that, by his signature on the within instrument,
the person or entity upon behalf of which he acted executed the within
instrument.
WITNESS my hand and official seal.
Signature (Seal)
---------------------------
EXHIBIT B
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<PAGE>
PURCHASE AGREEMENT
between
CERTIFIED GROCERS OF CALIFORNIA, LTD.
and
TRINET CORPORATE REALTY TRUST, INC.
November 21, 1994
5200 Sheila Street,
Commerce, California
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE 1 Purchase and Sale. . . . . . . . . . . . . . . . . . . . . . . 1
1.1 The Property . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Amount and Payment . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Liquidated Damages . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 3 Completion of Sale . . . . . . . . . . . . . . . . . . . . . . 2
3.1 Place and Date . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 4 Title to the Property. . . . . . . . . . . . . . . . . . . . . 3
4.1 Real Property. . . . . . . . . . . . . . . . . . . . . . . . . 3
4.2 Leaseback of Property. . . . . . . . . . . . . . . . . . . . . 3
4.3 Personal Property. . . . . . . . . . . . . . . . . . . . . . . 3
4.4 Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.5 Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE 5 Review of the Property . . . . . . . . . . . . . . . . . . . . 3
5.1 Delivery of Documents. . . . . . . . . . . . . . . . . . . . . 3
5.2 Seller's Existing Reports; Documents
Obtained by Buyer. . . . . . . . . . . . . . . . . . . . . . . 5
5.3 Access for Review. . . . . . . . . . . . . . . . . . . . . . . 6
5.4 Property Approval Period . . . . . . . . . . . . . . . . . . . 7
5.5 Survey . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.6 Environmental Definitions. . . . . . . . . . . . . . . . . . . 8
ARTICLE 6 Representations and Warranties . . . . . . . . . . . . . . . . 9
6.1 Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.2 Buyer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 7 Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.1 Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.2 Buyer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
7.3 Casualty Damage. . . . . . . . . . . . . . . . . . . . . . . . 17
7.4 Eminent Domain . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE 8 Conditions Precedent . . . . . . . . . . . . . . . . . . . . . 18
8.1 Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.2 Buyer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE 9 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.1 Procedure. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
9.2 Possession . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.3 Closing Costs and Credits. . . . . . . . . . . . . . . . . . . 22
9.4 Prorations . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 10 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
10.1 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
10.2 Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . . . . 23
10.3 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . 24
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<PAGE>
10.4 Construction . . . . . . . . . . . . . . . . . . . . . . . . . 24
10.5 Terms Generally. . . . . . . . . . . . . . . . . . . . . . . . 24
10.6 Further Assurances . . . . . . . . . . . . . . . . . . . . . . 24
10.7 Partial Invalidity . . . . . . . . . . . . . . . . . . . . . . 24
10.8 Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
10.9 Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . 24
10.10 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . 25
Exhibit A Preliminary Report
Exhibit B Personal Property
Exhibit C Contracts
Exhibit D Permits
Exhibit E Grant Deed
Exhibit F Lease
Exhibit G Bill of Sale
Exhibit H Assignment of Contracts
Exhibit I Assignment of Permits
Exhibit J Seller's Reports
Exhibit K Expense Statements
Exhibit L Seller's Closing Certificate
Exhibit M Buyer's Closing Certificate
Exhibit N Easement Agreement
Exhibit O Certificate of Non-Foreign Status
Exhibit P Agreement re Letter of Credit
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<PAGE>
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT ("Agreement"), made as of November _, 1994, by and
between CERTIFIED GROCERS OF CALIFORNIA, LTD., a California corporation
("Seller"), and TRINET CORPORATE REALTY TRUST, INC., a Maryland corporation
("Buyer"),
W I T N E S S E T H:
In consideration of the covenants in this Agreement, Seller and Buyer agree
as follows:
ARTICLE 1
PURCHASE AND SALE
1.1 THE PROPERTY. Seller agrees to sell to Buyer and Buyer agrees to
purchase from Seller, upon and subject to the terms and conditions in this
Agreement, all of the following property (collectively the "Property"):
(a) Approximately five and one-half (5.5) acres of real property in the City
of Commerce, State of California, commonly known as 5200 Sheila Street,
Commerce, California, described in preliminary report no. 5092212-67 dated
as of June 14, 1994 (the "Commitment"), prepared by Lawyers Title Insurance
Company (the "Title Company"), attached hereto as Exhibit A, together with
all buildings, structures and improvements located on such real property,
including an office building containing approximately one hundred thousand
(100,000) square feet of space and a cafeteria building containing
approximately eight thousand (8,000) square feet of space, and all Seller's
right, title and interest in and to all fixtures and heating, ventilating,
air conditioning, electrical, mechanical, plumbing, life safety and other
building systems affixed or attached to such real property and all easements
and rights appurtenant to such real property (all such real property,
buildings, structures, improvements, machinery, fixtures, equipment,
easements and rights are collectively the "Real Property");
(b) All Seller's right, title and interest in and to all tangible and
intangible personal property (the "Personal Property") described in Exhibit B
attached hereto;
(c) Seller's interest in all contracts, agreements, warranties and guaranties
(the "Contracts") described in Part I of Exhibit C attached hereto; and
(d) Seller's interest in all building permits, certificates of occupancy, and
other certificates, permits, licenses
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<PAGE>
and approvals (the "Permits") described in Exhibit D attached hereto.
ARTICLE 2
PURCHASE PRICE
2.1 AMOUNT AND PAYMENT. The total purchase price for the Property shall be
eleven million five hundred thousand dollars ($11,500,000). At the Closing
(as defined in section 3.1) on the Closing Date (as defined in section 3.1),
Buyer shall pay the total purchase price for the Property, adjusted to
reflect credits and prorations as provided in this Agreement, to Seller in
cash in immediately available funds.
2.2 LIQUIDATED DAMAGES. SELLER AND BUYER AGREE THAT, IF AFTER BUYER OBTAINS
THE BOARD APPROVAL (AS DEFINED IN SECTION 8.2(a)) BUYER MATERIALLY DEFAULTS
UNDER OR MATERIALLY BREACHES THIS AGREEMENT AND, THEREFORE, THE PURCHASE AND
SALE OF THE PROPERTY IS NOT COMPLETED, THEN THIS AGREEMENT SHALL TERMINATE
AND THE AMOUNT OF ONE HUNDRED THOUSAND DOLLARS ($100,000) SHALL BE PAID TO
SELLER UPON TERMINATION OF THIS AGREEMENT AND RETAINED BY SELLER AS
LIQUIDATED DAMAGES AND AS SELLER'S SOLE REMEDY AT LAW OR IN EQUITY, EXCEPT
THAT SELLER SHALL RETAIN THE RIGHT TO RECEIVE, IN ADDITION TO SUCH LIQUIDATED
DAMAGES, ANY AMOUNT BUYER IS OBLIGATED TO PAY PURSUANT TO SECTIONS 5.3 OR
10.2 HEREOF. SELLER AND BUYER AGREE THAT, UNDER THE CIRCUMSTANCES EXISTING AS
OF THE DATE OF THIS AGREEMENT, ACTUAL DAMAGES MAY BE DIFFICULT TO ASCERTAIN
AND THE FOREGOING AMOUNT IS A REASONABLE ESTIMATE OF THE DAMAGES THAT WILL BE
INCURRED BY SELLER IF BUYER MATERIALLY DEFAULTS UNDER OR MATERIALLY BREACHES
THIS AGREEMENT AND FAILS TO PURCHASE THE PROPERTY.
SELLER'S INITIALS: BUYER'S INITIALS:
---- ---- ----
ARTICLE 3
COMPLETION OF SALE
3.1 PLACE AND DATE. The purchase and sale of the Property shall be completed
in accordance with Article 9 hereof (the "Closing"). The Closing shall occur
through an escrow with the Title Company at 800 East Colorado Boulevard,
Suite 250, Pasadena, CA 91101 on the date ten (10) business days after the
date Buyer obtains the Board Approval, but in no event later than October 17,
1994, or at such other place or on such other date as Seller and Buyer agree
in writing. The date on which the Closing occurs is referred to herein as
the "Closing Date". Prior to the Closing Date, Seller and Buyer each shall
give appropriate written escrow instructions, consistent with this Agreement,
to the Title Company for the Closing in accordance with this Agreement.
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<PAGE>
ARTICLE 4
TITLE TO THE PROPERTY
4.1 REAL PROPERTY. Seller shall deliver to Title Company a duly executed and
acknowledged Grant Deed (the "Deed") in the form of Exhibit E attached
hereto, and shall take all steps necessary to cause Title Company to issue to
Buyer the title insurance policy described in section 8.2(e) insuring that
good and marketable fee simple absolute title to the Real Property is vested
in Buyer, free and clear of all liens, encumbrances, leases, easements,
restrictions, rights, covenants and conditions of any kind or nature
whatsoever, except only the following to the extent Buyer approves them
during the Property Approval Period (as defined in section 5.4) (the
"Permitted Exceptions"): (a) the matters shown as exceptions A, B and C (each
showing no delinquencies), 1 through 7, 11 and 12 in the Commitment, (b) the
Lease (as defined in section 4.2), (c) any matters shown on the survey
furnished to Buyer in accordance with this Agreement, and (d) any other
matters approved or caused by Buyer.
4.2 LEASEBACK OF PROPERTY. On the Closing Date, Buyer shall lease the Real
Property back to Seller pursuant to the Lease in the form attached as Exhibit
F (the "Lease").
4.3 PERSONAL PROPERTY. Seller shall transfer good title to the Personal
Property to Buyer, by a duly executed Bill of Sale (the "Bill of Sale") in
the form of Exhibit G attached hereto, free and clear of all liens,
encumbrances, security interests and adverse claims of any kind or nature
whatsoever.
4.4 CONTRACTS. Seller shall assign good title to Seller's interest in the
Contracts described in Part I of Exhibit C to Buyer, by a duly executed
Assignment of Contracts (the "Assignment of Contracts") in the form of
Exhibit H attached hereto, free and clear of all liens, encumbrances,
security interests and adverse claims of any kind or nature whatsoever.
4.5 PERMITS. Seller shall assign good title to the Permits to Buyer, by a
duly executed Assignment of Permits (the "Assignment of Permits") in the form
of Exhibit I attached hereto, free and clear of all liens, encumbrances,
security interests and adverse claims of any kind or nature whatsoever.
ARTICLE 5
REVIEW OF THE PROPERTY
5.1 DELIVERY OF DOCUMENTS. On or before the date of this Agreement or as
promptly thereafter as practicable, Seller
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<PAGE>
shall, at the expense of Seller, deliver to Buyer legible copies of
the following documents:
(a) Audited financial statements ("Financial Statements") of Seller for the
fiscal years 1991, 1992 and 1993, which Financial Statements shall include an
audited consolidated balance sheet of Seller and its consolidated
subsidiaries as at the end of such fiscal year, a consolidated statement of
operations of Seller and its consolidated subsidiaries for such fiscal year,
and a certificate of Seller's auditor (which shall be a recognized national
independent accounting firm) to the effect that such Financial Statements
were prepared in accordance with generally accepted accounting principles
consistently applied and fairly present the financial condition and
operations of Seller and its consolidated subsidiaries for and as at the end
of such fiscal year;
(b) All of the Contracts;
(c) All of the Permits;
(d) The annual expense statements with respect to the operation of the Real
Property for the years 1992 and 1993 and quarterly expense statements for the
first two calendar quarters of 1994, each showing all expenses reasonably
allocated to the Real Property, together with bills for real property taxes
and assessments for the most recent three (3) tax fiscal years, and any
available statements of capital expenditures, capital reserves and repairs
and maintenance expenses for calendar years 1992 and 1993 and the first two
calendar quarters of 1994;
(e) All architectural, engineering and other drawings, plans and
specifications for the buildings, structures, improvements, machinery,
fixtures and equipment included in the Real Property insofar as any thereof
have heretofore been prepared by, for or at the request of Seller or are in
the possession of or available to Seller;
(f) All reports, studies, investigations, appraisals and other materials
insofar as any thereof have heretofore been prepared by, for or at the
request of Seller or are in the possession of or available to Seller
concerning the design, construction, condition or status of the Real Property
or any of the buildings, structures, improvements, machinery, fixtures or
equipment included in the Real Property, or any system, element or component
thereof, including the appraisal, dated as of March 1, 1994, prepared by
American Appraisal Associates, and the structural report, dated as of
June 28, 1994, prepared by La Canada Design Group ("Seller's
Structural Report");
(g) All reports, studies, investigations, appraisals and other materials
insofar as any thereof have heretofore been prepared by, for or at the
request of Seller or are in the possession of or available to Seller
concerning the environ-
-4-
<PAGE>
mental condition or status of the Real Property or any of the buildings,
structures or improvements included in the Real Property, or any past or
present Release (as defined in section 5.6) or threatened Release of any
Hazardous Substances (as defined in section 5.6) in, on, under or within the
Real Property or any other real property in the vicinity of the Real
Property, or the compliance of the Real Property with Environmental Laws (as
defined in section 5.6), including that certain Phase I environmental
assessment report, dated as of March 10, 1994, prepared by ATC Environmental,
Inc. ("Seller's Phase I") and the items listed on Exhibit J attached hereto;
(h) All environmental impact reports, environmental impact certifications and
zoning, land use or development agreements relating to the Real Property
heretofore prepared by, for or at the request of Seller or are in the
possession of or available to Seller;
(i) The current annual operating and capital budget for 1994 for the Real
Property showing all projected expenses (operating and capital) reasonably
allocated to the Real Property for such period; and
(j) All documents referred to in the exceptions listed in the Commitment and
all other documents referred to therein.
5.2 SELLER'S EXISTING REPORTS; DOCUMENTS OBTAINED BY BUYER. As promptly as
practicable after the date of this Agreement, Buyer shall obtain the
following documents:
(a) A Phase I environmental assessment covering the Real Property and
confirming that in asbestos remediation plan for the Real Property has been
prepared and all such work has been completed in accordance with
Environmental Laws (the "Phase I Report") and a Phase II environmental
assessment (the "Phase II Report," which, together with the Phase I Report,
is collectively referred to herein as the "Environmental Reports"), in form
and scope as set forth in the letter dated August 15, 1994, from Groundwater
Technology, Inc. ("GTI") to Buyer (the "Phase II Letter"), which
Environmental Reports shall be prepared by GTI and shall be certified to
Buyer (and, if requested by Buyer, to Buyer's Lender); and
(b) Appraisals of the Real Property prepared by Cushman & Wakefield in
accordance with standard industry practices, for Buyer's benefit and which
shall be certified to Buyer, setting forth (a) the unencumbered value of the
fee simple interest in the Real Property and (b) the leased fee value of the
Property (collectively, the "Appraisals").
Buyer shall bear the costs and expenses of the Appraisals. Buyer initially
shall bear the costs and expenses of preparation of the Environmental
Reports; provided, however, Buyer shall receive a credit toward payment of
the total purchase price for
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<PAGE>
the Property, as provided in section 9.3, equal to one hundred percent (100%)
of the costs and expenses incurred by Buyer with respect to the Phase I
Report (the "'Phase I Costs"), provided such Phase I costs shall not exceed
seven thousand five hundred dollars ($7,500), and fifty percent (50%) of the
costs and expenses incurred by Buyer with respect to the Phase II Report (the
"Phase II Costs"), provided that such Phase II Costs shall not exceed the
estimated cost of the Phase II as set forth in the Phase II Letter for the
scope of work actually conducted by GTI. If this Agreement terminates for any
reason other than a breach or default by Seller, then Buyer shall bear the
Phase I Costs. If this Agreement terminates for any reason other than a
breach or default by Buyer, then Seller shall reimburse Buyer for fifty
percent (50%) of the Phase II Costs within ten (10) business days after Buyer
delivers to Seller the Phase II Report and an invoice for the Phase II Costs
and GTI's work in connection therewith in an amount not to exceed the amount
set forth in the Phase II Letter for the scope of work actually conducted by
GTI (the "Phase II Invoice"). Buyer shall promptly deliver to Seller copies
of the documents referred to in this section 5.2, without representation or
warranty, to the extent the same are in Buyer's possession and provided that
any limitations or restrictions in any agreement between Buyer and the
applicable consultant or contractor are satisfied or waived. At least five
(5) business days before the Closing, Buyer shall deliver to Seller the Phase
II Report and the Phase II Invoice.
5.3 ACCESS FOR REVIEW. From the date of this Agreement to the Closing Date,
Seller shall provide Buyer and Buyer's representatives with access to the
Real Property, the Personal Property, all drawings, plans and specifications
for the Real Property, all engineering and other reports and studies relating
to the Real Property, all files and correspondence relating to the Real
Property, and all financial and accounting books and records relating to the
ownership, management, operation, maintenance or repair of the Real Property
at all reasonable times to make such studies, inspections, tests (including
subsurface tests, borings, samplings and measurements, provided that Seller
has approved in advance any such intrusive tests, borings, samplings and
measurements), copies and verifications as Buyer, in Buyer's discretion,
considers reasonably necessary or desirable in the circumstances. Buyer
shall restore the Real Property to its condition existing immediately before
Buyer's entry upon the Real Property, and Buyer shall indemnify and defend
Seller against and hold Seller harmless from all claims, demands,
liabilities, losses, damages, costs and expenses, including reasonable
attorneys' fees and disbursements (collectively, "Claims"), arising from any
bodily injury, property damage or mechanics' lien claim caused by Buyer in
connection with entry on the Real Property by Buyer pursuant to this section
5.3 or the Phase II Letter; provided, however, Buyer's foregoing obligations
shall not include any obligation or duty with respect to Claims (including
Claims that the Real Property has declined in value) arising out of,
resulting from or
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incurred in connection with (i) the discovery or presence of any Hazardous
Substances, or (ii) the results, findings, tests or analyses of Buyer's
environmental investigation of the Real Property. Notwithstanding the
preceding sentence, Buyer shall contribute to Seller one-half (1/2) of the
amount of any costs incurred in remediating any property damage resulting
from a Release caused by the environmental testing contemplated under Section
5.2 hereof and one-half (1/2) of all claims, demands, liabilities, losses,
damages, costs and expenses, including reasonable attorneys' fees and
disbursements, arising from any such Release. Buyer acknowledges that it has
caused GTI to deliver a certificate of insurance naming Seller as an
additional insured under GTI's errors and omissions insurance policy, which
policy provides coverage in an amount of at least one million dollars
($1,000,000).
5.4 PROPERTY APPROVAL PERIOD. Between the date of this Agreement and the
date Buyer obtains the Board Approval, Buyer shall have the right to review
and investigate the physical and environmental condition of the Property, the
income and expenses of the Property, the character, quality, value and
general utility of the Property, the zoning, land use, environmental and
building requirements and restrictions applicable to the Property, the state
of title to the Real Property, and any other factors or matters relevant to
Buyer's decision to purchase the Property. As used in this Agreement, the
phrase "Property Approval Period" shall mean the period commencing on the
date Buyer receives the last of the documents required to be delivered by
Seller or obtained by Buyer pursuant to sections 5.1, 5.2 and 5.5 and ending
on the Property Approval Deadline. As used in this Agreement, the phrase
"Property Approval Deadline" shall mean the date which is fifteen (15) days
after the Property Approval Period commences. If (a) the Property Approval
Deadline has not occurred by September 30, 1994 due to Buyer's failure to
obtain the Appraisals and the Enviroranental Reports by September 15, 1994,
and (b) Buyer has not waived its rights under this section 5.4 to terminate
this Agreement, then Seller may terminate this Agreement at any time after
September 30, 1994 by written notice to Buyer, provided that such termination
shall not be effective if, within five (5) business days after such notice,
Buyer waives its rights under this section 5.4 to terminate this Agreement.
Buyer may determine whether or not the Property is acceptable to Buyer within
the Property Approval Period. If (1) during the Property Approval Period
Buyer determines that the Property is not acceptable for any reason
whatsoever, or (2) Buyer does not obtain the Board Approval within ten (10)
business days after the Property Approval Deadline, then Buyer shall have the
right, by giving notice to Seller, to terminate this Agreement. If Buyer
exercises the right to terminate this Agreement in accordance with this
section 5.4, this Agreement shall terminate as of the date such termination
notice is given by Buyer. If Buyer does not exercise the right to terminate
this Agreement in accordance with this section 5.4 and Buyer so obtains the
Board
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Approval, then this Agreement shall continue in full force and effect, and
Buyer shall have no further right to terminate this Agreement pursuant to
this section 5.4. If Buyer does not deliver to Seller the Board Approval by
the date which is fifteen (15) business days after the Property Approval
Deadline, then Seller may terminate this Agreement by delivering to Buyer
notice thereof, in which event this Agreement shall terminate as of the date
such notice is given.
5.5 SURVEY. On or before the date of this Agreement or as promptly
thereafter as practicable, Seller shall, at the expense of Seller, deliver to
Buyer a survey of the Real Property prepared by a licensed land surveyor or a
registered civil engineer approved in writing by Buyer. Such survey shall
comply with the current minimum standard detail requirements for land title
surveys established by the American Land Title Association and the American
Congress on Surveying and Mapping, shall contain the legal description of the
Real Property, shall include the surveyor's or engineer's certification (in
form and substance satisfactory to Buyer) to Buyer, Buyer's lender and any
trustee of such lender (collectively, "Lender"), the Title Company and any
other person designated by Buyer, signed by the surveyor or engineer, that
the survey correctly shows the Real Property on the basis of a field survey
and in accordance with the current minimum standard detail requirements for
land title surveys established by the American Land Title Association and the
American Congress on Surveying and Mapping, and shall otherwise be in form
and substance satisfactory to Buyer.
5.6 ENVIRONMENTAL DEFINITIONS. As used in this Agreement, the following
definitions shall apply: "Environmental Laws" shall mean all federal, state
and local laws, ordinances, rules and regulations now or hereafter in force,
as amended from time to time, and all federal and state court decisions,
consent decrees and orders interpreting or enforcing any of the foregoing, in
any way relating to or regulating human health or safety, or industrial
hygiene or environmental conditions, or protection of the environment, or
pollution or contamination of the air, soil, surface water or groundwater,
and includes the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. Section 9601, et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., and the Clean
Water Act, 33 U.S.C. Section 1251, et seq. "Hazardous Substances" shall mean
any substance or material that is described as a toxic or hazardous
substance, waste or material or a pollutant or contaminant, or words of
similar import, in any of the Environmental Laws, and includes asbestos,
petroleum (including crude oil or any fraction thereof, natural gas, natural
gas liquids, liquefied natural gas, or synthetic gas usable for fuel, or any
mixture thereof), petroleum products, polychlorinated biphenyls, urea
formaldehyde, radon gas, radioactive matter, medical waste, and chemicals
which may cause cancer or reproductive toxicity. "Release" shall mean any
spilling, leaking, pumping, pouring, emitting, emptying, discharging,
<PAGE>
injecting, escaping, leaching, dumping or disposing into the environment,
including continuing migration, of Hazardous Substances into or through soil,
surface water or groundwater, and shall include, without limitation, any
contamination of groundwater with Hazardous Substances previously located in
the soil or other groundwater.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
6.1 SELLER. The representations and warranties of Seller in this section
6.1 and in Seller's Closing Certificate (as defined in section 7.1(c)) are a
material inducement for Buyer to enter into this Agreement. Buyer would not
purchase the Property from Seller without such representations and warranties
of Seller. All representations and warranties of Seller shall survive the
Closing. Seller represents and warrants to Buyer as of the date of this
Agreement as follows:
(a) Seller is a corporation duly organized and validly existing under the
laws of the State of California. Seller has full power and authority to
enter into this Agreement and to perform this Agreement. The execution,
delivery and performance of this Agreement by Seller have been duly and
validly authorized by all necessary action on the part of Seller and all
required consents and approvals have been duly obtained. This Agreement is a
legal, valid and binding obligation of Seller, enforceable against Seller in
accordance with its terms, subject to the effect of applicable bankruptcy,
insolvency, reorganization, arrangement, moratorium or other similar laws
affecting the rights of creditors generally. Neither the execution and
delivery of this Agreement nor the consummation of the transactions
contemplated hereby will conflict with, or (with or without notice or lapse
of time, or both) result in a termination, breach, impairment or violation
of, or give rise to a default under (i) any provision of Seller's articles of
incorporation or bylaws, (ii) any material instrument or contract to which
Seller is a party or by which Seller is bound, or (iii) any federal, state,
local or foreign judgment, writ, decree, order, statute, rule or regulation
applicable to Seller, the Property or any other property of Seller.
(b) There are no persons leasing, using or occupying the Real Property or
any part thereof except Seller, other persons permitted to occupy the Real
Property in accordance with Section 12.5(a) of the Lease and users or
operators of the cafeteria as provided in Sections 12.5(c) and 12.5(d) of the
Lease. All of the Personal Property is described in Exhibit B attached
hereto, which is an accurate and complete list of all tangible and intangible
personal property owned by Seller and necessary for the management,
operation, maintenance or repair of the Real Property (other than (A)
personal property used in Seller's
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business as opposed to Seller's property management and operation, and (B)
ordinary tools and supplies which are easily replaceable). All of the
tangible Personal Property is located at the Real Property. All of the
Contracts are described in Exhibit C attached hereto, which is an accurate
and complete list of all presently effective contracts, agreements,
warranties and guaranties relating to the design, construction, ownership,
management, operation, maintenance or repair of the Real Property (but
excluding those relating to the operation of Seller's particular business as
opposed to Seller's property management and operations). All of the Permits
are described in Exhibit D attached hereto, which is an accurate and complete
list of all presently effective building permits, certificates of occupancy,
and other certificates, permits, licenses and approvals relating to the
design, construction, ownership, occupancy, use, management, operation,
maintenance or repair of the Real Property (other than those the expiration,
termination or invalidity of which would not materially (x) impair the value
of the Real Property, or (y) interfere with or restrict the present use of
the Real Property). Seller has good title to the Personal Property, the
Contracts and the Permits, free and clear of all liens, encumbrances,
security interests and adverse claims of any kind or nature whatsoever. All
of the copies of the documents delivered to Buyer pursuant to section 5.1 are
accurate and complete copies of all originals of the documents described in
section 5.1.
(c) The Real Property has at all times been managed, operated, maintained
and repaired by Seller in a manner in accordance with sound property
management practice. There are no defects or deficiencies in the design,
construction, fabrication, manufacture or installation of the Real Property
or any part thereof or any system, element or component thereof. All
systems, elements and components of the Property (including all machinery,
fixtures and equipment, the roof, foundation and structural elements, and the
elevator, mechanical, electrical and life safety systems) are in good working
order and repair and sound operating condition. Seller has received no
notice of any kind from any insurance broker, agent or underwriter that any
noninsurable condition exists in, on or about the Real Property or any part
thereof. The Real Property and every part thereof and the use and occupancy
of the Real Property are in material compliance with all applicable building,
earthquake, zoning, land use, environmental, antipollution, health, fire,
safety, access and accommodations for the physically handicapped,
subdivision, energy and resource conservation and similar laws, statutes,
rules, regulations and ordinances and all covenants, conditions and
restrictions applicable to the Real Property. Seller has received no notice,
citation or other claim alleging any violation of any such law, statute,
rule, regulation, ordinance, covenant, condition or restriction. The Permits
have been duly and validly issued, are in full force and effect, and are all
of the certificates, permits, licenses and approvals that are required by law
to own, operate, use and
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occupy the Real Property as it is presently owned, operated, used and
occupied. Seller has fully performed, satisfied and discharged all of the
obligations, requirements and conditions imposed on the Real Property by the
Permits.
(d) Except as permitted under applicable Environmental Laws or as
expressly disclosed in the Environmental Reports or other written reports
delivered to Buyer and listed on Exhibit J attached hereto (the "Seller
Reports"), no Hazardous Substances are present in, on or under the Real
Property or any nearby real property which could migrate to the Real
Property, and there is no present Release or threatened Release of any
Hazardous Substances in, on or under the Real Property. Seller has never
used the Real Property or any part thereof, and Seller has never permitted
any person to use the Real Property or any part thereof, for the production,
processing, manufacture, generation, treatment, handling, storage or disposal
of Hazardous Substances except as permitted by applicable Environmental Laws.
No underground or above-ground storage tanks, barrels, wells, pits, sumps,
lagoons or other containers of any kind are located in, on, under or, to the
best of Seller's knowledge, about the Real Property, except as disclosed in
the Environmental Reports and Seller Reports. To the best of Seller's
knowledge, except as disclosed in the Environmental Reports and Seller
Reports, no underground or above-ground storage tanks, barrels, wells, pits,
sumps, lagoons or other containers of any kind which were formerly located
in, on, under or about the Real Property either (i) constitute or have caused
any violation of any Environmental Laws, or (ii) could reasonably be expected
in the future to constitute or cause any violation of any Environmental Laws.
Except as expressly disclosed in the Environmental Reports or the Seller
Reports, the Real Property and every part thereof, and all operations and
activities therein and thereon and the use and occupancy thereof, comply with
all applicable Environmental Laws, and Seller is not violating any
Environmental Laws. Seller has all permits, licenses and approvals (which
are included in the Permits) required by all applicable Environmental Laws
for the use and occupancy of, and all operations and activities in, the Real
Property, Seller is in full compliance with all such permits, licenses and
approvals, and all such permits, licenses and approvals were duly issued and
are in full force and effect. Except as disclosed in the Environmental
Reports and Seller Reports, no claim, demand, action or proceeding of any
kind relating to any past or present Release or threatened Release of any
Hazardous Substances in, on or under the Real Property or any past or present
violation of any Environmental Laws at the Real Property has been made or
commenced during Seller's ownership of the Real Property (or, to the best of
Seller's knowledge, previously), or is pending, or to the best of Seller's
knowledge is being threatened or contemplated by any person.
(e) There is no litigation, arbitration or other legal or administrative
suit, action, proceeding or investigation of any
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kind pending, or to the best of Seller's knowledge threatened or being
contemplated, against or involving Seller relating to the Real Property or
any part thereof and, to the best of Seller's knowledge, there is no valid
basis for any such litigation, arbitration or other legal or administrative
suit, action, proceeding or investigation. There is no general plan, land
use or zoning action or proceeding of any kind, or general or special
assessment action or proceeding of any kind, or condemnation or eminent
domain action or proceeding of any kind pending or, to the best of Seller's
knowledge, threatened or being contemplated with respect to the Real Property
or any part thereof. There is no legal or administrative action or
proceeding pending to contest or appeal the amount of real property taxes or
assessments levied against the Real Property or any part thereof or the
assessed value of the Real Property or any part thereof for real property tax
purposes.
(f) All water, sewer, gas, electric, steam, telephone and drainage
facilities and all other utilities required by law or reasonably necessary or
proper and usual for the full operation, use and occupancy of the Real
Property are installed to the boundary lines of the Real Property, are
connected with valid permits, and are adequate to service the Real Property
and to allow full compliance with all applicable laws, and the cost of
installation and connection of all such utilities to the Property has been
fully paid.
(g) Seller is not a "foreign person" as defined in section 1445 of the
Internal Revenue Code of 1986, as amended, and the Income Tax Regulations
thereunder.
(h) Except for Smith Barney Shearson, Inc. ("Smith Barney"), Ridgewood
Capital Funding, Inc. ("Ridgewood") and LaSalle Partners ("LaSalle")
(collectively "Brokers"), Seller has not dealt with any investment adviser,
real estate broker or finder, or incurred any liability for any commission or
fee to any investment adviser, real estate broker or finder, in connection
with the sale of the Property or this Agreement.
(i) The Financial Statements are true, correct and complete, were prepared
in accordance with generally accepted accounting principles consistently
applied and fairly present the financial condition and operations of Seller
and its consolidated subsidiaries for and as at the respective period of each
such Financial Statement.
(j) The expense statements of the Real Property for the years 1992 and
1993 and the first two calendar quarters of 1994 collectively attached hereto
as Exhibit K are, to the best of Seller's knowledge, true, correct and
complete in all material respects, show with reasonable accuracy all expenses
reasonably allocated to the Real Property, and present fairly such expenses
for the periods indicated (but Buyer acknowledges that such statements are,
in some respects, based on estimated allocations
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of expense items that pertained to the Real Property and other property).
6.2 BUYER. The representations and warranties of Buyer in this section
6.2 and in Buyer's Closing Certificate (as defined in section 7.2(a)) are a
material inducement for Seller to enter into this Agreement. Seller would
not sell the Property to Buyer without such representations and warranties of
Buyer. Such representations and warranties shall survive the Closing. Buyer
represents and warrants to Seller as of the date of this Agreement as follows:
(a) Buyer is a corporation duly incorporated and organized and validly
existing and in good standing under the laws of the State of Maryland.
Subject to obtaining the Board Approval, Buyer has full corporate power and
authority to enter into this Agreement and to perform this Agreement. The
execution, delivery and performance of this Agreement by Buyer have been duly
and validly authorized by all necessary action on the part of Buyer and all
required consents and approvals have been duly obtained, subject to the Board
Approval. This Agreement is a legal, valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms, subject to the effect
of applicable bankruptcy, insolvency, reorganization, arrangement, moratorium
or other similar laws affecting the rights of creditors generally.
(b) Except for Brokers, Buyer has not dealt with any investment adviser,
real estate broker or finder, or incurred any liability for any commission or
fee to any investment adviser, real estate broker or finder, in connection
with the sale of the Property or this Agreement.
ARTICLE 7
COVENANTS
7.1 SELLER. Seller covenants and agrees with Buyer as follows:
(a) Between the date of this Agreement and the Closing Date, Seller shall
not, without the prior approval of Buyer, which approval may be withheld in
the sole and absolute discretion of Buyer, in any respect execute any lease
affecting the Real Property. Between the date of this Agreement and the
Closing Date, Seller shall not enter into any agreement, or amend, modify,
renew, extend or terminate, or waive rights under, any existing Contract or
Permit. Between the date of this Agreement and the Closing Date, Seller
shall manage, operate, maintain and repair the Real Property and the Personal
Property in the ordinary course of business in accordance with sound property
management practice, keep the Real Property and the Personal Property and
every part thereof in good repair and
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working order and sound condition, comply with the Permits and all covenants,
conditions, restrictions, laws, statutes, rules, regulations and ordinances
applicable to the Real Property or the Personal Property, keep the Contracts
and the Permits in force, immediately give Buyer copies of all notices
received by Seller asserting any breach or default under the Contracts or any
violation of the Permits or any covenants, conditions, restrictions, laws,
statutes, rules, regulations or ordinances applicable to the Real Property or
the Personal Property, and perform when due all of Seller's obligations under
the Contracts and the Permits in accordance with the Contracts and the
Permits and all applicable laws. Between the date of this Agreement and the
Closing Date, Seller shall keep in force property insurance covering all
buildings, structures, improvements, machinery, fixtures and equipment
included in the Real Property insuring against all risks of physical loss or
damage, subject to standard exclusions, in an amount equal to the actual
replacement cost (without deduction for depreciation) of such buildings,
structures, improvements, machinery, fixtures and equipment.
(b) Between the date of this Agreement and the Closing Date, Seller shall:
(i) not use, produce, process, manufacture, generate, treat, handle, store or
dispose of any Hazardous Substances in, on or under the Real Property, or use
the Real Property for any such purposes, or Release any Hazardous Substances
into any air, soil, surface water or groundwater comprising the Real
Property, or permit any person using or occupying the Real Property or any
part thereof to do any of the foregoing; (ii) comply, and shall cause all
persons using or occupying the Real Property or any part thereof to comply,
with all Environmental Laws applicable to the Real Property, or the use or
occupancy thereof, or any operations or activities therein or thereon; (iii)
duly obtain all permits, licenses and approvals required by all applicable
Environmental Laws for the use and occupancy of, and all operations and
activities in, the Real Property, comply fully with all such permits,
licenses and approvals, and keep all such permits, licenses and approvals in
full force and effect; (iv) give notice Buyer immediately after Seller
obtains any information indicating that any Hazardous Substances may be
present or any Release or threatened Release of Hazardous Substances may have
occurred in, on or under the Real Property (or any nearby real property which
could migrate to the Real Property) or that any violation of any
Environmental Laws may have occurred at the Real Property, together with a
reasonably detailed description of the event, occurrence or condition in
question; and (v) immediately furnish to Buyer copies of all written
communications received by Seller from any person (including notices,
complaints, claims or citations that any Release or threatened Release of any
Hazardous Substances or any violation of any Environmental Laws has actually
or allegedly occurred) or given by Seller to any person concerning any past
or present Release or threatened Release of any Hazardous Substances in, on
or under the Real Property (or any nearby real
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property which could migrate to the Real Property) or any past or present
violation of any Environmental Laws at the Real Property.
(c) All representations and warranties made by Seller in section 6.1 and
in Seller's Closing Certificate shall survive the Closing. Seller shall use
its best efforts, in good faith and with diligence, to cause all of the
representations and warranties made by Seller in section 6.1 to be true and
correct on and as of the Closing Date. At the Closing, Seller shall execute
and deliver to Buyer a Seller's Closing Certificate ("Seller's Closing
Certificate") in the form of Exhibit L attached hereto, certifying to Buyer
that all such representations and warranties are true and correct on and as
of the Closing Date, with only such exceptions therein as are necessary to
reflect facts or circumstances arising between the date of this Agreement and
the Closing Date which would make any such representation or warranty untrue
or incorrect on and as of the Closing Date.
(d) Seller shall indemnify and defend Buyer against and hold Buyer
harmless from all Claims that may be suffered or incurred by Buyer if any
representation or warranty made by Seller in section 6.1 or in Seller's
Closing Certificate was untrue or incorrect in any respect when made or that
may be caused by any breach by Seller of any such representation or warranty.
(e) Seller shall indemnify and defend Buyer against and hold Buyer
harmless from all Claims arising from or based on any failure by Seller to
perform all obligations of Seller in accordance with the Contracts or the
Permits before the Closing Date, or any breach, default or violation by
Seller (or any event by Seller or condition which, after notice or the
passage of time, or both, would constitute a breach, default or violation by
Seller) under the Contracts or the Permits that occurs before the Closing
Date, or any condition, event or circumstance relating to the Real Property
that existed or occurred before the Closing Date, or any personal injury or
property damage occurring in, on or about the Real Property before the
Closing Date. Seller shall indemnify and defend Buyer against and hold Buyer
harmless from all Claims arising from or based on any failure by Seller to
perform all obligations of Seller in accordance with the Contracts listed on
Part II of Exhibit C after the Closing Date, or any breach, default or
violation by Seller (or any event by Seller or condition which, after notice
or the passage of time, or both, would constitute a breach, default or
violation by Seller) under the Contracts listed on Part II of Exhibit C that
occurs after the Closing Date.
(f) Subject to the provisions of section 5.3, Seller shall indemnify and
defend Buyer against and hold Buyer harmless from all claims, demands,
liabilities, losses, damages, costs and
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expenses in any way arising from, relating to or connected with any past or
present Release or threatened Release of any Hazardous Substances in, on or
under the Real Property or any past or present violation of any Environmental
Laws at the Real Property that exists or occurs, or the onset of which exists
or occurs, before the Closing Date. The foregoing indemnification shall
include all expenses of investigation and monitoring, costs of containment,
abatement, removal, repair, cleanup, restoration and remedial work, penalties
and fines, attorneys' fees and disbursements, other response costs.
