UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
__________________________________
DATE OF REPORT
(DATE OF EARLIEST EVENT REPORTED): MAY 28, 1996
CERTIFIED GROCERS OF CALIFORNIA, LTD.
(Exact Name of Registrant as Specified in Charter)
CALIFORNIA
(State or Other 0-10815 95-0615250
Jurisdiction of (Commission (IRS Employer
Incorporation) File Number) Identification No.)
2601 S. EASTERN AVENUE
LOS ANGELES, CALIFORNIA 90040
(Address of Principal Executive Offices)
REGISTRANT'S TELEPHONE NUMBER,
INCLUDING AREA CODE: (213) 723-7476
Page 1 of 38 <PAGE>
Exhibit Index on Page 9
Item 2. ACQUISITION OR DISPOSITION OF ASSETS
Pursuant to a Stock Purchase Agreement dated as of
May 28, 1996, by and between Grocers Specialty Company, a
California corporation and a wholly-owned subsidiary of the
Registrant ("GSC"), and RHL Management Group, Inc., a Delaware
corporation ("RHL"), GSC sold to RHL 10,000 shares of Common Stock
of Hawaiian Grocery Stores, Limited, a Hawaiian corporation
("HGS"), representing all the issued and outstanding Common Stock
of HGS. GSC retained its ownership of 1,000 shares of preferred
stock of HGS. In connection with this transaction, GSC was
granted certain rights of first refusal, co-sale and pre-emptive
rights with respect to the capital stock of HGS. In addition, GSC
holds a warrant to purchase shares equal to 20% of the Common
Stock of HGS on a fully-diluted basis at an aggregate exercise
price of $500,000. HGS executed a secured promissory note in
favor of GSC in the amount of $5,300,000, which amount represents
prior indebtedness of HGS to the Registrant and its affiliates.
Additionally, the Registrant and HGS entered into a supply
agreement pursuant to which the Registrant has agreed to sell food
products and nonfood items to HGS. The consideration paid in
connection with the above-described transaction consisted of cash
in the amount of $2,425,387, which amount was determined by arms'
length bargaining.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS
(a) Not applicable.
(b) Pro Forma Financial Information.
The following unaudited pro forma condensed consolidated
balance sheet was prepared assuming the transaction was
consummated as of March 2, 1996, and the unaudited pro forma
condensed consolidated statements of operations for the year ended
September 2, 1995 and for the 26 weeks ended March 2, 1996, were
prepared assuming the transaction was consummated as of
September 4, 1994 and September 3, 1995, respectively. The
information presented below should be read in conjunction with the
other financial information of the Registrant included in the 1995
annual report on Form 10-K and the March 2, 1996 quarterly report
on Form 10-Q. The pro forma information is presented for
illustrative purposes only and is not necessarily indicative of
actual results that would have been achieved had these
transactions been consummated on such dates, and are not
necessarily indicative of future results.
Page 2 of 38 <PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
AS OF MARCH 2, 1996
(dollars in thousands)
ASSETS Historical Adjustments Pro Forma
------------------------------------
Current:
Cash and cash equivalents $ 8,526 $ 1,831 <Fa> $ 10,357
Accounts and notes receivable 120,460 (5,430) <Fb> 115,030
Inventories 138,132 (5,859) <Fc> 132,273
Prepaid expenses 5,196 (172) <Fc> 5,024
Deferred taxes 2,850 0 2,850
----------------------------------
Total current assets 275,164 (9,630) 265,534
Properties, at cost 151,201 (1,638) <Fc> 149,563
Less, accumulated depreciation (79,754) 1,208 <Fc> (78,546)
-----------------------------------
71,447 (430) 71,017
Investments 26,359 1,000 <Fd> 27,359
Notes receivable 26,660 5,300 <Fe> 31,960
Other assets 11,657 (72) <Fc> 11,585
----------------------------------
TOTAL ASSETS $411,287 $ (3,832) $407,455
==================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current:
Accounts payable $ 85,451 $ (3,645) <Fc> $ 81,806
Accrued liabilities 52,742 (553) <Fc> 52,189
Notes payable 11,642 0 11,642
Patrons' excess deposits and
estimated patronage dividends 15,267 0 15,267
----------------------------------
Total current liabilities 165,102 (4,198) 160,904
Notes payable, due after one year 138,244 0 138,244
Long-term liabilities 13,334 0 13,334
Commitments and contingencies
Patrons' deposits and certificates:
Patrons' required deposits 17,129 0 17,129
Subordinated patronage dividend
certificates 6,553 0 6,553
Shareholders' equity:
Class A Shares 5,350 0 5,350
Class B Shares 53,431 0 53,431
Retained earnings 12,110 366 <Ff> 12,476
Net unrealized gain on appreciation
of investments 34 0 34
Total shareholders' equity 70,925 366 71,291
----------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $411,287 $ (3,832) $407,455
=================================
Page 3 of 38 <PAGE>
[FN]
<Fa> Gross sales proceeds of $2.4 million, less cash disposed of
$0.6 million.
<Fb> Decrease in trade receivables of $4.6 million related to HGS and
$0.8 million, net related to the parent receivables.
<Fc> Net book value of assets/liabilities sold related to HGS.
<Fd> Preferred stock issued prior to the sale of HGS.
<Fe> Note receivable from the sale of HGS.
<Ff> Gain on sale of HGS of $366,000.
Page 4 of 38 <PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
26 WEEKS ENDED MARCH 2, 1996
(dollars in thousands)
Historical Adjustments Pro Forma
-----------------------------------
Net sales $ 971,981 $ (29,630) <Fa> $942,351
Costs and expenses:
Cost of sales 886,117 (27,666) <Fa> 858,451
Distribution, selling and
administrative 68,266 (2,066) <Fa> 66,200
Operating income 17,598 102 17,700
Interest expense (7,780) - (7,780)
Other income, net 25 <Fb> 25
-----------------------------------
Earnings before patronage dividends and
provision for income taxes 9,818 127 9,945
Declared patronage dividends (6,556) - (6,556)
-----------------------------------
Earnings before income tax provision 3,262 127 3,389
Provision for income taxes 1,160 46 <Fc> 1,206
--------------------------------
Net earnings $ 2,102 $ 81 $ 2,183
===================================
[FN]
<Fa> The pro forma adjustments for sales, cost of sales, and distribution
expenses reflect the elimination of HGS sales in the consolidated
statements of earnings, offset by expected sales, cost of sales, and
distribution expenses arising from Registrant's sales to HGS pursuant
to the HGS purchase agreement.
<Fb> Dividend income from preferred stock investment in HGS.
<Fc> Tax effect of adjustments a through b at statutory rate.