(g) Between the date of this Agreement and the Closing Date, Seller shall
not in any manner sell, convey, assign, transfer, lease, encumber or
otherwise dispose of the Real Property, the Personal Property, the Contracts
or the Permits, or any part thereof or interest therein, nor enter into any
agreement to do so.
(h) Seller shall pay all commissions, fees and expenses due to Smith
Barney and Ridgewood in respect of the sale of the Property or this Agreement.
(i) Seller shall cause to be removed or deleted from title to the Real
Property on or before the Closing Date any mortgage, lien or similar
encumbrance other than a Permitted Exception which may be removed or deleted
by the payment of money.
(j) On or before the Closing Date, Seller shall cause Seller's Structural
Report to be certified to Buyer and Lender.
(k) On or before the Closing Date Seller shall have taken, or as promptly
thereafter as practicable Seller shall take, all action necessary to cause
the Real Property to be identified on the rolls of the Los Angeles County Tax
Assessor as a separate tax parcel which includes no property other than the
Real Property. In the event that Seller shall not, on or prior to the Closing
Date, have delivered to Buyer evidence reasonably satisfactory to Buyer that
the Real Property constitutes a separate tax parcel, then Seller shall have
provided Buyer with assurance reasonably satisfactory to Buyer that all such
necessary actions will be completed promptly after the Closing Date.
7.2 BUYER. Buyer covenants and agrees with Seller as follows:
(a) All representations and warranties made by Buyer in section 6.2 and in
Buyer's Closing Certificate shall survive the Closing. Buyer shall use its
best efforts, in good faith and with diligence, to cause all of the
representations and warranties made by Buyer in section 6.2 to be true and
correct on and as of the Closing Date. At the Closing, Buyer shall execute
and deliver to Seller a Buyer's Closing Certificate ("Buyer's Closing
Certificate") in the form of Exhibit M
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attached hereto, certifying to Seller that all such representations and
warranties are true and correct on and as of the Closing Date, with only such
exceptions therein as are necessary to reflect facts or circumstances arising
between the date of this Agreement and the Closing Date which would make any
such representation or warranty untrue or incorrect on and as of the Closing
Date.
(b) Buyer shall indemnify and defend Seller against and hold Seller
harmless from all Claims that may be suffered or incurred by Seller if any
representation or warranty made by Buyer in section 6.2 or in Buyer's Closing
Certificate was untrue or incorrect in any respect when made or that may be
caused by any breach by Buyer of any such representation or warranty.
(c) Buyer shall indemnify and defend Seller against and hold Seller
harmless from all Claims arising from or based on any failure by Buyer to
perform all obligations of Buyer in accordance with the Contracts' arising or
accruing on or after the Closing Date and during Buyer's ownership of the
Property or any breach, default or violation by Buyer (or any event by Buyer
or condition which, after notice or the passage of time, or both, would
constitute a breach, default or violation by Buyer) under the Contracts that
occurs on or after the Closing Date and during Buyer's ownership of the
Property.
(d) Buyer shall pay all commissions, fees and expenses due to LaSalle in
respect of the sale of the Property or this Agreement.
7.3 CASUALTY DAMAGE. If, before the Closing Date, the improvements on the
Real Property are damaged by any casualty and the cost to restore such
improvements, as reasonably determined by Buyer, is more than one hundred
thousand dollars ($100,000.00), Buyer shall have the right, by giving notice
to Seller within thirty (30) days after Seller gives notice of the occurrence
of such casualty to Buyer, to terminate this Agreement, in which event this
Agreement shall terminate. If, before the Closing Date, the improvements on
the Real Property are damaged by any casualty and the cost to restore such
improvements, as reasonably determined by Buyer, is one hundred thousand
dollars ($100,000.00) or less, or if Buyer has the right to terminate this
Agreement pursuant to the preceding sentence but Buyer does not exercise such
right, then this Agreement shall remain in full force and effect and,
promptly after the Closing Date, Seller shall restore such damage as provided
in the Lease. Seller shall give notice to Buyer immediately after the
occurrence of any damage to the improvements on the Real Property by any
casualty. Buyer shall have a period of thirty (30) days (or such shorter
period as Buyer may elect by giving notice to Seller) after Seller has given
the notice to Buyer required by this section 7.3 to evaluate the extent of
the damage and make the determination as
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to whether to terminate this Agreement. If necessary, the Closing Date shall
be postponed until Seller has given the notice to Buyer required by this
section 7.3 and the period of thirty (30) days described in this section 7.3
has expired.
7.4 EMINENT DOMAIN. If, before the Closing Date, proceedings are
commenced for the taking by exercise of the power of eminent domain of all or
any part of the Property which, as reasonably determined by Buyer, would
render the Property unacceptable to Buyer or unsuitable for Buyer's intended
use, Buyer shall have the right, by giving notice to Seller within thirty
(30) days after Seller gives notice of the commencement of such proceedings
to Buyer, to terminate this Agreement, in which event this Agreement shall
terminate. If Buyer has the right to terminate this Agreement pursuant to
the preceding sentence but Buyer does not exercise such right, then this
Agreement shall remain in full force and effect and, on the Closing Date, the
condemnation award (or, if not theretofore received, the right to receive
such award) payable on account of the taking shall be transferred to Buyer.
Seller shall give notice to Buyer immediately after Seller's receiving notice
of the commencement of any proceedings for the taking by exercise of the
power of eminent domain of all or any part of the Property. Buyer shall have
a period of thirty (30) days (or such shorter period as Buyer may elect by
giving notice to Seller) after Seller has given the notice to Buyer required
by this section 7.4 to evaluate the extent of the taking and make the
determination as to whether to terminate this Agreement. If necessary, the
Closing Date shall be postponed until Seller has given the notice to Buyer
required by this section 7.4 and the period of thirty (30) days described in
this section 7.4 has expired.
ARTICLE 8
CONDITIONS PRECEDENT
8.1 SELLER. The obligations of Seller under this Agreement are subject to
satisfaction of all of the conditions set forth in this section 8.1. Seller
may waive any or all of such conditions in whole or in part but any such
waiver shall be effective only if made in writing. After the Closing, any
such condition that has not been satisfied shall be treated as having been
waived in writing. No such waiver shall constitute a waiver by Seller of any
of its rights or remedies if Buyer defaults in the performance of any
material covenant or agreement to be performed by Buyer under this Agreement
or if Buyer breaches any representation or warranty made by Buyer in section
6.2 or in Buyer's Closing Certificate. If any condition set forth in this
section 8.1 is not fully satisfied or waived in writing by Seller, this
Agreement shall, at Seller's option, terminate, but without releasing Buyer
from liability if Buyer defaults in the performance of any such covenant or
agreement to
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be performed by Buyer or if Buyer breaches any such representation or
warranty made by Buyer before such termination.
(a) On the Closing Date, Buyer shall not be in default in the performance
of any material covenant or agreement to be performed by Buyer under this
Agreement.
(b) On the Closing Date, all representations and warranties made by Buyer
in section 6.2 shall be true and correct in all material respects as if made
on and as of the Closing Date and Seller shall have received Buyer's Closing
Certificate, executed by Buyer, in which Buyer certifies to Seller that all
representations and warranties made by Buyer in section 6.2 are true and
correct in all material respects on and as of the Closing Date, so long as
Buyer's Closing Certificate sets forth any exceptions thereto.
(c) On the Closing Date, no judicial or administrative suit, action,
investigation, inquiry or other proceeding by any person shall have been
instituted against Seller which challenges the validity or legality of any of
the transactions contemplated by this Agreement.
(d) On the Closing Date, Seller and Buyer shall have entered into the
Lease and the Memorandum of Lease in the form attached to the Lease as
Exhibit D (the "Memorandum").
(e) On the Closing Date, the Title Company shall be unconditionally and
irrevocably committed to issue to Seller an American Land Title Association
leasehold policy of title insurance, with liability equal to $11,500,000,
insuring Seller's leasehold estate in the Real Property pursuant to the Lease
subject to the Permitted Exceptions and to any deed of trust ("Deed of
Trust") granted by Buyer to secure a loan from Nomura Asset Capital
Corporation ("Nomura"), but subject to the terms of the SNA (as hereinafter
defined).
(f) On the Closing Date, Seller shall have received the purchase price
payable by Buyer pursuant to section 2.1.
(g) On the Closing Date, Seller shall have received the Easement
Agreement in the form attached hereto as Exhibit N (the "Easement
Agreement"), executed and acknowledged by Buyer.
(h) On the Closing Date, Seller shall have received a Subordination,
Non-Disturbance and Attornment Agreement, in the form attached to the Lease
as Exhibit B (the "SNA Agreement"), executed by Buyer and Bankers Trust
Company, as trustee for Nomura ("Trustee").
8.2 BUYER. The obligations of Buyer under this Agreement are subject to
satisfaction of all of the conditions set forth in this section 8.2. Buyer
may waive any or all of such conditions in whole or in part but any such
waiver shall be
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effective only if made in writing. After the Closing, any such condition
that has not been satisfied shall be treated as having been waived in
writing. No such waiver shall constitute a waiver by Buyer of any of its
rights or remedies if Seller defaults in the performance of any covenant or
agreement to be performed by Seller or if Seller breaches any representation
or warranty made by Seller in section 6.1 or in Seller's Closing Certificate.
If any condition set forth in this section 8.2 is not fully satisfied or
waived in writing by Buyer by the applicable dates set forth below, this
Agreement shall, at Buyer's option, terminate, but without releasing Seller
from liability if Seller defaults in the performance of any such covenant or
agreement to be performed by Seller or if Seller breaches any such
representation or warranty made by Seller before such termination, and the
Deposit and any interest thereon shall be returned to Buyer.
(a) Within ten (10) business days after the Property Approval Deadline,
(i) the Board of Directors of Buyer shall have authorized and approved, in
the sole and absolute discretion of such Board of Directors, this Agreement,
the transactions contemplated by this Agreement, and the execution, delivery
and performance of this Agreement by Buyer and (ii) Buyer shall have given
notice of such authorization and approval to Seller (collectively, the "Board
Approval").
(b) On the Closing Date, Seller shall not be in default in the performance
of any covenant or agreement to be performed by Seller under this Agreement.
(c) On the Closing Date, all representations and warranties made by Seller
in section 6.1 shall be true and correct in all material respects as if made
on and as of the Closing Date and Buyer shall have received Seller's Closing
Certificate, executed by Seller, in which Seller certifies to Buyer that all
representations and warranties made by Seller in section 6.1 are true and
correct in all material respects on and as of the Closing Date, so long as
Seller's Closing Certificate sets forth any exceptions thereto.
(d) On the Closing Date, no judicial or administrative suit, action,
investigation, inquiry or other proceeding by any person shall have been
instituted against Buyer which challenges the validity or legality of any of
the transactions contemplated by this Agreement or which, if adversely
determined, would materially adversely affect the value of the Property.
(e) On the Closing Date, the Title Company shall be unconditionally and
irrevocably committed to issue to Buyer an American Land Title Association
Owner's Policy Form 1992 of title insurance, with liability not less than the
purchase price, containing such endorsements as Buyer may reasonably require,
insuring Buyer that fee simple absolute title to the
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Real Property is vested in Buyer subject only to the Permitted Exceptions.
(f) On the Closing Date, Buyer shall have received, at Seller's sole cost,
reasonably satisfactory evidence (in the form of an architect's certificate,
title endorsement or certificate from an appropriate government agency) that
the construction and use of the Real Property complies with all applicable
building, zoning, subdivision and land-use codes, laws, ordinances and
regulations.
(g) on or before the Closing Date, Seller shall have delivered to Buyer an
Estoppel Certificate, in the form attached to the Lease as Exhibit C (the
"Estoppel Certificate"), executed by Seller.
(h) On or before the Closing Date, Seller shall have delivered to Buyer
the SNA Agreement, executed and acknowledged by Seller.
(i) On the Closing Date, Seller and Buyer shall have entered into the
Lease and the Memorandum.
(j) There shall have been no material adverse change in the financial
condition of Seller between January 1, 1994 and the Closing Date.
(k) On the Closing Date, Seller shall have delivered to Buyer the
Agreement re Letter of Credit, in the form attached hereto as Exhibit P (the
"Letter of Credit Agreement"), executed by Seller.
(l) On the Closing Date, Seller shall have delivered to Buyer an original
Letter of Credit in the form of Exhibit A to the Letter of Credit Agreement
(the "Letter of Credit"), executed by the issuing bank.
ARTICLE 9
CLOSING
9.1 PROCEDURE. Seller and Buyer shall cause the following to occur at the
Closing on the Closing Date:
(a) The Deed, the Easement Agreement, the Memorandum, the Deed of Trust and
the SNA Agreement, duly executed and acknowledged by Seller, Buyer and
Trustee, as appropriate, shall be recorded in the Official Records of the
County of Los Angeles, California.
(b) Seller shall date as of the Closing Date, execute and deliver to Buyer
(i) the Lease, (ii) the Bill of Sale, (iii) the Assignment of Contracts, (iv)
the Assignment of Permits,
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(v) Seller's Closing Certificate, (vi) a Certificate of Non-Foreign Status in
accordance with section 1445 of the Internal Revenue Code of 1986, as
amended, and the Income Tax Regulations thereunder in the form of Exhibit 0
attached hereto, (vii) a Franchise Tax Board Form 590, (viii) the Estoppel
Certificate, (ix) the SNA Agreement, and (x) the Letter of Credit Agreement.
Seller also shall deliver the Letter of Credit to Buyer.
(c) Buyer shall date as of the Closing Date, execute and deliver to Seller
(i) the Lease, (ii) the Assignment of Contracts, and (iii) Buyer's Closing
Certificate.
(d) Buyer shall pay to Seller the net purchase price for the Property in
accordance with section 2.1.
(e) The Title Company shall issue to Buyer the title insurance policy
described in section 8.2(e) and to Seller the title insurance policy
described in section 8.1(e).
(f) The Title Company shall file the information return for the sale of
the Property required by section 6045 of the Internal Revenue Code of 1986,
as amended, and the Income Tax Regulations thereunder.
9.2 POSSESSION. Seller shall transfer possession of the Real Property and
the Personal Property to Buyer on the Closing Date subject to the Lease. If
not previously delivered to Buyer, Seller shall deliver to Buyer on the
Closing Date accurate and complete copies of the documents described in
section 5.1, and, to the extent requested by Buyer, copies of all files,
correspondence, maintenance records and operating manuals relating to the
Real Property in Seller's possession, and duplicates of all keys (properly
tagged or identified) to the Real Property. The originals of such documents
and such keys shall become the property of Buyer on the Closing Date. To the
extent not requested by Buyer prior to the Closing Date, Seller shall, on
Buyer's request after the Closing Date, deliver to Buyer copies of any files,
correspondence, maintenance records and operating manuals relating to the
Real Property in Seller's possession. On the Closing Date Seller and Buyer
shall send notices, in form and substance reasonably satisfactory to Buyer,
to all vendors and contractors under the Contracts informing them that Seller
sold the Property to Buyer on the Closing Date.
9.3 CLOSING COSTS AND CREDITS. Seller shall pay all costs, fees and
expenses in connection with the Closing (other than costs in connection with
Buyer's financing and Buyer's attorneys' fees) including all transfer taxes,
the premium for the title insurance policies described in sections 8.1(e) and
8.2(e), the escrow fee charged by the Title Company, and the recording fees
for the Deed and the Memorandum. The Phase I Costs and one-half (1/2) of the
Phase II Costs shall be credited against the total purchase for the Property;
provided, however,
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<PAGE>
the credit for the Phase I Costs shall not exceed $7,500, and the credit for
the Phase II Costs shall not exceed fifty percent (50%) of the estimated cost
of the Phase II as set forth in the Phase II Letter for the scope of work
actually conducted by GTI. Buyer shall provide to Title Company reasonably
satisfactory evidence of any such costs and expenses before the Closing Date.
9.4 PRORATIONS. Seller shall pay all taxes, assessments, utilities,
maintenance charges, invoices for goods furnished or services supplied, and
all other expenses relating to the Property, whether allocable to the period
before or after the Closing Date. Thus, there shall be no prorations for
these items.
ARTICLE 10
GENERAL
10.1 NOTICES. All notices and other communications under this Agreement
shall be properly given only if made in writing and either mailed by certified
mail, return receipt requested, postage prepaid, or delivered by hand
(including messenger or recognized delivery, courier or air express service)
to the party at the address set forth in this section 10.1 or such other
address as such party may designate by notice to the other party. Such
notices and other communications shall be effective on the date of receipt
(evidenced by the certified mail receipt) if mailed or on the date of hand
delivery if hand delivered. If any such notice or communication is not
received or cannot be delivered due to a change in the address of the
receiving party of which notice was not previously given to the sending party
or due to a refusal to accept by the receiving party, such notice or other
communication shall be effective on the date delivery is attempted. Any
notice or other communication under this Agreement may be given on behalf of
a party by the attorney for such party.
(a) The address of Seller is 2601 S. Eastern Avenue, Los Angeles,
California 90040, attention: Mr. Alfred A. Plamann; with a copy to
Sheppard, Mullin, Richter & Hampton, 333 S. Hope Street, 48th Floor, Los
Angeles, California 90071, attention: Mark T. Okuma, Esq.
(b) The address of Buyer is Four Embarcadero Center, Suite 3150, San
Francisco, California 94111, attention: Mr. Mark S. Whiting, with a copy to
Pillsbury Madison & Sutro, 235 Montgomery Street, 14th Floor, San Francisco,
California 94104, attention: Glenn Q. Snyder, Esq.
10.2 ATTORNEYS' FEES. If there is any legal action or proceeding between
Seller and Buyer arising from or based on this Agreement, the unsuccessful
party to such action or proceeding shall pay to the prevailing party all
costs and expenses, including reasonable attorneys' fees and disbursements,
incurred by such prevailing party in such action or proceeding and in any
appeal in connection therewith. If such prevailing party recovers a judgment
in any such action, proceeding or appeal, such costs, expenses and attorneys'
fees and disbursements shall be included in and as a part of such judgment.
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<PAGE>
10.3 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
10.4 CONSTRUCTION. Seller and Buyer acknowledge that each party and its
counsel have reviewed and revised this Agreement and that the rule of
construction to the effect that any ambiguities are to be resolved against
the drafting party shall not be employed in the interpretation of this
Agreement or any document executed and delivered by either party in
connection with the transactions contemplated by this Agreement. The
captions in this Agreement are for convenience of reference only and shall
not be used to interpret this Agreement.
10.5 TERMS GENERALLY. The defined terms in this Agreement shall apply
equally to both the singular and the plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The term "person" includes
individuals, corporations, partnerships, trusts, other legal entities,
organizations and associations, and any government or governmental agency or
authority. The words "include," "includes" and "including" shall be deemed
to be followed by the phrase "without limitation." The words "approval,"
"consent" and "notice" shall be deemed to be preceded by the word "written."
10.6 FURTHER ASSURANCES. From and after the date of this Agreement,
Seller and Buyer agree to do such things, perform such acts, and make,
execute, acknowledge and deliver such documents as may be reasonably
necessary or proper and usual to complete the transactions contemplated by
this Agreement and to carry out the purpose of this Agreement in accordance
with this Agreement.
10.7 PARTIAL INVALIDITY. If any provision of this Agreement is determined
by a proper court to be invalid, illegal or unenforceable, such invalidity,
illegality or unenforceability shall not affect the other provisions of this
Agreement and this Agreement shall remain in full force and effect without
such invalid, illegal or unenforceable provision.
10.8 WAIVERS. No waiver of any provision of this Agreement or any breach
of this Agreement shall be effective unless such waiver is in writing and
signed by the waiving party and any such waiver shall not be deemed a waiver
of any other provision of this Agreement or any other or subsequent breach of
this Agreement.
10.9 MISCELLANEOUS. The Exhibits attached to this Agreement are made a
part of this Agreement. This Agreement shall benefit and bind Seller and
Buyer and their respective personal representatives, heirs, successors and
assigns. Buyer shall have the right, without releasing Buyer from any
obligation under this Agreement, by giving notice to Seller before the
Closing Date, to assign this Agreement or to have Seller convey, assign and
transfer the Property at the Closing in accordance with this Agreement to any
person designated by Buyer in such notice. Time is of the essence of this
Agreement. This Agree-
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<PAGE>
ment may be executed in counterparts, each of which shall be an original, but
all of which shall constitute one and the same Agreement. This Agreement may
not be amended or modified except by a written instrument signed by Seller
and Buyer. This Agreement constitutes the entire and integrated agreement
between Seller and Buyer relating to the purchase and sale of the Property
and supersedes all prior agreements, understandings, offers and negotiations,
oral or written, with respect to the purchase and sale of the Property. The
covenants, terms and conditions of this Agreement shall survive the Closing.
10.10 CONFIDENTIALITY. This Agreement is entered into by Buyer on the
condition, and Seller covenants, that prior to the Closing Date Seller shall
not disclose (except to the extent necessary to comply with applicable law)
the existence of this Agreement or its terms to any person, except on a
strictly confidential basis to escrow, to Title Company, to Seller's
contractors, to Seller's lenders, creditors and personal property lessors
whose interests in the Property are affected by the transactions contemplated
herein, and to Seller's partners, directors, officers, affiliates, employees
and advisors, who are directly involved in Seller's obligations under this
Agreement. Seller shall not make, and Seller shall use its best efforts to
ensure that the foregoing third parties do not make, any public announcement
of this Agreement or the transactions contemplated by this Agreement prior to
the Closing Date without the prior consent of Buyer, which consent may be
withheld by Buyer in its sole and absolute discretion, unless such public
announcement is necessary to comply with applicable law.
IN WITNESS WHEREOF, Seller and Buyer have executed this Agreement as of
the date first hereinabove written.
SELLER: CERTIFIED GROCERS OF CALIFORNIA, LTD.,
a California corporation
By: /s/ Daniel T. Bane
---------------------------------------
Its: CFO
---------------------------------
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<PAGE>
BUYER: TRINET CORPORATE REALTY TRUST, INC., a
Maryland corporation
By: /s/ Mark S. Whiting, President
------------------------------------
Mark S. Whiting, President
By: /s/ Charles S. Swanson
------------------------------------
Its: Senior Vice President, Acquisitions
------------------------------
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<PAGE>
CONTINENTAL LAWYERS TITLE COMPANY
A WHOLLY OWNED SUBSIDIARY OF
LAWYERS TITLE INSURANCE CORPORATION
800 EAST COLORADO BOULEVARD
PASADENA, CALIFORNIA 91101
(818) 304-0040
SHEPPARD, MULLEN, RICHTER
333 SOUTH HOPE STREET 48TH FLOOR
LOS ANGELES, CALIFORNIA 90071
ATTENTION: STEVE ROSS YOUR NO. CERTIFIED GROCERS
ORDER NO. 5092212-67
(AMENDED)
- --------------------------------------------------------------------------------
DATED AS OF JUNE 14, 1994 AT 7:30 A.M.
IN RESPONSE TO THE ABOVE REFERENCED APPLICATION FOR A POLICY OF TITLE
INSURANCE
CONTINENTAL LAWYERS TITLE COMPANY
HEREBY REPORTS THAT IT IS PREPARED TO ISSUE, OR CAUSE TO BE ISSUED AS OF THE
DATE HEREOF, A LAWYERS TITLE INSURANCE CORPORATION POLICY OR POLICIES OF TITLE
INSURANCE DESCRIBING THE LAND AND THE ESTATE OR INTEREST THEREIN HEREINAFTER SET
FORTH, INSURING AGAINST LOSS WHICH MAY BE SUSTAINED BY REASON OF ANY DEFECT,
LIEN OR ENCUMBRANCE NOT SHOWN OR REFERRED TO AS AN EXCEPTION IN SCHEDULE B OR
NOT EXCLUDED FROM COVERAGE PURSUANT TO THE PRINTED SCHEDULES, CONDITIONS AND
STIPULATIONS OF SAID POLICY FORMS.
THE PRINTED EXCEPTIONS AND EXCLUSIONS FROM THE COVERAGE OF SAID POLICY OR
POLICIES ARE SET FORTH IN THE ATTACHED LIST. COPIES OF THE POLICY FORMS SHOULD
BE READ. THEY ARE AVAILABLE FROM THE OFFICE WHICH ISSUED THIS REPORT.
THIS REPORT (AND ANY SUPPLEMENTS OR AMENDMENTS HERETO) IS ISSUED SOLELY FOR THE
PURPOSE OF FACILITATING THE ISSUANCE OF A POLICY OF TITLE INSURANCE AND NO
LIABILITY IS ASSUMED HEREBY. IF IT IS DESIRED THAT LIABILITY BE ASSUMED PRIOR
TO THE ISSUANCE OF A POLICY OF TITLE INSURANCE, A BINDER OR COMMITMENT SHOULD BE
REQUESTED.
THE FORM OF POLICY OF TITLE INSURANCE CONTEMPLATED BY THIS REPORT IS:
1. CALIFORNIA LAND TITLE ASSOCIATION STANDARD COVERAGE POLICY - 1990 [X]
2. AMERICAN LAND TITLE ASSOCIATION LOAN POLICY (4/6/90) [X]
3. AMERICAN LAND TITLE ASSOCIATION RESIDENTIAL TITLE INSURANCE POLICY [ ]
(6-1-87)
4. AMERICAN LAND TITLE ASSOCIATION OWNER'S POLICY (4/6/90) [ ]
/S/ FRANK BRYANT
--------------------------------------------------
TITLE OFFICER
EXHIBIT A
<PAGE>
ORDER NO. 5092212-67
SCHEDULE A
THE ESTATE OR INTEREST IN THE LAND HEREINAFTER DESCRIBED OR REFERRED TO COVERED
BY THIS REPORT IS:
A FEE
TITLE TO SAID ESTATE OR INTEREST AT THE DATE HEREOF IS VESTED IN:
CERTIFIED GROCERS OF CALIFORNIA, LTD., A CALIFORNIA CORPORATION
THE LAND REFERRED TO IN THIS REPORT IS SITUATED IN THE STATE OF CALIFORNIA,
COUNTY OF LOS ANGELES AND IS DESCRIBED AS FOLLOWS:
PARCEL 1:
PARCELS 2 AND 3 OF PARCEL MAP NO. 11171, IN THE CITY OF COMMERCE, IN THE COUNTY
OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP FILED IN BOOK 113, PAGE 7 OF
PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
EXCEPTING THEREFROM THAT PORTION OF PARCEL 3 DESCRIBED AS FOLLOWS:
BEGINNING AT THE MOST WESTERLY CORNER OF SAID PARCEL 3; THENCE ALONG THE
NORTHWESTERLY LINE OF SAID PARCEL NORTH 22 DEG. 23' 00" EAST 361.13 FEET; THENCE
LEAVING SAID NORTHWESTERLY LINE SOUTH 67 DEG. 37' 12" EAST 396.81 FEET TO A
POINT ON THE SOUTHEASTERLY LINE OF SAID PARCEL 3; SAID POINT BEING DISTANT NORTH
22 DEG. 16' 55" EAST 360.65 FEET FROM THE MOST SOUTHERLY CORNER OF SAID PARCEL;
THENCE ALONG SAID SOUTHEASTERLY LINE SOUTH 22 DEG. 16' 55" WEST 360.65 FEET TO
THE MOST SOUTHERLY CORNER OF SAID PARCEL; THENCE ALONG THE SOUTHWESTERLY LINE OF
SAID PARCEL NORTH 67 DEG. 41' 22" WEST 397.44 FEET TO THE POINT OF BEGINNING.
ALSO EXCEPTING THE ENTIRE MINERAL ESTATE IN THE PROPERTY DESCRIBED LYING NOT
LESS THAN 500 FEET BENEATH THE NATURAL SURFACE; FOR THE PURPOSES OF THIS
RESERVATION THE MINERAL ESTATE SHALL INCLUDE ALL SUBSTANCES WHICH HAVE BEEN
DISCOVERED OR WHICH MAY IN THE FUTURE BE DISCOVERED UPON OR UNDER THE PROPERTY
DESCRIBED, WHICH ARE NOW OR MAY IN THE FUTURE BE VALUABLE, AND WHICH ARE NOW OR
MAY BE IN THE FUTURE ENJOYED THROUGH EXTRACTION FROM THE PROPERTY DESCRIBED,
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, THE MINERAL ESTATE SHALL
INCLUDE ALL FORMS OF GENERALITY OF THE FOREGOING, THE MINERAL ESTATE SHALL
INCLUDE ALL FORMS OF THE GEOTHERMAL ENERGY, ALL COAL, ALL GASES, ALL HYDROCARBON
SUBSTANCES, ALL FISSIONABLE MATERIALS, ALL METALLIC MINERALS, AND ALL NON-
METALLIC MINERALS.
PAGE 2
<PAGE>
ORDER NO. 5092212-67
NOTWITHSTANDING OWNERSHIP OF THE MINERAL ESTATE, NEITHER GRANTOR NOR ITS
SUCCESSORS OR ASSIGNS SHALL HAVE THE RIGHT TO ENTER UPON THE SURFACE OF THE
PROPERTY DESCRIBED FOR THE PURPOSE OF EXTRACTING ANY CONSTITUENTS OF THE MINERAL
ESTATE. GRANTOR RESERVES THE RIGHT, ON BEHALF OF ITSELF, ITS SUCCESSOR AND
ASSIGNS, (1) TO EXTRACT THE CONSTITUENTS OF THE MINERAL ESTATE FROM THE PROPERTY
DESCRIBED BY MEANS OF WELLS, SHAFTS, TUNNELS, OR OTHER SUBSURFACE ACCESSES WHICH
MAY BE CONSTRUCTED, DRILLED OR DUG ON OR FROM OTHER LAND AND WHICH MAY PENETRATE
INTO THE PROPERTY DESCRIBED BELOW A DEPTH OF 500 FEET, AND (2) TO EXCAVATE,
CONSTRUCT, MAINTAIN, AND OPERATE SUBSURFACE FACILITIES BELOW A DEPTH OF 500 FEET
OF THE PROPERTY DESCRIBED FOR THE EXTRACTION OF THE CONSTITUENTS OF THE MINERAL
ESTATE SO LONG AS THE SUBSURFACE FACILITIES DO NOT UNREASONABLY INTERFERE WITH
THE USE AND ENJOYMENT OF THE SURFACE ESTATE IN THE PROPERTY DESCRIBED, AS
RESERVED BY SANTA FE PACIFIC REALTY CORPORATION, SUCCESSOR BY MERGER WITH SANTA
FE LAND IMPROVEMENT COMPANY, IN DEED RECORDED AUGUST 15, 1989 AS INSTRUMENT NO.
89-1309080, OFFICIAL RECORDS.
PARCEL 2
AN EASEMENT FOR LANDSCAPING, UTILITIES, AND OPEN SPACE ON, OVER AND ACROSS A
STRIP OF LAND 10.00 FEET IN WIDTH BY 174.25 FEET IN LENGTH AS SHOWN ON PARCEL
MAP NO. 1171 AS PER MAP FILED IN BOOK 113 PAGE 7 OF PARCEL MAPS.
PAGE 3
<PAGE>
ORDER NO. 5092212-67
SCHEDULE A-1
REQUIREMENT NO. 1:
INFORMATION IN POSSESSION OF THE COMPANY INDICATES THAT A DIVISION OF LAND, AS
DEFINED IN GOVERNMENT CODE SECTION 66424, IS CONTEMPLATED IN THE CURRENT
TRANSACTION OR HAS BEEN DIVIDED FROM A PREVIOUSLY EXISTING PARCEL OF LAND, AND
INVOLVES THE LAND DESCRIBED IN THIS REPORT. SUCH DIVISION OF LAND OR
CONTEMPLATED DIVISION OF LAND WOULD APPEAR TO FALL WITHIN THE PURVIEW OF THE
SUBDIVISION MAP ACT (COMMENCING WITH GOVERNMENT CODE SECTION 66410), AND AS A
PREREQUISITE TO THE ISSUANCE OF FINAL TITLE EVIDENCE AT LEAST ONE OF THE
FOLLOWING REQUIREMENTS MUST BE ACCOMPLISHED TO THIS COMPANY'S SATISFACTION:
(A) THAT A FINAL (TRACT) MAP HAS BEEN RECORDED IN COMPLIANCE WITH THE
SUBDIVISION MAP ACT AND RELATED ORDINANCES;
(B) THAT A PARCEL MAP HAS BEEN RECORDED IN COMPLIANCE WITH THE SUBDIVISION MAP
ACT AND RELATED ORDINANCES; OR
(C) THAT A CERTIFICATE OF COMPLIANCE AS PROVIDED FOR IN THE SUBDIVISION MAP ACT
HAS BEEN RECORDED; OR THAT OTHER SATISFACTORY EVIDENCE INDICATING COMPLIANCE OR
NON-VIOLATION BE FURNISHED.
ESCROW COMMENTS:________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
REQUIREMENT NO. 2:
THIS COMPANY IS REQUIRING THAT THE ATTACHED "OWNERS INFORMATION STATEMENT" BE
COMPLETED BY THE OWNER OF THE ESTATE DESCRIBED OR REFERRED TO IN SCHEDULE A,
IMMEDIATELY PRIOR TO THE CLOSE OF THIS TRANSACTION AND RETURNED TO US FOR OUR
APPROVAL.
THE PURPOSE OF THE OWNERS INFORMATION STATEMENT IS TO PROVIDE THIS COMPANY WITH
CERTAIN INFORMATION THAT CANNOT NECESSARILY BE ASCERTAINED BY MAKING A PHYSICAL
INSPECTION OF THE LAND. PLEASE CONTACT US IN THE EVENT YOU REQUIRE ASSISTANCE
IN COMPLETING SAID OWNERS INFORMATION STATEMENT.
ESCROW COMMENTS:________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
PAGE 4
<PAGE>
ORDER NO. 5092212-67
REQUIREMENT NO. 3:
THIS COMPANY WILL REQUIRE THE FOLLOWING TO INSURE A LOAN BY OR A CONVEYANCE
FROM, THE ENTITY NAMED BELOW:
CERTIFIED GROCERS OF CALIFORNIA, LTD.
(A) A COPY OF THE CORPORATION BY-LAWS OR ARTICLES
(B) AN ORIGINAL OR CERTIFIED COPY OF THE RESOLUTION AUTHORIZING THE SUBJECT
TRANSACTION.
ESCROW COMMENTS:________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
REQUIREMENT NO. 4:
THIS COMPANY WILL REQUIRE THAT A CORRECT SURVEY OF SAID LAND, SATISFACTORY TO
THIS COMPANY, BE SUBMITTED. IT IS RECOMMENDED THAT THE SURVEYOR CONTACT THIS
COMPANY PRIOR TO STARTING THE SURVEY.
ESCROW COMMENTS:________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
NOTE NO. 1: THE CHARGE FOR A POLICY OF TITLE INSURANCE, WHEN ISSUED THROUGH
THIS TITLE ORDER, WILL BE BASED ON THE BASIC (NOT SHORT-TERM) TITLE INSURANCE
RATE.
NOTE NO. 2: IF YOU ARE AWARE OF ANY IMPROVEMENTS WHATSOEVER THAT HAVE BEEN
RECENTLY COMPLETED, THAT ARE ONGOING, OR CONTEMPLATED PRIOR TO CLOSING, THIS
OFFICE MUST BE INFORMED OF THESE FACTS IMMEDIATELY SO THAT YOUR TRANSACTION IS
NOT DELAYED.
PAGE 5
<PAGE>
ORDER NO. 5092212-67
OWNERS INFORMATION STATEMENT
THE UNDERSIGNED OWNER HEREBY STATES THAT THERE ARE NO UNRECORDED LEASES OR
AGREEMENTS AFFECTING THE PROPERTY DESCRIBED IN THE ABOVE REFERENCED PRELIMINARY
REPORT AND THAT THERE IS NO ONE IN POSSESSION OR ENTITLED TO POSSESSION OF SAID
PROPERTY OTHER THAN THE VESTEE SHOWN IN SAID PRELIMINARY REPORT EXCEPT: * ______
________________________________________________________________________________
________________________________________________________________________________
______________________________.
THE UNDERSIGNED OWNER STATES THAT TO HIS KNOWLEDGE THERE ARE NOT LIENS OR RIGHTS
TO LIENS UPON SAID PROPERTY FOR LABOR, SERVICES AND MATERIALS FOR WORK
CONTRACTED FOR AND COMPLETED BY AN OWNER, LESSEE, SUB-LESSEE OR TENANT WITHIN
THE LAST YEAR OR WHICH IS NOW IN PROGRESS EXCEPT: * __________________________
________________________________________________________________________________
________________________________________________________________________________
______________________________.
THIS STATEMENT IS MADE IN CONNECTION WITH THE REQUEST TO CONTINENTAL LAWYERS
TITLE COMPANY AND/OR LAWYERS TITLE INSURANCE CORPORATION TO ISSUE ITS POLICY(S)
OF TITLE INSURANCE WITH RESPECT TO THE ABOVE-REFERENCED ORDER NUMBER.
---------------------------------------------
OWNER
* IF NONE, STATE (NONE)
---------------------------------------------
ADDRESS
---------------------------------------------
DATE
<PAGE>
ORDER NO. 5092212-67
SCHEDULE B
AS THE DATE HEREOF EXCEPTIONS TO COVERAGE IN ADDITION TO THE PRINTED EXCEPTIONS
AND EXCLUSIONS IN THE POLICY FORM DESIGNATED ON THE FACE PAGE OF THIS REPORT
WOULD BE AS FOLLOWS:
A. PROPERTY TAXES, INCLUDING GENERAL AND SPECIAL TAXES, PERSONAL PROPERTY
TAXES, IF ANY, AND ANY ASSESSMENTS COLLECTED WITH TAXES, TO BE LEVIED FOR
THE FISCAL YEAR 1994 - 1995 WHICH ARE A LIEN NOT YET PAYABLE.
B. SUPPLEMENTAL ASSESSMENTS OF PROPERTY TAXES, IF ANY, MADE PURSUANT TO THE
PROVISIONS OF PART 0.5, CHAPTER 3.5 (COMMENCING WITH SECTION 75) OF THE
CALIFORNIA REVENUE AND TAXATION CODE AS A RESULT OF THE TRANSFER OF TITLE
TO THE VESTEE NAMED IN SCHEDULE A.
C. SUPPLEMENTAL OR ESCAPED ASSESSMENTS OF PROPERTY TAXES, IF ANY, MADE
PURSUANT TO PART 0.5, CHAPTER 3.5 OR PART 2, CHAPTER 3, ARTICLES 3 AND 4,
RESPECTIVELY, OF THE CALIFORNIA REVENUE AND TAXATION CODE AS A RESULT OF
CHANGES IN OWNERSHIP OR NEW CONSTRUCTION OCCURRING PRIOR TO DATE OF POLICY.
1. AN EASEMENT FOR THE PURPOSE SHOWN BELOW AND RIGHTS INCIDENTAL THERETO AS
SET FORTH IN A DOCUMENT
GRANTED TO: ATCHISON, TOPEKA AND SANTA FE RAILWAY
COMPANY, A CORPORATION
PURPOSE: DRAINAGE OF SURFACE WATERS OVER SAID LAND
FROM LAND ADJACENT ON THE SOUTHWEST
RECORDED: AUGUST 3, 1950 IN BOOK 33878 PAGE 374,
OFFICIAL RECORDS.
AFFECTS: SAID LAND
THE EXACT LOCATION AND EXTENT OF SAID EASEMENT IS NOT DISCLOSED OF RECORD.
SAID INSTRUMENT, AMONG OTHER THINGS, PROVIDES THAT THE ATCHISON, TOPEKA AND
SANTA FE RAILWAY COMPANY, A CORPORATION IS RELEASED FROM ANY AND ALL
LIABILITY TO GRANTOR BY REASON OF ANY DAMAGE TO GRANTORS ADJOINING LAND ON
ACCOUNT OF SUCH DRAINAGE.
2. AN EASEMENT FOR THE PURPOSE SHOWN BELOW AND RIGHTS INCIDENTAL THERETO AS
SET FORTH IN A DOCUMENT
GRANTED TO: SOUTHERN CALIFORNIA EDISON COMPANY, A
CORPORATION
PURPOSE: POLE LINES AND CONDUITS
RECORDED: AUGUST 23, 1956 IN BOOK 52113 PAGE 120,
OFFICIAL RECORDS.
PAGE 6
<PAGE>
ORDER NO. 5092212-67
AFFECTS: A STRIP OF LAND 6 FEET IN WIDTH LYING WITHIN
THAT PORTION OF LOT 74 OF THE RANCHO LAGUNA
(SO-CALLED) IN THE RANCHO SAN ANTONIO WHICH
PORTION IS DESCRIBED IN THAT CERTAIN DEED TO
THE GRANTOR HEREIN RECORDED MARCH 8, 1940 IN
BOOK 17373 PAGE 4, OFFICIAL RECORDS OF SAID
LOS ANGELES COUNTY, IN THE CENTER LINE OF
SAID 6 FOOT STRIP IS DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT IN THE SOUTHEASTERLY LINE OF ATLANTIC BOULEVARD AS NO
ESTABLISHED DISTANT SOUTHWESTERLY 193 FEET FROM THE SOUTHERLY LINE OF
SHEILA STREET AS NOW ESTABLISHED; THENCE SOUTHEASTERLY A DISTANCE OF
APPROXIMATELY 220 FEET FROM THE SOUTHERLY LINE OF SHEILA STREET.
BY AN INSTRUMENT RECORDED OCTOBER 26, 1978 AS INSTRUMENT NO. 78-1194416,
OFFICIAL RECORDS, SAID EASEMENT WAS QUITCLAIMED AS TO THE FOLLOWING
DESCRIBED LAND:
A STRIP OF LAND 6 FEET IN WIDTH, THE CENTERLINE OF SAID 6 FOOT STRIP IS
DESCRIBED AS FOLLOWS:
BEGINNING AT A POINT IN THE SOUTHEASTERLY LINE OF ATLANTIC BOULEVARD, AS
NOW ESTABLISHED DISTANT SOUTHWESTERLY 193 FEET FROM THE SOUTHERLY LINE OF
SHEILA STREET, AS NOW ESTABLISHED; THENCE SOUTHEASTERLY A DISTANCE OF
APPROXIMATELY 48 FEET TO A POINT DISTANT SOUTHERLY APPROXIMATELY 220 FEET
FROM THE SOUTHERLY LINE OF SHEILA STREET.
AN EASEMENT FOR THE PURPOSE SHOWN BELOW AND RIGHTS INCIDENTAL THERETO AS
SET FORTH IN A DOCUMENT
GRANTED TO: INSILCO CORPORATION, A CONNECTICUT
CORPORATION
PURPOSE: DRAINAGE
RECORDED: AUGUST 17, 1979 AS INSTRUMENT NO. 79-913046,
OFFICIAL RECORDS.
AFFECTS: A STRIP OF LAND 10.00 FEET IN WIDTH, THE
SOUTHWESTERLY LINE OF WHICH IS PARALLEL WITH
AND DISTANT NORTHEASTERLY 165.00 FEET AT
RIGHT ANGLES FROM THE SOUTHWESTERLY LINE OF
PARCEL 3 SHOWN ON SAID MAP AS HAVING A LENGTH
OF 397.42 FEET.
A SIDELINES OF SAID STRIP SHALL BE PROLONGED OR SHORTENED SO AS TO
TERMINATE IN A NORTHWESTERLY LINE OF SAID PARCEL SHOWN ON SAID MAP AS
HAVING A BEARING OF NORTH 22 DEG. 23' 01" EAST AND A LENGTH OF 381.15 FEET
AND IN THE SOUTHEASTERLY LINE OF SAID PARCEL.
PAGE 7
<PAGE>
ORDER NO. 5092212-67
4. AN EASEMENT FOR THE PURPOSE SHOWN BELOW AND RIGHTS INCIDENTAL THERETO AS
SET FORTH IN A DOCUMENT
GRANTED TO: SOUTHERN CALIFORNIA GAS COMPANY, A
CORPORATION
PURPOSE: PUBLIC UTILITIES
RECORDED: SEPTEMBER 18, 1979 AS INSTRUMENT NO.
79-1040198, OFFICIAL RECORDS.
AFFECTS: A STRIP OF LAND 10.00 FEET IN WIDTH, THE
CENTERLINE OF WHICH IS MORE PARTICULARLY
DESCRIBED AS FOLLOWS:
BEGINNING AT THE INTERSECTION OF THE MOST EASTERLY LINE OF PARCEL 2 OF SAID
PARCEL MAP WITH A LINE THAT IS PARALLEL WITH AND DISTANT SOUTHERLY 25.00
FEET AT RIGHT ANGLES FROM THE NORTHERLY LINE OF SAID PARCEL 2 THE TRUE
POINT OF BEGINNING; THENCE ALONG SAID PARALLEL LINE AND ITS WESTERLY
PROLONGATION NORTH 67 DEG. 41' 54" WEST 309.35 FEET TO THE SOUTHEASTERLY
LINE OF ATLANTIC BLVD. SHOWN ON SAID MAP AS HAVING A BEARING OF NORTH 51
DEG. 13' 15" EAST AND A LENGTH OF 826.18 FEET. THE SIDELINES OF SAID STRIP
OF LAND SHALL BE PROLONGED OR SHORTENED SO AS TO TERMINATE IN SAID MOST
EASTERLY PARCEL LINE AND IN SAID SOUTHEASTERLY STREET LINE.
5. THE TERMS, CONDITIONS AND PROVISION OF A "SAMPLE COVENANTS FOR OFFSITE
WORK" EXECUTED BY CERTIFIED GROCERS OF CALIF. LTD RECORDED JULY 27, 1990 AS
INSTRUMENT NO. 90-1314216 OF OFFICIAL RECORDS.
REFERENCE IS MADE TO SAID DOCUMENT FOR FULL PARTICULARS.
6. THE EFFECT OF THE FILING OF A RECORD OF SURVEY IN BOOK 116, AT PAGE 70 OF
RECORDS OF SURVEY; AND A RECORD OF SURVEY IN BOOK 139 AT PAGE 23 OF RECORDS
OF SURVEY.
7. THE EFFECT OF: A "CERTIFICATE OF COMPLIANCE AND LOT LINE
ADJUSTMENT"
DATED: NOT SHOWN
EXECUTED BY: BOB ZARRILLA ON BEHALF OF THE CITY OF
COMMERCE
RECORDED: FEBRUARY 10, 1990 AS INSTRUMENT NO.
90-224522, OFFICIAL RECORDS.
WHICH AMONG OTHER
THINGS PROVIDES: THAT THE PROPOSED LOT LINE ADJUSTMENT BETWEEN
ASSESSOR'S PARCEL NUMBERS 6335-7-804 AND
6335-007-803, AS SHOWN ON EXHIBIT "A" IS
EXEMPT FROM THE PARCEL MAP REQUIREMENTS OF
THE STATE SUBDIVISION MAP ACT AND CONFORMS TO
THE LOT LINE ADJUSTMENT REQUIREMENTS AS
PROVIDED IN THE SUBDIVISION ORDINANCE OF THE
MUNICIPAL CODE.
REFERENCE IS MADE TO SAID DOCUMENT FOR FULL PARTICULARS.
PAGE 8
<PAGE>
ORDER NO. 5092212-67
8. MATTERS WHICH MAY BE DISCLOSED BY AN INSPECTION OR BY A SURVEY OF SAID LAND
THAT IS SATISFACTORY TO THIS COMPANY, OR BY INQUIRY OF THE PARTIES IN
POSSESSION THEREOF.
AN INSPECTION OF SAID LAND HAS BEEN ORDERED; UPON ITS COMPLETION WE WILL
ADVISE YOU OF OUR FINDINGS.
9. ANY RIGHTS OF THE PARTIES IN POSSESSION OF SAID LAND, BASED ON AN
UNRECORDED AGREEMENT, CONTRACT OR LEASE, AS DISCLOSED BY INSPECTION, AND
INVESTIGATION.
THIS COMPANY WILL REQUIRE THAT A FULL COPY OF ANY UNRECORDED AGREEMENT,
CONTRACT, OR LEASE BE SUBMITTED TO US, TOGETHER WITH ALL SUPPLEMENTS,
ASSIGNMENTS AND AMENDMENTS, BEFORE ISSUING ANY POLICY OF TITLE INSURANCE.
10. ANY EASEMENTS NOT DISCLOSED BY THOSE PUBLIC RECORDS WHICH IMPART
CONSTRUCTIVE NOTICE AND WHICH ARE NOT VISIBLE AND APPARENT FROM AN
INSPECTION OF THE SURFACE OF SAID LAND.
11. WATER RIGHTS, CLAIMS OR TITLE TO WATER.
12. A 25 FOOT EASEMENT FOR INGRESS AND EGRESS OVER SAID LAND, AS SHOWN ON
RECORD OF SURVEY, DATED APRIL 15, 1992 AND RECORDED IN BOOK 139 PAGE 23 OF
RECORD OS SURVEYS.
13. ANY RIGHTS, INTERESTS, OR CLAIMS WHICH MAY EXIST OR ARISE BY REASON OF THE
FOLLOWING FACTS SHOWN ON A SURVEY PLAT ENTITLED "A.L.T.A. SURVEY," DATED
JANUARY 27, 1994 PREPARED BY: ASL CONSULTING ENGINEERS
A. THE LEGAL DESCRIPTION NEEDS TO CONFORM TO OUR PRELIMINARY TITLE REPORT
DATED JANUARY 10, 1994.
B. THE FACT THAT A CONCRETE CURB & PLANTER LIES PARTLY WITHIN SAID LAND
AND PARTLY WITHIN LAND ADJOINING ON THE SOUTHEAST.
C. THE FACT THAT A SHED IS PARTLY ON SAID LAND AND PARTLY ON LAND
ADJOINING ON THE NORTHWEST.
D. THE FACT THAT A CHAIN LINK FENCE WITH BARBED WIRE IS PARTLY ON SAID
LAND AND PARTLY ON LAND ADJOINING ON THE SOUTHWEST.
E. THE FACT THAT A WROUGHT IRON FENCE SITUATED ON SAID LAND EXTEND ONTO
SHEILA STREET.
END OF SCHEDULE B
JUNE 17, 1994
PAGE 9
<PAGE>
ORDER NO. 5092212-67
CC:
CERTIFIED GROCERS
2601 SOUTH EASTERN AVENUE
COMMERCE, CALIFORNIA 90040
ATTN: MARTY BARRATT
REF: CERTIFIED GROCERS
PAGE 10
<PAGE>
AB 512 FUNDING NOTIFICATION
NOTICE:
INSURANCE CODE SECTION 12413.1 (AB 512, CHAPTER 598 OF THE LAWS OF 1989)
PROHIBITS THE DISBURSEMENT OF FUNDS (AND HENCE, THE CLOSING OF TRANSACTIONS
CONTINGENT ON CONCURRENT DISBURSEMENTS) UNLESS SUCH FUNDS ARE AVAILABLE FOR
COLLECTION IN ACCORDANCE WITH THE SCHEDULE SET FORTH THEREIN, CUSTOMERS ARE
STRONGLY ADVISED TO FAMILIARIZE THEMSELVES WITH THE AVAILABILITY SCHEDULE AND
TO NOTE, IN PARTICULAR, THAT ONLY DEPOSITS MADE TO THE COMPANY'S ACCOUNTS BY
CASH AND WIRE TRANSFER ENJOY SAME-DAY AVAILABILITY. RECORDINGS MAY
NEVERTHELESS TAKE, A SHORTAGE IN AVAILABLE FUNDS IF THE PARTIES TO THE
TRANSACTION HAVE PROVIDED WRITTEN CONSENT TO DELAYED DISBURSEMENT. THE
CONSENT FORM REQUIRED BY THE COMPANY IS AVAILABLE UPON REQUEST FROM YOUR
TITLE OFFICER OR SALES REPRESENTATIVE.
FOR YOU INFORMATION OUR WIRING INSTRUCTIONS ARE AS FOLLOWS:
PASADENA OFFICE
UNION BANK
CENTURY CITY OFFICE
5200 W. CENTURY BLVD
LOS ANGELES, CA 90045
ACCT #335014-6899 ABA 122000496
REF: CONTINENTAL LAWYERS TITLE
ORDER NUMBER: 5092212-67
<PAGE>
ORDER NO. 5092212-67
LEGAL DESCRIPTION
PARCEL 1:
PARCELS 2 AND 3 OF PARCEL MAP NO. 11171, IN THE CITY OF COMMERCE, IN THE COUNTY
OF LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP FILED IN BOOK 113, PAGE 7 OF
PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.
EXCEPTING THEREFROM THAT PORTION OF PARCEL 3 DESCRIBED AS FOLLOWS:
BEGINNING AT THE MOST WESTERLY CORNER OF SAID PARCEL 3; THENCE ALONG THE
NORTHWESTERLY LINE OF SAID PARCEL NORTH 22 DEG. 23' 00" EAST 361.13 FEET;
THENCE LEAVING SAID NORTHWESTERLY LINE SOUTH 67DEG. 37' 12" EAST 396.81 FEET
TO A POINT ON THE SOUTHEASTERLY LINE OF SAID PARCEL 3; SAID POINT BEING
DISTANT NORTH 22DEG. 16' 55" EAST 360.65 FEET FROM THE MOST SOUTHERLY CORNER
OF SAID PARCEL; THENCE ALONG SAID SOUTHEASTERLY LINE SOUTH 22DEG. 16' 55"
WEST 360.65 FEET TO THE MOST SOUTHERLY CORNER OF SAID PARCEL; THENCE ALONG
THE SOUTHWESTERLY LINE OF SAID PARCEL NORTH 67DEG. 41' 22" WEST 397.44 FEET
TO THE POINT OF BEGINNING.
ALSO EXCEPTING THE ENTIRE MINERAL ESTATE IN THE PROPERTY DESCRIBED LYING NOT
LESS THAN 500 FEET BENEATH THE NATURAL SURFACE; FOR THE PURPOSES OF THIS
RESERVATION THE MINERAL ESTATE SHALL INCLUDE ALL SUBSTANCES WHICH HAVE BEEN
DISCOVERED OR WHICH MAY IN THE FUTURE BE DISCOVERED UPON OR UNDER THE PROPERTY
DESCRIBED, WHICH ARE NOW OR MAY IN THE FUTURE BE VALUABLE, AND WHICH ARE NOW OR
MAY BE IN THE FUTURE ENJOYED THROUGH EXTRACTION FROM THE PROPERTY DESCRIBED,
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, THE MINERAL ESTATE SHALL
INCLUDE ALL FORMS OF GENERALITY OF THE FOREGOING, THE MINERAL ESTATE SHALL
INCLUDE ALL FORMS OF THE GEOTHERMAL ENERGY, ALL COAL, ALL GASES, ALL HYDROCARBON
SUBSTANCES, ALL FISSIONABLE MATERIALS, ALL METALLIC MINERALS, AND ALL NON-
METALLIC MINERALS.
NOTWITHSTANDING OWNERSHIP OF THE MINERAL ESTATE, NEITHER GRANTOR NOR ITS
SUCCESSORS OR ASSIGNS SHALL HAVE THE RIGHT TO ENTER UPON THE SURFACE OF THE
PROPERTY DESCRIBED FOR THE PURPOSE OF EXTRACTING ANY CONSTITUENTS OF THE
MINERAL ESTATE. GRANTOR RESERVES THE RIGHT, ON BEHALF OF ITSELF, ITS
SUCCESSOR AND ASSIGNS, (1) TO EXTRACT THE CONSTITUENTS OF THE MINERAL ESTATE
FROM THE PROPERTY DESCRIBED BY MEANS OF WELLS, SHAFTS, TUNNELS, OR OTHER
SUBSURFACE ACCESSES WHICH MAY BE CONSTRUCTED, DRILLED OR DUG ON OR FROM OTHER
LAND AND WHICH MAY PENETRATE INTO THE PROPERTY DESCRIBED BELOW A DEPTH OF 500
FEET, AND (2) TO EXCAVATE, CONSTRUCT, MAINTAIN, AND OPERATE SUBSURFACE
FACILITIES BELOW A DEPTH OF 500 FEET OF THE PROPERTY DESCRIBED FOR THE
EXTRACTION OF THE CONSTITUENTS OF THE MINERAL ESTATE SO LONG AS THE
SUBSURFACE FACILITIES DO NOT UNREASONABLY INTERFERE WITH THE USE AND
ENJOYMENT OF THE SURFACE ESTATE IN THE PROPERTY DESCRIBED, AS RESERVED BY
SANTA FE PACIFIC REALTY CORPORATION, SUCCESSOR BY MERGER WITH SANTA FE LAND
IMPROVEMENT COMPANY, IN DEED RECORDED AUGUST 15, 1989 AS INSTRUMENT NO.
89-1309080, OFFICIAL RECORDS.
PARCEL 2
AN EASEMENT FOR LANDSCAPING, UTILITIES, AND OPEN SPACE ON, OVER AND ACROSS A
STRIP OF LAND 10.00 FEET IN WIDTH BY 174.25 FEET IN LENGTH AS SHOWN ON PARCEL
MAP NO. 1171 AS PER MAP FILED IN BOOK 113 PAGE 7 OF PARCEL MAPS.
<PAGE>
[Assessor'S Map Of Subject Property]
<PAGE>
PERSONAL PROPERTY
<TABLE>
<CAPTION>
Serial Number Description
------------- -----------
<S> <C>
01024001 Sandwich Table
53191000 Wall Panels
92001000 Salad Bar
92001100 Steam Table
92500000 Cabinets
49835000 Ice Machine
49835001 Range
49835002 Sinks
49835003 Microwave, Scale, Griddle & Mixer
49835004 Slicer
35092300 Folding Partition
8088300 Vertical Blinds
86799000 Reception Station
35090700 Telephone System
35091400 Telephone System
35092000 Telephone System
35092600 Telephone System
57918000 Telephone System
85184000 Telephone System
</TABLE>
11803975 EXHIBIT B
<PAGE>
CONTRACTS
<TABLE>
<CAPTION>
PART I
- ------
<C> <C> <S>
1. 10/22/90 Security System Installation and Service Agreement
between Electro Security Corporation and Cergro.
03/15/91 Addendum to Security System Installation and Service
Agreement between Cergro and Electro Security Corporation.
2. -- Scholten Roofing Service guarantee.
PART II
- -------
1. 06/29/89 Contract to Purchase Real Property, Buyer Cergro
and Seller Santa Fe Pacific Realty Corporation.
2. 09/27/89 Lease Agreement between Video Associates, Inc.,
Lessor, and Certified Grocers ("Cergro"), Lessee.
03/12/90 Amendment to Lease Agreement between Video Associates,
Inc., Lessor, and Cergro, Lessee.
3. 11/16/89 Service and Maintenance Agreement between Amtech
Reliable Elevator Co. and Cergro.
- Purchase Order No. P58494A (06/11/90).
4. 10/22/90 Commercial Agreement for Sale of Security System
between Electro Security Corporation and Cergro.
5. 04/17/91 Contract for Landscaping Maintenance between
Environmental Care, Inc. and Cergro.
6. 04/14/92 Service Agreement between Won Door Corporation
and Cergro, No. 01547.
- Purchase Order No. P00115073 (07/28/93).
- Purchase Order No. P00127341 (08/08/94).
7. 03/16/93 Water Treatment Contract between Chemco Products
Company and Cergro. EXPIRED.
8. 03/03/94 Water Treatment Contract between Chemco Products
Company and Cergro.
9. 08/19/93 Security Agreement No. 048/93 between Cergro and
U.S. Guards Company, Inc.
10. 09/01/94 Agreement between Diversified Maintenance Services
Inc. and Cergro.
11. -- Refusal Removal Non-Contract Service.
</TABLE>
11803975 EXHIBIT C
-1-
<PAGE>
PERMITS
<TABLE>
<CAPTION>
<C> <C> <S>
1. 09/27/78 Sewer, sewage disposal.
2. 09/27/78 County Engineer building and safety division
permit.
3. 10/12/78 Application for plumbing permit.
4. 12/15/78 Heating ventilating air conditioning re fan
ventilation.
5. 12/15/78 Heating ventilation air conditioning re four
air handling units.
6. 02/10/79 Sewer, sewage disposal.
7. 02/27/79 Application for plumbing permit.
8. 03/26/79 Application for plumbing permit.
9. 04/06/79 Application for occupancy inspection re
remodel.
10. 04/06/79 Application for occupancy inspection.
11. 04/20/79 Application for electrical permit.
12. 04/20/79 Application for building permit.
13. 05/29/79 Application for occupancy inspection.
14. 06/06/79 Application for building permit.
15. 06/06/79 Application for building permit re installation
of 1,000 gallon fuel oil tank.
16. 06/06/79 Application for building permit.
(Valuation $1,250,000.00)
17. 06/06/79 Application for electrical permit.
18. 06/06/79 Application for building permit.
(Valuation $12,000.00).
19. 06/06/79 Application for electrical permit.
20. 06/06/79 Application for plumbing permit.
21. 06/09/79 Application for plumbing permit re floor
sinks.
</TABLE>
11803975 EXHIBIT D
-1-
<PAGE>
<TABLE>
<CAPTION>
<C> <C> <S>
22. 02/08/84 Heating ventilation air conditioning.
23. 12/01/86 Application for building permit.
24. 01/06/87 Application for plumbing permit.
25. 03/04/87 Application for electrical permit (CK 1074).
26. 05/04/87 Heating ventilating air conditioning (CK 4228).
27. 02/26/88 Application for building permit re asbestos
removal.
28. 03/21/89 Application for certificate of occupancy re
office.
29. 10/05/89 Application for certificate of occupancy re
office and cafeteria.
30. 01/26/90 Application for plumbing permit (Policy No.
P996016).
31. 03/29/90 Application for electrical permit.
32. 06/07/90 Permit to operate internal combustion engine
Permit No. D22372.
33. 06/21/90 Application for grading permit.
34. 07/09/90 Permit to operate boiler No. 3 (D24830).
35. 07/09/90 Permit to operate boiler (D24831).
36. 07/09/90 Permit to operate boiler (D24832).
37. 09/11/90 Application for plumbing permit (CK 9025).
38. 09/21/90 Inspection Record No. 0229.
39. 09/21/90 Certificate of Occupancy - Permit No. 0229.
40. 11/01/90 Application for certificate of occupancy.
41. 02/08/91 Permit to operate boiler, Ajax, etc. Permit
No. D24830.
42. 02/08/91 Permit to operate boiler, Ajax, etc. Permit
No. D24832.
</TABLE>
11803975 EXHIBIT D
-2-
<PAGE>
<TABLE>
<CAPTION>
<C> <C> <S>
43. 02/13/91 Permit to operate boiler, Ajax, etc. Permit
No. D24831.
44. 06/20/91 Application for electrical permit.
45. 08/06/91 Application for electrical permit.
46. 11/01/91 Electrical permit.
47. 01/14/92 Mechanical permit.
48. 01/14/92 Heating ventilating air conditioning
(M9200004).
49. 01/14/92 Permit type Illegal re duct shaft (C900028).
50. 01/15/92 Commercial construction, Permit No. C920028.
51. 01/16/92 Application for plumbing permit (P9200003).
52. 04/13/92 Application for plumbing permit (P9200034).
53. 06/11/92 Application for Closure File No. 3565.
54. 07/31/92 Application for electrical permit.
55. 08/05/92 Application for certificate of occupancy.
56. 08/05/92 Application for certificate of occupancy
regarding cafeteria service.
57. 08/07/92 Application for plumbing permit (P9200113).
58. 08/07/92 Electrical Permit No. E9200210.
59. 08/11/92 Heating ventilating air conditioning
(M9200098).
60. 08/11/92 Electrical Permit No. E9200210.
61. 08/20/92 QA Lab inspection record No. P9200085.
62. 09/02/92 Notice
63. 09/10/92 Inspection Record Permit No. 0378.
64. 09/10/92 Commercial Construction Permit No. C9200123.
</TABLE>
11803975 EXHIBIT D
-3-
<PAGE>
<TABLE>
<CAPTION>
<C> <C> <S>
65. 02/01/93 Mechanical Permit No. M9300019.
66. 02/01/93 Heating ventilating air conditioning (M9300019).
67. 04/06/93 Electrical permit (E9300105).
68. 05/24/93 Permit to operate elevator No. 043596.
69. 05/24/93 Elevator Operating Permit No. 043602.
70. 05/24/93 Elevator Operating Permit No. 043601.
71. 06/02/93 Inspection Record C9300246.
72. 07/20/93 Inspection Record No. 0378.
73. 06/23/94 Application for certificate of occupancy.
74. 08/26/94 Elevator operating permit (043596).
75. Date Illegible Application for building permit
(IL 1) (C9300246)
76. Date Illegible Application for building permit.
(IL #2)
77. Date Illegible Application for building permit.
(IL #3)
78. Date Illegible Application for building permit.
(IL #4)
79. Date Illegible Application for building permit, re
(IL #5) building code compliance and upgrade
modifications.
80. Date Illegible Application for building permit.
(IL #6)
81. Date Illegible Application for electrical permit.
(IL #7)
82. Date Illegible Application for electrical permit.
(IL 8)
83. Date Illegible Application for plumbing permit
(IL #9) (P9200085)
84. Date Illegible Heating ventilation air conditioning
(IL#10) (CK 1746).
</TABLE>
11803975 EXHIBIT D
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<PAGE>
<TABLE>
<CAPTION>
<C> <C> <S>
85. Date Illegible Heating ventilation air conditioning re
(IL #11) air in and outlets (CK 1956).
86. Date Illegible Heating ventilating air conditioning re
(IL #12) boiler.
87. Illegible Date Application for building permit.
(IL #13)
</TABLE>
11803975 EXHIBIT D
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<PAGE>
Recorded at Request of:
TRINET CORPORATE REALTY TRUST, INC.
When Recorded Mail to:
PILLSBURY MADISON & SUTRO P.O. Box 7880 San Francisco, CA
94120-7880 Attn: Glenn Q. Snyder, Esq.
Mail Tax Statements to:
TRINET CORPORATE REALTY TRUST, INC.
Four Embarcadero Center, Suite 3150
San Francisco, CA 94111
Attn: Mr. James R. Reinhart
GRANT DEED
For valuable consideration, receipt of which is acknowledged,
CERTIFIED GROCERS OF CALIFORNIA, LTD., a California corporation,
hereby grants to TRINET CORPORATE REALTY TRUST, INC., a Maryland
corporation, the real property in the City of Commerce, County of
Los Angeles, State of California, described in Exhibit A attached
hereto and made a part hereof, subject to any and all
encumbrances (as that term is used in California Civil Code
Section 1113(2)).
Dated:_____________, 1994.
CERTIFIED GROCERS OF CALIFORNIA, LTD.,
a California corporation
By: _______________________________
Its: __________________________
11803975 EXHIBIT E
<PAGE>
EXHIBIT A
GRANT DEED
All of the real property in the City of Commerce, County of Los
Angeles, State of California, described as follows:
1180397 5 EXHIBIT E
<PAGE>
EXHIBIT F
COMMERCIAL LEASE - NET
(Single Tenant Building)
BASIC LEASE INFORMATION
Date:______________, 1994
Landlord: TriNet Essential Facilities XII, Inc., a Maryland
corporation
Tenant: Certified Grocers of California, Ltd., a California
corporation
Premises (section 1.1): See Exhibit A; Address: 5200 Sheila
Street, City of Commerce, County of Los Angeles State of
California, consisting of a four-story building (the "Office
Building") and a one-story building (the "Cafeteria")
Term (section 2.1): Twenty (20) years, plus, if the Commencement
Date is not the first day of a calendar month, the partial month
from the Commencement Date to the end of the calendar month in
which the Commencement Date occurs.
Extension Terms (section 2.4): Two (2) ten (10) year extension
terms.
Commencement Date (section 2.1): ________________, 1994
Expiration Date (section 2.1): ________________, 2014
Initial Base Rent (section 3.1(a)): $107,812.50 per month.
Use (section 6.1): As to the Office Building, for office
purposes; and as to the Cafeteria, for office, large meeting
and/or cafeteria purposes for Tenant's employees only.
Liability Insurance (section 10.3): $2,000,000 aggregate;
$1,000,000 per occurrence
Insuring Party for Property Insurance (section 10.4): Tenant.
Landlord's Address (section 23.1): Four Embarcadero Center,
Suite 3150, San Francisco, CA 94111, Attn: Mr. James R. Reinhart,
Facsimile No.: 415-391-6259.
11804342 -i-
<PAGE>
EXHIBIT F
Copy to: TriNet Corporate Realty Trust, Inc.,
7406 Fullerton Street, Suite 105, Jacksonville, FL 32256,
Attn: Ms. Jo Ann Chitty, Facsimile No.: 904-363-1260
Tenant's Address (section 23.1): 2601 S. Eastern Avenue, Los
Angeles, CA 90040, Attn: Corporate Secretary, Facsimile
No.: 213-888-2915.
Exhibits and Addenda (section 24.3): Exhibit A - Legal Description
of the Land; Exhibit B - Form of Subordination Agreement; Exhibit C -
Form of Estoppel Certificate; Exhibit D - Memorandum of Lease.
The foregoing BASIC LEASE INFORMATION is incorporated in and
made a part of the Lease to which it is attached. If there is
any conflict between the BASIC LEASE INFORMATION and the Lease,
the Lease shall control.
Landlord: Tenant:
TriNet Essential Facilities CERTIFIED GROCERS OF
XII, INC., a Maryland CALIFORNIA, LTD., a
corporation California corporation
By __________________________ By __________________________
Mark S. Whiting
President Its _____________________
11804342 -ii-
<PAGE>
EXHIBIT F
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Article Page
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<S> <C> <C>
1 Premises.................................................. 1
2 Term...................................................... 2
3 Rent...................................................... 3
4 Property Taxes............................................ 6
5 Other Taxes............................................... 7
6 Use....................................................... 7
7 Services.................................................. 8
8 Maintenance and Repairs................................... 8
9 Alterations............................................... 10
10 Insurance................................................. 15
11 Compliance With Legal Requirements........................ 18
12 Assignment or Sublease ................................... 19
13 Entry by Landlord......................................... 21
14 Events of Default and Remedies............................ 22
15 Damage or Destruction..................................... 25
16 Eminent Domain............................................ 28
17 Subordination, Merger and Sale............................ 30
18 Estoppel Certificate ..................................... 31
19 Holding Over.............................................. 32
20 Financial Statements...................................... 32
21 Hazardous Materials....................................... 32
22 Waiver.................................................... 35
23 Notices................................................... 35
</TABLE>
11804342 -iii-
<PAGE>
EXHIBIT F
TABLE OF CONTENTS
Article Page
- --------- -----
24 Names.................................................. 35
25 Memorandum of Lease.................................... 36
26 Miscellaneous.......................................... 36
11804342 -iv-
<PAGE>
EXHIBIT F
LEASE
THIS LEASE, made as of the date specified in the BASIC LEASE
INFORMATION, is by and between the landlord specified in the
BASIC LEASE INFORMATION ("Landlord"), and the tenant specified in
the BASIC LEASE INFORMATION ("Tenant"),
W I T N E S S E T H:
ARTICLE 1
PREMISES
1.1 Landlord hereby leases to Tenant, and Tenant hereby leases
from Landlord, for the term and subject to the covenants
hereinafter set forth, to all of which Landlord and Tenant hereby
agree, (a) the land described in Exhibit A hereto, together with
all easements and other appurtenances thereto (the "Land"), (b) all
improvements now or hereafter located on the Land (the "Improvements"),
including the two buildings described in the Basic Lease Information, (c) all
of Landlord's right, title and interest in and to all fixtures and heating,
ventilating, air conditioning, electrical, mechanical, plumbing, life safety
and other building systems affixed or attached to the Land or the
Improvements (collectively, the "Equipment"), and (d) all of Landlord's
right, title and interest in and to the personal property described on
Schedule I attached hereto (the "Personal Property"). The Land,
Improvements, Equipment and Personal Property are collectively referred to
herein as the "Premises." Landlord hereby grants to Tenant an exclusive
license (the "License") to use the following: (a) the contracts described on
Schedule II attached hereto (the "Contracts"); and the permits described in
Schedule III attached hereto (the "Permits"). The License is coupled with an
interest, irrevocable and assignable or sublicensable by Tenant in connection
with any permitted assignment or sublease of this Lease. The License shall
automatically terminate, without notice to Tenant, upon the termination of
this Lease, whether upon expiration of the Lease term or earlier. Tenant
hereby assumes and agrees to perform, at Tenant's sole expense, all
obligations of Landlord under the Contracts and Permits during the term of
this Lease. Tenant further agrees during the entire term of the License to
(x) keep the Contracts in full force and effect, unless Landlord otherwise
consents in writing (which consent may be withheld in Landlord's sole
discretion), until the expiration of any Contract by its own terms (other
than as a result of a default by Tenant thereunder), and (y) keep the Permits
in full force and effect until the expiration of the Lease term. Tenant
shall maintain the Personal Property in good condition and repair, except
that Tenant may replace the
11804342 -1-
<PAGE>
EXHIBIT F
Personal Property with personal property of comparable quality
when consistent with prudent business practices.
ARTICLE 2
TERM
2.1 The term of this Lease shall be the term specified in the
BASIC LEASE INFORMATION, which shall commence on the commencement
date specified in the BASIC LEASE INFORMATION (the "Commencement
Date") and, unless sooner terminated as hereinafter provided,
shall end on the expiration date specified in the BASIC LEASE
INFORMATION (the "Expiration Date").
2.2 If the Commencement Date is not the first day of a calendar
month, Tenant shall pay to Landlord the Base Rent payable under
section 3.1, calculated on a per them basis, for the period from
the Commencement Date until the first day of the next full
calendar month. Tenant shall pay the Base Rent in respect of
such period to Landlord on the Commencement Date.
2.3 Tenant shall accept the Premises "as is" on the Commencement
Date. Landlord shall have no obligation to construct or install
any improvements in the Premises. Tenant acknowledges that,
prior to the Commencement Date, Tenant occupied the Premises.
Tenant's possession of the Premises shall constitute Tenant's
acknowledgment that the Premises are in all respects in the
condition in which Landlord is required to deliver the Premises
to Tenant under this Lease and that Tenant has examined the
Premises and is fully informed to Tenant's satisfaction of the
physical and environmental condition and the utility of the
Premises. Tenant acknowledges that Landlord, its agents and
employees and other persons acting on behalf of Landlord have
made no representation or warranty of any kind in connection with
any matter relating to the physical or environmental condition,
value, fitness, use or zoning of the Premises upon which Tenant
has relied directly or indirectly for any purpose.
2.4 Tenant shall have the option to renew this Lease for two (2)
additional terms of ten (10) years each. Tenant shall be
conclusively deemed to have exercised each such option unless
Landlord receives written notice from Tenant that Tenant has
elected not to exercise such option at least twelve (12) months
before the expiration of the then-existing term of the Lease.
Unless Landlord timely receives Tenant's notice electing not to
exercise an option, the term of this Lease shall be automatically
extended for the applicable ten (10) year period and Tenant shall
continue to lease the Premises on all of the terms and conditions
of this Lease, except that: (a) the Base Rent payable by Tenant during each
renewal term shall be as set forth
11804342 -2-
<PAGE>
EXHIBIT F
in section 3.1(b); and (b) after the second renewal term, Tenant shall have
no further renewal options under this Lease.
ARTICLE 3
RENT
3.1 Tenant shall pay to Landlord the following amounts as rent for the
Premises:
(a) During the first five (5) years of the initial term of this Lease,
Tenant shall pay to Landlord, as base monthly rent, the amount of monthly
rent specified in the BASIC LEASE INFORMATION (the "Base Rent"). Commencing
on the first day of the sixth, eleventh and sixteenth years of the initial
term of this Lease (each, an "Adjustment Date"), the Base Rent shall be
increased by the percentage increase in the Index (as defined below) during
the period commencing on the first day of the immediately preceding five (5)
year period and ending on the applicable Adjustment Date under this section
3.1(a); provided, however, Base Rent shall not be increased more than four
percent (4%) per annum on a cumulative basis during each such five (5) year
period (i.e., not more than twenty percent (20%) for each such five (5) year
period). As used in this Lease, the term "Index" shall mean the United
States Department of Labor, Bureau of Labor Statistics, Consumer Price Index
for All Urban Consumers (all items for the Los Angeles-Long Beach-Anaheim
area, 1982-1984=100). If the data from the Department of Labor for the Index
are not yet available on any Adjustment Date, then Tenant shall continue to
pay the Base Rent in effect on that Adjustment Date, until such time as the
data for the Index become available. Once the data become available so that
the Base Rent can be increased in accordance with this section 3.1(a) or
section 3.1(b), Tenant shall pay to Landlord, with the next succeeding
installment of Base Rent, the increase in Base Rent that Tenant would have
paid had the Index been revised on the applicable Adjustment Date. If the
Index is no longer published, another generally recognized index shall be
substituted by agreement of the parties. If they are unable to agree within
thirty (30) days after demand by either party, the substitute index shall on
application of either party be selected by the chief officer of the San
Francisco Regional Office of the Bureau of Labor Statistics or its successor.
(b) Commencing on the first day of the first and sixth years of each
renewal term of this Lease (each of which shall also be deemed an Adjustment
Date), the Base Rent shall be increased by the percentage increase in the
Index during the period commencing on the first day of the immediately
preceding five (5) year period and ending on the applicable Adjustment Date
under this section 3.1(b); provided, however, Base Rent
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<PAGE>
EXHIBIT F
shall not be increased by less than three percent (3%) per annum, nor more
than four percent (4%) per annum, on a cumulative basis during each such five
(5) year period (i.e., not less than fifteen percent (15%), nor more than
twenty percent (20%), for each such five (5) year period).