Page 5 of 38 <PAGE>
CERTIFIED GROCERS OF CALIFORNIA, LTD. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
YEAR ENDED SEPTEMBER 2, 1995
(dollars in thousands)
Unaudited
-----------------------
1995 1995
(52 Weeks) (52 Weeks)
Historical Adjustments Pro Forma
-------------------------------------
Net sales $1,822,804 $(54,912) <Fa> $1,767,892
Costs and expenses:
Cost of sales 1,653,660 (50,546) <Fa> 1,603,114
Distribution, selling and
administrative 141,947 (4,169) <Fa> 137,778
Operating income 27,197 (197) 27,000
Interest expense (15,260) 0 (15,260)
Other income, net 509 50 <Fb> 559
------------------------------------
Earnings before patronage dividends and
provision for income taxes 12,446 0 12,446
Declared patronage dividends (11,571) (11,571)
------------------------------------
Earnings before income tax provision 875 (147) 728
Provision for income taxes 106 (60) <Fc> 46
------------------------------------
Net earnings $ 769 $ (87) $ 682
====================================
[FN]
<Fa> The pro forma adjustments for sales, cost of sales, and distribution
expenses reflect the elimination of HGS sales in the consolidated
statements of earnings, offset by expected sales, cost of sales, and
distribution expenses arising from Registrant's sales to HGS pursuant
to the HGS purchase agreement.
<Fb> Dividend income from preferred stock investment in HGS.
<Fc> Tax effect of adjustments a through b at statutory rate.
Page 6 of 38 <PAGE>
(c) Exhibits.
Exhibit No. Description of Exhibit
----------- ----------------------
2 Stock Purchase Agreement dated as of May 28, 1996,
by and between Grocers Specialty Company, a
California corporation, and RHL Management Group,
Inc., a Delaware corporation ("Purchase
Agreement"). (Schedules and Exhibits have been
omitted pursuant to Rule 601(b)(2) of
Regulation S-K. Such Schedules and Exhibits are
listed and described in the Purchase Agreement.
Registrant hereby agrees to furnish supplementally
to the Securities and Exchange Commission, upon its
request, any or all such omitted Schedules and
Exhibits.)
Page 7 of 38 <PAGE>
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
CERTIFIED GROCERS OF CALIFORNIA, LTD.
By: /s/ Daniel T. Bane
----------------------------
Daniel T. Bane
Senior Vice President, Finance and
Administration, and Chief Financial
Officer
Dated: June 11, 1996
Page 8 of 38 <PAGE>
INDEX TO EXHIBITS
Sequentially
Exhibit Number Description of Exhibit Numbered Page
-------------- ---------------------- -------------
2 Stock Purchase Agreement dated as of
May 28, 1996, by and between Grocers
Specialty Company, a California
corporation, and RHL Management Group,
Inc., a Delaware corporation
("Purchase Agreement"). (Schedules
and Exhibits have been omitted
pursuant to Rule 601(b)(2) of
Regulation S-K. Such Schedules and
Exhibits are listed and described in
the Purchase Agreement. Registrant
hereby agrees to furnish supple-
mentally to the Securities and
Exchange Commission, upon its request,
any or all such omitted
Schedules and Exhibits.) 10
Page 9 of 38 <PAGE>
EXHIBIT 2
=========
STOCK PURCHASE AGREEMENT
------------------------
This STOCK PURCHASE AGREEMENT (the "Agreement") is
made as of May 28, 1996, by and between (1) RHL Management
Group, Inc., a Delaware corporation ("Buyer"), and (2) Grocers
Specialty Company, a California corporation ("Seller").
RECITALS
--------
A. Hawaiian Grocery Stores, Limited, a Hawaiian
corporation (the "Company"), is a wholesale distributor of food
products and nonfood items to independent and chain retail
grocery markets in the State of Hawaii (the "Business").
B. Seller is the beneficial and record owner of
(1) 10,000 shares ("Shares") of common stock ("Common Stock")
of the Company, (2) a Warrant dated May 18, 1996, to purchase
up to 20% of the Common Stock of the Company (the "Warrant"),
and (3) 1,000 shares of preferred stock ("Preferred Stock") of
the Company.
C. Seller desires to sell and Buyer desires to
purchase the Shares of Common Stock in accordance with the
terms and conditions set forth in this Agreement.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the premises set
forth above and the covenants set forth in this Agreement, and
subject to the terms and conditions stated herein, Buyer and
Seller hereby agree as follows:
ARTICLE 1
PURCHASE AND SALE OF SHARES
---------------------------
1.1 PURCHASE AND SALE OF SHARES. Subject to the
terms and conditions hereinafter set forth, Seller hereby
sells, and Buyer hereby purchases, the Shares of Common Stock
free and clear of all liens and encumbrances (except for
restrictions of general applicability imposed by federal and
state securities laws).
1.2 PURCHASE PRICE. As full payment for the Shares
of Common Stock and for Seller's agreements contained herein,
Buyer hereby agrees to pay to Seller the sum of Two Million
Four Hundred Twenty-Five Thousand Three Hundred Eighty-Seven
United States Dollars (U.S. $2,425,387) (the "Purchase Price"),
by wire transfer of immediately available funds or cashier's
check, on the date of this Agreement. Seller hereby
acknowledges receipt of the Purchase Price.
-1-
Page 10 of 38
1.3 DELIVERY.
(a) Concurrently with receipt of the Purchase
Price, Seller hereby delivers to Buyer a certificate
evidencing the Shares of Common Stock, together with a
stock assignment separate from certificate duly executed
in blank. Buyer hereby acknowledges receipt of such stock
certificate and assignment.
(b) Seller shall also, promptly following the
Closing, deliver to Buyer the original Minute Books, Stock
Books and corporate seal of the Company and all assets of
the Company in the possession of Seller.
(c) The parties hereto agree that all other
actions have been taken, and all other documents have been
duly executed and delivered, which are necessary to
consummate all other transactions contemplated by this
Agreement, other than such actions and documents as are to
be taken or delivered at another date as specifically
provided in this Agreement.
1.4 CLOSING. The closing of the transactions pro-
vided for in this Article 1 (the "Closing") has occurred on the
date of this Agreement at the offices of counsel for Seller,
Sheppard, Mullin, Richter & Hampton LLP, 333 South Hope Street,
48th Floor, Los Angeles, California 90071.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLER
----------------------------------------
Except as otherwise set forth in any Schedule
specified in this Article 2 (such Schedules being hereinafter
collectively referred to as the "Disclosure Schedule"), Seller
hereby represents and warrants to Buyer as follows:
2.1 ORGANIZATION. The Company is a corporation duly
organized, validly existing and in good standing under the laws
of the State of Hawaii and has all requisite corporate power
and corporate authority to own, lease and operate its assets,
properties and Business and to carry on the Business as now
being conducted. The Company is duly licensed or qualified and
in good standing as a foreign corporation in each jurisdiction
in which the failure to so qualify would have a material
adverse effect on the Business, financial condition or results
of operations of the Company taken as a whole.
2.2 ARTICLES OF INCORPORATION AND BYLAWS. Seller
has concurrently delivered to Buyer true and complete copies of
the Articles of Incorporation and Bylaws of the Company as in
effect on the date hereof. The minute books of the Company
-2-
Page 11 of 38
accurately reflect all actions taken at all meetings and by
consents in lieu of meetings of its stockholders, and all
actions taken at all meetings and by consents in lieu of
meetings of its board of directors and all committees.