(c) In the event that Landlord advances the Improvement Allowance (as
defined in Section 9.4), for the period from and after the date of such
advance through and including the Expiration Date, the monthly Base Rent
shall be increased by an amount equal to one-twelfth of (i) the amount of the
Improvement Allowance actually disbursed to Tenant, multiplied by (ii) the
Annual Payment Multiple (as defined below). The term "Annual Payment
Multiple" shall mean (1) eleven and twenty-five hundredths percent (11.25%)
if the Improvement Allowance is advanced prior to the first anniversary of
the Commencement Date, (2) eleven and forty-five hundredths percent (11.45%)
if the Improvement Allowance is advanced after the first anniversary and
prior to the second anniversary of the Commencement Date, (3) eleven and
sixty-eight hundredths percent (11.68%) if the Improvement Allowance is
advanced after the second anniversary and prior to the third anniversary of
the Commencement Date, (4) eleven and ninety-four hundredths percent (11.94%)
if the Improvement Allowance is advanced after the third anniversary and
prior to the fourth anniversary of the Commencement Date, and (5) twelve and
twenty-four hundredths percent (12.24%) if the Improvement Allowance is
advanced after the fourth anniversary of the Commencement Date.
(d) Throughout the term of this Lease, Tenant shall pay, as additional
rent, all other amounts of money and charges required to be paid by Tenant
under this Lease, whether or not such amounts of money or charges are
designated "additional rent." As used in this Lease, "rent" shall mean and
include all Base Rent and additional rent payable by Tenant in accordance
with this Lease.
3.2 It is the intention of Landlord and Tenant that the Base Rent payable
by Tenant to Landlord during the entire term of this Lease shall be
absolutely net of all costs and expenses incurred in connection with the
management, operation, maintenance and repair of the Premises in accordance
with this Lease. Landlord shall have no obligations or liabilities
whatsoever with respect to the management, operation, maintenance or repair
of the Premises during the term of this Lease, and Tenant shall manage,
operate, maintain and repair the Premises in accordance with this Lease and
shall pay all costs and expenses incurred in connection therewith before such
costs or expenses become delinquent. Without limiting the generality of the
foregoing, throughout the entire term of this Lease, Tenant shall pay, as
additional rent (whether payable to Landlord or the applicable third
parties), all premiums for all property and liability
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<PAGE>
EXHIBIT F
insurance covering the Premises carried by Landlord or Tenant, all Property
Taxes (as defined in section 4.1) and all Other Taxes (as defined in section
5.1) that accrue during or are allocable to the term of this Lease.
3.3 Tenant shall pay all Base Rent to Landlord, in advance, on or before
the first day of each and every calendar month during the term of this Lease.
Tenant shall pay all additional rent owing to Landlord on or before the
third business day following written demand therefor given in accordance with
section 23.1. Tenant shall pay all Base Rent and additional rent to Landlord
without notice, demand, deduction or offset, in lawful money of the United
States of America, by wire transfer to an account specified in writing by
Landlord from time to time, or to such other person, by such other method or
at such other place as Landlord may from time to time designate in writing,
provided that any change in the method of payment shall be subject to
Tenant's reasonable approval.
3.4 Tenant acknowledges that the late payment by Tenant of any Base Rent
or additional rent payable to Landlord (including the items described in
section 3.2 to the extent owed to Landlord) will cause Landlord to incur
costs and expenses, the exact amount of which is extremely difficult and
impractical to fix. Such costs and expenses will include administration and
collection costs and processing and accounting expenses. Therefore, if any
Base Rent or additional rent owed to Landlord is not received by Landlord
within three (3) business days after Landlord gives written notice thereof
(by facsimile or other method of notice permitted by section 23.1) to Tenant,
Tenant shall immediately pay to Landlord a late charge equal to six percent
(6%) of such delinquent amount; provided, however, that after the second such
failure in a calendar year, no notice shall be required, and such late charge
shall be due and payable on the due date if Base Rent or additional rent is
not received by Landlord on the date due. Landlord and Tenant agree that such
late charge represents a reasonable estimate of such costs and expenses and
is fair compensation to Landlord for the loss suffered by Tenant's failure to
make timely payment. In no event shall such late charge be deemed to grant
to Tenant a grace period or extension of time within which to pay any rent or
prevent Landlord from exercising any right or enforcing any remedy available
to Landlord upon Tenant's failure to pay all rent due under this Lease in a
timely fashion, including the right to terminate this Lease. All amounts of
money payable by Tenant to Landlord hereunder, if not paid when due, shall
bear interest from the due date until paid at the Prime Rate (as hereinafter
defined) plus five percent (5%) per annum. "Prime Rate" shall mean the
reference rate announced from time to time by Bank of America NT & SA at its
headquarters location.
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<PAGE>
EXHIBIT F
3.5 Notwithstanding the foregoing, Tenant shall not be deemed to be in
default under this Lease as the result of (a) any failure to pay any Property
Taxes, Other Taxes or other obligation of any nature (including construction
costs) owed to any party other than Landlord, or (b) any failure to comply
with any applicable law, regulation or other applicable legal requirement, so
long as, in each case, (i) such tax, other obligation, law or other legal
requirement is being diligently contested in good faith, and (ii) Tenant has
provided Landlord with assurances reasonably acceptable to Landlord that such
failure to pay or comply, pending the outcome of such contest, could not
materially impair Landlord's rights and interests with respect to the
Premises (including assurance that the applicable contest proceeding will
operate during the pendency thereof to prevent or stay any sale, forfeiture
or loss of all or any portion of the Premises). The right to contest third
party obligations and legal requirements granted to Tenant in this paragraph
(subject to the provisions of this Section 3.5) shall be referred to herein
as the "Right to Contest."
3.6 In the event that Tenant desires from time to time to contest any tax
or other law applicable to the Premises or to commence any lawsuit or other
proceeding relating to the Premises, and in the event that Landlord's
participation is legally required, Landlord shall reasonably cooperate with
Tenant in connection therewith so long as Tenant reimburses Landlord, within
ten (10) business days following written demand from time to time (but no
more than once in any calendar month), for all costs incurred by Landlord as
a result of such cooperation, but only to the extent that such costs exceed
any direct economic benefits to Landlord which result from the final
determination of the applicable contest or proceeding. Landlord shall refund
all appropriate amounts within ten (10) business days following receipt of
demand therefor in the event that any such direct economic benefits make it
evident, following any such final determination, that Landlord was
over-reimbursed by Tenant prior to such determination.
ARTICLE 4
PROPERTY TAXES
4.1 "Property Taxes" shall mean all taxes, assessments, excises, levies,
fees and charges (and any tax, assessment, excise, levy, fee or charge levied
wholly or partly in lieu thereof or as a substitute therefor or as an
addition thereto) of every kind and description, general or special, ordinary
or extraordinary, foreseen or unforeseen, secured or unsecured, whether or
not now customary or within the contemplation of Landlord and Tenant, that
are levied, assessed, charged, confirmed or imposed by any public or
government authority on or
-6-
<PAGE>
EXHIBIT F
against, or otherwise with respect to, the Premises or any part thereof or
any personal property used in connection with the Premises. Unless and until
the Premises receives its own tax parcel identification number, "Property
Taxes" shall also mean all taxes, assessments and other charges included in
the definition of Property Taxes with respect to any real property that is
part of the same tax parcel as any part of the Premises. Property Taxes shall
not include net income (measured by the income of Landlord from all sources
or from sources other than solely rent), franchise, inheritance or capital
stock taxes of Landlord, unless levied or assessed against Landlord in whole
or in part in lieu of, as a substitute for, or as an addition to any Property
Taxes.
ARTICLE 5
OTHER TAXES
5.1 "Other Taxes" shall mean all taxes, assessments, excises, levies, fees
and charges, including all payments related to the cost of providing
facilities or services, whether or not now customary or within the
contemplation of Landlord and Tenant, that are levied, assessed, charged,
confirmed or imposed by any public or government authority upon, or measured
by, or reasonably attributable to (a) the Premises, (b) the cost or value of
Tenant's equipment, furniture, fixtures and other personal property located
in the Premises or the cost or value of any leasehold improvements made in or
to the Premises by or for Tenant, regardless of whether title to such
improvements is vested in Tenant or Landlord, (c) any rent payable under this
Lease, including any gross income tax or excise tax levied by any public or
government authority with respect to the receipt of any such rent, (d) the
possession, leasing, operation, management, maintenance, alteration, repair,
use or occupancy by Tenant of the Premises, or (e) this transaction or any
document to which Tenant is a party creating or transferring an interest or
an estate in the Premises. Other Taxes shall not include net income
(measured by the income of Landlord from all sources or from sources other
than solely rent), franchise, inheritance or capital stock taxes of Landlord,
unless levied or assessed against Landlord in whole or in part in lieu of, as
a substitute for, or as an addition to any Other Taxes.
ARTICLE 6
USE
6.1 The Premises shall be used only for the purpose specified in the BASIC
LEASE INFORMATION and no other purpose without Landlord's prior written
consent, which consent shall
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<PAGE>
EXHIBIT F
not be unreasonably withheld or delayed; provided, however, Landlord's
withholding of consent shall be conclusively presumed reasonable if the
proposed use would substantially increase the wear and tear on or the risk of
damage to the Premises above levels or risks resulting from Tenant's use as
of the date of this Lease or the proposed use is for an illegal purpose. For
purposes of this Lease, "office purposes" shall include incidental uses
related to office purposes, including without limitation printing and
reprographic services incidental to Tenant's business, computer operations
for Tenant's business, quality testing for Tenant's in-house food brand and
food preparation training for the employees of Tenant and Tenant's clients;
provided, however, that any material increase in the square footage used for
any such incidental use shall be deemed to be a change in use requiring
Landlord's consent as provided above, if such increase in square footage will
overburden or unduly strain the Premises or will exceed the recommended
capacity or impair the operation of any building systems. Tenant shall not
do or permit to be done in, on or about the Premises, nor bring or keep or
permit to be brought or kept therein, anything which is prohibited by or will
in any way conflict with any law, ordinance, rule, regulation or order now in
force or which may hereafter be enacted, or which is prohibited by any
insurance policy for the Premises or will cause a cancellation of any
insurance for the Premises. Tenant shall not do or permit anything to be
done in, on or about the Premises which will in any way obstruct or interfere
with the rights of Landlord. Tenant shall not maintain or permit any nuisance
in, on or about the Premises or commit or suffer to be committed any waste
in, on or about the Premises.
ARTICLE 7
SERVICES
7.1 Tenant shall, at Tenant's sole cost and expense, supply the Premises
with electricity, heating, ventilating and air conditioning, water, natural
gas, lighting replacement for all lights, restroom supplies, telephone
service, window washing, security service, janitor, scavenger and disposal
services, and such other services as Tenant determines to furnish to the
Premises. Landlord shall not be in default hereunder or be liable for any
damage or loss directly or indirectly resulting from, nor shall the rent be
abated or a constructive or other eviction be deemed to have occurred by
reason of, the installation, use or interruption of use of any equipment in
connection with the furnishing of any of the foregoing services, any failure
to furnish or delay in furnishing any such services, whether such failure or
delay is caused by accident or any condition beyond the control of Landlord
or Tenant or by the making of repairs or improvements to the
-8-
<PAGE>
EXHIBIT F
Premises, or any limitation, curtailment, rationing or restriction on use of
water, electricity, gas or any form of energy serving the Premises, whether
such results from mandatory governmental restriction or voluntary compliance
with governmental guidelines. Tenant shall pay the full cost of all of the
foregoing services to the applicable third parties as additional rent.
ARTICLE 8
MAINTENANCE AND REPAIRS
8.1 (a) Tenant shall, at all times during the term of this Lease and at
Tenant's sole cost and expense, maintain and repair the Premises and every
part thereof and all grounds, landscaping, parking areas, lighting, roof,
walls, foundations, signs, heating, ventilating and air conditioning,
mechanical, electrical, plumbing, sprinkler and life safety systems,
equipment, fixtures, alterations, additions and improvements therein or
thereon and keep all of the foregoing clean and in good order and operating
condition (including, without limitation, painting the exterior of the
Premises as often as reasonably needed to keep such exterior in a good, well
painted condition, cleaning interior and exterior doors, windows and glass,
and repairing and replacing any exterior windows and glass that is broken,
cracked or damaged). Tenant may use qualified employees of Tenant to perform
routine maintenance and routine repairs of the Premises. For all other
maintenance and all non-routine repair services on the heating, ventilating
and air conditioning, mechanical, electrical, plumbing, sprinkler and life
safety systems and equipment in the Premises, Tenant shall engage a duly
licensed independent contractor; provided, however, that Tenant may use its
qualified employees to perform such other maintenance and non-routine repairs
with Landlord's consent, which consent may be withheld if, in Landlord's
reasonable determination, there is a substantial possibility of an increased
risk of damage to the Premises or any systems or equipment located therein if
such other maintenance or repair is performed by Tenant's employee instead of
by a licensed independent contractor. If Landlord does not disapprove
Tenant's use of a designated employee for a particular repair or maintenance
project within five (5) business days after Tenant's notice requesting such
approval (which notice shall be accompanied by an accurate description of the
project and the designated employee's relevant qualifications), Landlord
shall be deemed to have approved such employee's work on such project.
(b) Landlord and its consultants or contractors shall have the right to
inspect the Premises to determine Tenant's compliance with this section 8.1,
and Tenant shall promptly complete any maintenance or repair work reasonably
required by Landlord
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<PAGE>
EXHIBIT F
or its consultants or contractors as a result of any such inspection. Tenant
shall reimburse the Landlord, as additional rent, the costs incurred by
Landlord in engaging Eckland Engineers or another consultant or contractor to
perform such inspections and provide a report thereof, provided that Tenant's
above-described reimbursement obligation shall be limited to the cost of one
such inspection and report in any calendar year and provided that Tenant
shall not be required to reimburse Landlord more than one thousand five
hundred dollars ($1,500) per year during the first five (5) years of the
Lease term or more than two thousand dollars ($2,000) per year thereafter for
such inspection and report. Tenant hereby waives all rights to make repairs
at the expense of Landlord or in lieu thereof to vacate the Premises.
Subject to section 9.3, Tenant shall, at the end of the term of this Lease,
surrender to Landlord the Premises and all alterations, additions, fixtures
and improvements therein or thereto in the same condition as when received,
ordinary wear and tear and damage thereto by fire or other casualty excepted.
8.2 Notwithstanding the foregoing, during the last five (5) years of the
Lease term, excluding any extension term, if Tenant is required by the terms
of section 8.1 to perform any substantial repair or replacement the cost of
which would be treated as a capital expense in accordance with generally
accepted accounting principles (a "Capital Repair"), Landlord shall reimburse
to Tenant, by a rent credit applied at the end of the Lease term, an amount
equal to (a) the cost of the Capital Repair, multiplied by (b) a fraction (i)
the numerator of which is the number of years beyond the Lease term the useful
life of the Capital Repair is anticipated to extend, and (ii) the denominator
of which is the total anticipated useful life of the Capital Repair, provided
that each of the following conditions is satisfied: the cost of such Capital
Repair exceeds one hundred thousand dollars ($100,000) (the "Cost-Share
Threshold"); fifty percent (50%) or more of the anticipated useful life of
the Capital Repair extends beyond the Lease term; Tenant has not exercised
its option, if any, to extend the Lease term; the anticipated useful life of
the Capital Repair is ten (10) years or more; and Landlord approves the plans
and specifications and the budget for the completion of the Capital Repair.
The Cost-Share Threshold shall be increased annually during the Lease term,
including extensions, by an amount equal to the percentage increase in the
Index during the preceding year. Any rent credit that Landlord is required
to give Tenant under this Section 8.2 shall bear interest at the Prime Rate
plus two percent (2%) per annum. If Tenant exercises its right to extend the
Lease term, Landlord shall be relieved of any obligation to reimburse Tenant
pursuant to this Section 8.2.
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EXHIBIT F
ARTICLE 9
ALTERATIONS
9.1 Except as specifically permitted in section 9.2, Tenant shall not make
any alterations, additions or improvements in or to the Premises or any part
thereof, or attach any fixtures or equipment thereto, without Landlord's
prior written consent. In no event shall Tenant be permitted to install
underground storage tanks or fuel systems on the Premises. Landlord's
refusal to consent to the installation of an underground tank or fuel system
shall be conclusively presumed to be reasonable. Except as specifically
permitted in section 9.2, all alterations, additions and improvements in or
to the Premises to which Landlord consents shall be made by Tenant at
Tenant's sole cost and expense as follows:
(a) Tenant shall submit to Landlord, for Landlord's written approval,
complete plans and specifications for all work to be done by Tenant. Such
plans and specifications shall be prepared by the licensed architect(s) and
engineer(s), shall comply with all applicable codes, laws, ordinances, rules
and regulations, shall not adversely affect the structural elements of the
Premises, shall be in a form sufficient to secure the approval of all
government authorities with jurisdiction over the Premises, and shall be
otherwise satisfactory to Landlord in Landlord's reasonable discretion.
(b) Landlord shall notify Tenant promptly in writing whether Landlord
approves or disapproves such plans and specifications and, if Landlord
disapproves such plans and specifications, Landlord shall describe the
reasons for disapproval. Tenant may submit to Landlord revised plans and
specifications for Landlord's prior written approval. Tenant shall pay all
costs, including the fees and expenses of the licensed architect(s) and
engineer(s), in preparing such plans and specifications. If Landlord fails
to notify Tenant within thirty (30) days of Landlord's receipt of the plans
and specifications for the work to be done by Tenant and all other
information reasonably required by Landlord regarding such work, then
Landlord shall be deemed to have consented to such work. With respect to
alterations or improvements requiring Landlord's consent, Landlord shall have
the right to condition its consent on Tenant's agreement to remove such
alterations or improvements from the Premises upon the termination of the
Lease; provided, however, that Landlord shall only be permitted to require
Tenant to remove such alterations or improvements if failure to remove
them, in Landlord's reasonable opinion, would adversely affect the value of
the Premises or Landlord's ability to lease the Premises to a new tenant for
office purposes.
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EXHIBIT F
(c) All changes in the plans and specifications approved by Landlord shall
be subject to Landlord's prior written approval. If Tenant wishes to make any
such change in such approved plans and specifications, Tenant shall have such
architect(s) and engineer(s) prepare plans and specifications for such change
and submit them to Landlord for Landlord's written approval. Landlord shall
notify Tenant in writing promptly whether Landlord approves or disapproves
such change and, if Landlord disapproves such change, Landlord shall describe
the reasons for disapproval. Tenant may submit to Landlord revised plans and
specifications for such change for Landlord's written approval. After
Landlord's written approval of such change, such change shall become part of
the plans and specifications approved by Landlord.
(d) Tenant shall obtain and comply with all building permits and other
governmental permits and approvals required in connection with the work.
Tenant shall, through Tenant's licensed contractor, perform the work
substantially in accordance with (i) the plans and specifications approved in
writing by Landlord, (ii) the permits obtained by Tenant, and (iii) all
applicable codes, laws, ordinances, rules and regulations. Notwithstanding
the foregoing sentence, Tenant may use its qualified employees to perform
such work, instead of a licensed contractor, with Landlord's consent, which
consent may be withheld by Landlord if, in Landlord's reasonable
determination, there is a substantial risk that the work performed by
Tenant's employees would be of lesser quality than work performed by a
licensed of contractor. Tenant shall pay the applicable third parties, as
additional rent, the entire cost of all work (including the cost of all
utilities, permits, fees, taxes, and property and liability insurance
premiums in connection therewith) required to make the alterations, additions
and improvements, subject to the Right to Contest. Under no circumstances
shall Landlord be liable to Tenant for any damage, loss, cost or expense
incurred by Tenant on account of any plans and specifications, contractors or
subcontractors, design of any work, construction of any work, or delay in
completion of any work, except to the extent that the same results from a
breach by Landlord of its obligations under this Lease.
(e) Tenant shall give written notice to Landlord of the date on which
construction of any work will be commenced at least ten (10) days prior to
such date; provided that no such notice shall be required for work to be
performed by Tenant's qualified employees as permitted under Section 9.1(d)
if such work does not require the issuance of a building permit under
applicable codes. Subject to the Right to Contest, Tenant shall keep the
Premises free from mechanics', materialmen's and all other liens arising out
of any work performed, labor supplied, materials furnished or other
obligations incurred by Tenant.
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EXHIBIT F
Subject to the Right to Contest, Tenant shall promptly and fully pay and
discharge all claims on which any such lien could be based. Landlord shall
have the right to post and keep posted on the Premises any notices that may
be provided by law or which Landlord may deem to be proper for the protection
of Landlord and the Premises from such liens, and to take any other action
Landlord deems necessary to remove or discharge liens or encumbrances at the
expense of Tenant.
9.2 Tenant may make such alterations, additions or improvements without
Landlord's consent only if the total cost of such alterations, additions or
improvements is two hundred fifty thousand dollars ($250,000) (increased
annually by an amount equal to the percentage increase in the Index during
the preceding year) or less for any project or series of related projects and
such alterations, ' additions or improvements will not affect in any way the
structural, exterior or roof elements of the Premises and will not materially
impair the mechanical, electrical, plumbing, utility or life safety systems
of the Premises, but Tenant shall give Landlord prior written notice of any
such alterations, additions or improvements; provided that no such notice
shall be required for alterations, additions or improvements to be performed
by Tenant's qualified employees as permitted under Section 9.1(d) if such
work does not require the issuance of a building permit under applicable
codes. In addition, Landlord acknowledges that Tenant intends to construct
non-structural, interior improvements on the fourth floor of the Office
Building. Tenant agrees to complete such improvements before the end of
fifth year of the initial term of this Lease; provided, however, that if
Landlord's mortgagee or a third party purchaser acquires the Premises through
a foreclosure sale, deed in lieu of foreclosure or similar transfer, and such
mortgagee or third party purchaser refuses to agree in writing, after request
from Tenant, to fund the Improvement Allowance (as hereinafter defined) in
accordance with Section 9.4, Tenant shall not be obligated to complete such
improvements until the end of the tenth year of the initial term of this
Lease. Provided that such improvements (i) are substantially similar to the
nature and quality of the improvements on the first, second and third floors
of the Office Building and (ii) will not affect in any way the structural,
exterior or roof elements of the Premises, and will not materially impair the
mechanical, electrical, plumbing, utility or life safety systems of the
Premises, then Landlord agrees it shall not have the right to approve
Tenant's plans and specifications for such improvements. For all
alterations, additions and improvements performed in accordance with this
Section 9.2, Tenant shall comply with all provisions of section 9.1 other
than those provisions requiring Landlord's consent to plans and
specifications in constructing such improvements.
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EXHIBIT F
9.3 All alterations, additions, fixtures and improvements, whether
temporary or permanent in character, made in or to the Premises by Tenant,
shall become part of the Premises and Landlord's property excluding, however,
underground tanks which shall remain the property of Tenant and shall be
registered in the name of Tenant so long as this Lease remains in effect.
Upon termination of this Lease, Landlord shall have the right, at Landlord's
option, by giving written notice to Tenant at any time before or within ten
(10) days after such termination with respect to any alterations, additions,
fixtures or improvements to which Landlord did not consent or with respect to
which Landlord's consent was conditioned on Tenant's removal of such
alteration, addition, fixture or improvement from the Premises upon
termination of the Lease, to retain all such alterations, additions, fixtures
and improvements in the Premises, without compensation to Tenant, or (if '
failure to remove such alterations or improvements would, in Landlord's
reasonable opinion,, adversely affect the value of the Premises or Landlord's
ability to lease the Premises to a new tenant for office purposes) to remove
all such alterations, additions, fixtures and improvements from the Premises,
repair all damage caused by any such removal, and restore the Premises to the
condition in which the Premises existed before such alterations, additions,
fixtures and improvements were made, and in the latter case Tenant shall pay
to Landlord, upon billing by Landlord, the cost of such removal, repair and
restoration (including a reasonable charge for Landlord's overhead and
profit). All movable furniture, equipment, trade fixtures and other personal
property shall remain the property of Tenant. Upon termination of this
Lease, Tenant shall, at Tenant's expense, remove all such movable furniture,
equipment, trade fixtures other personal property from the Premises and
repair all damage caused by any such removal. Termination of this Lease
shall not affect the obligations of Tenant pursuant to this section 9.3 to be
performed after such termination.
9.4 Subject to the terms and conditions of this Section 9.4, Landlord
shall provide Tenant an allowance (the "Improvement Allowance") in an amount
requested by Tenant, but not exceeding five hundred thousand dollars
($500,000), to reimburse Tenant for costs incurred in constructing the
interior improvements on the fourth floor of the Office Building as described
in Section 9.2 (the 'Fourth Floor Work"). Landlord shall disburse the
Improvement Allowance to Tenant in one lump sum, within thirty (30) days
after notice from Tenant requesting such disbursement and specifying the
requested amount, which notice shall be accompanied by paid invoices for
labor and materials in connection with the Fourth Floor work and final
unconditional lien releases from the contractor, all subcontractors and all
suppliers providing labor or materials for the Fourth Floor Work.
Notwithstanding the preceding sentence, if Tenant is unable to provide
Landlord with an unconditional lien
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EXHIBIT F
release for reasons other than that the work is not substantially completed,
and provided all other conditions set forth in this Section 9.4 are
satisfied, Landlord shall disburse the Improvement Allowance less two times
the amount or amounts to which the missing lien releases correspond (the
"Hold Back"), and when Landlord has received all unconditional lien releases
(or the last day for filing the applicable lien passes and, on the tenth
(10th) day thereafter, no lien has been filed and/or Tenant has removed any
lien that is filed, by bonding or otherwise), Landlord will disburse the Hold
Back in one lump SUM. Landlord's obligation to disburse the Improvement
Allowance is conditioned upon Landlord's receipt prior to the fifth
anniversary of the Commencement Date (the "Improvement Completion Deadline")
of (a) a certificate of Tenant's architect or engineer, in form reasonably
satisfactory to Landlord, certifying that the Fourth Floor Work has been
substantially completed, was constructed in compliance with all applicable
codes, laws, ordinances, rules and regulations and is free of material
defects (other than latent defects), and (b) a certificate of occupancy with
respect to the Fourth Floor Work. The Improvement Completion Deadline shall
be extended by one (1) day for each day that Tenant or Tenant's contractor,
subcontractors or suppliers are prevented from providing labor or materials
for the Fourth Floor Work for reasons beyond the reasonable control of the
party from whom performance is required, such as acts of nature, a strike or
other labor disturbance, war or riots; provided, however, that the
Improvement Completion Deadline shall in no event be extended more than one
hundred eighty (180) days.
ARTICLE 10
INSURANCE
10.1 Landlord shall not be liable to Tenant for any damage to or loss or
theft of any property or for any bodily or personal injury, illness or death
of any person in, on or about the Premises arising at any time and from any
cause whatsoever, except to the extent caused by the gross negligence or
willful misconduct of Landlord. Tenant waives all claims against Landlord
arising from any liability described in this section 10.1, except to the
extent caused by the gross negligence or willful misconduct of Landlord.
10.2 Tenant shall indemnify and defend Landlord against and hold Landlord
harmless from all claims, demands, liabilities, damages, losses, costs and
expenses, including reasonable attorneys' fees and disbursements, arising
from or related to any use or occupancy of the Premises, or any condition of
the Premises, or any default in the performance of Tenant's obligations, or
any damage to any property (including property of
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EXHIBIT F
employees and invitees of Tenant) or any bodily or personal injury, illness
or death of any person (including employees and invitees of Tenant) occurring
in, on or about the Premises or any part thereof or any part of the building
or the land containing the Premises arising at any time and from any cause
whatsoever (except to the extent caused by the gross negligence or willful
misconduct of Landlord) or occurring outside the Premises when such damage,
bodily or personal injury, illness or death is caused by any act or omission
of Tenant or its agents, officers, employees, contractors, invitees or
licensees. This section 10.2 shall survive the termination of this Lease
with respect to any damage, bodily or personal injury, illness or death
occurring prior to such termination.
10.3 Tenant shall, at all times during the term of this Lease and at
Tenant's sole cost and expense, obtain and keep in force comprehensive
general liability insurance, including contractual liability (covering this
Lease), cross liability, and premises operations, all on an "occurrence"
policy form, with a minimum combined single limit in the amount specified in
the BASIC LEASE INFORMATION per occurrence for bodily or personal injury to,
illness of, or death of persons and damage to property occurring in, on or
about the Premises, such insurance shall name the Landlord and any other
parties designated by Landlord as additional insureds. Tenant shall, at
Tenant's sole cost and expense, be responsible for insuring Tenant's
furniture, equipment, fixtures, computers, office machines and personal
property, to the extent Tenant elects to do so.
10.4 Tenant shall, at all times during the term of this Lease and at
Tenant's sole cost and expense, obtain and keep in force Worker's
compensation and employer's liability insurance in all states in which the
Premises and any other operations of the Tenant are located and any other
state in which the Tenant or its contractors or subcontractors may be subject
to any statutory or other liability arising in any manner whatsoever out of
the actual or alleged employment of others. The total limits of the
employer's liability coverage required hereunder shall not be less than the
amounts specified in section 10.3.
10.5 The insuring party for property insurance specified in the BASIC
LEASE INFORMATION shall, at all times during the term of this Lease, at such
party's sole cost and expense, obtain and keep in force (a) insurance against
loss or damage to the Premises by fire and all other risks of physical loss
covered by insurance of the type now known as "all risk," including coverage
for flood (if the Premises is located in an area identified as an area having
special flood hazards) and earthquake (subject to the limitations set forth
in the following sentence), with difference in conditions coverage, in an
amount not less than the full replacement cost of the Premises (without
deduction for depreciation), including the
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EXHIBIT F
cost of debris removal and such endorsements as Landlord may reasonably
require, and containing the "Replacement Cost Endorsement"; (b) boiler and
machinery insurance covering pressure vessels, air tanks, boilers, machinery,
pressure piping, heating, ventilation and air conditioning equipment, and
elevator and escalator equipment, provided the Premises contain equipment of
such nature and insurance against loss of occupancy or use arising from any
breakdown of any such items, in such amounts as Landlord may reasonably
determine; and (c) plate glass insurance in such amounts as Landlord may
reasonably determine if the Premises contain plate glass. Tenant shall only
be required to maintain earthquake insurance on the Premises if the annual
premium (or the allocated premium if Tenant's earthquake insurance policy
insures property in addition to the Premises) does not exceed twenty thousand
five hundred dollars ($20,500), increased annually during the Lease term,
including extensions, by an amount equal to the percentage increase in the
Index during the preceding year (as increased, the "Premium Cap"). If for
any year the annual premium for the earthquake insurance exceeds the Premium
Cap, Tenant shall not be obligated to carry earthquake insurance, but if
Landlord elects to cover the Premises under an earthquake insurance policy,
including a blanket policy, carried by Landlord for any such year, Tenant
shall pay to the Landlord for that year the lesser of (a) the Premium Cap, or
(b) the portion of the earthquake insurance premium paid by Landlord
allocable to the Premises. If Landlord elects to carry earthquake insurance
on the Premises in accordance herewith, then upon request by Tenant, Landlord
shall furnish Tenant with evidence of Landlord's premium allocation.
10.6 All insurance required to be maintained by Tenant under this Article
10 and all renewals thereof shall be issued by good and responsible companies
qualified to do and doing business in the state where the Premises are
located and having a rating in Best's Insurance Guide of at least A-IX. No
deductible amount under any such insurance policy shall exceed twenty-five
thousand dollars ($25,000), except for the deductible for Tenant's earthquake
insurance policy, which deductible shall not exceed five percent (5%) of the
value of the Premises. Each policy to be maintained by Tenant shall
expressly provide that the policy shall not be canceled or altered without
sixty (60) days' prior written notice to Landlord and shall remain in effect
notwithstanding any such cancellation or alteration until such notice shall
have been given to Landlord and such period of sixty (60) days shall have
expired. All insurance under this Article 10 to be maintained by Tenant
shall name Landlord and any other parties designated by Landlord as an
additional insured, shall be primary and noncontributing with any insurance
which may be carried by Landlord, shall afford coverage for all claims based
on any act, omission, event or condition that occurred or arose (or the
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EXHIBIT F
onset of which occurred or arose) during the policy period, and shall
expressly provide that Landlord, although named as an insured, shall
nevertheless be entitled to recover under the policy for any loss, injury or
damage to Landlord. Upon the issuance of each such policy to be maintained
by Tenant, Tenant shall deliver each such policy or a certified copy and a
certificate thereof to Landlord for retention by Landlord. The insurance
required to be maintained by Tenant under this Article 10 may be provided for
in the form of a blanket policy or policies of insurance, provided all of the
requirements of this Article 10 are satisfied by such blanket policy or
policies. If Tenant fails to insure or fails to furnish to Landlord upon
notice to do so any policy to be maintained by Tenant or certified copy and
certificate thereof as required, Landlord shall have the right from time to
time to effect such insurance for the benefit of Tenant or Landlord or both
of them and all premiums paid by Landlord shall be payable by Tenant as
additional rent on demand. Tenant shall pay to Landlord, immediately upon
demand all costs incurred by Landlord as a result of Tenant's failure to
obtain and maintain in effect the policies of insurance required under this
Article 10.
10.7 Tenant waives on behalf of all insurers under all policies of
property, liability and other insurance (excluding workers' compensation) now
or hereafter carried by Tenant insuring or covering the Premises, or any
portion or any contents thereof, or any operations therein, all rights of
subrogation which any insurer might otherwise, if at all, have to any claims
of Tenant against Landlord. Landlord waives on behalf of all insurers under
all policies of property, liability and other insurance (excluding workers,
compensation) now or hereafter carried by Landlord insuring or covering the
Premises or any portion or any contents thereof, or any operations therein,
all rights of subrogation which any insurer might otherwise, if at all, have
to any claims of Landlord against Tenant. Tenant shall, prior to or
immediately after the date of this Lease, procure from each of the insurers
under all policies of property, liability and other insurance (excluding
workers' compensation) now or hereafter carried by Tenant insuring or
covering the Premises, or any portion or any contents thereof, or any
operations therein, a waiver of all rights of subrogation which the insurer
might otherwise, if at all, have to any claims of Tenant against Landlord as
required by this section 10.6.
ARTICLE 11
COMPLIANCE WITH LEGAL REQUIREMENTS
11.1 Subject to the Right to Contest, Tenant shall, at Tenant's sole cost
and expense, promptly comply with all laws, ordinances, rules, regulations,
orders and other requirements of
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EXHIBIT F
any government or public authority now in force or which may hereafter be in
force with all requirements of any board of fire underwriters or other
similar body now or hereafter constituted, and with all directions and
certificates of occupancy issued pursuant to any law by any governmental
agency or officer, insofar as any thereof relate to or are required by the
condition, use or occupancy of the Premises or the operation, use or
maintenance of any personal property, fixtures, machinery, equipment or
improvements in the Premises.
11.2 Notwithstanding the foregoing, during the last five (5) years of the
Lease term, excluding any extension term, if Tenant is required, pursuant to
section 11.1, to make any substantial repair or improvement to the Premises
the cost of which would be treated as a capital expense in accordance with
generally accepted accounting principles (a "Required Improvement"), Landlord
shall reimburse to Tenant, by a rent credit applied at the end of the Lease
term, an amount equal to (a) the cost of the Required Improvement, multiplied
by (b) a fraction (i) the numerator of which is the number of years beyond
the Lease term the useful life of the Required Improvement is anticipated to
extend, and (ii) the denominator of which is the total anticipated useful
life of the Required Improvement, provided that each of the following
conditions is satisfied: the cost of such Required Improvement exceeds the
Cost-Share Threshold, as adjusted pursuant to Section 8.2; fifty percent
(50%) or more of the anticipated useful life of the Required Improvement
extends beyond the Lease term; Tenant has not exercised its option, if any,
to extend the Lease term; the anticipated useful life of the Required
Improvement is ten (10) years or more; and Landlord approves the plans and
specifications and the budget for the construction or installation of the
Required Improvement. If Tenant exercises its right to extend the Lease
term, Landlord shall be relieved of any obligation to reimburse Tenant
pursuant to this Section 11.2.
11.3 Landlord shall reasonably cooperate with Tenant from time to time,
upon Tenant's request and at Tenant's expense, to the extent that Landlord's
signature, consent or participation (or any other action of Landlord) is
legally required in connection with (a) petitions, or other applications for
changes to, laws, taxes, assessments or other monetary impositions relating
to the Premises, (b) applications for, modifications of, disputes with
respect to, or other actions, proceedings or negotiations relating to
permits, licenses and/or other authorizations relating to the Premises, (c)
existing easements, covenants, conditions and/or restrictions relating to the
Premises (or modifications thereto) or supplemental or additional agreements
of such type, (d) dedications or transfers of unimproved portions of the
Premises for road or other public purposes, (e) petitions to have the
Premises annexed to any utility or service district or other similar entity,
and/or
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EXHIBIT F
(f) any other agreements, transactions, disputes, proceedings or other
matters, whether involving governmental or quasigovernmental authorities or
private parties, with respect to which Landlord's cooperation is legally
required; provided that Landlord may refuse to cooperate as set forth herein
(i) in the event that the activity with respect to which Tenant is seeking
such cooperation is prohibited by this Lease, or (ii) in the event that all
of the following are true: (A) the activity with respect to which Tenant is
seeking such cooperation is not expressly permitted by this Lease, (B) no
other provision of this Lease would obligate Landlord to provide such
cooperation, and (C) Landlord reasonably determines that the result that
Tenant is seeking to accomplish would materially and adversely affect
Landlord's interests with respect to the Premises.
ARTICLE 12
ASSIGNMENT OR SUBLEASE
12.1 Tenant shall not, directly or indirectly, without the prior written
consent of Landlord (which consent shall not be unreasonably withheld),
assign this Lease or any interest herein or sublease the Premises or any part
thereof (except as provided in section 12.4), or permit the use or occupancy
of the Premises by any person or entity other than Tenant. This Lease shall
not, nor shall any interest herein, be assignable as to the interest of
Tenant involuntarily or by operation of law without the prior written consent
of Landlord. Any of the foregoing acts without such prior written consent of
Landlord shall be void and shall, at the option of Landlord, constitute a
default that entitles Landlord to terminate this Lease. Tenant agrees that
the instrument, by which any assignment to which Landlord consents or which
is permitted by section 12.4 is accomplished, shall expressly provide that
the assignee will perform all of the covenants to be performed by Tenant
under this Lease as and when performance is due after the effective date of
the assignment and that Landlord will have the right to enforce such
covenants directly against such assignee. Tenant agrees that the instrument,
by which any sublease to which Landlord consents or which is permitted by
section 12.4 is accomplished, shall expressly provide that it is subject and
subordinate to the Lease. Any purported assignment or sublease without an
instrument containing the foregoing provisions shall be void. Tenant shall in
all cases remain liable for the performance by any assignee or subtenant of
all such covenants.
12.2 If Landlord consents in writing, Tenant may complete the intended
assignment or sublease, provided, however, that no assignment or sublease
shall be valid and no assignee or subtenant shall take possession of the
Premises or any part thereof until an executed duplicate original of such
assignment
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EXHIBIT F
or sublease, in compliance with section 12.1, has been delivered to Landlord.
12.3 No assignment or sublease whatsoever shall release Tenant from
Tenant's obligations and liabilities under this Lease or alter the primary
liability of Tenant to pay all rent and to perform all obligations to be paid
and performed by Tenant during the term of this Lease, including all
extension terms (whether or not Tenant consents to such extension by an
assignee). The acceptance of rent by Landlord from any other person or
entity shall not be deemed to be a waiver by Landlord of any provision of
this Lease. Consent to one assignment or sublease shall not be deemed
consent to any subsequent assignment or sublease. If any assignee, subtenant
or successor of Tenant defaults in the performance of any obligation to be
performed by Tenant under this Lease, Landlord may proceed directly against
Tenant without the necessity of exhausting remedies against such assignee,
subtenant or successor. Landlord may consent to subsequent assignments or
subleases or amendments or modifications to this Lease with assignees,
subtenants or successors of Tenant, without notifying Tenant or any successor
of Tenant and without obtaining any consent thereto from Tenant or any
successor of Tenant, and such action shall not release Tenant from liability
under this Lease; provided, however, that if Landlord and Tenant's assignee
agree to increase Base Rent in excess of the amount of Base Rent otherwise
payable under section 3.1, then Tenant shall not be liable to Landlord for
payment of such excess Base Rent.
12.4 Tenant may sublease all or any portion of the Premises to its
Affiliates, and may sublease less than ten thousand (10,000) square feet of
the Office Building to any person or entity, without Landlord's prior written
consent so long as such subtenant's proposed use of the Premises: (a) shall
be permitted hereunder and under all legal and other requirements described
in Article 11; (b) shall not substantially increase the wear and tear on or
the risk of damage to the Premises above levels or risks resulting from
Tenant's use as of the date of this Lease; and (c) is not for any illegal
purpose. All provisions of this Article 12 applicable to subletting, other
than the requirement of obtaining Landlord's prior consent, shall apply to
any subletting under this 12.4. As used in this Lease, the term "Affiliates"
means an entity which controls, is controlled by or is under common control
with Tenant.
12.5 Notwithstanding anything to the contrary set forth in this Article
12, Landlord's consent shall not be required to (a) any temporary, rent-free
use of up to twenty thousand (20,000) square feet of the Premises by Tenant's
suppliers, customers or other persons with whom Tenant conducts business,
provided that Tenant retains the right to terminate each such
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EXHIBIT F
persons' use of the Premises at any time and Tenant shall use diligent
efforts to assure that such users comply with all of the applicable terms and
provisions of this Lease; (b) a consolidation or merger of Tenant or a sale
of all or substantially all of Tenant's assets, provided the tangible net
worth of Tenant's successor immediately after such consolidation, merger or
sale is equal to or greater than Tenant's tangible net worth immediately
prior to such consolidation, merger or sale, all as evidenced by audited
balance sheets; (c) any sublease of the Cafeteria for a period of one (1)
week or less; or (d) any cafeteria operating agreement (in the event that any
such agreement is construed to constitute a sublease).
ARTICLE 13
ENTRY BY LANDLORD
13.1 Landlord shall have the right, following no less than one (1)
business day's advance notice (except in emergencies), to enter the Premises
at any reasonable time to (a) inspect the Premises, (b) exhibit the Premises
to prospective purchasers, to lenders, or during the last twelve (12) months
of the term of this Lease to tenants, (c) determine whether Tenant is
performing all of Tenant's obligations, (d) perform any obligations of Tenant
in accordance with section 14.5, (e) post notices of nonresponsibility, 'For
sale", and during the last twelve (12) months of the term of this Lease "For
lease" signs,in and about the Premises, (f) make any repairs to the Premises
which Landlord is entitled to make and (g) investigate and perform tests to
determine Tenant's compliance with Article 21. Tenant waives all claims for
damages for any injury or inconvenience to or interference with Tenant's
business, any loss of occupancy or quiet enjoyment of the Premises or any
other loss occasioned by such entry. Tenant shall be entitled to have one of
its agents or other representatives accompany Landlord at all times during
any such entry (except in emergencies), and Landlord shall reasonably
cooperate with Tenant to minimize any unavoidable disruption of Tenant's
operations resulting from any such entry. If Landlord removes any existing
underground tanks and fueling system from the Premises, Landlord shall have
no obligation to replace them or provide alternate tanks or a fueling system.
Landlord shall at all times have a key to unlock all such doors and Landlord
shall have the right to use any and all means which Landlord may deem proper
to open such doors in an emergency to obtain entry to the Premises. Any
entry to the Premises obtained by Landlord by any of such means shall not
under any circumstances be construed or deemed to be a forcible or unlawful
entry into or a detainer of the Premises or an eviction, actual or
constructive, of Tenant from the Premises or any portion thereof.
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EXHIBIT F
ARTICLE 14
Events of Default and Remedies
------------------------------
14.1 The occurrence of any one or more of the following events ("Event
of Default") shall constitute a breach of this Lease by Tenant:
(a) Tenant fails to pay any Base Rent and such failure continues for
more than three (3) business days after Landlord gives written notice thereof
to Tenant; provided, however, that after the second such failure in a calendar
year, only the passage of time, but no further notice shall be required to
establish an Event of Default in the same calendar year; or
(b) Tenant fails to pay any additional rent or other amount of money or
charge payable by Tenant hereunder as and when such additional rent or amount
or charge becomes due and payable and such failure continues for more than
ten (10) days after Landlord gives written notice thereof to Tenant; provided,
however, that after the second such failure in a calendar year, only the
passage of time, but no further notice, shall be required to establish an
Event of Default in the same calendar year; or
(c) Tenant fails to perform or breaches any other agreement or covenant
of this Lease to be performed or observed by Tenant as and when performance
or observance is due (subject to the Right to Contest) and such failure or
breach continues for more than ten (10) days after Landlord gives written
notice thereof to Tenant; provided, however, that if, by the nature of such
agreement or covenant, such failure or breach cannot reasonably be cured within
such period of ten (10) days, an Event of Default shall not exist as long as
Tenant commences with due diligence and dispatch the curing of such failure or
breach within such period of ten (10) days and, having so commenced, thereafter
prosecutes with diligence and dispatch and completes the curing of such failure
or breach within a reasonable time; or
(d) Tenant (i) files, or consents by answer or otherwise to the filing
against it of, a petition for relief or reorganization or arrangement or any
other petition in bankruptcy or for liquidation or to take advantage of any
bankruptcy, insolvency or other debtors' relief law of any jurisdiction, (ii)
makes an assignment for the benefit of its creditors, (iii) consents to the
appointment of a custodian, receiver, trustee or other officer with similar
powers of Tenant or of any substantial part of Tenant's property, or (iv)
takes action for the purpose of any of the foregoing; or
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EXHIBIT F
(e) Without consent by Tenant, a court or government authority enters
an order, and such order is not vacated within sixty (60) days, (i)
appointing a custodian, receiver, trustee or other officer with similar
powers with respect to Tenant or with respect to any substantial part or
Tenant's property, or (ii) constituting an order for relief or approving a
petition for relief or reorganization or arrangement or any other petition in
bankruptcy or for liquidation or to take advantage of any bankruptcy,
insolvency or other debtors' relief law of any jurisdiction, or (iii)
ordering the
dissolution, winding-up or liquidation of Tenant; or
(f) This Lease or any estate of Tenant hereunder (other than particular
items of Equipment whose aggregate value does not exceed one hundred thousand
dollars ($100,000)) is levied upon under any attachment or execution and such
attachment or execution is not vacated within sixty (60) days; or
(g) Tenant abandons the Premises.
14.2 If an Event of Default occurs, Landlord shall have the right at any
time to give a written termination notice to Tenant and, on the date
specified in such notice, Tenant's right to possession shall terminate and
this Lease shall terminate. Upon such termination, Landlord shall have the
right to recover from Tenant:
(a) The worth at the time of award of all unpaid rent which had been
earned at the time of termination;
(b) The worth at the time of award of the amount by which all unpaid
rent which would have been earned after termination until the time of award
exceeds the amount of such rental loss that Tenant proves could have been
reasonably avoided;
(c) The worth at the time of award of the amount by which all unpaid
rent for the balance of the term of this Lease after the time of award
exceeds the amount of such rental loss that Tenant proves could be reasonably
avoided; and
(d) All other amounts necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform all of Tenant's
obligations under this Lease or which in the ordinary course of things would
be likely to result therefrom. The "worth at the time of award" of the
amounts referred to in clauses (a) and (b) above shall be computed by
allowing interest at the maximum annual interest rate allowed by law for
business loans (not primarily for personal, family or household purposes) not
exempt from the usury law at the time of termination or, if there is no such
maximum annual interest rate, at the rate of eighteen percent (18%) per
annum. The "worth at the time of award" of the amount referred to in clause
(c) above
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EXHIBIT F
shall be computed by discounting such amount at the discount rate of the
Federal Reserve Bank located nearest the Premises at the time of award plus
one percent (1%). For the purpose of determining unpaid rent under clauses
(a), (b) and (c) above, the rent reserved in this Lease shall be deemed to be
the total rent payable by Tenant under Articles 3 and 5 hereof.
14.3 Even though Tenant has breached this Lease, this Lease shall
continue in effect for so long as Landlord does not terminate Tenant's right
to possession, and Landlord shall have the right to enforce all its rights
and remedies under this Lease, including the right to recover all rent as it
becomes due under this Lease. Acts of maintenance or preservation or efforts
to relet the Premises or the appointment of a receiver upon initiative of
Landlord to protect Landlord's interest under this Lease shall not constitute
a terminationa of Tenant's right to possession unless written notice of
termination is given by Landlord to Tenant.
14.4 The remedies provided for in this Lease are in addition to all
other remedies available to Landlord at law or in equity by statute or
otherwise.
14.5 All agreements and covenants to be performed or observed by Tenant
under this Lease shall be at Tenant's sole cost and expense and without any
abatement of rent. If Tenant fails to pay any sum of money to be paid by
Tenant or to perform any other act to be performed by Tenant under this
Lease, Landlord shall have the right, but shall not be obligated, and without
waiving or releasing Tenant from any obligations of Tenant, to make any such
payment or to perform any such other act on behalf of Tenant in accordance
with this Lease. All sums so paid by Landlord and all necessary incidental
costs shall be deemed additional rent hereunder and shall be payable by
Tenant to Landlord on demand, together with interest on all such sums
from the date of expenditure by Landlord to the date of repayment by Tenant
at the maximum annual interest rate allowed by law for business loans (not
primarily for personal, family or household purposes) not exempt from the
usury law at the date of expenditure or, if there is no such maximum annual
interest rate, at the rate of eighteen percent (18%) per annum. Landlord
shall have, in addition to all other rights and remedies of Landlord, the
same rights and remedies in the event of the nonpayment of such sums plus
interest by Tenant as in the case of default by Tenant in the payment of rent.
14.6 If Tenant abandons or surrenders the Premises, or is dispossessed
by process of law or otherwise, any movable furniture, equipment, trade
fixtures or personal property belonging to Tenant and left in the Premises
shall be deemed to be abandoned, at the option of Landlord, and Landlord
shall have
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EXHIBIT F
the right to sell or otherwise dispose of such personal property in any
commercially reasonable manner.
ARTICLE 15
Damage or Destruction
---------------------
15.1 Landlord and Tenant acknowledge that, pursuant to Section 19.03.093
(as the same may be amended from time to time and together with any successor
section, the "Use Section") of the Zoning Ordinance of the City of Commerce,
California (as the same may be amended from time to time and together with
any successor ordinance, the "Zoning Ordinance"), if the Premises are
"destroyed" (as such term is used in the Use Ordinance) and not replaced
within a specified period of time, the use of the Premises for office
purposes could cease to be a permitted nonconforming use ("Permitted Use
Termination") under the Zoning Ordinance. If the Premises, or any part
thereof, is damaged by fire or other casualty during the term of this Lease
and neither Landlord nor its Lender reasonably determine that such damage is
of such nature and or/magnitude that, under all of the circumstances, there
is a material risk that a Permitted Use Termination could result pursuant to
the Use Section, then Tenant shall restore the Premises, and insurance
proceeds shall be made available to Tenant therefor, pursuant to Section 15.2
hereof. If the Premises, or any part thereof, is damaged by fire or other
casualty during the term of this Lease and Landlord or its Lender determine,
in their reasonable judgment, that such damage is of such nature and/or
magnitude that, under all of the circumstances, there is a material risk that
a Permitted Use Termination could result pursuant to the Use Section, then
Tenant shall diligently seek to obtain "reasonably satisfactory assurances"
(as hereinafter defined) that the Premises' permitted office use pursuant to
the Zoning Ordinance will continue after restoration of the Premises. If
Tenant does obtain "reasonably satisfactory assurances" within sixty (60)
days after the casualty event, then Tenant shall restore the Premises, and
insurance proceeds shall be made available to Tenant therefor, pursuant to
Section 15.2 hereof. If Tenant does not obtain "reasonably satisfactory
assurances" within sixty (60) days after the casualty event, then Landlord
shall have the right to elect, by giving Tenant written notice of such
election within one hundred five (105) days after the casualty event, to
either: (a) continue the Lease in effect, in which case Tenant shall restore
the Premises, and insurance proceeds shall be made available therefore,
pursuant to Section 15.2 hereof; or (b) terminate the Lease and reconvey the
Premises to Tenant "as is." If Landlord elects, pursuant to subsection (b) of
the preceding sentence, to reconvey the Premises to Tenant (a "Landlord
Put"), then Landlord shall deliver to Tenant a grant deed and a bill of sale
conveying the premises, an assignment of
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EXHIBIT F
the Contracts and Permits and an assignment of any unpaid casualty insurance
proceeds relating to the Premises to which Landlord is entitled, within sixty
(60) days after Tenant receives Landlord's election notice, in exchange for
the following: (x) if Landlord has received casualty insurance proceeds on
account of such casualty on or before the reconveyance date, Landlord shall
retain such proceeds and Tenant shall pay to Landlord the difference, if any,
between the applicable amount (the "Total Stipulated Amount") set forth on
the Stipulated Amount Schedule attached hereto as Schedule IV and the
casualty insurance proceeds actually received by Landlord; or (y) if Landlord
has not received any casualty insurance proceeds on account of such casualty
on or before the reconveyance date, Tenant shall pay to Landlord the
applicable Total Stipulated Amount. In the case of a Landlord Put, Landlord
shall reconvey the Premises to Tenant free and clear of all monetary liens,
and Tenant shall be solely responsible for any transfer taxes and all other
closing costs (except Landlord's attorney's fees) associated with the
reconveyance. "Reasonably satisfactory assurances" means written assurance
from the responsible city authorities (or other reasonably equivalent
assurances) indicating, to the reasonable satisfaction of Landlord and its
lender, that no Permitted Use Termination will result from the casualty and
that the permitted office use of the Premises pursuant to the Zoning
Ordinance shall continue in effect after restoration of the Premises
notwithstanding any delays that may cause restoration to be completed after
expiration of the time period specified in the Use Section. "Reasonably
satisfactory assurances" may include an extension of the time period referred
to in the Use Section, so long as such extension is sufficient to leave no
reasonable possibility that the restoration will not be completed within the
extended time. "Reasonably satisfactory assurances" may inlcude satisfactory
written confirmation that the casualty damage was not of such nature and/or
magnitude as to constitute "destruction" of the Premises (as such term is
used in the Use Section).
15.2 If under Section 15.1 of this Lease Tenant is required to restore
the Premises following a fire or other casualty event, then Tenant shall
repair such damage and restore the Premises to substantially the same or
better condition as existed before the occurrence of such fire or other
casualty, Tenant shall repair and replace all furniture, equipment, trade
fixtures and personal property of Landlord (or, in lieu of the foregoing
repair and replacement, Tenant shall construct and install other Improvements
and Equipment in accordance with the requirements of Article 9), and this
Lease shall remain in full force and effect. Such repair and replacement by
Tenant shall be done in accordance with Article 9. Tenant's obligation to
rebuild, and Tenant's obligation to pay the full rent specified in this
Lease, as herein provided shall not be affected in any
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EXHIBIT F
way by such damage or destruction even if the casualty results in the loss of
the permitted non-conforming use status of the Premises that allows the
Premises to be used as an office building; provided, however, that in such
event Landlord shall not unreasonably withhold consent to (x) a modification
of the use provisions of this Lease to the extent necessary to allow Tenant
(or its permitted assignees or subtenants) to make reasonable beneficial use
of the Premises in accordance with applicable land use restrictions, and (y)
changes to the Improvements reasonably necessary to facilitate any such
change in use, subject to the applicable terms and provisions of Article 9 of
this Lease. In no event shall rent abate. Provided Tenant is not in default
under this Lease (and no event has occurred which, with the passage of time,
the giving of notice, or both, would constitute a default), and provided
Tenant has (i) delivered to Landlord plans and specifications and a budget
for such repair and restoration (all of which Landlord shall have approved
pursuant to Article 9), and (ii) deposited with Landlord cash in the sum
equal to the excess, if any, of the total cost set forth in such approved
budget (the "Estimated Repair Cost") over the amount of insurance proceeds
received on account of such casualty (the "Insurance Proceeds"), then
Landlord shall make available to Tenant all insurance proceeds actually
received by Landlord on account of such casualty, for application to the
costs of such approved repair and restoration, as follows:
(a) No more frequently than once per calendar month, Tenant may request
that Landlord either (at Tenant's option) reimburse Tenant for costs incurred
by Tenant or pay Tenant's contractors or subcontractors directly for work in
place to repair and restore the Premises during the immediately preceding
calendar month. Tenant's request shall certify that all work for which
payment is requested was performed in compliance with the plans and
specifications approved by Landlord pursuant to Article 9 and all applicable
codes, laws, ordinances, rules and regulations, and shall include reasonably
satisfactory evidence of the costs incurred by Tenant or due to Tenant's
contractors or subcontractors, as the case may be, and lien releases in form
and substance required by applicable law executed by all mechanics,
materialmen, laborers, suppliers and contractors who performed any portion of
the repair work or supplied materials.
(b) Within five (5) business days after receiving Tenant's request,
Landlord shall approve or disapprove Tenant's request, which approval shall
not be unreasonably withheld, by written notice to Tenant. If Landlord
approves all or any portion of a request and Landlord has received (and not
previously disbursed) insurance proceeds, then Landlord's approbal shall
include a check in the amount approved by Landlord. If Landlord disapproves
all or any portion of a request, then Landlord's notice shall state the
reasons for that disapproval. Landlord's
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EXHIBIT F
failure to deliver a notice approving or disapproving a request shall be
conclusively deemed Landlord's approval of the requst. In addition, Landlord
shall have the right to impose other conditions upon disbursement so long as
they are consistent with customary construction loan disbursement practices.
If, after all repair and restoration has been completed, the total actual
cost to complete such repair and restoration (the "Actual Repair Cost") is
less than the Estimated Repair Cost and Tenant was required to deposit cash
with Landlord to make up the difference between the Estimated Repair Cost and
the Insurance Proceeds pursuant to this section 15.2, Landlord shall return
to Tenant the lesser of (i) the difference between the Estimated Repair Cost
and Actual Repair Cost and (ii) the amount of the cash deposited by Tenant
with Landlord.
(15.3) In addition to Landlord's rights under Section 15.1 hereof, if
the Premises, or any part thereof, is damaged by fire or other casualty and
(a) such fire or other casualty occurs during the last twelve (12) months of
the term of this Lease and the repair and restoration work to be performed by
Tenant in accordance with section 15.2 cannot, as reasonably estimated by
Landlord, be completed within two (2) months after the occurrence of such
fire or other casualty, or (b) the insurance proceeds received by Landlord
and Tenant in respect of such damage are not adequate to pay the entire cost,
as reasonably estimated by Landlord, of the repair and restoration work to be
performed by Tenant in accordance with section 15.2 and Tenant does not
deposit such shortfall with Landlord, then, in any such event, Landlord shall
have the right, by giving written notice to Tenant within forty-five (45)
days after the occurrence of such fire or other casualty, to terminate this
Lease as of the date of such notice, in which case all insurance proceeds on
account of such casualty shall be paid to Landlord. If Landlord does not
exercise the right to terminate this Lease in accordance with this section
15.3, Tenant sahll repair such damage and restore the Premises in accordance
with section 15.2 and this Lease shall remain in full force and effect.
ARTICLE 16
Eminent Domain
--------------
16.1 If a substantial portion of the Premises is taken and the remaining
portion of the Premises is not reasonably suitable for Tenant's purposes, or
if a portion of the Premises is taken resulting in loss of access to and from
the Premises without reasonable substitute access being available, Landlord
and Tenant each shall have the right, by giving written notice to the other
within thirty (30) days after the date of such taking, to terminate this
Lease. If either Landlord or Tenant exercises
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EXHIBIT F
such right to terminate this Lease in accordance with this section 16.1, this
Lease shall terminate as of the date of such taking. If neither Landlord nor
Tenant exercises such right to terminate this Lease in accordance with this
section 16.1, this Lease shall terminate as to the portion of the Premises so
taken as of the date of such taking and shall remain in full force and effect
as to the portion of the Premises not so taken, Tenant shall restore the
portion of the Premises not so taken to an integrated architectural unit in
accordance with Article 9 and the Base Rent shall be reduced as of the date
of such taking in the proportion that the rentable area of the Premises so
taken bears to the total rentable area of the Premises. If all of the
Premises is taken by exercise of the power of eminent domain before the
Commencement Date or during the term of this Lease, this Lease shall
terminate as of the date of such taking.
16.2 If all or any part of the Premises is taken by exercise of the
power of eminent domain, all awards, compensation, damages, income, rent and
interest payable in connection with such taking shall, except as expressly
set forth in this section 16.2, be paid to and become the property of
Landlord, and Tenant hereby assigns to Landlord all of the foregoing. Without
limiting the generality of the foregoing, Tenant shall have no claim against
Landlord or the entity exercising the power of eminent domain for the value
of the leasehold estate created by this Lease or any unexpired term of this
Lease. Tenant shall have the right to claim and receive directly from the
entity exercising the power of eminent domain only the share of any award
determined to be owing to Tenant for the taking of improvements installed in
the portion of the Premises so taken by Tenant at Tenant's sole cost and
expense based on the unamortized cost actually paid by Tenant for such
improvements, for the taking of Tenant's movable furniture, equipment, trade
fixtures and personal property, for loss of goodwill, for interference with
or interruption of Tenant's business, or for removal and relocation expenses.
16.3 In the event of any taking other than a taking referred to in
section 16.1, this Lease shall continue in full force and effect, Tenant
shall continue to pay all of the rent and to perform all of the covenants of
Tenant in accordance with this Lease and Tenant shall restore the Premises to
an integrated architectural unit in accordance with Article 9. Provided
Tenant is not in default under this Lease (and no event has occurred which,
with the passage of time, the giving of notice, or both, would constitute a
default), and provided Tenant has (i) delivered to Landlord plans and
specifications and a budget for such repair and restoration (all of which
Landlord shall have approved pursuant to Article 9), and (ii) deposited with
Landlord cash in the sum equal to the excess, if any, of the total cost set
forth in such approved budget (the "Estimated Restoration Cost") over the
amount of
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EXHIBIT F
---------
condemnation award proceeds received on account of such taking (the
"Condemnation Proceeds"), then Landlord shall make available to Tenant all
condemnation award proceeds actually received by Landlord on account of such
taking, for application to the costs of such approved repair and restoration,
as follows:
(a) No more frequently than once per calendar month, Tenant may request
that Landlord either (at Tenant's option) reimburse Tenant for costs incurred
by Tenant or pay Tenant's contractors or subcontractors directly for work in
place to repair and restore the Premises during the immediatley preceding
calendar month. Tenant's request shall certify that all work for which
payment is requested was performed in compliance with the plans and
specifications approved by Landlord pursuant to Article 9 and all applicable
codes, laws, ordinances, rules and regulations, and shall include reasonably
satisfactory evidence of the costs incurred by Tenant and lien releases in
form and substance required by applicable law executed by all mechanics,
materialmen, laborers, suppliers and contractors who performed any portion of
the repair work or supplied materials.
(b) Within five (5) business days after receiving Tenant's request,
Landlord shall approve or disapprove Tenant's request, which approval shall
not be unreasonably withheld, by written notice to Tenant. If Landlord
approves all or any portion of a request and Landlord has received (and not
previously disbursed) condemnation award proceeds, then Landlord's approval
shall include a check in the amount approved by Landlord. If Landlord
disapproves all or any portion of a request, then Landlord's notice shall
state the reasons for that disapproval. Landlord's failure to deliver a
notice approving or disapproving a request shall be conclusively deemed
Landlord's approval of the request. In addition, Landlord shall have the
right to impose other conditions upon disbursement so long as they are
consistent with customary construction loan disbursement practices.
If, after all repair and restoration has been completed, the total actual
cost to complete such repair and restoration (the "Actual Restoration Cost")
is less than the Estimated Restoration Cost and Tenant was required to
deposit cash with Landlord to make up the difference between the Estimated
Restoration Cost and the Condemnation Proceeds pursuant to this section 16.3,
Landlord shall return to Tenant the lesser of (i) the difference between the
Estimated Restoration Cost and the Actual Restoration Cost, and (ii) the
amount of cash deposited by Tenant with Landlord.
16.4 As used in this Article 16, a "taking" means the acquisition of all
or part of the Premises for a public use by exercise of the power of eminent
domain (or a sale of any or all of the Premises in lieu, or under threat,
thereof) and the
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EXHIBIT F
taking shall be considered to occur as of the earlier of the date on which
possession of the Premises (or part so taken) by the entity exercising the
power of eminent domain is authorized as stated in an order for possession or
the date on which title to the Premises (or part so taken) vests in the
entity exercising the power of eminent domain.
ARTICLE 17
Subordination, Merger and Sale
------------------------------
17.1 This Lease shall be subject and subordinate at all times to the
lien of all mortgages and deeds of trust securing any amount or amounts
whatsoever which may now exist or hereafter be placed on or against the
Premises or on or against Landlord's interest or estate therein, all without
the necessity of having further instruments executed by Tenant to effect such
subordination. Notwithstanding the foregoing, in the event of a foreclosure
of any such mortgage or deed of trust or of any other action or proceeding
for the enforcement thereof, or of any sale thereunder, this Lease shall not
be terminated or extinguished, nor shall the rights and possession of Tenant
hereunder be disturbed (except that, at any time when an Event of Default
exists under this Lease, any person who acquires Landlord's interest
hereunder shall have all of the rights and remedies provided under Article
14), and Tenant shall attorn to the person who acquires Landlord's interest
hereunder through any such mortgage or deed of trust. Tenant agrees to
execute, acknowledge and deliver upon demand such further instruments
evidencing such subordination of this Lease to the lien of all such mortgages
and deeds of trust as may reasonably be required by Landlord, but Tenant's
covenant to subordinate this Lease to mortgages or deeds of trust hereafter
executed is conditioned upon each such senior mortgage or deed of trust, or a
separate subordination agreement, containing the commitments specified in the
preceding sentence. Without limiting the generality of the foregoing, Tenant
agrees to enter into a subordination, nondisturbance and attornment agreement
substantially in the form attached hereto as Exhibit B.
17.2 The voluntary or other surrender of this Lease by Tenant, or a
mutual cancellation thereof, shall not work a merger and shall, at the option
of Landlord, terminate all or any existing subleases or subtenancies or
operate as an assignment to Landlord of any or all such subleases or
subtenancies.
17.3 If the original Landlord hereunder, or any successor owner of the
Premises, sells or conveys the Premises, all liabilities and obligations on
the part of the original Landlord, or such successor owner, under this Lease
accruing after such sale or conveyance shall terminate and the original Land-
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EXHIBIT F
lord, or such successor owner, shall automatically be released therefrom, and
thereupon all such liabilities and obligations shall be binding upon the new
owner, and such new owner shall be deemed to have assumed all such
liabilities and obligations. Tenant agrees to attorn to such new owner.
ARTICLE 18
ESTOPPEL CERTIFICATE
18.1 At any time and from time to time, Tenant shall, within ten (10) days
after written request by Landlord, execute, acknowledge and deliver to
Landlord a certificate, in the form attached as Exhibit C, certifying: (a)
that this Lease is unmodified and in full force and effect (or, if there have
been modifications, that this Lease is in full force and effect as modified,
and stating the date and nature of each modification); (b) the Commencement
Date and the Expiration Date determined in accordance with Article 2 and the
date, if any, to which all rent and other sums payable hereunder have been
paid; (c) that no notice has been received by Tenant of any default by Tenant
hereunder which has not been cured, except as to defaults specified in such
certificate; (d) that Landlord is not in default under this Lease, except as
to defaults specified in such certificate; and (e) such other matters as may
be reasonably requested by Landlord or any actual or prospective purchaser or
mortgage lender. Any such certificate may be relied upon by Landlord and any
actual or prospective purchaser or mortgage lender of the Premises or any
part thereof.
18.2 Landlord shall execute and deliver to Tenant, within ten (10) days
following written request by Tenant, a certificate, in a form reasonably
acceptable to Landlord, pursuant to which Landlord certifies and agrees, for
the benefit of an assignee or subtenant of Tenant, except as otherwise
expressly set forth in such certificate: (a) that attached to the certificate
is a true and complete copy of this Lease and all modifications thereto, each
of which is in full force and effect and which constitute all of the
agreements presently in effect between Landlord and Tenant with respect to
the Premises; (b) that, to the best of Landlord's knowledge, Tenant is not
materially in default with respect to this Lease; and (c) all other
certifications and agreements reasonably required by Tenant that do not
impair Landlord's rights hereunder or under any other agreement.
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EXHIBIT F
ARTICLE 19
HOLDING OVER
19.1 If, without objection by Landlord, Tenant holds possession of the
Premises after expiration of the term of this Lease, Tenant shall become a
tenant from month to month upon the terms herein specified but at a Base Rent
equal to one hundred fifty percent (150%) of the Base Rent in effect at the
expiration of the term of this Lease pursuant to Article 3, payable in
advance on or before the first day of each month. Such month to month
tenancy may be terminated by either Landlord or Tenant by giving thirty (30)
days' written notice of termination to the other at any time.
ARTICLE 20
FINANCIAL STATEMENTS
20.1 On or before April 1 of each year, Tenant shall deliver to Landlord
Tenant's audited financial statements ("Financial Statements") for the
previous fiscal year of Tenant, which Financial Statements shall include an
audited consolidated balance sheet of Tenant and its consolidated
subsidiaries as at the end of such fiscal year, a consolidated statement of
operations of Tenant and its consolidated subsidiaries for such fiscal year,
and a certificate of Tenant's auditor (which shall be a recognized national
independent accounting firm) to the effect that such Financial Statements
were prepared in accordance with generally accepted accounting principals
consistently applied and fairly present the financial condition and
operations of Tenant and its consolidated subsidiaries for and as at the end
of such fiscal year. Tenant's fiscal year ends on the Saturday falling
closest to August 31.
ARTICLE 21
HAZARDOUS MATERIALS
21.1 As used herein, the term "Hazardous Material" means any hazardous or
toxic substance, material or waste, or any pollutant or contaminant, or words
of similar import, which is or becomes regulated by any local governmental
authority, the state in which the Premises are located, or the United States
Government. The term "Hazardous Material" includes, but is not limited to,
any material or substance which is, (i) designated as a "hazardous substance"
pursuant to section 311 of the Federal Water Pollution Control Act (33 U.S.C.
section 1317), (ii) defined as a "hazardous waste" pursuant to section 1004
of the Federal Resource Conservation and Recovery Act, 42 U.S.C.
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EXHIBIT F
section 6901, et seq. (42 U.S.C. section 6903), (iii) defined as a
"hazardous substance" pursuant to section 101 of the Comprehensive
Environmental Response Compensation and Liability Act (42 U.S.C. section
9601, et seq.), (iv) asbestos, (v) petroleum (including crude oil or any
fraction thereof, natural gas, natural gas liquids, liquefied natural gas, or
synthetic gas usable for fuel, or any mixture thereof), (vi) petroleum
products, (vii) polychlorinated biphenyls, (viii) urea formaldehyde, (ix)
radon gas, (x) radioactive matter, (xi) medical waste, and (xii) chemicals
which may cause cancer or reproductive toxicity.
21.2 As used herein, the term "Environmental Requirements" means all laws,
ordinances, rules, regulations, orders and other requirements of any
government or public authority now in force or which may hereafter be in
force relating to protection of human health or the environment from
Hazardous Material, including all requirements pertaining to reporting,
licensing, permitting, investigation and remediation of emissions,
discharges, storage, disposal or releases of Hazardous Materials and all
requirements pertaining to the protection of the health and safety of
employees or the public with respect to Hazardous Material.
21.3 Tenant shall not permit or conduct the handling, use, generation,
treatment, storage or disposal on, in or about the Premises of any Hazardous
Material without prior written notice to Landlord. Any such notice by Tenant
to Landlord shall be in writing and shall demonstrate it the reasonable
satisfaction of Landlord that such Hazardous Material is necessary to the
business of Tenant and will be handled, used, generated, treated, stored or
disposed of in a manner that complies with all Environmental Requirements.
Any such handling, use, generation, treatment, storage or disposal of any
Hazardous Material permitted by Landlord hereunder shall be in compliance
with all Environmental Requirements.
21.4 Tenant shall, within five (5) days after the receipt thereof, give
written notice to Landlord of any notice or other communication regarding any
(a) actual or alleged violation of Environmental Requirements by Tenant or
with respect to the Premises, (b) actual or threatened migration of Hazardous
Material from the Premises, or (c) the existence of Hazardous Material in or
on the Premises or regarding any actual or threatened investigation, inquiry,
lawsuit, claim, citation, directive, summons, proceeding, complaint, notice,
order, writ or injunction relating to any of the foregoing.
21.5 Tenant shall indemnify and defend Landlord against and hold Landlord
harmless from all claims, demands, liabilities, damages, fines, encumbrances,
liens, losses, costs and expenses, including reasonable attorneys' fees and
disburse-
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EXHIBIT F
ments, and costs and expenses of investigation, arising from or related to
the existence on or after the Commencement Date of Hazardous Material in or
on the Premises or the actual or threatened migration on or after the
Commencement Date of Hazardous Material from the Premises or the existence on
or after the Commencement Date of a violation of Environmental Requirements
by Tenant or with respect to the Premises. Notwithstanding the foregoing,
Tenant shall not be required to indemnify, defend or hold harmless Landlord
with respect to Hazardous Materials brought or migrating onto the Premises
after the Lease term expires or for violations of Environmental Requirements
with respect to the Premises that occur after the Lease term expires, unless
Tenant or its successor or assign is responsible for bringing the Hazardous
Materials onto the Premises, for causing the migration or for the violation
of Environmental Requirements. The obligations of Tenant under this section
21.5 shall not be affected by any investigation by or on behalf of Landlord
or by any information which Landlord may have or obtain with respect thereto.
Tenant shall, to the reasonable satisfaction of Landlord, perform all
remedial actions necessary to remove any Hazardous Material in or on the
Premises on or after the Commencement Date or to remedy actual or threatened
migration from the Premises of any Hazardous Material or to remedy any actual
or threatened violation of Environmental Requirements, provided such remedial
action is required under Environmental Requirements. This section 21.5 shall
survive termination of this Lease.
21.6 If, at any time when the term of this Lease (including any renewal
term) would expire but for the terms of this section 21.6, a Hazardous
Material exists in, on, about or under the Premises, then the term of this
Lease shall automatically be extended and this Lease shall remain in effect
until the earlier of (i) the completion of all remedial action required under
section 21.5, or (ii) the date specified in a written notice from Landlord to
Tenant terminating this Lease. During any such extension period, Tenant
shall perform all of its obligations under this Lease including payments of
all rent due hereunder (for which purpose the monthly Base Rent shall remain
unchanged).
21.7 Notwithstanding the foregoing, Landlord acknowledges and agrees that
Tenant shall be permitted to store and use on the Premises from time to time
certain Hazardous Material whose nature and quantities are customary in
connection with the office, cafeteria and other permitted uses of the
Premises (and in connection with any permitted Alterations performed by
Tenant), and that Tenant shall not be required to provide Landlord with
specific notice of any such storage or use; provided that Tenant shall at all
times comply with all Environmental Requirements pertaining to any such
Hazardous Material.
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EXHIBIT F
ARTICLE 22
WAIVER
22.1 The waiver by Landlord or Tenant of any breach of any covenant in
this Lease shall not be deemed to be a waiver of any subsequent breach of the
same or any other covenant in this Lease, nor shall any custom or practice
which may grow up between Landlord and Tenant in the administration of this
Lease be construed to waive or to lessen the right of Landlord or Tenant to
insist upon the performance by Landlord or Tenant in strict accordance with
this Lease. The subsequent acceptance of rent hereunder by Landlord or the
payment of rent by Tenant shall not waive any preceding breach by Landlord or
Tenant of any covenant in this Lease, nor cure any Event of Default, nor
waive any forfeiture of this Lease or unlawful detainer action, other than
the failure of Tenant to pay the particular rent so accepted, regardless of
Landlord's or Tenant's knowledge of such preceding breach at the time of
acceptance or payment of such rent.
ARTICLE 23
NOTICES
23.1 All requests, approvals, consents, notices and other communications
given by Landlord or Tenant under this Lease shall be properly given only if
made in writing and either deposited in the United States mail, postage
prepaid, certified with return receipt requested, or delivered by hand (which
may be through a messenger or recognized delivery or courier service), or by
electronic facsimile transmission and addressed as follows: To Landlord at
the address of Landlord specified in the BASIC LEASE INFORMATION, or at such
other place as Landlord may from time to time designate in a written notice
to Tenant; and to Tenant, before the Commencement Date, at the address of
Tenant specified in the BASIC LEASE INFORMATION, and after the Commencement
Date, at the Premises, or at such other place as Tenant may from time to time
designate in a written notice to Landlord. Such requests, approvals,
consents, notices and other communications shall be effective on the date of
receipt (evidenced by the certified mail receipt) if mailed or on the date of
delivery if hand delivered.
ARTICLE 24
TRADE NAMES
24.1 All trade names used by Tenant from time to time in connection with
its operations in the Premises, all patents and
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EXHIBIT F
other intellectual property rights of Tenant, and all other intangible
personal property of Tenant used or arising in connection with Tenant's
operations in the Premises shall not be subject to any lien or claim of
ownership by Landlord. Tenant may use any trade name(s) that it chooses in
connection with its operations in the Premises and may change such trade
name(s) from time to time.