2.3 CAPITALIZATION. The Company has an authorized
capital stock consisting of 20,000 shares of Common Stock,
without par value, of which 10,000 shares are issued and
outstanding, and 1,000 shares of Preferred Stock, without par
value, of which 1,000 shares are issued and outstanding. All
issued and outstanding shares of Common Stock and Preferred
Stock are validly issued, fully paid and nonassessable. Except
as set forth above in this Section 2.3, there are (a) no shares
of Common Stock, Preferred Stock, or other equity securities of
the Company outstanding, (b) no outstanding options, warrants
or rights to purchase or acquire any Common Stock or Preferred
Stock, except for the Warrant, and (c) except for the Warrant
and the Rights Agreement (as described in Section 4.6 below),
no contracts, commitments, understandings, arrangements or
restrictions by which the Company is bound to issue additional
shares of Common Stock or Preferred Stock or options, warrants
or rights to purchase or acquire any additional shares of
Common Stock or Preferred Stock.
2.4 TITLE TO SHARES. Seller owns (beneficially and
of record) the Shares of Common Stock free and clear of all
liens and encumbrances (other than restrictions of general
applicability imposed by federal or state securities laws), and
upon delivery of the Purchase Price on the date of this Agree-
ment as herein provided, Buyer will acquire good and marketable
title to the Shares of Common Stock, free and clear of any lien
or encumbrance (other than such securities law restrictions).
2.5 SUBSIDIARIES. Except for Kauai Tobacco, Inc.
(which is wholly-owned by the Company), the Company does not
own or control any subsidiary and does not own any interest in
any joint venture, corporation, partnership, or proprietorship.
2.6 FINANCIAL STATEMENTS. Seller has previously
provided to Buyer a copy of the Company's unaudited balance
sheet as of February 3, 1996, and the related statement of
income for the period ended on such date (collectively the
"Financial Statements"). Except for footnotes and normal year-
end adjustments with respect to such statements, the Financial
Statements are complete and correct, were prepared in
accordance with the Company's books and records, and present
fairly the financial condition of the Company.
2.7 NO UNDISCLOSED LIABILITIES. To the best of
Seller's knowledge, the Company has no indebtedness,
obligations, commitments or liabilities, accrued, absolute,
contingent, threatened or otherwise (collectively, the
"Liabilities"), including, but not limited to, employment or
-3-
Page 12 of 38
product liability claims, which in the aggregate are material
to the Business, financial condition or results of operations
of the Company, except (a) Liabilities reserved on the
February 3, 1996, balance sheet of the Company (the "Balance
Sheet"), (b) Liabilities incurred in connection with the
Company's continuing business, in the ordinary course of busi-
ness and consistent with past practice since the date of the
Balance Sheet ("Balance Sheet Date"), (c) Liabilities dis-
closed in the attached Schedule 2.7 or disclosed elsewhere in
the Disclosure Schedule, and (d) Liabilities arising from the
Company's normal obligations under existing contracts.
2.8 ABSENCE OF CERTAIN CHANGES. Since the Balance
Sheet Date, to the best of Seller's knowledge, the Company has
not, except as set forth on Schedule 2.8:
(a) entered into any material transaction, con-
tract or commitment which is not in the ordinary course of
business or which, in the exercise of business judgment,
the Company had reason to believe would be materially
adverse to the Business, financial condition or results of
operations of the Company taken as a whole;
(b) waived or released any rights of material
value, other than in the ordinary course of business;
(c) made or granted any general or specific
wage or salary increase (other than in the ordinary course
of business and consistent with existing policies and
practices), entered into any written employment contract
with any officer or employee, or made any loan of material
value (excluding an advance for normal reimbursable
business expenses) to, or entered into any similar trans-
action with, any officer, director or employee of the
Company;
(d) suffered any material adverse change in its
financial condition or results of operations or in its
assets, properties, Business or operations;
(e) except for the Warrant, issued, sold or
otherwise disposed of any shares of Common Stock of the
Company;
(f) declared or paid any cash dividend on, or
made any cash distribution with respect to, any shares of
the Common Stock of the Company;
(g) made any changes in the accounting methods
or practices of the Company; or
(h) entered into any agreement to do any of the
things described in this Section 2.8.
-4-
Page 13 of 38
2.9 TAXES. The Company has filed all federal, state
and local tax returns and reports required to have been filed
with respect to the operations, income or assets of the
Company. The Company has paid all taxes and assessments which
have become due pursuant thereto or as reflected thereon, and
any interest and penalties with respect thereto, other than
assessments which are being contested by the Company in good
faith by appropriate proceedings diligently pursued.
2.10 CONTRACTS AND OTHER AGREEMENTS. To the best of
Seller's knowledge, except as set forth on Schedule 2.10,
(a) all material contracts, guarantees, promissory notes and
other agreements to which the Company is a party or by which or
to which it or its assets or properties are bound or subject
(collectively the "Contracts") were entered into in bona fide
transactions in the ordinary course of business and are in full
force and effect, (b) the Company has not been found to be in
material default under any of the Contracts, (c) no facts exist
or events have occurred which would, after notice or lapse of
time or both, constitute a material default by the Company
under any of the Contracts, and (d) the consummation of the
transactions contemplated by this Agreement will not result in
a material default under any Contract.
2.11 REAL PROPERTY LEASES. The Company owns no real
property. To the best of Seller's knowledge, except as set
forth on Schedule 2.11, all leases, subleases or other
agreements under which the Company is lessee of any real
property are in full force and effect, the Company has not
received any notice of any material default thereunder, and no
facts exist or events have occurred which would, after notice
or lapse of time or both, constitute a material default under
any such lease, sublease, or other agreement.
2.12 TITLE TO PROPERTIES; ABSENCE OF LIENS AND
ENCUMBRANCES. The Company has good title to all of its proper-
ties and assets which it purports to own, whether real, per-
sonal, tangible or intangible, including all property reflected
in the Balance Sheet and those acquired since the Balance Sheet
Date (except as since sold or otherwise disposed of in the
ordinary course of business), free and clear of all liens and
encumbrances, other than (a) any liens for taxes not yet delin-
quent or being contested in good faith by appropriate pro-
ceedings, and (b) the matters set forth on the attached
Schedule 2.12. Except as set forth on Schedule 2.12, the
Company has valid and enforceable leasehold interests under all
equipment leases used in the Business, and to the best of
Seller's knowledge, there is no material default (or event
which with notice or lapse of time or both would constitute a
material default) on the part of the Company under any of such
leases.
-5-
Page 14 of 38
2.13 EMPLOYEE MATTERS. Over the past six years, the
Company (a) has not been a party to any collective bargaining
agreements, (b) has not experienced any labor disputes or work
stoppages due to labor disagreement with respect to the
operation of the Business, and (c) has not experienced any
union organizing efforts of a substantial nature. The Company
currently has no pension, profit-sharing, or other benefit
plans governed by the Employee Retirement Income Security Act
of 1974, except for one profit-sharing plan.
2.14 LITIGATION. Except as set forth on the
attached Schedule 2.14, the Company has not received service or
other written notice of any litigation, action, suit,
proceeding or investigation presently pending (and, to the best
of Seller's knowledge, threatened) against or affecting the
Company, its properties, or the Business, or which would
restrict or prohibit the consummation of the transactions
contemplated by this Agreement.
2.15 CONDITION OF TANGIBLE ASSETS. To the best of
Seller's knowledge, all tangible assets of the Company which
are material to the operation of the Business are in good
working order, normal wear and tear excepted.
2.16 AUTHORITY AND ENFORCEABILITY. Seller has all
requisite corporate power and corporate authority to enter
into, deliver and consummate this Agreement, and has taken all
corporate action required to authorize and enter into this
Agreement and to consummate the transactions contemplated
hereby. This Agreement has been duly and validly executed and
delivered by Seller and constitutes a valid and binding
agreement of Seller enforceable against Seller in accordance
with its terms except as the same may be limited by bankruptcy,
insolvency, reorganization, moratorium or other laws affecting
the rights of creditors generally and subject to the rules of
law governing (and all limitations on) specific performance,
injunctive relief and other equitable remedies.
2.17 NO VIOLATION OF LAW AND AGREEMENTS. The exe-
cution, delivery and performance of this Agreement by Seller do
not and will not conflict with or violate any provision of
Seller's articles of incorporation or bylaws, and do not and
will not conflict with, violate, result in a breach of, or
cause a default under, (a) any provision of any federal, state
or local law or regulation relating to the business or assets
of Seller or the Company, (b) any provision of any order,
arbitration award, judgment or decree to which Seller or the
Company, or Seller's or the Company's properties, is subject,
or (c) except as set forth in the Disclosure Schedule, any
provision of any material agreement or instrument to which
Seller or the Company, or Seller's or the Company's properties,
is subject.
-6-
Page 15 of 38
2.18 CONSENTS REQUIRED. Except as set forth on
Schedule 2.18, the execution, delivery and performance of this
Agreement by Seller do not require Seller to obtain any
consent, approval or action of, or make any filing with or give
notice to, any corporation, partnership, person, firm or other
entity or any public, governmental or judicial authority.
2.19 INSURANCE. All existing insurance policies
owned or held by the Company or covering the Business, property
or assets of the Company are in full force and effect, all
premiums with respect thereto covering all periods up to and
including the date hereof have been paid, no notice of
cancellation or termination has been received by the Company
with respect to any such policy, and no such policy will
terminate or lapse by reason of the transactions contemplated
by this Agreement.
2.20 COMPLIANCE WITH LAW. To the best of Seller's
knowledge, the Company has complied, and is now complying, in
all material respects with all applicable federal, state and
local laws, ordinances, rules, and regulations, including but
not limited to all health and safety laws. To the best of
Seller's knowledge, the Company has obtained all consents,
permits, approvals, and licenses, and has made all filings, in
each case as are necessary for the conduct of the Business, and
they are all in full force and effect.
2.21 ENVIRONMENTAL MATTERS. To the best knowledge
of Seller, the Company has complied in all material respects
with (a) all permits, licenses, and authorizations required
with respect to the Company or the Business under federal,
state, and local laws relating to pollution or protection of
the environment, including laws relating to emissions,
discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic, or hazardous
substances or wastes into the environment (including, without
limitation, ambient air, surface water, ground water, or land),
or otherwise relating to the production, manufacture,
processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, chemicals,
or industrial, toxic or hazardous substances or wastes, and
(b) all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules, and
timetables contained in those environmental laws or contained
in any regulation, code, plan, order, decree, judgment,
injunction, notice, or demand letter issued, entered,
promulgated or approved thereunder with respect to the Company
or the Business. To the best of Seller's knowledge, there is
no civil, criminal, or administrative action, suit, demand,
claim, hearing, notice, or demand letter, notice of violation,
investigation, or proceeding pending or threatened against the
Company with respect to the Business and relating in any way to
such environmental laws or any regulation, code, plan, order,
-7-
Page 16 of 38
decree, judgment, injunction, notice, or demand letter issued,
entered, promulgated or approved thereunder.
2.22 NO BROKER. No broker or finder has acted,
directly or indirectly, for Seller or the Company in connection
with this Agreement or the transactions contemplated hereby,
and no broker, finder or other person acting for Seller or the
Company is entitled to any brokerage or finder's fee or other
commission in respect thereof.
2.23 BOOKS AND RECORDS. The books of account and
other financial records of the Company are complete and
correct, and have been maintained in accordance with sound
business and accounting practices.
2.24 DISCLOSURE. No representation or warranty by
Seller contained in this Agreement or in respect of the
Schedules, lists or other documents delivered to Buyer by
Seller and referred to herein, and no statement contained in
any certificate furnished by or on behalf of Seller pursuant
hereto or in connection with the transactions contemplated
hereby, contains or will contain, as of the date such
representation or warranty is made or such certificate is
furnished, any untrue statement of a material fact, or omits to
state, as of the date such representation or warranty is made
or such certificate is furnished, any material fact which is
necessary to make the statements contained herein or therein,
in light of the circumstances under which they were made, not
misleading.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer hereby represents and warrants to Seller as
follows:
3.1 ORGANIZATION. Buyer is a corporation duly
organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power
and corporate authority to own, lease and operate its assets,
properties and business, and to carry on its business as now
being conducted. All of the issued and outstanding stock of
Buyer is owned by Richard H. Loeffler, a United States citizen
residing in California.
3.2 CERTIFICATE OF INCORPORATION AND BYLAWS. Buyer
has concurrently delivered to Seller true and complete copies
of the Certificate of Incorporation and Bylaws of Buyer in
effect on the date hereof.
3.3 AUTHORITY AND ENFORCEABILITY. Buyer has all
requisite corporate power and corporate authority to enter
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into, deliver and consummate this Agreement, and has taken all
corporate action required to authorize and enter into this
Agreement and to consummate the transactions contemplated
hereby. This Agreement has been duly and validly executed and
delivered by Buyer and constitutes the valid and binding
agreement of Buyer enforceable against Buyer in accordance with
its terms except as the same may be limited by bankruptcy,
insolvency, reorganization, moratorium or other laws affecting
the rights of creditors generally and subject to the rules of
law governing (and all limitations on) specific performance,
injunctive relief and other equitable remedies.
3.4 CONSENTS AND APPROVALS; NO VIOLATION.
(a) The execution, delivery and performance of
this Agreement by Buyer do not require Buyer to obtain any
consent, approval or action of, or make any filing with or
give notice to, any corporation, partnership, person, firm
or entity or any public, governmental or judicial
authority.
(b) The execution, delivery and performance of
this Agreement by Buyer do not and will not conflict with
or violate any provision of Buyer's certificate of
incorporation or bylaws, and do not and will not conflict
with, violate, result in a breach of, or cause a default
under (i) any provision of any federal, state or local law
or regulation relating to the business or assets of Buyer,
(ii) any provision of any order, arbitration award, judg-
ment or decree to which Buyer or its properties is sub-
ject, or (iii) any provision of any material agreement or
instrument to which Buyer or its properties is subject.
3.5 NO BROKER. No broker or finder has acted,
directly or indirectly, for Buyer in connection with this
Agreement or the transactions contemplated hereby, and no
broker, finder or other person acting for Buyer is entitled to
any brokerage or finder's fee or other commission in respect
thereof.