ARTICLE 25
MEMORANDUM OF LEASE
25.1 Concurrently with the execution of this Lease, Landlord shall execute
and deliver to Tenant a memorandum of lease, in the form attached hereto as
Exhibit D.
ARTICLE 26
MISCELLANEOUS
26.1 The words "Landlord" and "Tenant" as used herein shall include the
plural as well as the singular. The words "include," "includes" and
"including" shall be deemed to be followed by the phrase "without
limitation." Tenant shall indemnify and defend Landlord against and hold
Landlord harmless from all claims, demands, liabilities, damages, losses,
costs and expenses, including reasonable attorneys' fees and disbursements,
arising out of or resulting from any failure by Tenant to perform any of its
obligations or any breach by Tenant of any of its representations or
warranties in accordance with this Lease. If there is more than one Tenant,
the obligations hereunder imposed upon Tenant shall be joint and several.
Time is of the essence of this Lease and each and all of its provisions.
Submission of this instrument for examination or signature by Tenant does not
constitute a reservation of or option for lease, and it is not effective as a
lease or otherwise until execution and delivery by both Landlord and Tenant.
Subject to Article 12, this Lease shall benefit and bind Landlord and Tenant
and the personal representatives, heirs, successors and assigns of Landlord
and Tenant. If any provision of this Lease is determined to be illegal or
unenforceable, such determination shall not affect any other provision of
this Lease and all such other provisions shall remain in full force and
effect. This Lease shall be governed by and construed in accordance with the
laws of the state where the Premises are located.
26.2 If there is any legal action or proceeding between Landlord and
Tenant to enforce this Lease or to protect or establish any right or remedy
under this Lease, the unsuccessful party to such action or proceeding shall
pay to the prevailing
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<PAGE>
EXHIBIT F
party all costs and expenses, including reasonable attorneys' fees and
disbursements, incurred by such prevailing party in such action or proceeding
and in any appeal in connection therewith. If such prevailing party recovers
a judgment in any such action, proceeding or appeal, such costs, expenses and
attorneys' fees and disbursements shall be included in and as a part of such
judgment.
26.3 The exhibits and addenda, if any, specified in the BASIC LEASE
INFORMATION are attached to and made a part of this Lease.
26.4 Tenant warrants and represents to Landlord that Tenant and has not
authorized or employed, or acted by implication to authorize or to employ,
any real estate broker or salesman to act for Tenant in connection with this
Lease.
26.5 Tenant and each person executing this Lease on behalf of Tenant
represents and warrants to Landlord that (a) Tenant is a corporation, duly
organized and validly existing under the laws of the State of California, (b)
Tenant is qualified to do business in the state where the Premises is
located, (c) Tenant has full right, power and authority to enter into this
Lease and to perform all of Tenant's obligations hereunder, and (d) each
person signing this Lease on behalf of Tenant is duly and validly authorized
to do so. Landlord and each person executing this Lease on behalf of
Landlord represents and warrants to Tenant that (a) Landlord is a corporation
duly organized and validly existing under the laws of the State of Maryland,
(b) Landlord is (to the extent so required) qualified to do business in
California, (c) Landlord has full right, power and authority to enter into
this Lease and to perform all of Landlord's obligations hereunder, and (d)
each person signing this Lease on behalf of Landlord is duly and validly
authorized to do so.
26.6 There are no oral agreements between Landlord and Tenant affecting
this Lease, and this Lease supersedes and cancels any and all previous
negotiations, arrangements, brochures, offers, agreements and understandings,
oral or written, if any, between Landlord and Tenant or displayed by Landlord
to Tenant with respect to the subject matter of this Lease or the Premises.
There are no representations between Landlord and Tenant or between any real
estate broker and Tenant other than those expressly set forth in this Lease
and all reliance with respect to any representations is solely upon
representations expressly set forth in this Lease. This Lease may not be
amended or modified in any respect whatsoever except by an instrument in
writing signed by Landlord and Tenant.
26.7 Except for determinations expressly described as being in the "sole"
or "absolute" discretion of the applicable
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<PAGE>
EXHIBIT F
party (or other similar words or phrases), neither Landlord nor Tenant shall
unreasonably withhold or delay any consent,
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<PAGE>
EXHIBIT F
approval or other determination provided for hereunder, and determinations
subject to sole or absolute discretion (or other similar words or phrases)
shall not be unreasonably delayed.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the
date first hereinabove written.
Landlord: Tenant:
TriNet Essential Facilities XII, CERTIFIED GROCERS OF CALIFORNIA, INC.,
a Maryland corporation LTD., a California corporation
By___________________________________ By___________________________________
Its________________________________ Its________________________________
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<PAGE>
EXHIBIT F
LEGAL DESCRIPTION OF THE LAND
EXHIBIT A
<PAGE>
EXHIBIT F
LEGAL DESCRIPTION OF THE LAND
All of the real property located in the City of Commerce, County of Los
Angeles, State of California, described as follows:
EXHIBIT A
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<PAGE>
EXHIBIT F
Recording Requested By, and
When Recorded, Mail to:
Schulte Roth & Zabel
900 Third Avenue
New York, NY 10022
Attn: Connie Rodriguez, Esq.
- -------------------------------------------------------------------------------
(Space above line for recorder's use)
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
-------------------------------------------------------
THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT (the
"Agreement"), made as of _____________, 1994 by and among BANKERS TRUST COMPANY
("Trustee"), as trustee for NOMURA ASSET CAPITAL CORPORATION, a Delaware
corporation ("NACC"), having an office in care of Bankers Trust Company of
California, N.A., 3 Park Plaza, 16th Floor, Irvine, California 92714, CERTIFIED
GROCERS OF CALIFORNIA, LTD., a California corporation ("Tenant"), having an
office at 2601 S. Eastern Avenue, Los Angeles, California 90040, Attn:
Mr. Alfred A. Plamann, and TriNet Essential Facilities XII, INC., a Maryland
corporation ("TriNet"), having an office at Four Embarcadero Center,
Suite 3150, San Francisco, CA 94111, Attn: Mr. James R. Reinhart.
W I T N E S S E T H:
WHEREAS, Tenant is the tenant under that certain Commerical Lease-Net,
dated as of ___________, 1994 (the "Lease"), between TriNet as landlord
(together with its successors and assigns, the "Landlord"), and Tenant, as
tenant, which Lease demises certain premises (the "Premises") known by the
street address ________________________________________________________, in
the City of Commerce, County of Los Angeles, State of California, as more
particularly described in Exhibit A annexed hereto;
WHEREAS, NACC has made a mortgage loan (the "Loan") to Landlord, which
Loan is secured by, among other things, a certain mortgage, mortgage deed or
deed of trust (the "Mortgage") encumbering the Premises;
WHEREAS, Trustee and Tenant wish to confirm the subordination of the
Lease to the Mortgage on the terms hereinafter set forth; and
EXHIBIT B
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<PAGE>
EXHIBIT F
WHEREAS, Tenant wants to be assured of the continued possession of the
Premises.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, Trustee and Tenant hereby agree as follows:
1. The Lease and any extensions, renewals, replacements or
modifications thereof and all of the right, title and interest of Tenant
thereunder in and to the Premises (including, without limitation, any and
all options to purchase the Premises and rights of first refusal or offer
held by Tenant with respect to the Premises) shall be subject and
subordinate to the lien of the Mortgage, and to all of the terms and
conditions of the Mortgage, and to all renewals, modifications, consolidations,
relacements and extensions thereof. Tenant hereby consents to, and waives
any right of first refusal or offer which may exist under the Lease with
respect to, any transfer of title to the Premises to Trustee in connection
with the Loan and related transactions.
2. So long as Tenant shall not be in default under the Lease, Trustee
shall not name or join Tenant as a party defendant in any action or
proceeding to foreclose the Mortgage for the purpose of terminating the
Lease or otherwise affecting Tenant's rights thereunder unless Tenant or
any person claiming through or under Tenant is deemed a necessary party
by the court, in which event such party may be named or joined but such
naming or joining shall not otherwise be in derogation of the rights of
Tenant set forth in this Agreement. Tenant's quiet enjoyment of the Premises
will not be disturbed by Trustee, NACC or a purchaser of the Premises,
except that any time a default exists under the Lease, any person who acquires
Landlord's interest thereunder shall have all of the rights and remedies
provided under Article 14 of the Lease.
3. If Trustee or NACC shall succeed to the interest of Landlord,
whether through possession or foreclosure action or a deed in lieu of
foreclosure, or if the Premises shall be sold as a result of any action
or proceeding to foreclose the Mortgage or deed in lieu thereof,
(i) The Lease shall continue in full force and effect as a
direct lease between Tenant and Trustee, NACC or the purchaser of
the Premises, as the case may be,
(ii) Provided that Trustee, NACC or such purchaser of the
Premises assumes in writing (subject to the provisions of this
Agreement) the obligations of landlord accruing on or after the date
Trustee, NACC or such purchaser acquired title to the Premises,
EXHIBIT B
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<PAGE>
EXHIBIT F
Tenant shall and does hereby attorn to and recognize Trustee, NACC or
the purchaser of the Premises, as the case may be, as Tenant's landlord
under the Lease, and Trustee, NACC or such purchaser shall, subject to
the terms hereof, accept such attornment and recognize Tenant as
Trustee's, NACC's or such purchaser's tenant under the Lease, said
attornment to be effective and self-operative without the execution of
any further instruments on the part of any of the parties hereto
immediately upon Trustee, NACC or such purchaser succeeding to the
interest of Landlord in the Premises. Tenant agrees, however, upon the
election of and written demand of Trustee, NACC or such purchaser
within twenty (20) days after Trustee, NACC or such purchaser receives
title to the Premises, to execute an instrument received in confirmation
of the foregoing provisions, satisfactory to Trustee, NACC or such
purchaser in which Tenant shall acknowledge such attornment and set forth
the terms and conditions of its tenancy, provided that Trustee, NACC or
such purchaser shall include in such instrument a non-disturbance
provision as set forth in paragraph 2 hereof,
(iii) In the event that any security deposit has been delivered to
the prior landlord in the form of a letter of credit or other instrument,
Tenant agrees to amend or have reissued such letter of credit or other
instrument for the benefit of Trustee or such purchaser, and
(iv) Trustee, NACC or such purchaser shall not:
(a) be bound by any prepayment of more than one calendar
month's rent,
(b) be bound by any modification of the Lease made without
the written consent of Trustee,
(c) be subject to any offsets or defenses against any prior
landlord, including Landlord, or be liable for any previous act or
omission of any prior landlord, including Landlord, under the
Lease; provided, however, that Trustee, NACC or such purchaser,
as applicable, shall be obligated to cure any continuing
nonmonetary default by any prior landlord (including Landlord)
that is reasonably susceptible of cure by Trustee, NACC or such
purchaser, as applicable, within a reasonable time following its
acquisition of the Premises, unless the applicable landlord obliga-
EXHIBIT B
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<PAGE>
EXHIBIT F
tion is of a type for which Trustee, NACC or such purchaser is
expressly relieved of liability pursuant to the other provisions
of this Agreement,
(d) be required to repair, restore, rebuild or replace the
Premises or any part thereof in the event of damage or destruction
by fire or other casualty or in the event of condemnation,
(e) be required to make any capital improvements to the
Premises, or to construct, erect, or complete any construction or
renovation of all or any portion of the improvements at the Premises
which the Landlord may have agreed to make but has not commenced
or completed, or to perform any work, or provide any services, to
prepare the Premises for occupancy by Tenant,
(f) be bound by any notice of termination, other than a notice
of termination as a result of Tenant's default under the Lease,
given by Landlord or any prior landlord to Tenant without Trustee's
concurrent written consent thereto,
(g) be personally liable under the Lease, and Trustee's,
NACC's or such purchaser's liability under the Lease shall be
limited to its ownership interest in the Premises, or
(h) be bound to any obligation of Landlord to make any
payments or contributions to Tenant, other than attorneys' fees,
letter of credit fees referenced in paragraph 7 of the Agreement
re Letter of Credit dated as of the date hereof (the "Letter of
Credit Agreement"), between Landlord and Tenant and any insurance
or condemnation proceeds and Tenant-deposited funds that Landlord
would be required to disburse to Tenant pursuant to Section 15.2
or 16.3 of the Lease.
4. Tenant shall provide Trustee with copies of all written notices sent
to Landlord pursuant to the Lease simultaneously with transmission of such
notices to Landlord. Tenant shall not cancel the Lease or claim a partial or
total eviction or any abatement of the rents, additional rents or other sums
payable under the Lease, or a set-off against Tenant's obligation for any such
rent, additional rent or other sums, and agrees that, notwithstanding any
provisions of the Lease to the contrary, Tenant will not exercise any such
right or make any such claim, until (i) it has given written notice to Trustee
of the act or omission which would entitle Tenant to
EXHIBIT B
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<PAGE>
EXHIBIT F
exercise such right or make such claim, and (ii) a reasonable period (but
in no event less than thirty (30) days) for remedying such act or omission
shall have elapsed following the giving of such notice and provided Trustee
shall, with reasonable diligence, give Tenant notice of intention to, and
commence and continue to, remedy such act or omission or cause the same to
be remedied, following the time when Trustee shall have obtained possession
of the Premises and/or otherwise become entitled under the Mortgage to
remedy the same (which shall in no event be less than the period to which
Landlord would be entitled under the Lease to effect such remedy).
Notwithstanding the preceding sentence, if Trustee must obtain possession of
the Premises to remedy such act or omission, and Trustee ceases to diligently
pursue obtaining possession of the Premises, then Tenant shall have the right
to exercise any right or remedy to which Tenant is entitled. Under no
circumstances shall Trustee be obligated to remedy such act or omission.
5. Notwithstanding any provisions of the Lease to the contrary,
Tenant agrees and acknowledges that while the Premises are encumbered by
the Mortgage each and every right of Landlord under the Lease to terminate
or cancel the Lease or to release the Tenant from any liability thereunder
shall be subject to the prior written consent of Trustee and than any attempt
by Landlord to terminate or cancel the Lease or release the Tenant from any
liability thereunder, without the prior written consent of Trustee, shall be
null and void between Tenant and Landlord. In situations where the notice of
termination must be delivered to Tenant within a specified time period, the
termination shall not be effective unless Tenant has received a notice of
termination from Landlord and Trustee within such time period.
6. Notwithstanding any provisions of the Lease to the contrary, Tenant
hereby agrees not to settle or compromise any claim for insurance proceeds
or condemnation awards without the prior written approval of Trustee; provided,
however, Tenant may settle or compromise any such claim with respect to
Tenant's personal property or fixtures without Trustee's prior written
approval.
7. All notices, consents and other communications required or permitted
pursuant to the provisions of this Agreement shall be in writing and shall be
sent by registered or certified mail, return receipt requested, postage
prepaid, or by hand-delivery or overnight courier, and shall be deemed given
when received if sent by hand-delivery, one (1) day after delivered to the
courier service if sent by overnight courier or three (3) days after
postmarked if mailed and properly addressed as follows:
EXHIBIT B
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<PAGE>
EXHIBIT F
If to Trustee:
At the address hereinabove designated to the attention of
Mr. Victor Woodworth.
with a copy to:
Schulte Roth & Zabel
900 Third Avenue
New York, NY 10021
Attn: Connie Rodriguez, Esq.
and to:
Nomura Asset Capital Corporation
2 World Financial Center
Building B
New York, NY 10281
Attn: Mr. Wayne M. Brandt
If to Tenant:
At the address hereinabove designated.
with a copy to:
Sheppard, Mullin, Richter & Hampton
333 S. Hope Street
48th Floor
Los Angeles, CA 90071
Attn: Mark T. Okuma, Esq.
If to Landlord:
At the address hereinabove designated.
with a copy to:
Pillsbury Madison & Sutro
235 Montgomery Street, 14th Floor
San Francisco, CA 94104
Attn: Glenn Q. Snyder, Esq.
Each party may designate a change of address by notice to the other
parties, given in the manner provided for in this Paragraph, which notice
shall be given at least fifteen (15) days before such change of address is
to become effective.
8. The provisions of this Agreement shall bind and inure to the benefit
of the parties hereunder and their successors and assigns.
EXHIBIT B
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<PAGE>
EXHIBIT F
9. Tenant hereby agrees that, in the event that Trustee delivers to
Tenant a notice (i) stating that an Event of Default (as defined in the
Mortgage) has occurred under the Mortgage and (ii) requesting that all rent
and additional rent due to Landlord under the Lease be thereafter paid to
Trustee, Tenant shall pay such rent and additional rent directly to Trustee.
Delivery to Tenant of the aforedescribed notice from Trustee shall be
conclusive evidence of the right of Trustee to receive such rents and
payment of the rents by Tenant to Trustee pursuant to such notice shall
constitute performance in full of Tenant's obligation under the Lease to pay
such rents to Landlord. If and to the extent that the Lease or any provision
of law shall entitle Tenant to notice of any mortgage, Tenant acknowledges
and agrees that this Agreement shall constitute such notice to Tenant of the
existence of the Mortgage. Tenant acknowledges that it has notice that the
Lease and the rents and all other sums due thereunder have been assigned to
Trustee as part of the security for the Loan Documents (as defined in the
Mortgage).
10. Tenant represents and warrants to Trustee that, as of the date
hereof, there are no agreements other than the Lease in
EXHIBIT B
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<PAGE>
EXHIBIT F
existence or contemplated between Landlord and Tenant relating to the Tenant's
occupancy of the Premises, other than the Letter of Credit Agreement.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date and year first above written.
CERTIFIED GROCERS OF CALIFORNIA, LTD.,
a California corporation, as Tenant
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
BANKERS TRUST COMPANY, as trustee for
NOMURA ASSET CAPITAL CORPORATION, as
Trustee
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
TriNet Essential Facilities XII, INC.,
a Maryland corporation
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
EXHIBIT B
-8-
<PAGE>
EXHIBIT F
STATE OF CALIFORNIA, )
) ss.
County of Los Angeles. )
On ___________, 1994, before me, _____________________________________
________________________________, a Notary Public in and for the State of
California, personally appeared ____________________________________________,
personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person whose name is subscribed to the within instrument,
and acknowledged to me that he executed the within instrument in his
authorized capacity and that, by his signature on the within instrument, the
person or entity upon behalf of which he acted executed the within instrument.
WITNESS my hand and official seal.
Signature ________________________ (Seal)
EXHIBIT B
-9-
<PAGE>
EXHIBIT F
STATE OF CALIFORNIA, )
) ss.
County of Orange. )
On ___________, 1994, before me, _____________________________________
________________________________, a Notary Public in and for the State of
California, personally appeared ____________________________________________,
personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person whose name is subscribed to the within instrument,
and acknowledged to me that he executed the within instrument in his
authorized capacity and that, by his signature on the within instrument, the
person or entity upon behalf of which he acted executed the within instrument.
WITNESS my hand and official seal.
Signature ________________________ (Seal)
EXHIBIT B
-10-
<PAGE>
EXHIBIT F
STATE OF CALIFORNIA, )
) ss.
County of San Francisco. )
On ___________, 1994, before me, _____________________________________
________________________________, a Notary Public in and for the State of
California, personally appeared ____________________________________________,
personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person whose name is subscribed to the within instrument,
and acknowledged to me that he executed the within instrument in his
authorized capacity and that, by his signature on the within instrument, the
person or entity upon behalf of which he acted executed the within instrument.
WITNESS my hand and official seal.
Signature ________________________ (Seal)
EXHIBIT B
-11-
<PAGE>
EXHIBIT F
TENANT ESTOPPEL CERTIFICATE
TO: TriNet Essential Facilities XII, Inc.
Four Embarcadero Center, Suite 3150
San Francisco, CA 94111
Attn: Mr. James R. Reinhart
Nomura Asset Capital Corporation
2 World Financial Center, Building B
New York, NY 10281
Attn: Mr. Wayne M. Brandt
Bankers Trust Company, as
trustee for Nomura Asset
Capital Corporation
3 Park Plaza, 16th Floor
Irvine, CA 92714
Attn: Mr. Victor Woodworth
Re: Commercial Lease-Net, dated as of ___________,1994, between
CERTIFIED GROCERS OF CALIFORNIA, LTD., a California corporation, as
tenant (the original named tenant under the Lease, together with
such tenant's successors and assigns, being hereinafter referred to
as the "Tenant"), and TriNet Essential Facilities XII, INC., a
Maryland corporation ("TriNet"), as landlord, covering certain
premises known by the street address ____________________________, in
the City of Commerce, County of Los Angeles, State of California (the
"Leased Premises"), as amended as noted on attached Schedule A
(collectively, the "Lease")
Gentlemen:
The undersigned Tenant hereby represents, warrants and certifies to TriNet,
to Nomura Asset Capital Corporation ("Trustee") and to Bankers Trust Company, as
trustee for Trustee ("Trusteell), that:
1. The Lease has not been modified, changed, altered or amended in any
respect, either orally or in writing, except as may be indicated on Schedule A
annexed hereto, and constitutes the entire agreement between Tenant and landlord
under the Lease ("Landlord") affecting Tenant's leasing of the Leased Premises.
A true and correct copy of the Lease is attached as Schedule B. The Lease is in
full force and effect and is not subject to any contingencies or conditions not
set forth in the Lease.
EXHIBIT C
-1-
<PAGE>
EXHIBIT F
2. The term of the Lease commenced on _____, 1994 and will expire on
____, 2014; the Tenant has two (2) options to renew the Lease term for a term of
ten (10) years each.
3. Tenant has paid all fixed and additional rent and other sums which are
due and payable under the Lease through the date hereof, and Tenant has not made
and will not make any prepayments of rent for more than one calendar month in
advance. There are no presently unexpired rental concessions or abatements due
under the Lease except as set forth on Schedule A annexed hereto. Tenant has no
credits, offsets, abatements, defenses, counterclaims or deductions against any
rental or other payments due under the Lease or with respect to its performance
of the other terms and conditions of the Lease, and has asserted no claims
against Landlord.
4. Tenant has not made any payment to Landlord as a security deposit,
advance or prepaid rent except as provided in the Lease. There is no security
deposit (whether cash or a letter of credit) paid to Landlord under the Lease.
5. Landlord has completed, and, if required under the Lease, paid for, any
and all tenant work required under the Lease and Tenant has accepted the Leased
Premises. Tenant is not entitled to any further payment or credit for tenant
work.
6. To Tenant's best knowledge, Landlord is not in default in the
performance of any of the terms of the Lease, nor is there now any fact or
condition which, with notice or lapse of time or both, will become such a
default. Tenant has not delivered to Landlord any notice of default with
respect to the Landlord's obligations under the Lease.
7. Tenant is not an affiliate of TriNet.
8. Tenant is in actual possession of the entire Leased Premises
and, to Tenant's best knowledge, is not in any respect in default underany
of the terms and conditions of the Lease, nor is there now any fact or
condition which, with notice or lapse of time or both, will become such a
default. Tenant has not received from Landlord any notice of default with
respect to the Tenant's obligations under the Lease.
9. Tenant has not assigned, transferred, mortgaged or otherwise encumbered
its interest under the Lease, nor subleased any of the Leased Premises, nor
permitted any person or entity to use the Leased Premises, except as otherwise
indicated on Schedule A annexed hereto.
10. Except as expressly provided in the Lease, Tenant:
EXHIBIT C
-2-
<PAGE>
EXHIBIT F
(i) does not have any right to renew or extend the term of the Lease,
(ii) does not have any right to cancel or surrender the Lease prior
to the expiration of the term of the Lease,
(iii) does not have any option or rights of first refusal or first
offer to purchase or lease all or any part of the Leased Premises or the
real property of which the Leased Premises are a part,
(iv) does not have any right, title or interest with respect to the
Leased Premises other than as lessee under the Lease, and
(v) does not have any right to relocate into other property owned by
Landlord or any of Landlord's affiliates.
11. Tenant acknowledges that pursuant to the deed of trust (the
"Mortgage") to be given by TriNet to Trustee and Trustee in connection with a
mortgage loan (the "Loan") to be made by Trustee to TriNet, TriNet will assign
all of its right, title and interest in and to the Lease to Trustee and Trustee
as collateral security for the Loan. Tenant agrees that it will not amend,
modify or terminate the Lease to the extent prohibited by the Mortgage.
12. There has not been filed by or against Tenant a petition in
bankruptcy, voluntary or otherwise, any assignment for the benefit of creditors,
any petition seeking reorganization or arrangement under the bankruptcy laws of
the United States, or any state thereof, or any other action brought under said
bankruptcy laws with respect to Tenant.
13. If Tenant is required to provide insurance coverage under the Lease,
Tenant has not given or received written notice that Tenant's insurance coverage
will be canceled or will not be renewed.
14. Tenant has not received any notice, citation or other claim alleging
any violation of any such law, statute, rule, regulation, ordinance, covenant,
condition or restriction applicable to the Leased Premises.
15. To the best knowledge of Tenant, any and all brokerage and leasing
commissions relating to and/or resulting from Tenant's execution and delivery of
the Lease and occupancy of the Leased Premises have been paid in full.
EXHIBIT C
-3-
<PAGE>
EXHIBIT F
16. The individual executing this Tenant Estoppel Certificate on behalf of
Tenant represents and warrants that -he has the power and the authority to
execute this Tenant Estoppel Certificate on behalf of Tenant.
17. Trustee has advised Tenant that Trustee and Trustee will rely upon the
truth of this certification in making the Loan to TriNet, and TriNet has advised
Tenant that TriNet will rely upon the truth of this certification in acquiring
the Leased Premises. This Tenant Estoppel Certificate shall inure to the
benefit of TriNet, Trustee and Trustee and their respective nominees,
successors, assigns, participants and designees and shall be binding upon Tenant
and its successors and assigns.
Dated this ____ day of _____________________________, 1994.
Tenant:
CERTIFIED GROCERS OF CALIFORNIA,
LTD., a California corporation
By:________________________________
Its:____________________________
EXHIBIT C
-4-
<PAGE>
EXHIBIT F
SCHEDULE A
-
None.
EXHIBIT C
-5-
<PAGE>
EXHIBIT F
SCHEDULE B
EXHIBIT C
-6-
<PAGE>
EXHIBIT F
MEMORANDUM OF LEASE
Recording requested by
and when recorded return to:
Mark T. Okuma, Esq.
Sheppard, Mullin, Richter & Hampton
333 S. Hope Street
48th Floor
Los Angeles, CA 90071
- -------------------------------------------------------------------------------
MEMORANDUM OF LEASE
THIS MEMORANDUM OF LEASE entered into this_____ day of _____, 1994 by and
between TriNet Essential Facilities XII, Inc., a Maryland corporation
("Landlord"), whose address is Four Embarcadero Center, Suite 3150, San
Francisco, California 94111 and Certified Grocers of California, Ltd., a
California corporation ("Tenant"), whose address is 2601 S. Eastern Avenue, Los
Angeles, California 90040.
RECITALS:
A. Landlord, as the owner of record title to that certain parcel of
land, commonly known as __________________________________, Commerce,
California, as more particularly described on the attached Exhibit "A" (the
"Land"), has leased the Land and improvements thereon (collectively the
"Premises"), pursuant to that certain Commercial Lease - Net dated of even
date herewith, by and between Landlord and Tenant for the term and upon the
conditions therein provided (the "Lease").
B. Landlord and Tenant desire to give notice of the Lease and of all of
the terms and provisions thereof, including Tenant's renewal option and right of
first refusal to purchase the Premises.
NOW, THEREFORE, in consideration of the rents and the covenants and
conditions more fully set forth in the Lease, and other good and valuable
consideration, Landlord and Tenant agree as follows:
1. AGREEMENT. Landlord has leased to Tenant and Tenant has leased from
Landlord the Premises upon and subject to the terms and provisions of the Lease.
2. TERM. The term of the Lease, unless earlier terminated pursuant to
the Lease, is for twenty (20) years, terminating on ______________, 2014.
EXHIBIT D
-1-
<PAGE>
EXHIBIT F
3. RENEWAL OPTION. The Lease grants to Tenant the right and option to
renew the initial term for two (2) additional terms of ten (10) years each
commencing upon expiration of the then-existing term of the Lease, subject to
certain terms and conditions more fully set forth in the Lease.
4. NOTICE. The purpose of the Memorandum is to give notice of the Lease
and of all the terms, conditions and provisions thereof, including the renewal
option, as the same may be amended from to time.
5. COUNTERPARTS. This instrument may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, but
all such counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, Landlord and Tenant have executed and delivered this
Memorandum as of the date first hereinabove written.
TriNet Essential Facilities XII,
INC. ("LANDLORD")
BY:________________________________
Its:____________________________
CERTIFIED GROCERS OF CALIFORNIA,
LTD. ( "TENANT")
BY:________________________________
Its:____________________________
EXHIBIT D
-2-
<PAGE>
EXHIBIT F
STATE OF CALIFORNIA, )
) ss.
County of San Francisco. )
On __________________ , 1994 before me, ____________________________, a
Notary Public in and for the State of California, personally appeared
_______________, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the within
instrument, and acknowledged to me that he executed the within instrument in his
authorized capacity and that, by his signature on the within instrument, the
person or entity upon behalf of which he acted executed the within instrument.
WITNESS my hand and official seal.
Signature ________________________________________________ (Seal)
EXHIBIT D
-3-
<PAGE>
EXHIBIT F
STATE OF CALIFORNIA, )
) ss.
County of Los Angeles. )
On _____________, 1994 before me, _________________, a Notary Public in and
for the State of California, personally appeared ________________, personally
known to me (or proved to me on the basis of satisfactory evidence) to be the
person whose name is subscribed to the within instrument, and acknowledged to me
that he executed the within instrument in his authorized capacity and that, by
his signature on the within instrument, the person or entity upon behalf of
which he acted executed the within instrument.
WITNESS my hand and official seal.
Signature _____________________ (Seal)
EXHIBIT D
-4-
<PAGE>
EXHIBIT F
SCHEDULE I
LIST OF PERSONAL PROPERTY
Serial Number Description
- ------------- -----------
01024001 Sandwich Table
53191000 Wall Panels
92001000 Salad Bar
92001100 Steam Table
92500000 Cabinets
49835000 Ice Machine
49835001 Range
49835002 Sinks
49835003 Microwave, Scale, Griddle & Mixer
49835004 Slicer
35092300 Folding Partition
8088300 Vertical Blinds
86799000 Reception Station
35090700 Telephone System
35091400 Telephone System
35092000 Telephone System
35092600 Telephone System
57918000 Telephone System
85184000 Telephone System
SCHEDULE I
<PAGE>
EXHIBIT F
SCHEDULE II
LIST OF CONTRACTS
1. 10/22/90 Security System Installation and Service Agreement between
Electro Security Corporation and Cergro.
03/15/91 Addendum to Security System Installation and Service Agreement
between Cergro and Electro Security Corporation.
2. -- Scholten Roofing Service guarantee.
SCHEDULE II
<PAGE>
EXHIBIT F
SCHEDULE III
LIST OF PERMITS
1. 09/27/78 Sewer, sewage disposal.
2. 09/27/78 County Engineer building and safety division permit.
3. 10/12/78 Application for plumbing permit.
4. 12/15/78 Heating ventilating air conditioning re fan
ventilation.
5. 12/15/78 Heating ventilation air conditioning re four air
handling units.
6. 02/10/79 Sewer, sewage disposal.
7. 02/27/79 Application for plumbing permit.
8. 03/26/79 Application for plumbing permit.
9. 04/06/79 Application for occupancy inspection re remodel.
10. 04/06/79 Application for occupancy inspection.
11. 04/20/79 Application for electrical permit.
12. 04/20/79 Application for building permit.
13. 05/29/79 Application for occupancy inspection.
14. 06/06/79 Application for building permit.
15. 06/06/79 Application for building permit re installation of
1,000 gallon fuel oil tank.
16. 06/06/79 Application for building permit. (Valuation
$1,250,000.00)
17. 06/06/79 Application for electrical permit.
18. 06/06/79 Application for building permit. (Valuation
$12,000.00).
19. 06/06/79 Application for electrical permit.
20. 06/06/79 Application for plumbing permit.
SCHEDULE III
<PAGE>
EXHIBIT F
21. 06/09/79 Application for plumbing permit re floor sinks.
22. 02/08/84 Heating ventilation air conditioning.
23. 12/01/86 Application for building permit.
24. 01/06/87 Application for plumbing permit.
25. 03/04/87 Application for electrical permit (CK 1074).
26. 05/04/87 Heating ventilating air conditioning (CK 4228).
27. 02/26/88 Application for building permit re asbestos removal.
28. 03/21/89 Application for certificate of occupancy re office.
29. 10/05/89 Application for certificate of occupancy re office and
cafeteria.
30. 01/26/90 Application for plumbing permit (Policy No. P996016).
31. 03/29/90 Application for electrical permit.
32. 06/07/90 Permit to operate internal combustion engine Permit No.
D22372.
33. 06/21/90 Application for grading permit.
34. 07/09/90 Permit to operate boiler No. 3 (D24830).
35. 07/09/90 Permit to operate boiler (D24831).
36. 07/09/90 Permit to operate boiler (D24832).
37. 09/11/90 Application for plumbing permit (CK 9025).
38. 09/21/90 Inspection Record No. 0229.
39. 09/21/90 Certificate of Occupancy - Permit No. 0229.
40. 11/01/90 Application for certificate of occupancy.
SCHEDULE III
<PAGE>
EXHIBIT F
41. 02/08/91 Permit to operate boiler, Ajax, etc. Permit No. D24830.
42. 02/08/91 Permit to operate boiler, Ajax, etc. Permit No. D24832.
43. 02/13/91 Permit to operate boiler, Ajax, etc. Permit No. D24831.
44. 06/20/91 Application for electrical permit.
45. 08/06/91 Application for electrical permit.
46. 11/01/91 Electrical permit.
47. 01/14/92 Mechanical permit.
48. 01/14/92 Heating ventilating air conditioning (M9200004).
49. 01/14/92 Permit type Illegal re duct shaft (C900028).
50. 01/15/92 Commercial construction, Permit No. C920028.
51. 01/16/92 Application for plumbing permit (P9200003).
52. 04/13/92 Application for plumbing permit (P9200034).
53. 06/11/92 Application for Closure File No. 3565.
54. 07/31/92 Application for electrical permit.
55. 08/05/92 Application for certificate of occupancy.
56. 08/05/92 Application for certificate of occupancy regarding
cafeteria service.
57. 08/07/92 Application for plumbing permit (P9200113).
58. 08/07/92 Electrical Permit No. E9200210.
59. 08/11/92 Heating ventilating air conditioning (M9200098).
60. 08/11/92 Electrical Permit No. E9200210.
SCHEDULE III
<PAGE>
EXHIBIT F
61. 08/20/92 QA Lab inspection record No. P9200085.
62. 09/02/92 Notice
63. 09/10/92 Inspection Record Permit No. 0378.
64. 09/10/92 Commercial Construction Permit No. C9200123.
65. 02/01/93 Mechanical Permit No. M9300019.
66. 02/01/93 Heating ventilating air conditioning (M9300019).
67. 04/06/93 Electrical permit (E9300105).
68. 05/24/93 Permit to operate elevator No. 043596.
69. 05/24/93 Elevator Operating Permit No. 043602.
70. 05/24/93 Elevator Operating Permit No. 043601.
71. 06/02/93 Inspection Record C9300246.
72. 07/20/93 Inspection Record No. 0378.
73. 06/23/94 Application for certificate of occupancy.
74. 08/26/94 Elevator operating permit (043596).
75. Date Illegible Application for building permit (C9300246)
(IL #1)
76. Date Illegible Application for building permit.
(IL #2)
77. Date Illegible Application for building permit.
(IL #3)
78. Date Illegible Application for building permit.
(IL #4)
79. Date Illegible Application for building permit, re building
(IL #5) code compliance and upgrade modifications.
80. Date Illegible Application for building permit.
(IL #6)
81. Date Illegible Application for electrical permit.
(IL #7)
SCHEDULE III
<PAGE>
EXHIBIT F
82. Date Illegible Application for electrical permit.
(IL #8)
83. Date Illegible Application for plumbing permit (P9200085)
(IL #9)
84. Date Illegible Heating ventilation air conditioning
(IL #10) (CK 1746).
85. Date Illegible Heating ventilation air conditioning re air
(IL #11) in and outlets (CK 1956).
86. Date Illegible Heating ventilating air conditioning re
(IL #12) boiler.
87. Illegible Date Application for building permit.
(IL #13)
SCHEDULE III
<PAGE>
EXHIBIT F
SCHEDULE IV
STIPULATED AMOUNT SCHEDULE
<TABLE>
<CAPTION>
TOTAL
COST STIPULATED STIPULATED
LEASE RENTALS LOSS AMOUNT
MONTHS SEMI-ANNUAL VALUE
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
<S> <C> <C> <C>
1-6 654,765 11,455,885 12,110,650
- ----------------------------------------------------------------------
7-12 654,765 11,409,427 12,064,192
- ----------------------------------------------------------------------
13-18 654,765 11,360,503 12,015,268
- ----------------------------------------------------------------------
19-24 654,765 11,308,980 11,963,745
- ----------------------------------------------------------------------
25-30 654,765 11,254,722 11,909,487
- ----------------------------------------------------------------------
31-36 654,765 11,197,584 11,852,349
- ----------------------------------------------------------------------
37-42 654,765 11,137,416 11,792,181
- ----------------------------------------------------------------------
43-48 654,765 11,074,057 11,728,822
- ----------------------------------------------------------------------
49-54 654,765 11,007,341 11,662,107
- ----------------------------------------------------------------------
55-60 654,765 10,937,092 11,591,858
- ----------------------------------------------------------------------
61-66 654,765 10,863,020 11,517,785
- ----------------------------------------------------------------------
67-72 654,765 10,785,081 11,439,846
- ----------------------------------------------------------------------
73-78 654,765 10,703,003 11,357,769
- ----------------------------------------------------------------------
79-84 654,765 10,616,623 11,271,389
- ----------------------------------------------------------------------
85-90 654,765 10,525,543 11,180,308
- ----------------------------------------------------------------------
91-96 654,765 10,429,690 11,084,455
- ----------------------------------------------------------------------
97-102 654,765 10,328,758 10,983,523
- ----------------------------------------------------------------------
103-108 654,765 10,222,483 10,877,248
- ----------------------------------------------------------------------
109-114 654,765 10,110,587 10,765,352
- ----------------------------------------------------------------------
115-120 654,765 9,992,571 10,647,336
- ----------------------------------------------------------------------
121-126 654,765 9,868,411 10,523,177
- ----------------------------------------------------------------------
127-132 654,765 9,737,659 10,392,424
- ----------------------------------------------------------------------
133-138 654,765 9,599,964 10,254,729
- ----------------------------------------------------------------------
139-144 654,765 9,454,960 10,109,725
- ----------------------------------------------------------------------
145-150 654,765 9,302,292 9,957,057
- ----------------------------------------------------------------------
SCHEDULE IV
-1-
<PAGE>
EXHIBIT F
<CAPTION>
<S> <C> <C> <C>
- ----------------------------------------------------------------------
151-156 654,765 9,141,571 9,796,337
- ----------------------------------------------------------------------
157-162 654,765 8,972,385 9,627,150
- ----------------------------------------------------------------------
163-168 654,765 8,793,730 9,448,496
- ----------------------------------------------------------------------
169-174 654,765 8,605,913 9,260,678
- ----------------------------------------------------------------------
175-180 654,765 8,408,122 9,062,888
- ----------------------------------------------------------------------
181-186 654,765 8,199,830 8,854,595
- ----------------------------------------------------------------------
187-192 654,765 7,980,478 8,635,243
- ----------------------------------------------------------------------
193-198 654,765 7,749,480 8,404,245
- ----------------------------------------------------------------------
199-204 654,765 7,506,215 8,160,981
- ----------------------------------------------------------------------
205-210 654,765 7,250,034 7,904,799
- ----------------------------------------------------------------------
211-216 654,765 6,980,402 7,635,167
- ----------------------------------------------------------------------
217-222 654,765 6,696,647 7,351,412
- ----------------------------------------------------------------------
223-228 654,765 6,396,911 7,051,676
- ----------------------------------------------------------------------
229-234 654,765 6,081,823 6,736,589
- ----------------------------------------------------------------------
235 and 6,404,765* 6,404,765
there-
after
- ----------------------------------------------------------------------
* includes 50% of original cost as residual value
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
</TABLE>
SCHEDULE IV
-2-
<PAGE>
BILL OF SALE
For valuable consideration, receipt of which is acknowledged, CERTIFIED
GROCERS OF CALIFORNIA, LTD., a California corporation ("Seller"), hereby sells,
assigns, transfers and delivers to TRINET CORPORATE REALTY TRUST, INC., a
Maryland corporation ("Buyer"), all of the personal property described in
Exhibit A attached hereto and made a part hereof. Seller warrants to Buyer that
Seller has good title to all such personal property, free and clear of all
liens, encumbrances, security interests and adverse claims of any kind or nature
whatsoever, and Seller shall forever warrant and defend the title to all such
personal property unto Buyer.