3.6 INVESTMENT INTENT. Buyer is purchasing the
Shares of Common Stock for its own account for investment and
with no present intention of distributing or reselling such
Shares or any part thereof. Buyer understands that the
issuance and sale of the Shares to be purchased by Buyer
hereunder have not been, and will not be, the subject of a
registration statement filed under the Securities Act of 1933,
as amended (the "Securities Act") by reason of specific
exemption from the registration provisions of the Securities
Act which depends upon, among other things, the bona fide
nature of the investment intent and the accuracy of Buyer's
representations as expressed herein. Buyer understands that in
addition to not being registered under the Securities Act, the
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Shares to be purchased hereunder are not qualified under any
state securities laws, that any disposition of such Shares is
subject to restrictions imposed by federal and state law, and
that the certificates representing such Shares should bear a
restrictive legend. Buyer understands that no federal or state
governmental agency has made a finding or determination
relating to such Shares and that no such agency has or will
recommend or endorse such Shares.
3.7 NO LITIGATION. Buyer has not received service
or other written notice of any litigation, action, suit,
proceeding or investigation presently pending (and, to the best
knowledge of Buyer, threatened) which would restrict or
prohibit the consummation of the transactions contemplated by
this Agreement.
ARTICLE 4
COVENANTS AND AGREEMENTS
------------------------
4.1 EXPENSES. The parties to this Agreement shall
bear their respective expenses incurred in connection with the
preparation, execution and performance of this Agreement and
the transactions contemplated hereby, including, without
limitation, all fees and expenses of agents, representatives,
counsel, advisors, and accountants. Seller acknowledges and
agrees that it, and not the Company, shall pay Seller's
counsel.
4.2 FURTHER ASSURANCES. Each of the parties shall
execute such documents and other papers and take such further
actions as may be reasonably required or desirable to carry out
the provisions hereof and the transactions contemplated hereby.
4.3 RESIGNATION. Concurrently with the Closing,
Seller shall cause each of the Company's directors to resign.
4.4 NEW PROMISSORY NOTE.
(a) Concurrently with the Closing, Buyer shall
cause the Company to enter into (i) the Promissory Note
("Promissory Note") to Seller in the form of the attached
Exhibit 4.4(a)(i), and (ii) the Security Agreement
("Security Agreement") to Seller in the form of the
attached Exhibit 4.4(a)(ii) and any related financing
statement (and Seller shall enter into such Security
Agreement and financing statement).
(b) As set forth in the Security Agreement,
Seller will agree to subordinate the Promissory Note and
the lien of the Security Agreement to new third-party
institutional commercial lenders of the Company which are
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secured by a perfected security interest lien in
substantially all of the assets of the Company.
4.5 NEW SUPPLY AGREEMENT. Concurrently with the
Closing, Buyer shall cause the Company to enter into, and
Seller shall cause Certified Grocers of California, Ltd.,
("Certified") to enter into, the Supply Agreement in the form
of the attached Exhibit 4.5 (the "Supply Agreement"). As
contemplated in Section 5(b) of the Supply Agreement, promptly
following the Closing, Buyer will cause the Company, and Seller
will cause Certified, to prepare a mutually agreeable joint
marketing plan for the Company, which such approved plan Buyer
will cause the Company to immediately implement.
4.6 RIGHTS AGREEMENT. Concurrently with the
Closing, both Buyer and Seller shall enter into, and Buyer
shall cause the Company to enter into, the Rights Agreement
(the "Rights Agreement") in the form of the attached
Exhibit 4.6.
4.7 ORGANIZATIONAL DEVELOPMENT. Buyer hereby agrees
that on and after the Closing, Buyer shall cause the Company to
hire, develop and maintain, so long as the Supply Agreement is
in effect, key management personnel and adequate sales
personnel in order to fulfill the joint marketing plan
referenced in Section 4.5 above.
4.8 RECEIVABLES.
(a) Within ten (10) days after the Closing,
each of the accounts receivable of the Company which exist
on the date of the Closing (collectively the
"Receivables") shall be mutually identified and set forth
on a mutually-agreed-to list.
(b) For a period of six (6) months after the
date of the Closing (the "Collection Period"), Buyer shall
cause the Company, at its expense, to use its best efforts
in the collection of the Receivables, utilizing the
Company's normal collection efforts and procedures in the
ordinary course of business, which efforts and procedures
must be at least those as were in place just prior to the
Closing. During the Collection Period, the Company shall
not utilize a collection agency or initiate litigation or
arbitration actions against a customer regarding such
customer's Receivables without the prior written consent
of Seller.
(c) During the Collection Period, Buyer hereby
agrees that if any of the Receivables is or becomes sixty
(60) or more days past due, Buyer shall cause the Company
(i) to place such customer on a C.O.D. basis until all
Receivables owed by that customer to the Company are paid
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in full, and (ii) upon the written request of Seller, to
cease selling goods and services to such customer until
all Receivables owed by that customer to the Company are
paid in full.
(d) Buyer hereby agrees that during the
Collection Period, Buyer shall insure that (i) all
collections received by the Company (other than C.O.D.
payments) from and after the Closing from or on behalf of
a customer owing any of the Receivables shall be applied
first to the principal amount outstanding of such
customer's Receivables on an oldest-outstanding-invoice-
first basis (PROVIDED, HOWEVER, that such invoice is not
then in dispute between such customer and the Company),
(ii) the Company shall not compromise the amount owed
under any Receivable without the prior written consent of
Seller, (iii) the Company shall provide to Seller copies
of all customer payments, aging reports and other
documents and reports relating to the Receivables, and
(iv) the Company shall provide to Seller reasonable
access, during normal business hours, to the Company's
collection personnel and books and records regarding the
Receivables.
(e) At the end of the Collection Period, Buyer
shall cause the Company (i) to prepare and deliver to
Seller an accounting with regard to the Receivables,
showing payments made and balances due (the "Unpaid
Receivables"), (ii) to deliver an assignment to Seller of
the Unpaid Receivables in such form as is reasonably
requested by Seller, and (iii) to deliver to Seller all
books, records, and documents relating to such Unpaid
Receivables. Concurrently therewith, Seller shall deliver
to the Buyer's lender, Congress Financial Corporation
(Western), a check, payable (at the direction of Buyer)
directly to Buyer's lender, Congress Financial Corporation
(Western), in the net amount of the Unpaid Receivables
(i.e., gross amount less the applicable bad debt reserve
of $30,509 which was established prior to the Closing).
Seller agrees that the amount of such check shall not be
subject to offset, claim or defense by Seller, and shall
be paid even if Buyer or the Company is in default under
any obligations owed to Seller or its affiliates.
4.9 PHYSICAL INVENTORY. Approximately one (1) week
after the Closing, a "wall-to-wall" physical inventory of the
Company will be taken by the Company (at its expense), which
inventory will be observed by a representative of Buyer (at
Buyer's expense) and by a representative of Seller (at Seller's
expense). Richard H. Loeffler (representing Buyer) and David
Knutson (representing Seller) shall, in good faith, reach
mutual agreement on such Closing inventory and the value
thereof (based on the lower of cost or market). In the event
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that such Closing inventory value is less than the Closing book
value of the inventory on the books of the Company, Seller
shall deliver a check to Buyer's lender, Congress Financial
Corporation (Western), in the amount of such difference. Buyer
hereby agrees that such check shall be made payable directly to
Buyer's lender, Congress Financial Corporation (Western).
Seller agrees that the amount of such check shall not be
subject to offset, claim, or defense by Seller, and shall be
paid even if Buyer or the Company is in default under any
obligations owed to Seller or its affiliates.
4.10 HAWAII DISLOCATED WORKERS STATUTE. Buyer hereby
agrees that Buyer shall not seek indemnity from Seller in
connection with any liability or obligation arising under the
Hawaii Dislocated Workers Statute (Chapter 394B, Hawaii Revised
Statutes and the related regulations) created by or arising
from this transaction or any termination of the Company's
employees on or after the Closing; PROVIDED, HOWEVER, that
Seller shall be liable under such statute and regulations with
regard to the termination on the day after the Closing of Wayne
Yamada and Kyle Kuroda.
4.11 SUBLEASE. Concurrently with the Closing, Buyer
shall cause the Company to enter into, and Seller shall enter
into, the Sublease in the form of the attached Exhibit 4.11
(the "Sublease"). Concurrently with the Closing, Seller shall
deliver to Buyer's lender, Congress Financial Corporation
(Western), a Landlord Waiver in such form as is acceptable to
Seller and such lender.
4.12 INSURANCE. As an accommodation to Buyer, Seller
agrees to maintain the current insurance coverage for the
Company for up to twenty (20) days after the Closing, with the
cost of such insurance for such period to be borne by Buyer and
the Company. Insurance proceeds shall be payable to Buyer's
lender, Congress Financial Corporation (Western), and where
appropriate, a BFU 438 endorsement shall be attached to the
policy. During such period, Buyer will cause the Company to
acquire its own insurance. At the end of such 20-day period,
Seller shall cancel such insurance without liability.
ARTICLE 5
SURVIVAL OF
REPRESENTATIONS AND WARRANTIES
------------------------------
The respective representations and warranties of
Buyer and Seller contained herein or in any certificate,
schedule or other document delivered prior to or at the Closing
in connection with this Agreement shall survive the Closing for
a period of one (1) year after the Closing, except for (a) the
representation and warranty in Section 2.9 above (relating to
taxes) shall survive for the relevant statute of limitations
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period under the Internal Revenue Code, and (b) the
representation and warranty in Section 2.4 above (relating to
title) shall survive forever.
ARTICLE 6
INDEMNIFICATION
---------------
6.1 INDEMNIFICATION BY SELLER. Seller hereby agrees
to defend, indemnify and hold harmless Buyer (and its
directors, officers, employees, agents, affiliates, successors
and assigns) from and against any and all claims, causes of
action, losses, deficiencies, liabilities, damages, assess-
ments, judgments, costs and expenses, including reasonable
attorneys' fees (both those incurred in connection with the
defense or prosecution of the indemnifiable claim and those
incurred in connection with the enforcement of this provision),
caused by, resulting from or arising out of:
(a) breaches of any representation and warranty
hereunder on the part of Seller;
(b) any failure by Seller to perform or
otherwise fulfill any undertaking or other agreement or
obligation hereunder; and
(c) any and all actions, suits, disputes,
claims, demands or administrative, governmental,
regulatory, arbitral or mediation proceedings, incident to
any of the foregoing or such indemnification.
6.2 INDEMNIFICATION BY BUYER. Buyer hereby agrees
to defend, indemnify and hold harmless Seller (and its
directors, officers, employees, agents, affiliates, successors
and assigns) from and against any and all claims, causes of
action, losses, deficiencies, liabilities, damages,
assessments, judgments, costs and expenses, including
reasonable attorneys' fees (both those incurred in connection
with the defense or prosecution of the indemnifiable claim and
those incurred in connection with the enforcement of this
provision), caused by, resulting from or arising out of:
(a) breaches of any representation and warranty
hereunder on the part of Buyer;
(b) any failure by Buyer to perform or
otherwise fulfill any undertaking or other agreement or
obligation hereunder;
(c) any liabilities of the Company arising
after the Closing, other than those liabilities for which
Seller would be responsible due to its breach of a Seller
representation or warranty in this Agreement; and
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(d) any and all actions, suits, disputes,
claims, demands or administrative, governmental, regula-
tory, arbitral or mediation proceedings, incident to any
of the foregoing or such indemnification.
6.3 CLAIMS. All claims for indemnification of a
party entitled to indemnification under Sections 6.1 or 6.2
above ("Indemnitee") by the party responsible under the
applicable Sections 6.1 or 6.2 above to provide such
indemnification ("Indemnitor") shall be asserted and resolved
as follows:
(a) In the event that any claim or demand for
which Indemnitor would be liable to Indemnitee hereunder
is asserted against or sought to be collected from
Indemnitee by a third party, Indemnitee shall promptly
notify Indemnitor in writing of such claim or demand,
specifying the nature of such claim or demand and the
amount or the estimated amount thereof to the extent then
feasible (which estimate shall not be conclusive of the
final amount of such claim or demand) (collectively the
"Claim Notice"). The failure by Indemnitee to give such
prompt notice to Indemnitor shall not relieve Indemnitor
from liability under this Article 6 except to the extent
that such failure results in financial harm to Indemnitor
due to the inability to timely defend such action.
Indemnitor shall notify Indemnitee promptly (i) whether or
not Indemnitor disputes the liability of Indemnitor to
Indemnitee hereunder with respect to such claim or demand
and (ii) whether or not Indemnitor desires, at the sole
cost and expense of Indemnitor, to defend Indemnitee
against such claim or demand. Subject to clause (b)
below, in the event that Indemnitor notifies Indemnitee
that it desires to defend Indemnitee against such claim or
demand, Indemnitor shall have the right to defend by
appropriate proceedings, provided that Indemnitor and its
counsel (which counsel must be approved by Indemnitee,
such approval not to be unreasonably withheld) shall
proceed with diligence and good faith with respect
thereto. If Indemnitee desires to participate in, but not
control, any such defense or settlement, it may do so at
its sole cost and expense. Indemnitor shall not settle
such claim or demand without prior reasonable consultation
with Indemnitee and without the prior written consent of
Indemnitee (which consent shall not be unreasonably
withheld).
(b) If, in the reasonable opinion of
Indemnitee, notice of which shall be given in writing to
Indemnitor, Indemnitee reasonably determines in good faith
that its interests with respect to such claim or demand
described in Section 6.3(a) above cannot appropriately be
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represented by Indemnitor due to a conflict of interest,
then Indemnitee shall have the right to assume control of
the defense of such claim or demand and the amount of any
judgment or settlement together with the reasonable costs
and expenses of defense shall be included as part of the
indemnification obligations of Indemnitor hereunder;
PROVIDED, HOWEVER, that no settlement of such claim or
demand may be made without prior reasonable consultation
with Indemnitor and without the prior written consent of
Indemnitor (which consent shall not be unreasonably
withheld). If Indemnitee should elect to exercise the
right under this clause (b), Indemnitor shall have the
right to participate in, but not control, the defense of
such claim or demand at the sole cost and expense of
Indemnitor.
(c) In the event Indemnitee should have a claim
against Indemnitor hereunder which does not involve a
claim or demand being asserted against or sought to be
collected from Indemnitee by a third party, then Indemni-
tee shall promptly send a Claim Notice with respect to
such claim to Indemnitor. Such notice shall specify in
detail the nature of the claim, the provision of this
Agreement under which it arises, and the amount or esti-
mated amount thereof. If Indemnitor does not notify
Indemnitee in writing within 30 days from the receipt of
the Claim Notice that Indemnitor disputes such claim, the
amount of such claim shall be conclusively deemed a
liability of Indemnitor hereunder. If Indemnitor does
dispute such claim in writing to Indemnitee within such
30-day period, then Indemnitee may pursue its legal
remedies with regard to such claim against Indemnitor.