Dated: , 1994.
---------------
SELLER: CERTIFIED GROCERS OF CALIFORNIA, LTD.,
a California corporation
By:
------------------------------------
Its:
--------------------------------
EXHIBIT G
-1-
<PAGE>
EXHIBIT A
BILL OF SALE
Serial Number Description
- ------------- -----------
01024001 Sandwich Table
53191000 Wall Panels
92001000 Salad Bar
92001100 Steam Table
92500000 Cabinets
49835000 Ice Machine
49835001 Range
49835002 Sinks
49835003 Microwave, Scale, Griddle & Mixer
49835004 Slicer
35092300 Folding Partition
8088300 Vertical Blinds
86799000 Reception Station
35090700 Telephone System
35091400 Telephone System
35092000 Telephone System
35092600 Telephone System
57918000 Telephone System
85184000 Telephone System
EXHIBIT G
-2-
<PAGE>
ASSIGNMENT OF CONTRACTS
THIS ASSIGNMENT, made as of ____________, 1994, by and between CERTIFIED
GROCERS OF CALIFORNIA, LTD., a California corporation ("Seller"), and TRINET
CORPORATE REALTY TRUST, INC., a Maryland corporation ("Buyer"),
W I T N E S S E T H:
For valuable consideration, receipt of which is acknowledged, Seller and
Buyer agree as follows:
1. ASSIGNMENT AND ASSUMPTION.
(a) Seller hereby assigns and transfers to Buyer all right, title and
interest of Seller in, to and under the contracts (the "Contracts") described in
Exhibit A attached hereto and made a part hereof.
(b) Buyer hereby accepts the foregoing assignment, and assumes and agrees
to perform all of the covenants and agreements in the Contracts to be performed
by Seller thereunder that arise or accrue from and after the date of this
Assignment as long as Buyer owns the real property subject to the Contracts.
2. INDEMNIFICATION.
(a) Seller shall indemnify and defend Buyer against and hold Buyer harmless
from all claims, demands, liabilities, losses, damages, costs and expenses,
including, without limitation, reasonable attorneys' fees and disbursements,
that are caused by any failure by Seller to perform the obligations of Seller
under the Contracts before the date of this Assignment.
(b) Buyer shall indemnify and defend Seller against and hold Seller
harmless form all claims, demands, liabilities, losses, damages, costs and
expenses, including, without limitation, reasonable attorneys' fees and
disbursements, that are caused by any failure by Buyer to perform the
obligations of Seller arising or accruing under the Contracts on or after the
date of this Assignment and during Buyer's ownership of the real property
subject to the Contracts.
3. FURTHER ASSURANCES. Seller and Buyer agree to execute such other
documents and perform such other acts as may be reasonably necessary or proper
and usual to effect this Assignment.
4. GOVERNING LAW. This Assignment shall be governed by and construed in
accordance with the laws of the State of California.
EXHIBIT H
-1-
<PAGE>
5. SUCCESSORS AND ASSIGNS. This Assignment shall be binding upon and
shall inure to the benefit of Seller and Buyer and their respective personal
representatives, heirs, successors and assigns.
6. COUNTERPARTS. This Assignment may be signed in multiple counterparts
which, when signed by all parties, shall constitute a binding agreement.
IN WITNESS WHEREOF, Seller and Buyer have executed this Assignment as of
the date first hereinabove written.
SELLER: CERTIFIED GROCERS OF CALIFORNIA, LTD.,
a California corporation
By:
----------------------------------
Its:
-----------------------------
BUYER: TRINET CORPORATE REALTY TRUST,
INC., a Maryland corporation
By:
-----------------------------
Its:
------------------------
EXHIBIT H
-2-
<PAGE>
EXHIBIT A
ASSIGNMENT OF CONTRACTS
PART I
1. 10/22/90 Security System Installation and Service Agreement between
Electro Security Corporation and Cergro.
03/15/91 Addendum to Security System Installation and Service Agreement
between Cergro and Electro Security Corporation.
2. -- Scholten Roofing Service guarantee.
PART II
1. 06/29/89 Contract to Purchase Real Property, Buyer Cergro and Seller Santa
Fe Pacific Realty Corporation.
2. 09/27/89 Lease Agreement between Video Associates, Inc., Lessor, and
Certified Grocers ("Cergro"), Lessee.
03/12/90 Amendment to Lease Agreement between Video Associates, Inc.,
Lessor, and Cergro, Lessee.
3. 11/16/89 Service and Maintenance Agreement between Amtech Reliable
Elevator Co. and Cergro.
- Purchase Order No. P58494A (06/11/90).
4. 10/22/90 Commercial Agreement for Sale of Security System between Electro
Security Corporation and Cergro.
5. 04/17/91 Contract for Landscaping Maintenance between Environmental Care,
Inc. and Cergro.
6. 04/14/92 Service Agreement between Won Door Corporation and Cergro,
No. 01547.
- Purchase Order No. P00115073 (07/28/93).
- Purchase Order No. P00127341 (08/08/94).
7. 03/16/93 Water Treatment Contract between Chemco Products Company and
Cergro. EXPIRED.
8. 03/03/94 Water Treatment Contract between Chemco Products Company and
Cergro.
9. 08/19/93 Security Agreement No. 048/93 between Cergro and U.S. Guards
Company, Inc.
10. 09/01/94 Agreement between Diversified Maintenance Services Inc. and
Cergro.
11. -- Refusal Removal Non-Contract Service.
EXHIBIT H
-3-
<PAGE>
ASSIGNMENT OF PERMITS
For valuable consideration, receipt of which is acknowledged, CERTIFIED
GROCERS OF CALIFORNIA, LTD., a California corporation ("Seller"), hereby assigns
and transfers to TRINET CORPORATE REALTY TRUST, INC., a Maryland corporation all
of Seller's right, title and interest in, to and under the Permits described in
Exhibit A attached hereto and made a part hereof.
Dated: , 1994.
-------------
SELLER: CERTIFIED GROCERS OF CALIFORNIA, LTD.,
a California corporation
By:
----------------------------------
Its:
-----------------------------
EXHIBIT I
-1-
<PAGE>
EXHIBIT A
ASSIGNMENT OF PERMITS
1. 09/27/78 Sewer, sewage disposal.
2. 09/27/78 County Engineer building and safety division permit.
3. 10/12/78 Application for plumbing permit.
4. 12/15/78 Heating ventilating air conditioning re fan
ventilation.
5. 12/15/78 Heating ventilation air conditioning re four air
handling units.
6. 02/10/79 Sewer, sewage disposal.
7. 02/27/79 Application for plumbing permit.
8. 03/26/79 Application for plumbing permit.
9. 04/06/79 Application for occupancy inspection re remodel.
10. 04/06/79 Application for occupancy inspection.
11. 04/20/79 Application for electrical permit.
12. 04/20/79 Application for building permit.
13. 05/29/79 Application for occupancy inspection.
14. 06/06/79 Application for building permit.
15. 06/06/79 Application for building permit reinstallation of 1,000
gallon fuel oil tank.
16. 06/06/79 Application for building permit.
(Valuation $1,250,000.00)
17. 06/06/79 Application for electrical permit.
18. 06/06/79 Application for building permit.
(Valuation $12,000.00).
19. 06/06/79 Application for electrical permit.
20. 06/06/79 Application for plumbing permit.
EXHIBIT I
-2-
<PAGE>
21. 06/09/79 Application for plumbing permit re floor sinks.
22. 02/08/84 Heating ventilation air conditioning.
23. 12/01/86 Application for building permit.
24. 01/06/87 Application for plumbing permit.
25. 03/04/87 Application for electrical permit (CK 1074).
26. 05/04/87 Heating ventilating air conditioning (CK 4228).
27. 02/26/88 Application for building permit re asbestos removal.
28. 03/21/89 Application for certificate of occupancy re office.
29. 10/05/89 Application for certificate of occupancy re office and
cafeteria.
30. 01/26/90 Application for plumbing permit (Policy No. P996016).
31. 03/29/90 Application for electrical permit.
32. 06/07/90 Permit to operate internal combustion engine Permit
No. D22372.
33. 06/21/90 Application for grading permit.
34. 07/09/90 Permit to operate boiler No. 3 (D24830).
35. 07/09/90 Permit to operate boiler (D24831).
36. 07/09/90 Permit to operate boiler (D24832).
37. 09/11/90 Application for plumbing permit (CK 9025).
38. 09/21/90 Inspection Record No. 0229.
39. 09/21/90 Certificate of Occupancy - Permit No. 0229.
40. 11/01/90 Application for certificate of occupancy.
41. 02/08/91 Permit to operate boiler, Ajax, etc.
Permit No. D24830.
EXHIBIT I
-3-
<PAGE>
42. 02/08/91 Permit to operate boiler, Ajax, etc. Permit No.
D24832.
43. 02/13/91 Permit to operate boiler, Ajax, etc. Permit No.
D24831.
44. 06/20/91 Application for electrical permit.
45. 08/06/91 Application for electrical permit.
46. 11/01/91 Electrical permit.
47. 01/14/92 Mechanical permit.
48. 01/14/92 Heating ventilating air conditioning (M9200004).
49. 01/14/92 Permit type Illegal re duct shaft (C900028).
50. 01/15/92 Commercial construction, Permit No. C920028.
51. 01/16/92 Application for plumbing permit (P9200003).
52. 04/13/92 Application for plumbing permit (P9200034).
53. 06/11/92 Application for Closure File No. 3565.
54. 07/31/92 Application for electrical permit.
55. 08/05/92 Application for certificate of occupancy.
56. 08/05/92 Application for certificate of occupancy regarding
cafeteria service.
57. 08/07/92 Application for plumbing permit (P9200113).
58. 08/07/92 Electrical Permit No. E9200210.
59. 08/11/92 Heating ventilating air conditioning (M9200098).
60. 08/11/92 Electrical Permit No. E9200210.
61. 08/20/92 QA Lab inspection record No. P92OOO85.
62. 09/02/92 Notice
63. 09/10/92 Inspection Record Permit No. 0378.
EXHIBIT I
-4-
<PAGE>
64. 09/10/92 Commercial Construction Permit No. C9200123.
65. 02/01/93 Mechanical Permit No. M9300019.
66. 02/01/93 Heating ventilating air conditioning (M9300019).
67. 04/06/93 Electrical permit (E9300105).
68. 05/24/93 Permit to operate elevator No. 043596.
69. 05/24/93 Elevator Operating Permit No. 043602.
70. 05/24/93 Elevator Operating Permit No. 043601.
71. 06/02/93 Inspection Record C9300246.
72. 07/20/93 Inspection Record No. 0378.
73. 06/23/94 Application for certificate of occupancy.
74. 08/26/94 Elevator operating permit (043596).
75. Date Illegible Application for building permit
(I#L 1) (C9300246)
76. Date Illegible Application for building permit.
(IL #2)
77. Date Illegible Application for building permit.
(IL #3)
78. Date Illegible Application for building permit.
(IL #4)
79. Date Illegible Application for building permit, re
(IL #5) building code compliance and upgrade modifications.
80. Date Illegible Application for building permit.
(IL #6)
81. Date Illegible Application for electrical permit.
(IL #7)
82. Date Illegible Application for electrical permit.
(IL #8)
83. Date Illegible Application for plumbing permit
(IL #9) (P9200085)
EXHIBIT I
-5-
<PAGE>
84. Date Illegible Heating ventilation air conditioning
(IL #10) (CK 1746).
85. Date Illegible Heating ventilation air conditioning re
(IL #11) air in and outlets (CK 1956).
86. Date Illegible Heating ventilating air conditioning re
(IL #12) boiler.
87. Illegible Date Application for building permit.
(IL #13)
EXHIBIT I
-6-
<PAGE>
SELLER'S REPORTS
1. 11/__/89 SCS Engineers Environmental Assessment Report re 2500 Atlantic
Boulevard.
2. 03/2/89 SCS Engineers Subsurface Investigation Report.
3. 05/08/89 Garrett Engineers report re monitoring of PCB's in electrical
systems; and 04/07/89 letter, attaching 05/25/88 letter, re same.
4. 05/10/89 Letter from Director of Dept. of Public Works (re removal of
property from list of disposal sites).
5. Materials relating to asbestos removal by the prior owner:
07/25/89 A. Letter from CTL Environmental Services.
07/20/89 B. Internal memorandum and attachments
(including asbestos survey).
06/05/89 C. Letter from CTL.
6. 01/15/92 ATC Phase I Assessment.
7. 08/03/93 Earth Science correspondence regarding May 1993 drilling.
8. 02/03/94 ATC Phase I Environmental Assessment.
9. 02/23/94 CET Environmental Services Subsurface Investigation.
10. 03/10/94 ATC Phase I Environmental Assessment.
11. 05/17/94 Ultimate Engineering Group Subsurface Site Investigation Phase II
Assessment re 5240 East Washington Boulevard.
12. 07/08/94 Groundwater Technology Phase I findings.
13. 07/08/94 Pyke Construction Remedial Action - Closure Report re 5530 Sheila
Street.
EXHIBIT J
-1-
<PAGE>
OPERATING STATEMENTS
The operating statements attached represent Certified's costs associated with
the west office building. These costs may be direct costs or allocated costs.
In addition, no attempt has been made to reduce these costs for the land used
for parking which are not included in the sale (i.e., property taxes). The
attached schedules are for:
Fiscal Year 1991
1992, 52 weeks
1993, 52 weeks
1994, 39 weeks
EXHIBIT K
<PAGE>
- --------------------------------------------------------------------------------
WEST OFFICE BUILDING - FISCAL 1994
EXPENSE ANALYSIS
DETAIL OF DIVISION 57 EXPENSES
DIVISION TOTALS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION A/C # 2ND QTR BAL. MARCH APRIL MAY 3RD QTR BAL.
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
POSTAGE AND OFFICE
Printing 60600320
UTILITIES
Gas 61100320 9,158.25 2,423.43 1,961.31 1,733.60 15,276.59
Telephone 61101020 957.88 276.01 727.84 1,961.73
MAINTENANCE
M&R CGC Whse (Materials) 62500320 1,266.00 1,145.00 2,411.00
M&R CGC Whse (Moving) 62500320
Landscaping 62500420 4,800.00 1,572.18 5,523.88 4,376.46 16,272.52
Other 62500420
Outside Maintenance 62500420 5,285.25 5,285.25
Janitorial Services 62501020 24,010.00 4,665.00 4,665.00 5,130.00 38,470.00
Plant Protection 62500820 521.00 65.00 247.00 65.00 898.00
Supplies & Service 62500920 3,146.94 365.36 365.36 365.36 4,243.02
Plant Maintenance (Labor) 62500620 54,374.68 15,278.74 69,653.42
DEPRECIATION 65500120 282,355.67 141,393.00 423,748.67
WAREHOUSE (OTHER)
Deferred Expense (Moving)
Property Tax 66000420 63,000.00 10,500.00 10,500.00 10,500.00 94,500.00
Consulting 64000320 1,140.44 10,892.51 12,032.95
Licenses 66000320 1,516.00 1,516.00
Insurance 66000120 31,211.00 31,211.00
Rental Equipment 68000420
Rent Expense 68000320 (482,743.11) (234,737.04) (717,480.15)
--------------------------------------------------------------------------
TOTALS 0.00 19,866.98 23,262.55 (43,129.53) 0.00
--------------------------------------------------------------------------
--------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
WEST OFFICE BUILDING - FISCAL 1994
EXPENSE ANALYSIS
DETAIL OF DIVISION 57 EXPENSES
COST CENTER 625
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION A/C # 2ND QTR BAL. MARCH APRIL MAY 3RD QTR BAL.
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
POSTAGE AND OFFICE
Printing 60600320
UTILITIES
Gas 61100320 9,158.25 2,423.43 1,961.31 1,733.60 15,276.59
Telephone 61101020 957.88 276.01 0.00 727.84 1,961.73
MAINTENANCE
M&R CGC Whse (Materials) 62500320
M&R CGC Whse (Moving) 62500320
Landscaping 62500420 4,800.00 1,572.18 5,523.88 4,376.46 16,272.52
Other 62500420
Outside Maintenance 62500420 5,285.25 0.00 0.00 0.00 5,285.25 (A)
Janitorial Services 62501020 24,010.00 4,665.00 4,665.00 5,130.00 38,470.00 (B)
Plant Protection 62500820 521.00 65.00 247.00 65.00 898.00 (C)
Supplies & Service 62500920 2,836.94 365.36 365.36 365.36 3,935.02 (D)
Plant Maintenance (Labor) 62500620
DEPRECIATION 65500120 273,880.23 137,155.28 411,035.51
WAREHOUSE (OTHER)
Deferred Expense (Moving)
Property Tax 66000420 63,000.00 10,500.00 10,500.00 10,500.00 94,500.00
Consulting 64000320 792.44 0.00 (792.44) (E)
Licenses 66000320 1,516.00 0.00 0.00 1,516.00 (F)
Insurance 66000120 31,211.00 0.00 31,211.00
Rental Equipment 68000420
Rent Expense 68000320 (482,743.11) (234,737.04) (717,480.15)
--------------------------------------------------------------------------
TOTALS (64,772.12) 19,866.98 23,262.55 (75,475.94) (97,118.53)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
</TABLE>
(A) 1st Qtr'94 includes $248.00 for lifting up door(Barr Door)
and $211.95 to install new passage lever(Key West). 2nd
Qtr'94 includes $497.34 for keys (KeyWest), $3511.54 Amtech
elevator $546.41 to AGlass to replace glass and $270.00 to
Won Door to inspect fire doors.
(B) 3rd Qtr'94 includes $33,820.00 Diversified Maintenance
Services, $4,650.00 Union Rubbish services.
(C) Represents $898.00 paid to ElectroSecurity Corp. for
monitoring services for the West Office building.
(D) 3rd Qtr'94 includes $3,845.02 for rental of floor mats
(Cintas), and $90.00 to Citgo Pump for containers.
(E) The $792.44 for West Office building equip roof consultant
(Milton Jeffs & Associates) was transfered to cost center
$626.
(F) Represents $860.00 paid for public health license for the
West Office Cafeteria. 2nd Qtr.'94 includes $656.00 paid
for Boilers Annual Billing (SCAQMD).
<PAGE>
- -------------------------------------------------------------------------------
WEST OFFICE BUILDING - FISCAL 1994
EXPENSE ANALYSIS
DETAIL OF DIVISION 57 EXPENSES
COST CENTER 626
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION A/C # 2ND QTR BAL. MARCH APRIL MAY 3RD QTR BAL.
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
POSTAGE AND OFFICE
Printing 60600320
UTILITIES
Gas 61100320
Telephone 61101020
MAINTENANCE
M&R CGC Whse (Materials) 62500320 1,266.00 1,145.00 2,411.00
M&R CGC Whse (Moving) 62500320
Landscaping 62500420
Other 62500420
Outside Maintenance 62500420
Janitorial Services 62501020
Plant Protection 62500820
Supplies & Service 62500920 308.00 0.00 0.00 308.00 (A)
Plant Maintenance (Labor) 62500620 54,374.68 15,278.74 69,653.42
DEPRECIATION 65500120 8,475.44 4,237.72 12,713.16
WAREHOUSE (OTHER)
Deferred Expense (Moving)
Property Tax 66000420
Consulting 64000320 348.00 0.00 0.00 11,684.95 12,032.95
Licenses 66000320
Insurance 66000120
Rental Equipment 68000420
Rent Expense 68000320
--------------------------------------------------------------------------
TOTALS 64,772.12 0.00 0.00 32,346.41 97,118.53
--------------------------------------------------------------------------
--------------------------------------------------------------------------
</TABLE>
(A) Represents fees re: music and message on-hold services
<PAGE>
- --------------------------------------------------------------------------------
WEST OFFICE BUILDING - FISCAL 1993
EXPENSE ANALYSIS
DETAIL OF DIVISION 57 EXPENSES
DIVISION TOTALS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION A/C # 3RD QTR BAL. JUNE JULY AUGUST 4TH QTR BAL.
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
POSTAGE AND OFFICE
Printing 60600320
UTILITIES
Gas 61100320 15,041.64 908.04 211.74 317.08 16,478.70
Telephone 61101020 1,836.24 131.70 129.75 113.40 2,211.09
MAINTENANCE
M&R CGC Whse (Materials) 62500320 1,636.00 4,925.00 6,561.00
M&R CGC Whse (Moving) 62500320
Landscaping 62500420 10,560.00 1,290.00 800.00 800.00 13,450.00
Other 62500420
Outside Maintenance 62500420 3,768.71 270.00 4,038.71
Janitorial Services 62501020 44,718.50 5,057.41 4,778.01 4,665.00 59,218.92
Plant Protection 62500820 1,641.00 65.00 65.00 65.00 1,836.00
Supplies & Service 62500920 1,053.00 77.00 931.10 2,061.10
Plant Maintenance (Labor) 62500620 75,495.30 25,365.85 100,863.16
DEPRECIATION 65500120 383,254.02 137,478.29 520,732.31
WAREHOUSE (OTHER)
Deferred Expense (Moving)
Property Tax 66000420 90,000.00 10,000.00 10,500.00 10,500.00 121,000.00
Consulting 64000320 7,002.09 3,786.12 10,788.21
Licenses 66000320 1,328.00 440.00 1,768.00
Insurance 66000120 27,562.00 27,562.00
Rental Equipment 68000420
Rent Expense 68000320 (664,897.70) (223,671.50) (888,569.20)
--------------------------------------------------------------------------
TOTALS 00.0 17,969.15 20,270.62 (38,239.77) 0.00
--------------------------------------------------------------------------
--------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
WEST OFFICE BUILDING - FISCAL 1993
EXPENSE ANALYSIS
DETAIL OF DIVISION 57 EXPENSES
COST CENTER 625
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION A/C # 3RD QTR BAL. JUNE JULY AUGUST 4TH QTR BAL.
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
POSTAGE AND OFFICE
Printing 60600320
UTILITIES
Gas 61100320 15,041.84 908.04 211.74 317.08 16,478.70
Telephone 61101020 1,836.24 131.70 129.75 113.40 2,211.09
MAINTENANCE
M&R CGC Whse (Materials) 62500320
M&R CGC Whse (Moving) 62500320
Landscaping 62500420 10,560.00 1,290.00 800.00 800.00 13,450.00
Other 62500420
Outside Maintenance 62500420 3,768.71 270.00 4,038.71 (A)
Janitorial Services 62501020 44,718.50 5,057.41 4,778.01 4,665.00 59,218.92 (B)
Plant Protection 62500820 1,641.00 65.00 65.00 65.00 1,836.00 (C)
Supplies & Service 62500920 360.00 931.10 1,291.10 (D)
Plant Maintenance (Labor) 62500620
DEPRECIATION 65500120 370,540.87 133,240.61 503,781.45
WAREHOUSE (OTHER)
Deferred Expense (Moving)
Property Tax 66000420 90,000.00 10,000.00 10,500.00 10,500.00 121,000.00
Consulting 64000320
Licenses 66000320 1,328.00 440.00 1,768.00 (E)
Insurance 66000120 27,562.00 27,562.00
Rental Equipment 68000420
Rent Expense 68000320 (664,897.70) (223,671.50) (888,569.20)
--------------------------------------------------------------------------
TOTALS (97,540.54) 17,892.15 16,484.50 (72,769.31) (135,933.20)
--------------------------------------------------------------------------
--------------------------------------------------------------------------
</TABLE>
(A) 1st Qtr'93 includes $1,063.10 for roof repairs. 2nd, 3rd
and 4th Qtr'93 include the following:
Dec'92: $849.50 for door closers (Key West Lock) & $270.00
for fire doors.
Jan'93: $611.15 for window & glass repairs.
Feb'93: $85.39 for Johnson Controls (repair of temperature
controls).
Mar'93: $117.00 for Commercial Door Co. (repair cafeteria
door entrance to WOB).
May'93: $792.57 for Johnson Controls (repair of temperature
controls).
Aug'93: $270.00 for Won & Door (fire door inspection per
contract).
(B) 52 weeks fy'93 includes $53,046.50 Diversified Maintenance
Services, $5,115 Union Rubbish services, $550 Kornoff
Inc (wood trash removal), and $505.42 for janitorial
supplies.
(C) Represents $1,636.00 paid to ElectroSecurity Corp. for
purchase of security cameras and monthly monitoring services
for the West Office Building.
(D) Represents $360.00 paid for purchase of mini-blinds for
Conference Room #355 in the West Office building and $931.10
for rental of safety floor mats.
(E) Represents $692.00 paid for public health license for the
West Office Cafeteria, $636.00 to the SCAQMD for annual
license fees, $330.00 for elevator inspections, and $110.00
to the Department of Industrial Relations for West Office
building permits.
<PAGE>
- --------------------------------------------------------------------------------
WEST OFFICE BUILDING - FISCAL 1993
EXPENSE ANALYSIS
DETAIL OF DIVISION 57 EXPENSES
COST CENTER 626
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION A/C # 3RD QTR BAL. JUNE JULY AUGUST 4TH QTR BAL.
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
POSTAGE AND OFFICE
Printing 60600320
UTILITIES
Gas 61100320
Telephone 61101020
MAINTENANCE
M&R CGC Whse (Materials) 62500320 1,636.00 4,925.00 6,581.00
M&R CGC Whse (Moving) 62500320
Landscaping 62500420
Other 62500420
Outside Maintenance 62500420
Janitorial Services 62501020
Plant Protection 62500820
Supplies & Service 62500920 693.00 77.00 770.00 (A)
Plant Maintenance (Labor) 62500620 75,496.30 25,366.86 100,863.16
DEPRECIATION 65500120 12,713.15 4,237.66 16,950.83
WAREHOUSE (OTHER)
Deferred Expense (Moving)
Property Tax 66000420
Consulting 64000320 7,002.09 3,786.12 10,788.21 (B)
Licenses 66000320
Insurance 66000120
Rental Equipment 68000420
Rent Expense 68000320
--------------------------------------------------------------------------
TOTALS 97,540.54 77.00 3,786.12 34,529.54 135,933.20
--------------------------------------------------------------------------
--------------------------------------------------------------------------
</TABLE>
(A) Represents fees re: music and message on-hold services
(B) Includes:
$2,321.20 Ridgewood Partners Ltd. (1st qtr'93)-
September'92
$897.40 La Canada Design Group (1st Qtr'93)-October'92
$255.27 La Canada Design Group (1st Qtr'93)-November'92
$1,170.00 ATC Enviromental (1st Qtr'93)-November'92
$253.59 La Canada Design Group (2nd Qtr'93)-February'93
$320.00 Anachern labs (2nd Qtr'93)-February'93
$1,503.48 La Canada Design Group (3rd Qtr'93)-March '93
$281.15 La Canada Design Group (3rd Qtr'93)-April '93
$3,786.12 La Canada Design Group (4th Qtr'93)-July'93
<PAGE>
- -------------------------------------------------------------------------------
WEST OFFICE BUILDING - FISCAL 1992
EXPENSE ANALYSIS
DETAIL OF DIVISION 57 EXPENSES
Division Totals
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION A/C # 3RD QTR BAL. JUNE JULY AUGUST 4TH QTR BAL.
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
POSTAGE AND OFFICE
Printing 60600320
UTILITIES
Gas 61100320 13,456.34 (369.24) 727.89 474.66 14,289.65
Telephone 61101020 14,123.11 153.31 138.95 462.71 14,878.08
MAINTENANCE
M&R CGC Whse 62500320 7,428.00 674.00 8,101.00
M&R CGC Whse (Moving) 62500320 1,185.00 1,185.00
Landscaping 62500420 5,600.00 1,600.00 800.00 1,280.00 9,280.00
Other 62500420
Outside Maintenance 62500420 5,118.20 258.68 270.00 1,479.04 7,125.92
Janitorial Services 62501020 24,478.02 4,635.00 4,738.59 5,100.00 38,951.61
Plant Protection 62500820 1,008.77 65.00 65.00 65.00 1,203.77
Supplies & Service 62500920 2,412.68 77.00 77.00 322.77 2,889.45
Plant Maintenance (Labor) 62500620 68,726.14 23,727.22 92,453.36
DEPRECIATION 65500120 354,997.79 123,098.09 478,095.88
WAREHOUSE (OTHER)
Deferred Expense (Moving)
Property Tax 66000420 68,4000.00 7,600.00 10,000.00 10,000.00 96,000.00
Consulting 64000320 24,536.67 9,060.47 33,597.14
Licenses 66000320 541.65 541.65
Insurance 66000120 28,123.00 28,123.00
Rental Equipment 68000420 9,220.41 9,220.41
Rent Expense 68000320 (629,354.78) (206,581.14) (835,935.92)
---------------------------------------------------------------------------------
TOTALS 0.00 14,019.75 25,877.90 (39,897.65) 0.00
=================================================================================
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
WEST OFFICE BUILDING - FISCAL 1992
EXPENSE ANALYSIS
DETAIL OF DIVISION 57 EXPENSES
Cost Center 625
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION A/C # 3RD QTR BAL. JUNE JULY AUGUST 4TH QTR BAL.
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
POSTAGE AND OFFICE
Printing 60600320
UTILITIES
Gas 61100320 13,456.34 (369.24) 727.89 474.66 14,289.65
Telephone 61101020 14,123.11 153.31 136.95 462.71 14,878.08
MAINTENANCE
M&R CGC Whse (Materials) 62500320
M&R CGC Whse (Moving) 62500320 185.00 185.00
Landscaping 62500420 5,600.00 1,600.00 800.00 1,280.00 9,280.00
Other 62500420
Outside Maintenance 62500420 3,689.63 258.68 270.00 1,479.04 5,697.35
Janitorial Services 62501020 24,478.02 4,635.00 4,738.59 5,100.00 38,951.61
Plant Protection 62500820 1,008.77 65.00 65.00 65.00 1,203.77
Supplies & Service 62500920 2,053.16 (0.00) 0.00 245.77 2,298.95
Plant Maintenance (Labor) 62500620
DEPRECIATION 65500120 353,078.09 118,662.84 471,940.93
WAREHOUSE (OTHER)
Deferred Expense (Moving)
Property Tax 66000420 68,400.00 7,600.00 10,000.00 10,000.00 96,000.00
Consulting 64000320 4,197.21 8,060.47 (8,060.47) 4,197.21
Licenses 66000320 541.65 541.65
Insurance 66000120 28,123.00 28,123.00
Rental Equipment 68000420
Rent Expense 68000320 (629,354.78) (206,581.14) (835,935.92)
----------------------------------------------------------------------------------
TOTALS (110,420.78) 13,942.75 24,600.90 (76,671.59) (148,348.72)
==================================================================================
</TABLE>
(A) 4th Qtr'92 includes $258.68 fire extinguisher service,
$270.00 fire door inspection service, $1,236.00 elevator
repairs, and $243.08 plumbing repairs.
(B) 4th Qtr'92 includes $12,703.59 Diversified Maintenance
Services and $1,770 Union Rubbish services.
(C) Represents $2,053.18 for purchase of 20 fire extinguishers
plus smoke detectors for West Office and $245.77 for belts
and misc. parts.
<PAGE>
- -------------------------------------------------------------------------------
WEST OFFICE BUILDING - FISCAL 1992
EXPENSE ANALYSIS
DETAIL OF DIVISION 57 EXPENSES
Cost Center 626
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION A/C # 3RD QTR BAL. JUNE JULY AUGUST 4TH QTR BAL.
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
POSTAGE AND OFFICE
Printing 60600320
UTILITIES
Gas 61100320
Telephone 61101020
MAINTENANCE
M&R CGC Whse (Materials) 62500320 7,427.00 674.00 8,101.00
M&R CGC Whse (Moving) 62500320 1,000.00 1,000.00
Landscaping 62500420
Other 62500420
Outside Maintenance 62500420 1,428.57 1,428.57
Janitorial Services 62501020
Plant Protection 62500820
Supplies & Service 62500920 359.50 77.00 77.00 77.00 590.50
Plant Maintenance (Labor) 62500620 68,726.14 23,727.22 92,453.36
DEPRECIATION 65500120 1,919.70 4,235.25 6,154.95
WAREHOUSE (OTHER)
Deferred Expense (Moving)
Property Tax 66000420
Consulting 64000320 20,339.46 1,000.00 8,060.47 29,399.93
Licenses 66000320
Insurance 66000120
Rental Equipment 68000420 9,220.41 9,220.41
Rent Expense 68000320
---------------------------------------------------------------------------------
TOTALS 110,420.78 77.00 1,077.00 36,773.94 148,348.72
=================================================================================
</TABLE>
(A) Includes:
$2,705.00 La Canada Design Group (1st qtr'92)
$1,500.00 Electrical Engineering Services (1st qtr'92)
$1,485.00 Structural Engineering Services (1st qtr'92)
$1,884.66 La Canada Design Group (January '92)
$845.25 transferred expense from GEC CC 603
$8,110.74 La Canada Design Group architectural services
(February '92)
$3,314.99 La Canada Design Group architectural services
(April '92)
$455.00 BKM Total Office (April '92)
$58.82 Electrical Engineering Services (April '92)
$1,000.00 Van Dijk & Associates roof consulting
services
$2,612.37 La Canada Design Group architectural services
(February '92)
$798.22 La Canada Design Group architectural services
(March '92)
$4,649.88 La Canada Design Group architectural services
(April '92)
(B) Includes:
$1018.00 Air Monitoring Services
$321.57 plumbing repairs cafeteria
$89.00 elevator repairs
(C) Represents fees re: music and message on-hold services
(D) Represents Xerox copier rental expense
<PAGE>
- -------------------------------------------------------------------------------
WEST OFFICE BUILDING - FISCAL 1991
EXPENSE ANALYSIS
DETAIL OF DIVISION 57 EXPENSES
Division Totals
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION 3RD QTR BALANCE JUNE JULY AUGUST 4TH QTR BALANCE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
POSTAGE AND OFFICE
Printing
UTILITIES
Gas 3,309.30 476.19 462.90 684.14 4,932.53
Telephone 7,013.89 267.15 313.69 300.55 7,895.28
MAINTENANCE
M&R CGC Whse 1,382.00 8,267.00 9,649.00
Landscaping 16,780.00 800.00 800.00 7,475.00 25,855.00
Other 895.26 895.26
Outside Maintenance 1,607.09 1,607.09
Plant Maintenance 30,037.82 32,005.63 62,043.45
Plant Protection 11,020.14 195.00 11,215.14
Supplies & Service 3,753.84 750.00 4,503.84
DEPRECIATION 136,253.40 112,341.97 248,595.37
WAREHOUSE (OTHER)
Deferred Expense (Moving) 15,753.56 8,848.00 8,848.00 8,848.00 42,297.56
Property Tax 7,600.00 7,600.00 15,200.00
Licenses 693.40 693.40
Rental Equipment 2,112.00 2,112.00
Rent Expense (229,918.30) (207,576.62) (437,494.92)
--------------------------------------------------------------------------------------------------
TOTALS (0.00) 11,141.34 18,024.59 (29,165.93) (0.00)
==================================================================================================
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
WEST OFFICE BUILDING - FISCAL 1991
EXPENSE ANALYSIS
DETAIL OF DIVISION 57 EXPENSES
Cost Center 625
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION 3RD QTR BALANCE JUNE JULY AUGUST 4TH QTR BALANCE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
POSTAGE AND OFFICE
Printing
UTILITIES 1,376.59 476.19 462.90 684.14 2,999.82
Gas 1,779.25 267.15 313.69 300.55 2,660.64
Telephone
MAINTENANCE
M&R CGC Whse
Landscaping 3,175.00 800.00 800.00 4,775.00
Other 29.00 29.00
Outside Maintenance 608.84 608.84
Plant Maintenance
Plant Protection 6,511.29 195.00 6,706.29
Supplies & Service 1,695.81 1,695.81
DEPRECIATION 136,253.40 112,341.97 248,595.37
WAREHOUSE (OTHER)
Deferred Expense (Moving)
Property Tax 7,600.00 7,600.00 15,200.00
Licenses 53.40 53.40
Rental Equipment
Rent Expense (229,918.30) (207,576.62) (437,494.92)
-----------------------------------------------------------------------------------------------------
TOTALS (78,489.12) 1,543.34 9,176.59 (86,401.56) (154,170.75)
=====================================================================================================
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
WEST OFFICE BUILDING - FISCAL 1991
EXPENSE ANALYSIS
DETAIL OF DIVISION 57 EXPENSES
Cost Center 626
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION 3RD QTR BALANCE JUNE JULY AUGUST 4TH QTR BALANCE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
POSTAGE AND OFFICE
Printing
UTILITIES
Gas 1,932.71 1,932.71
Telephone 5,234.64 5,234.64
MAINTENANCE
M&R CGC Whse 1,382.00 8,267.00 9,649.00
Landscaping 13,605.00 7,475.00 21,080.00
Other 866.26 866.26
Outside Maintenance 998.25 998.25
Plant Maintenance 30,037.82 32,005.63 62,043.45
Plant Protection 4,508.85 4,508.85
Supplies & Service 2,058.03 750.00 2,808.03
DEPRECIATION
WAREHOUSE (OTHER)
Deferred Expense (Moving) 15,753.56 8,848.00 8,848.00 8,848.00 42,297.56
Property Tax
Licenses 640.00 640.00
Rental Equipment 2,112.00 2,112.00
Rent Expense
---------------------------------------------------------------------------------------------------
TOTALS 78,489.12 9,598.00 8,848.00 57,235.63 154,170.75
===================================================================================================
</TABLE>
<PAGE>
SELLER'S CLOSING CERTIFICATE
For valuable consideration, receipt of which is acknowledged, CERTIFIED
GROCERS OF CALIFORNIA, LTD., a California corporation ("Seller"), hereby
certifies to TRINET CORPORATE REALTY TRUST, INC., a Maryland corporation
("Buyer"), that all representations and warranties made by Seller in section
6.1 of the Purchase Agreement (the "Purchase Agreement") dated __________,
1994, between Seller and Buyer are true and correct on and as of the date of
this Certificate. This Certificate is executed by Seller and delivered to
Buyer pursuant to the Purchase Agreement.