(d) Regardless of which party is controlling
the defense of any claim, (i) both Indemnitor and
Indemnitee shall act in good faith, (ii) in the case of a
third-party claim, the controlling party shall deliver, or
cause to be delivered, to the other party, copies of all
correspondence, studies, reports, pleadings, motions,
briefs, appeals or other written statements relating to or
submitted in connection with the third-party claim or
demand and with the defense of any such claim or demand,
and timely notices of, and the right to participate in (as
an observer), any hearing or other court proceeding
relating to such claim or demand, and (iii) in the case of
a third-party claim, the other party shall cooperate fully
with the controlling party with respect to access to
books, records, or other documentation within such other
party's direct or indirect control, if deemed necessary or
appropriate by the controlling party in the defense of any
claim or demand.
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(e) If Indemnitor does not elect under Sec-
tion 6.3(a) above to defend Indemnitee, or if Indemnitor
elects to defend Indemnitee but does not proceed with
diligence and in good faith, then Indemnitee shall have
the right to take over control of any defense and settle-
ment of such claim or demand (and shall, so long as any
legal rights are not jeopardized, notify Indemnitor not
less than ten (10) days in advance of the reasons for the
defense being taken over), and the reasonable costs and
expenses of defense shall be included as part of the
indemnification obligations of Indemnitor hereunder. No
settlement of such claim or demand may be made without
prior reasonable consultation with Indemnitor and without
the prior written consent of Indemnitor (which consent
shall not be unreasonably withheld).
(f) After payment by the Indemnitor of a claim,
then Indemnitor shall, unless prohibited by law or
contract, be subrogated to the rights of Indemnitee
against any third party.
6.4 LIMITATIONS.
(a) Indemnitee shall not be permitted to
enforce any claim for indemnification under this Article 6
until the aggregate amount of such losses for which
indemnity is claimed exceeds $20,000. Once such aggregate
losses claimed by Indemnitee exceed such threshold amount,
then all such losses over such $20,000 amount may be
sought by Indemnitee under this Article 6. The $20,000
amount shall not apply to the amounts payable to Buyer and
Buyer's lender, Congress Financial Corporation (Western),
under Sections 4.8(e) and 4.9 above.
(b) Anything in this Agreement to the contrary
notwithstanding, the maximum aggregate amount for which
Seller may be liable to Buyer under this Article 6 shall
in no event exceed the amount of the Purchase Price.
6.5 EXCLUSIVE REMEDY. Except as otherwise provided
in this Agreement, Buyer's sole and exclusive remedy against
Seller for any breach of a representation, warranty or covenant
of Seller in this Agreement, or for the failure of Seller to
perform or comply with any agreement made by Seller in this
Agreement, and Seller's sole and exclusive remedy against Buyer
for any breach of a representation, warranty or covenant of
Buyer in this Agreement, or for the failure of Buyer to comply
with any agreement made by Buyer in this Agreement, shall be a
claim for indemnification made pursuant to and subject to the
terms and conditions of this Article 6.
6.6 DIRECTED PAYMENT. In the event that Buyer is
entitled to recovery from Seller under this Section 6 because
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of Seller's breach of Sections 2.9 or 2.12 above, then the
parties hereto hereby agree that payment therefor shall be made
by Seller to Buyer's lender, Congress Financial Corporation
(Western) without offset by Seller.
ARTICLE 7
MISCELLANEOUS
-------------
7.1 ENTIRE AGREEMENT. This Agreement (together with
the Schedules and Exhibits attached hereto) constitutes the
entire agreement and understanding of the parties hereto with
respect to the subject matter hereof and supersedes all prior
oral or written agreements, arrangements, and understandings
with respect thereto (including the letter of intent dated
February 14, 1996). No representation, promise, inducement,
statement or intention has been made by any party hereto that
is not embodied herein, and no party shall be bound by or
liable for any alleged representation, promise, inducement, or
statement not so set forth herein.
7.2 AMENDMENT. This Agreement may be modified,
amended, superseded, or cancelled only by a written instrument
signed by each of the parties hereto (PROVIDED, HOWEVER, that
Sections 4.8(e) and 4.9 above may not be amended unless Buyer's
lender, Congress Financial Corporation (Western), also agrees
in writing), and any of the terms, covenants, representations,
warranties or conditions hereof may be waived only by a written
instrument executed by the party to be bound by any such
waiver.
7.3 SEVERABILITY. Nothing contained herein shall be
construed to require the commission of any act contrary to law.
Should there be any conflict between any provisions hereof and
any present or future statute, law, ordinance, regulation, or
other pronouncement having the force of law, the latter shall
prevail, but the provision of this Agreement affected thereby
shall be curtailed and limited only to the extent necessary to
bring it within the requirements of the law, and the remaining
provisions of this Agreement shall remain in full force and
effect.
7.4 HEADINGS. The section and other headings
contained in this Agreement are for reference purposes only and
shall not in any way affect the meaning and interpretation of
this Agreement.
7.5 COUNTERPARTS. This Agreement may be executed in
several counterparts and all documents so executed shall
constitute one agreement, binding on all of the parties hereto,
notwithstanding that all of the parties did not sign the
original or the same counterparts.
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7.6 NOTICES. All notices, requests, demands and
other communications hereunder shall be in writing and shall be
deemed given (a) if delivered personally or sent by facsimile
transmission (confirmed electronically), on the date given,
(b) if delivered by a courier express delivery service, on the
date of delivery, or (c) if by certified or registered mail,
postage prepaid, return receipt requested, five (5) days after
mailing, to each of the parties hereto, their successors in
interest or their assignees at the addresses listed beneath
such party's signature to this Agreement, or at such other
addresses as such party may designate by written notice in the
manner aforesaid.
7.7 GOVERNING LAW. This Agreement is made under and
shall be construed pursuant to the laws of the State of
California (excluding principles of conflict of laws). In
construing this Agreement, none of the parties hereto shall
have any term or provision construed against such party solely
by reason of such party having drafted the same.
7.8 ATTORNEYS' FEES AND COSTS. In the event of any
dispute arising out of the subject matter of this Agreement,
the prevailing party shall recover, in addition to any other
damages assessed, its reasonable attorneys' fees and costs
incurred in litigating, arbitrating, or otherwise settling or
resolving such dispute.
7.9 DISPUTE RESOLUTION. All disputes arising under
this Agreement that cannot be amicably resolved shall be
settled by binding arbitration in Honolulu, Hawaii, and
judgment upon the award rendered may be entered in any court
having jurisdiction thereof; PROVIDED, HOWEVER, that if
equitable relief is sought (including injunctive relief) by a
party hereto for a breach of this Agreement, then the non-
breaching party may, in its sole discretion, enforce such
rights or seek such equitable relief by court action. Except
as provided below, the arbitration shall proceed in accordance
with the laws of the State of California. Any party requesting
arbitration shall serve a written demand for arbitration on the
other party by registered or certified mail. The demand shall
set forth a statement of the nature of the dispute, the amount
involved and the remedies sought. No later than twenty (20)
calendar days after a demand for arbitration is served, the
parties shall jointly select and appoint a retired judge of the
Hawaiian trial courts to act as the arbitrator. In the event
that the parties do not agree on the selection of an
arbitrator, the party seeking arbitration shall apply to the
Hawaiian trial court in Honolulu, Hawaii, for appointment of a
retired judge to serve as an arbitrator. No later than ten
(10) calendar days after appointment of an arbitrator, the
parties shall jointly prepare and submit to the arbitrator a
set of rules for arbitration. In the event that the parties
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cannot agree on the rules for the arbitration, the arbitrator
shall establish the rules. No later than ten (10) calendar
days after the arbitrator is appointed, the arbitrator shall
schedule the arbitration for a hearing to commence on a
mutually convenient date. The hearing, which shall be in the
English language, shall commence no later than one hundred
twenty (120) calendar days after the arbitrator is appointed
and shall continue from day to day until completed. The
arbitrator shall issue his or her award in writing no later
than twenty (20) calendar days after the conclusion of the
hearing. The arbitration award shall be final and binding
regardless of whether any party fails or refuses to participate
in the arbitration. The arbitrator is empowered to hear and
determine all disputes between the parties hereto concerning
the subject matter of this Agreement, and the arbitrator may
award money damages, punitive damages, injunctive relief,
specific performance, rescission, restitution, costs, and
attorneys' fees. In the event that any party serves a proper
demand for arbitration under this Agreement, all parties may
pursue discovery in accordance with California Code of Civil
Procedure Section 1283.05, the provisions of which are
incorporated herein by reference, with the following
exceptions: (a) The parties hereto may conduct all discovery,
including depositions for discovery purposes, without leave of
the arbitrator; and (b) all discovery shall be completed no
later than the commencement of the arbitration hearing or one
hundred twenty (120) calendar days after the date that a proper
demand for arbitration is served, whichever occurs earlier,
unless upon a showing of good cause the arbitrator extends or
shortens that period. The arbitrator shall not have the power
to amend this Agreement in any respect.
7.10 WAIVER. The waiver by any of the parties
hereto, express or implied, of any right under this Agreement
or any failure to perform under this Agreement by any other
party, shall not constitute or be deemed a waiver of any other
right under this Agreement by such other party, whether of a
similar or dissimilar nature.
7.11 SUCCESSORS. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their
respective heirs, representatives, assignees or successors in
interest; PROVIDED, HOWEVER, that (a) any claims which Buyer
may have against Seller under this Agreement may be brought
only by Buyer and not by an assignee of Buyer, and (b) an
assigning party shall continue to be bound to all of its
obligations under this Agreement.
7.12 SCHEDULES. The Disclosure Schedule and the
Exhibits are made a part of this Agreement as if fully set
forth herein. All references herein to Articles, Sections,
paragraphs, Exhibits, and Schedules shall be deemed references
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to such parts of this Agreement, unless the context shall
otherwise require.
7.13 PUBLICITY. Each of Seller and Buyer will
consult with the other before issuing any press releases or
otherwise making any public statements with respect to this
Agreement and the transactions contemplated hereby and shall
not issue any such press release or make any such public
statement without the prior approval of the other party hereto,
except as otherwise required by law. Buyer's lender, Congress
Financial Corporation (Western), may publish an advertising
"tombstone" regarding their financing of the Buyer in this
transaction only in such form as is mutually agreed to in
advance by both Buyer and Seller.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be signed by each of such parties as of the
date first above written.
RHL MANAGEMENT GROUP, INC.
By: /s/ Richard H. Loeffler
-----------------------------------
Richard H. Loeffler, President
Address: 9903 Santa Monica Blvd.
Suite 287
Beverly Hills, CA 90212
FAX: (____) ____________
GROCERS SPECIALTY COMPANY
By: /s/ D. A. Woodward
-----------------------------------
Its: Secretary/Treasurer
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Address: 2601 South Eastern Avenue
Commerce, CA 90040
FAX: (213) 888-2915
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Page 30 of 38
List of Schedules and Exhibits
Schedule
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2.7 = Other Disclosed Liabilities
2.8 = Changes
2.10 = Contract Exceptions
2.11 = Lease Exceptions
2.12 = Liens and Encumbrances
2.14 = Litigation
2.18 = Consents
Exhibit
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4.4(a)(i) = Promissory Note
4.4(a)(ii) = Security Agreement
4.5 = Supply Agreement
4.6 = Rights Agreement
4.11 = Sublease
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Page 31 of 38
Schedule 2.7
Other Disclosed Liabilities
None
Sch. 2.7 - Page 1
Page 32 of 38
Schedule 2.8
Changes
1. The Company made a stock dividend to Seller, consisting of
1,000 shares of preferred stock, on May 17, 1996.
2. The Company made a stock dividend to Seller, consisting of
the Warrant, on May 18, 1996.
3. The personnel headcount for the Company has decreased
slightly.
Sch. 2.8 - Page 1
Page 33 of 38
Schedule 2.10
Contract Exceptions
1. With the concurrence of Buyer, neither Seller nor the
Company have notified any equipment lessor with regard to
this transaction. Therefore, no consent to this
transaction has been obtained from such lessors. Not
obtaining such consent may constitute a default by the
Company under the applicable equipment lease.
2. Seller has contacted each of the real property landlords
and has requested their consent to this transaction. Each
landlord has orally consented, and is in the process of
obtaining the written consent. They may not be received
prior to the Closing. Technically, under the agreements,
until such written consent is received, this transaction
would constitute a breach of such agreement.
Sch. 2.10 - Page 1
Page 34 of 38
Schedule 2.11
Lease Exceptions
1. Seller has contacted each of the Company's real property
landlords and has requested their consent to this
transaction. Each such landlord has orally consented, and
Seller is in the process of obtaining the signed written
consents. Such consents may not be received prior to the
Closing. Technically, under the agreements, until such
written consent is received, this transaction would
constitute a breach of such agreement.
Sch. 2.11 - Page 1
Page 35 of 38
Schedule 2.12
Liens and Encumbrances
1. Incorporated herein are the matters set forth on
Schedule 2.10.
2. UCC Filings
a. No. 94-215777 of 12/30/94 to IBM Credit Corporation.
b. No. 92-016081 of 2/3/92 to Certified Grocers of
California, Ltd. and BT Commercial Corporation and
Union Bank (a termination statement to be delivered
at the Closing).
c. No. 91-113508 of 8/21/91 to GECC Financial
Corporation.
d. All UCC Financing Statements filed by Buyer's lender,
Congress Financial Corporation (Western).
Sch. 2.12 - Page 1
Page 36 of 38
Schedule 2.14
Litigation
1. Wrongful termination lawsuit brought by a former employee,
Julian Madamba, asserting, among other things, wrongful
discharge and discrimination. Local counsel recommends
settlement in the $50,000-$80,000 range.
Sch. 2.14 - Page 1
Page 37 of 38
Schedule 2.18
Consents
1. Incorporated herein are the matters set forth in
Schedule 2.10.
Sch. 2.18 - Page 1
Page 38 of 38