Dated: _______________, 1994.
SELLER: CERTIFIED GROCERS OF CALIFORNIA, LTD.,
a California corporation
By:
___________________________________
Its:
-------------------------------
EXHIBIT L
<PAGE>
BUYER'S CLOSING CERTIFICATE
For valuable consideration, receipt of which is acknowledged, TRINET
CORPORATE REALTY TRUST, INC., a Maryland corporation ("Buyer"), hereby
certifies to CERTIFIED GROCERS OF CALIFORNIA, LTD., a California corporation
("Seller"), that all representations and warranties made by Buyer in section
6.2 of the Purchase Agreement (the "Purchase Agreement") dated __________,
1994, between Seller and Buyer are true and correct on and as of the date of
this Certificate. This Certificate is executed by Buyer and delivered to
Seller pursuant to the Purchase Agreement.
Dated: _______________, 1994.
TRINET CORPORATE REALTY TRUST, INC.,
a Maryland corporation
By:
___________________________________
Its:
______________________________
EXHIBIT M
<PAGE>
EXHIBIT "N"
(EASEMENT AGREEMENT)
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
Sheppard, Mullin, Richter & Hampton
333 South Hope Street, 48th Floor
Los Angeles, California 90071
Attention: Mark Okuma
- --------------------------------------------------------------------------------
(Space above this line for Recorder's use)
GRANT OF EASEMENTS
This GRANT OF EASEMENTS ("Agreement") is executed as of November
___, 1994, by TRINET ESSENTIAL FACILITIES XII, INC., a Maryland corporation
("Grantor"), and CERTIFIED GROCERS OF CALIFORNIA, LTD., a California
corporation ("Grantee").
WHEREAS, Grantor is the owner of certain real property located in
the City of Commerce, County of Los Angeles, State of California, more
particularly described on EXHIBIT "A-1" attached hereto ("Servient
Property"); and Grantee is the owner of certain real property located in the
City of Commerce, County of Los Angeles, State of California, more
particularly described on EXHIBIT "B" attached hereto ("Dominant Property").
NOW, THEREFORE, for good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, Grantor and Grantee hereby
agree as follows:
1. GRANT OF EASEMENTS. Grantor hereby grants and conveys to Grantee,
for the use of Grantee and all tenants, subtenants and other lawful occupants
of the Dominant Property from time to time (and the licensees, invitees and
guests of each), each of the following non-exclusive easements and
rights-of-way appurtenant to the Dominant Property, together with the right
of Grantee to grant all or any portion or portions thereof to any
governmental or quasi-governmental agencies and bodies, and public and
private utility companies, to the extent reasonably necessary for the use of
such easements as provided herein (collectively, the "Easements''):
1.1 A permanent, non-exclusive easement and right-of-way in,
under, on, upon, over, through, across and along that certain portion of the
Servient Property more particularly described on EXHIBIT "A-2" attached
hereto ("Roadway"), at any time and from time to time, for vehicular and
pedestrian ingress and egress to and from the Dominant Property.
Exhibit "N"
Page 1 of 11
<PAGE>
1.2 A permanent, non-exclusive easement and right-of-way in, under,
on, upon, over, through, across and along the Roadway, at any time and from time
to time, to construct, lay, renew, alter, add to, use, maintain, install,
inspect, operate, repair, replace, reconstruct and remove sewer, storm drainage,
water, electrical, power, gas, other utilities, and telephone, cable television
and other communication systems and lines, and structures, improvements and
appurtenances related thereto, including, without limitation, metering,
measuring, regulating and other equipment and underground conduits, manholes,
pedestals, cables, vaults and wires (collectively, the "Utility Systems").
Grantor agrees to execute any easement agreement requested by any utility
company (on such utility company's standard form for such easements, with any
adjustments reasonably required by Grantor) in furtherance of Grantee's exercise
of the foregoing utility easement, provided Grantee reimburses Grantor for any
reasonable attorneys' fees incurred by Grantor in connection with the review,
negotiation and execution of such easement agreement.
Notwithstanding the foregoing, this Agreement shall not be construed to permit
Grantee to use the Roadway in a manner (a) that is materially different from the
use of the Roadway for the benefit of the Dominant Property on the date of this
Agreement, and (b) that materially interferes with Grantor's ongoing use of the
Servient Property (including the Roadway).
2. MAINTENANCE AND REPAIR OF ROADWAY.
2.1 Grantee shall diligently, and at Grantee's sole expense, restore
any damage to the Roadway from time to time caused by the use by Grantee (and/or
Grantee's tenants, subtenants, occupants, licensees or other invitees) of the
easements granted hereunder; and Grantor shall diligently, and at Grantor's sole
expense, restore any damage to the Roadway from time to time caused by Grantor
(and/or Grantor's tenants, licensees or other invitees).
2.2 Except as otherwise provided in Section 2.1, Grantor and Grantee
shall each be entitled, at any time and from time to time, to perform any
maintenance or repairs then reasonably required with respect to the Roadway and
to send the other party a statement, in reasonable detail, with copies of
applicable invoices, which requests from such other party a contribution toward
the cost of such work which is proportional to the reasonably allocated share of
the benefit thereof which will accrue to such other party (which allocation
shall be described in such request), in which event such other party shall,
within ten (10) business days following receipt of such request (and such
invoices and explanation of allocation), pay such contribution to the performing
party.
Exhibit "N"
Page 2 of 11
<PAGE>
3. QUIET ENJOYMENT. Grantor shall not construct any improvements that
materially interfere with any Easement, and Grantor shall perform when due
any obligation secured by a lien against the Servient Property senior in
priority to this Agreement that would, if foreclosed, terminate this
Agreement with respect to the Servient Property. Upon Grantor's failure to
perform any such obligation when due, Grantee may (but shall not be obligated
to) perform the same, and Grantor shall, immediately upon demand by Grantee,
reimburse Grantee for all amounts paid (and costs reasonably incurred) by
Grantee with respect to such performance. Grantor shall be permitted to
grant other non-exclusive easements within the Roadway (and otherwise on the
Servient Property) without Grantee's consent so long as any such easement
does not materially and adversely affect Grantee's use of the Easements.
4. LIABILITY INSURANCE; INDEMNITY. At any time that Grantee is making
use of the Roadway pursuant to this Agreement, Grantee shall maintain in
effect a policy of commercial general liability insurance in an amount not
less than $1,000,000 combined single limit. Grantee shall defend, indemnify
and hold Grantor harmless from and against all claims, demands, causes of
action, liabilities, losses, costs and expenses (including costs of suit and
reasonable attorneys' fees) arising from or in connection with any use of the
easements by Grantee which constitutes negligence or willful misconduct.
Grantor shall defend, indemnify and hold Grantee harmless from and against
all claims, demands, causes of action, liabilities, losses, costs and
expenses (including costs of suit and reasonable attorneys' fees) arising
from or in connection with any use of the Roadway or Utility Systems by
Grantor which constitutes negligence or willful misconduct.
5. MISCELLANEOUS. This Agreement shall be governed by California law.
In the event of any dispute in connection with this Agreement, the
prevailing party shall be entitled to recover from the other party the
prevailing party's attorneys' fees and court costs, whether or not an action
is filed or prosecuted to judgement. This Agreement shall be binding upon,
enforceable by, and shall inure to the benefit of, Grantor and Grantee and
their respective successors and assigns and the successive owners of the
Servient Property and the Dominant Property. The covenants of Grantor set
forth in this Agreement are intended to run with the Servient Property for
the benefit of the Servient Property and to satisfy the requirements of
California Civil Code Section 1468, and the covenants of Grantee set forth in
this Agreement are intended to run with the Dominant Property for the benefit
of the Servient Property and to satisfy the requirements of California Civil
Code Section 1468.
Exhibit "N"
Page 3 of 11
<PAGE>
IN WITNESS WHEREOF, Grantor and Grantee have executed this
Agreement as of the day and year first above written.
TRINET ESSENTIAL FACILITIES XII, INC.,
a Maryland corporation
By:
----------------------------------------
----------------------------------------
(Printed Name and Title)
By:
----------------------------------------
----------------------------------------
(Printed Name and Title)
CERTIFIED GROCERS OF CALIFORNIA, LTD.,
a California corporation
By:
----------------------------------------
----------------------------------------
(Printed Name and Title)
By:
----------------------------------------
----------------------------------------
(Printed Name and Title)
Exhibit "N"
Page 4 of 11
<PAGE>
STATE OF CALIFORNIA )
)ss.
COUNTY OF_____________________)
On___________________, 1994, before me,
________________________________ , Notary Public in and for said
County and State, personally appeared
- ------------------------------------------------------------------------------,
personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their signature(s)
on the instrument the person(s), or the entity upon behalf of which the
person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature
--------------------------
STATE OF CALIFORNIA )
)ss.
COUNTY OF_____________________)
On___________________, 1994, before me,
________________________________ , Notary Public in and for said
County and State, personally appeared
- ------------------------------------------------------------------------------,
personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their signature(s)
on the instrument the person(s), or the entity upon behalf of which the
person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature
--------------------------
Exhibit "N"
Page 5 of 11
<PAGE>
STATE OF CALIFORNIA )
)ss.
COUNTY OF_____________________)
On___________________, 1994, before me,
________________________________ , Notary Public in and for said
County and State, personally appeared
- ------------------------------------------------------------------------------,
personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their signature(s)
on the instrument the person(s), or the entity upon behalf of which the
person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature
--------------------------
STATE OF CALIFORNIA )
)ss.
COUNTY OF_____________________)
On___________________, 1994, before me,
________________________________ , Notary Public in and for said
County and State, personally appeared
- ------------------------------------------------------------------------------,
personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their signature(s)
on the instrument the person(s), or the entity upon behalf of which the
person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature
--------------------------
Exhibit "N"
Page 6 of 11
<PAGE>
EXHIBIT "A-1"
(DESCRIPTION OF SERVIENT PROPERTY)
PARCEL 1
Parcels 2 and 3 of Parcel Map No. 11171, in the City of Commerce, in the
County of Los Angeles, State of California, as per map filed in Book 113,
Page 7 of Parcel Maps, in the Office of the County Recorder of said County.
Excepting therefrom that portion of Parcel 3 described as follows:
Beginning at the most westerly corner of said Parcel 3; thence along the
northwesterly line of said Parcel north 22 DEG. 23' 00" east 361.13 feet; thence
leaving said northwesterly line south 67 DEG. 37' 12" east 396.81 feet to a
point on the southeasterly line of said Parcel 3; said point being distant
north 22 DEG. 16' 55" east 360.65 feet from the most southerly corner of said
Parcel; thence along said southeasterly line south 22 DEG. 16' 55" west 360.65
feet to the most southerly corner of said Parcel; thence along the southwesterly
line of said Parcel north 67 DEG. 41' 22" west 397.44 feet to the point of
beginning.
Also excepting the entire mineral estate in the property described lying not
less than 500 feet beneath the natural surface; for the purposes of this
reservation the mineral estate shall include all substances which have been
discovered or which may in the future be discovered upon or under the
property described, which are now or may in the future be valuable, and which
are now or may be in the future enjoyed through extraction from the property
described; without limiting the generality of the foregoing, the mineral
estate shall include all forms of geothermal energy, all coal, all gases, all
hydrocarbon substances, all fissionable materials, all metallic minerals, and
all non-metallic minerals.
Notwithstanding ownership of the mineral estate, neither grantor nor its
successors or assigns shall have the right to enter upon the surface of the
property described for the purpose of extracting any constituents of the
mineral estate. Grantor reserves the right, on behalf of itself, its
successors and assigns, (1) to extract the constituents of the mineral estate
from the property described by means of wells, shafts, tunnels or other
subsurface accesses which may be constructed, drilled or dug on or from other
land and which may penetrate into the property described below a depth of 500
feet, and (2) to excavate, construct, maintain and operate subsurface
facilities below a depth of 500 feet of the property described for the
extraction of the constituents of the mineral estate so long as the
subsurface facilities do not unreasonably interfere with the use and
enjoyment of the surface estate in the property described, as reserved by
Santa Fe Pacific Realty
Exhibit "A-1"
Page 1 of 2
<PAGE>
Corporation, successor by merger with Santa Fe Land Improvement Company, in
deed recorded August 15, 1989 as Instrument No. 89-1309080, Official Records.
PARCEL 2
An easement for landscaping, utilities and open space on, over and across a
strip of land 10.00 feet in width by 174.25 feet in length as shown an Parcel
Map No. 11171 as per map filed in Book 113, Page 7 of Parcel Maps.
Exhibit "A-1"
Page 2 of 2
<PAGE>
EXHIBIT "A-2"
(DESCRIPTION OF ROADWAY)
The Northwesterly 25.00 feet of the southeasterly 32.00 feet of Lot A as shown
on the record of survey map dated April 15, 1992, recorded in Book 139, Pages 23
and 24 of Records of Survey, Official Records, County of Los Angeles, State of
California, which map was also recorded as Exhibit "All to Certificate of
Compliance and Lot Line Adjustment 94-4, recorded September 13, 1994 as
Instrument No. 94-1685316 in such Official Records.
Exhibit "A-2"
Page 1 of 1
<PAGE>
EXHIBIT "B"
(DESCRIPTION OF DOMINANT PROPERTY)
That portion of Lot 74 of the subdivision of the Rancho Laguna, in the City of
Commerce, in the County of Los Angeles, State of California, as per map attached
to and made a part of the Decree of Partition recorded in Book 6387, Page 1 of
Deeds, in the Office of the County Recorder of said County, described as
follows:
Beginning at a point in the southwesterly line of Lot 74, said southwesterly
line also being the norteasterly line of the 100 feet right-of-way of the
Atchison, Topeka and Santa Fe Railway, as shown on said map, said point being
distant north 67 DEG 42' 45" west 350.84 feet from the most southerly corner of
said Lot 74, said point also being the most southerly corner of that certain
parcel of land described in the deed to Fluor Corporation Ltd. recorded March
8, 1940 as Instrument No. 546 in Book 17373, Page 4, Official Records of said
County; thence along said northeasterly line north 67 DEG 42' 45'' west 72.16
feet to a point, said last mentioned point being distant thereon south 67 DEG
42' 45" east 1352 feet from the intersection of said northeasterly line and with
the easterly line of Atlantic Avenue (40 feet wide) as widened by deed recorded
in Book 6256, Page 390 of Official Records of said County; thence north 32 DEG
42' 45" west 61.02 feet to a line that is parallel with and distant 35 feet
northeasterly (measured at right angles) from said northeasterly line; thence
along said parallel line north 67 DEG 42' 45" west to the intersection of the
southwesterly prolongation of that certain coarse in the southeasterly boundary
of said deed to Fluor Corporation Ltd. as described as having a bearing and
length of "south 22 DEG 17' 15" west 356.77 feet"; thence along said
prolongation north 22 DEG 17' 15" east to the southwesterly terminus of said
certain course of "south 22 DEG 17' 15" west 356.77 feet"; said southwesterly
terminus also being the beginning of a tangent curve concave easterly and having
a radius of 387.85 feet; thence along said curve and along said southeasterly
boundary as follows: southerly along said curve an arc distance 174.65 feet,
south 3 DEG 30' 47" east 331.32 feet, and southeasterly along a tangent curve
concave northeasterly and having a radius of 277.94 feet an arc distance of
235.72 feet to the point of beginning.
Together with a portion of Parcel 3 of Parcel Map No. 11171, in the City of
Commerce, in the County of Los Angeles, State of California, as per map filed in
Book 113, Page 7 of Parcel Maps, in the Office of the County Recorder of said
County, described as follows:
Beginning at the most westerly corner of said Parcel 3; thence along the
northwesterly line of said Parcel north 22 DEG 23' 00" east 361.13 feet; thence
leaving said northwesterly line south 67 DEG 37' 12" east 396.81 feet to a point
on the southeasterly
Exhibit "B"
Page 1 of 2
<PAGE>
line of said Parcel 3; said point being distant north 22 DEG 161 55" east 360.65
feet from the most southerly corner of said Parcel; thence along said
southeasterly line south 22 DEG 161 55" west 360.65 feet to the most southerly
corner of said Parcel; thence along the southwesterly line of said Parcel north
67 DEG 411 22" west 397.44 feet to the point of beginning.
Exhibit "B"
Page 2 of 2
<PAGE>
CERTIFICATE OF NON-FOREIGN STATUS
Section 1445 of the Internal Revenue Code provides that a transferee of a
U.S. real property interest must withhold tax if the transferor is a foreign
person. To inform the transferee that withholding of tax is not required upon
the disposition of a U.S. real property interest by CERTIFIED GROCERS OF
CALIFORNIA, LTD., a California corporation ("Seller"), the undersigned hereby
certifies the following on behalf of Seller:
1. Seller is not a foreign corporation, foreign partnership, foreign trust
or foreign estate (as those terms are defined in the Internal Revenue Code and
Income Tax Regulations);
2. Seller's U.S. employer identification number is ; and
-----------
3. Seller's office address is 2601 S. Eastern Avenue, Los Angeles,
California 90040.
Seller understands that this certification may be disclosed to the Internal
Revenue Service by the transferee and that any false statement contained herein
could be punished by fine, imprisoranent, or both.
Under penalties of perjury I declare that I have examined this certificate
and to the best of my knowledge and belief it is true, correct and complete, and
I further declare that I have authority to sign this document on behalf of
Seller.
Dated:_______, 1994.
SELLER: CERTIFIED GROCERS OF CALIFORNIA, LTD.,
a California corporation
By:__________________________________________________________
Its:______________________________________________________
EXHIBIT O
<PAGE>
AGREEMENT RE LETTER OF CREDIT
This Agreement re Letter of Credit ("Agreement"), dated as of November
___, 1994, executed by TriNet Essential Facilities XII, Inc., a Maryland
corporation ("Landlord"), and Certified Grocers of California, Ltd., a
California corporation ("Tenant"), is entered into with reference to that
certain Lease of even date herewith (the "Leasel"), by and between Landlord and
Tenant. Capitalized terms used and not otherwise defined herein shall have the
meanings set forth for them in the Lease. This Agreement is also entered into
with reference to the following facts:
A. Pursuant to the Lease, Tenant is leasing from Landlord certain
real and personal property which Landlord is acquiring from Tenant pursuant to a
Purchase Agreement dated November ___ , 1994 (the "Purchase Agreement").
B. As conditions to the closing of the sale (the "Sale") described in
the Purchase Agreement, Landlord has required (1) the concurrent execution and
delivery of this Agreement, and (2) the issuance by Bankers Trust Company and
the delivery to Landlord, of a letter of credit in the amount of $1,500,000 (the
"Initial Letter of Credit") in substantially the form of Exhibit "A" hereto
(subject to changes to such form required by the issuing bank which do not
materially impair Landlord's rights and interests with respect thereto). As
used in this Agreement, "Letter of Credit" means the Initial Letter of Credit
and each subsequent letter of credit delivered to Landlord in substitution
therefor in accordance with this Agreement.
In consideration of the foregoing, and for other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. ISSUANCE AND RENEWAL OF LETTERS OF CREDIT. Concurrently with the
closing of the Sale, Tenant shall deliver to Landlord the Initial Letter of
Credit. Tenant shall maintain each Letter of Credit delivered pursuant to this
Agreement in force (or provide a replacement Letter of Credit to remain in
force) until the earlier of (i) the applicable time specified in this Agreement,
as the case may be, or (ii) the seventh (7th) anniversary of the Commencement
Date. It is anticipated that each Letter of Credit will automatically renew for
successive one (1) year terms subject to the bank issuing such Letter of Credit
(the "Issuing Bank") giving written notice of nonrenewal at least sixty (60)
days prior to the then expiration date of the respective Letter of Credit, and
Tenant shall be required to provide a replacement Letter of Credit on the
date (each, a "Renewal Date") not less than
EXHIBIT P
-1-
<PAGE>
thirty (30) days prior to the then expiration date of the expiring Letter of
Credit (as provided hereinbelow). Not less than thirty (30) days prior to the
expiration date of any Letter of Credit, Tenant shall deliver to Landlord a new
Letter of Credit (or evidence of the extension of the expiration date of the
existing Letter of Credit) so that the expiration date of the new or extended
Letter of Credit shall be a date at least twelve (12) months after the
expiration date of the previous Letter of Credit. Contemporaneously with the
delivery of any new Letter of Credit to Landlord, Landlord shall surrender to
Tenant the Letter of Credit being replaced. Each Letter of Credit shall permit
partial drawings, shall be assignable, and shall provide that funds thereunder
shall be available upon a sight draft and a certificate signed by a senior
executive officer of the beneficiary of the Letter of Credit stating that
Landlord is entitled to draw thereunder.
2. DRAWING UPON NONRENEWAL. If the Issuing Bank gives written notice of
nonrenewal at least sixty (60) days prior to the then expiration date of the
Letter of Credit and Tenant fails to deliver such new Letter of Credit at least
thirty (30) days in advance of such expiration date, then Landlord shall be
entitled to draw upon the Letter of Credit in full and hold the drawn funds in
Landlord's own name as secured party with respect to a security interest hereby
granted by Tenant, as cash collateral, in a separate interest-bearing account
(the "Draw Account") established with a financial institution satisfactory to
Tenant, in which event Landlord shall have the right to draw upon and retain
such funds upon the same conditions as set forth in Articles 3 and 4 hereof.
Interest earned on such funds shall be disbursed on each anniversary of the date
the funds are deposited in the Draw Account as follows: (a) first, to pay all
reasonable costs charged by the applicable financial institution to establish
and maintain the Draw Account ("Account Costs"); and (b) second, the balance of
such interest to Tenant. In the event that Landlord draws the entire balance of
the Letter of Credit in accordance with this Article 2, Tenant shall be deemed
to have timely cured the default resulting from its failure to deliver a new
Letter of Credit, and Tenant shall have no further right or obligation to
provide an additional Letter of Credit.
3. DRAWING UPON MONETARY DEFAULT. In the event that Tenant fails to pay
any Rent or other amount owing to Landlord under the Lease when due (after the
expiration of any applicable cure period), Landlord may draw (in whole or in
part, as applicable) under the Letter of Credit an amount equal to such
delinquent amount, together with any late charges and interest to which
Landlord may be entitled under the Lease with respect to such delinquent amount.
-2-
<PAGE>
4. DRAWING UPON LEASE TERMINATION. In the event that Landiord terminates
the Lease as the result of an Event of Default thereunder, the following shall
apply:
4.1 In the event that, at the time of such Lease termination,
Tenant has not completed (and/or has not fully paid for) the Fourth Floor Work,
Landlord shall be entitled to draw up to $500,000 under the Letter of Credit to
pay (a) the costs to complete the Fourth Floor Work and (b) any unpaid
construction costs with respect to portions of the Fourth Floor Work completed
by Tenant.
4.2 Until the earlier of (i) the commencement of the term of a
new lease (or leases) of the entire Premises by one or more third parties or
(ii) the determination, by a court of competent jurisdiction, of the damages to
which Landlord is entitled as a result of Tenant's default, Landlord shall be
entitled to draw upon the Letter of Credit, on or after the first day of each
calendar month, in the amount of all Rent that would have been due under the
Lease during such calendar month in the event that the Lease had not been
terminated and any other amounts then owing by Tenant to Landlord, which amounts
shall be deposited by Landlord in the Draw Account and held in accordance with
this Agreement.
4.3 Following the determination, by a court of competent
jurisdiction, of the damages to which Landlord is entitled as a result of
Tenant's default: (a) Landlord shall be entitled to apply any amounts then held
by Landlord in the Draw Account to any unpaid darages which Landlord is so
awarded (and Landlord shall promptly withdraw and deliver to Tenant the amount,
if any, by which the funds then held in the Draw Account exceed the sum of (i)
such unpaid damages and (ii) any outstanding Account Costs); and (b) to the
extent that the funds, if any, then held in the Draw Account are exceeded by the
sum of (i) such unpaid damages and (ii) any outstanding Account Costs, Landlord
shall be entitled to draw upon the Letter of Credit in the amount of such
excess, for application against such unpaid damages and Account Costs.
4.4 It is understood and agreed that the amounts available in the
Draw Account and/or under the Letter of Credit from time to time are not
intended to limit, liquidate or augment any damages to which Landlord may be
entitled as a result of Tenant's default. In the event that the amount of any
unpaid damages that Landlord is awarded by a court of competent jurisdiction as
a result of Tenant's default (together with any outstanding Account Costs)
exceed the sum of (a) any funds then held in the Draw Account and (b) any amount
available to be drawn under the Letter of Credit, Tenant shall immediately pay
the amount of any such excess damages to Landlord. In the event that the amount
of any damages that Landlord is so awarded are subsequently reduced on
appeal, and
-3-
<PAGE>
in the event that Landlord has applied Letter of Credit and/or Draw Account
proceeds against the damages earlier awarded in amounts in excess of the amount
of the reduced award, Landlord shall immediately pay the amount of any such
excess to Tenant.
5. REDUCTIONS IN LETTER OF CREDIT AMOUNT. Upon the fourth (4th)
anniversary of the Commencement Date, the required amount of the Letter of
Credit shall be reduced by $375,000, and such required amount shall be reduced
by an additional $375,000 upon each subsequent anniversary of the Commencement
Date until, upon the seventh (7th) anniversary of the Commencement Date,
Tenant's obligation to maintain a Letter of Credit in effect shall terminate.
Thus, the required Letter of Credit amount following the fourth (4th) through
sixth (6th) anniversaries of the Commencement Date shall be as follows:
Anniversary Required Amount
----------- ----------------
4th 1,125,000
5th 750,000
6th 375,000
In the event that, upon any such anniversary, the Draw Account exists and the
balance of such Draw Account (after deduction of any outstanding Account Costs)
exceeds the new required Letter of Credit amount, Landlord shall immediately
withdraw funds in the amount of such excess from the Draw Account and deliver
such funds to Tenant. Upon the seventh (7th) anniversary of the Commencement
Date, any funds then held in the Draw Account (after deduction of any
outstanding Account Costs) shall be withdrawn by Landlord and delivered to
Tenant.
6. TERMINATION OF LETTER OF CREDIT REQUIREMENT. Notwithstanding the
foregoing, Tenant's obligation to maintain a Letter of Credit in effect shall
terminate in the event that, for any two consecutive fiscal years of Tenant
following the fiscal year which ended on September 3, 1994, (a) Tenant's
consolidated gross revenues equal or exceed $1,800,000,000, and (b) Tenant's net
operating income (prior to deduction of patronage dividends) equals or exceeds
$12,500,000. In such event, (i) Landlord shall promptly take all actions, and
execute and deliver all documents, reasonably required by Tenant to obtain the
cancellation of any Letter of Credit which is then in effect, and (ii) in the
event that the Draw Account then exists, all funds then held in the Draw Account
(after deduction of any outstanding Account Costs) shall be withdrawn by
Landlord and delivered to Tenant.
7. LETTER OF CREDIT FEES. Landlord shall reimburse Tenant from time to
time, within five (5) business days following Tenant's demand, for all issuance
fees, letter of credit fees, renewal fees and similar fees (collectively,
"Letter of Credit Fees") charged by any Issuing Bank with
-4-
<PAGE>
respect to the issuance or renewal of any Letter of Credit; provided, however,
that Landlord shall not be obligated to reimburse Tenant with respect to Letter
of Credit Fees to the extent that they exceed 2% of the face amount of any
Letter of Credit per annum. Landlord acknowledges that the late payment by
Landlord of any such reimbursement amount will cause Tenant to incur costs and
expenses, the exact amount of which is extremely difficult and impractical to
fix. Such costs and expenses will include administrative and collection costs
and processing and accounting expenses. Therefore, if any such reimbursement
owed to Tenant is not received by Tenant within three (3) business days after
Tenant gives written notice to Landlord that Landlord has failed to make such
payment when due, Landlord shall immediately pay to Tenant a late charge equal
to six percent (6%) of such delinquent amount. Landlord and Tenant agree that
such late charge represents a reasonable estimate of such costs and expenses and
is fair compensation to Tenant for the loss suffered by Landlord's failure to
make timely payment. All amounts of money payable by Landlord to Tenant
hereunder, if not paid when due, shall bear interest from the due date until
paid at the Prime Rate plus five percent (5%) per annum.
8. ATTORNEYS' FEES. In the event that any litigation shall be commenced
concerning this Agreement by any party hereto, the party prevailing in such
litigation shall be entitled to recover, in addition to such other relief as may
be granted, its reasonable costs and expenses, including without limitation
reasonable attorneys' fees and court costs, whether or not taxable, as awarded
by a court of competent jurisdiction.
9. NOTICES. All notices, demands, approvals and other communications
provided for in this Agreement shall be in writing and be delivered to the
appropriate party at its address as follows:
If to Landlord:
TriNet Essential Facilities XII, Inc.
Four Embarcadero Center, Suite 3150
San Francisco, California 94111
Attention: Mr. James R. Reinhart
with a copy to:
TriNet Corporate Realty Trust, Inc.
7406 Fullerton Street, Suite 105
Jacksonville, Florida 32256
Attention: Ms. JoAnn Chitty
-5-
<PAGE>
If to Tenant:
Certified Grocers of California, Ltd.
2601 South Eastern Avenue
Los Angeles, California 90040
Attention: Corporate Secretary
Addresses for notice may be changed from time to time by written notice to all
other parties. All communications shall be effective when actually received;
provided, however, that nonreceipt of any communication as the result of a
change of address of which the sending party was not notified or as the result
of a refusal to accept delivery shall be deemed receipt of such communication.
10. MISCELLANEOUS. This Agreement shall bind, and shall inure to the
benefit of, the successors and assigns of the parties. This document may be
executed in counterparts with the same force and effect as if the parties had
executed one instrument, and each such counterpart shall constitute an original
hereof. This Agreement shall be governed by the laws of the State of California
(without regard to any choice of law provisions thereof).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first written above.
"Landlord":
TRINET ESSENTIAL FACILITIES XII, INC.,
a Maryland corporation
By:
------------------------------
------------------------------
(Printed Name and Title)
"Tenant":
CERTIFIED GROCERS OF CALIFORNIA, LTD.,
a California corporation
By:
------------------------------
------------------------------
(Printed Name and Title)
-6-
<PAGE>
EXHIBIT "A"
(FORM OF LETTER OF CREDIT)
[Issuing Bank Letterhead]
________________, 19__
IRREVOCABLE STANDBY LETTER OF CREDIT NO._______________
BENEFICIARY: APPLICANT:
Amount: $__________________
Expiry Date: ______________________, 19___
Ladies and Gentlemen:
By order of and for the account of _______________ (the "Applicant"),
we (the "Bank") hereby establish this Irrevocable Standby Letter of Credit (the
"Letter of Credit") in the aggregate amount of $ _____________ in your favor.
Funds under this Letter of Credit are available to you or the
transferee of this Letter of Credit (you, or such transferee during the period
such transferee has possession of this Letter of Credit, being referred to
herein as "Beneficiary") against Beneficiary's sight draft(s) drawn on us, at
our office at ________________________________________________, mentioning our
Letter of Credit No. ___________ and accompanied by the original of this Letter
of Credit and Beneficiary's signed statement, in the form of Annex A attached
hereto, that the Beneficiary is entitled to draw under this Letter of Credit.
We engage with you that all drafts drawn by Beneficiary under and in
compliance with this Letter of Credit will be duly honored by us.
Partial draws are permitted under this Letter of Credit. Upon any
partial draw, this Letter of Credit shall immediately be returned to the
Beneficiary.
This Letter of Credit shall expire on ________________, 19__;
provided, however, that, on ________________, 19__ and each anniversary thereof,
this Letter of Credit shall automatically be extended for successive periods of
one year until not later than ________________, 2001; and provided further that
this Letter of Credit shall not be so extended if the Bank
Exhibit "A"
Page 1 of 4
<PAGE>
in its sole discretion gives to you and the Beneficiary (if different), and to
the Applicant, sixty (60) days' written notice prior to the Expiration Date (as
hereinafter defined) then in effect that the Bank will not renew this Letter of
Credit for any additional period. It is understood that if, upon such notice of
nonrenewal, the Applicant fails to deliver to the Beneficiary a replacement
letter of credit in accordance with that certain Agreement re Letter of Credit
dated November , 1994 between the Beneficiary and the Applicant, this Letter of
Credit may be drawn upon by the Beneficiary at any time within thirty (30) days
prior to the Expiration Date.
This Letter of Credit shall automatically expire at 5:00 P.M. Pacific
time on the date (the "Expiration Date") which is the earlier of (i)
________________, 19__, or the date to which expiration has been extended
pursuant to the immediately preceding paragraph hereof; (ii) the date on which
the Bank shall have honored Beneficiary's draft or drafts presented hereunder in
the full amount hereof; and (iii) the date when Beneficiary surrenders this
Letter of Credit to the Bank (it being understood that presentation of this
Letter of Credit for purposes of transfer of or a partial draw under this Letter
of Credit shall not constitute a surrender of this Letter of Credit).
All documents presented to the Bank in connection with any drawing,
and all other communications and notices to the Bank with respect to this Letter
of Credit, shall be in writing and delivered to the Bank in person, by
registered or certified mail or via express delivery service, at the address set
forth in the second paragraph of this Letter of Credit, and shall specifically
refer to ________________ Bank Irrevocable Standby Letter of Credit No
____________.
This Letter of Credit is transferable by the Beneficiary in its
entirety from time to time, in each case upon presentation to the Bank of a
Certificate of Transfer in the form of Annex B attached hereto.
This Letter of Credit is irrevocable. This Letter of Credit is
subject to the Uniform Customs and Practices for Documentary Credits, 1993
Revision, International Chamber of Commerce Publication No. 500.
Very truly yours,
___________________________________
(Authorized Signature)
Exhibit "A"
Page 2 of 4
<PAGE>
THIS FORMS AN INTEGRAL PART OF OUR IRREVOCABLE STANDBY LETTER OF CREDIT
NO.__ DATED _____________ 19__
ANNEX A
TO IRREVOCABLE STANDBY
LETTER OF CREDIT
CERTIFICATE OF DRAWING
The undersigned hereby certifies to [Issuing Bank] (the "Bank"), with
reference to the Bank's Irrevocable Standby Letter of Credit No._____ (the
"Letter of Credit," the terms defined therein and not otherwise defined
herein being used herein as therein defined) in favor of _________, that:
1. He/she is a duly authorized officer of the undersigned.
2. The undersigned is the Beneficiary under the Letter of Credit.
3. The undersigned is entitled to draw under the Letter of Credit.
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Certificate as of the ____ day of ________________, 19__.
By ____________________________________
Name ___________________________________
Title __________________________________
Exhibit "A"
Page 3 of 4
<PAGE>
ANNEX B
TO IRREVOCABLE STANDBY
LETTER OF CREDIT
CERTIFICATE OF TRANSFER
________________, 19__
_______________________
_______________________
_______________________
Attn: Letter of Credit Department
Ladies and Gentlemen:
The undersigned authorized officer of the beneficiary of your
Irrevocable Standby Letter of Credit No. ___ (the "Letter of Credit") hereby
irrevocably instructs you to transfer the Letter of Credit in its entirety to:
_______________________________
(Name of transferee)
_______________________________
(Address)
who shall upon your transfer of the Letter of Credit have the sole rights as
beneficiary thereof. This request for transfer complies with the requirements
of the Letter of Credit pertaining to transfers.
The original of the Letter of Credit is returned herewith, and in
accordance therewith we ask you to endorse the transfer on the reverse thereof
and deliver it directly to the above-named transferee together with your
customary notice of transfer.
By this transfer, all rights of the undersigned beneficiary in the
Letter of Credit are transferred to the above-named transferee, who shall
hereafter have the sole rights as beneficiary thereof.
By ________________________________
Name ______________________________
Title _____________________________
Exhibit "A"
Page 4 of 4
<PAGE>
EXHIBIT 22.1
SUBSIDIARIES OF THE REGISTRANT
As of September 2, 1995, the Company's subsidiaries, all wholly-owned and
incorporated in California (except where noted otherwise) are:
Grocers Equipment Co.
Grocers and Merchants Insurance Service, Inc.
(1)Grocers Capital Company
Springfield Insurance Company Limited (incorporated in Bermuda)
Grocers Specialty Company
(2)Grocers Development Center, Inc.
Grocers and Merchants Management Company
Preferred Public Storage Company
Crown Grocers, Inc.
Grocers General Merchandise Company
(3)Springfield Insurance Company
(4)Hawaiian Grocery Stores Limited (incorporated in Hawaii)
(5)Kauai Tobacco, Inc. (incorporated in Hawaii)
- ---------------
(1) Outstanding capital shares are owned by Grocers Equipment Co. (67.63%)
and the Registrant (32.37%).
(2) Outstanding capital shares are owned by Grocers Equipment Co.
(3) Outstanding capital shares are owned by Grocers and Merchants Insurance
Services, Inc.
(4) Outstanding capital shares are owned by Grocers Specialty Company.
(5) Outstanding capital shares are owned by Hawaiian Grocery Stores Limited.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-02-1995
<PERIOD-START> SEP-04-1994
<PERIOD-END> SEP-02-1995
<CASH> 7,329
<SECURITIES> 22,051
<RECEIVABLES> 108,061
<ALLOWANCES> (3,812)
<INVENTORY> 149,432
<CURRENT-ASSETS> 268,649
<PP&E> 148,285
<DEPRECIATION> 76,469
<TOTAL-ASSETS> 398,603
<CURRENT-LIABILITIES> 160,964
<BONDS> 129,686
<COMMON> 61,558
0
0
<OTHER-SE> 10,602
<TOTAL-LIABILITY-AND-EQUITY> 398,603
<SALES> 1,822,804
<TOTAL-REVENUES> 0
<CGS> 1,653,660
<TOTAL-COSTS> 1,795,607
<OTHER-EXPENSES> (509)
<LOSS-PROVISION> 0
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<INCOME-PRETAX> 875
<INCOME-TAX> 106
<INCOME-CONTINUING> 769
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 769
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
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