SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended October 18, 1997.
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period___________ to___________.
Commission file number: 0-16900
RICHFOOD HOLDINGS, INC.
Incorporated under the laws I.R.S. Employer Identification
of Virginia No. 54-1438602
4860 Cox Road
Suite 300
Glen Allen, Virginia 23060
(804)915-6000
Former address:
8258 Richfood Road
Mechanicsville, Virginia 23116
(804)746-6000
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 .
The number of shares outstanding of the Registrant's common stock as of November
25, 1997, was as follows:
Common Stock, without par value: 47,542,786 shares.
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements.
RICHFOOD HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Dollar amounts in thousands, except per share data)
- --------------------------------------------------------------------------------------------------------
<CAPTION>
(Unaudited)
Second Quarter Ended
--------------------------------------------------------
October 18, October 12,
1997 1996
(12 weeks) % (12 weeks) %
- --------------------------------------------------------------------------------------------------------
<S> <C>
Sales $ 719,474 100.00 $ 739,640 100.00
Costs and expenses:
Cost of goods sold 640,977 89.09 662,020 89.51
Operating and adminis-
trative expenses 53,978 7.50 55,898 7.55
Interest expense 927 0.13 1,585 0.21
Interest income (915) (0.13) (838) (0.11)
---------- ------ -------- ------
Earnings before income taxes 24,507 3.41 20,975 2.84
Income taxes 9,497 1.32 8,403 1.14
----------- ---- ------------ ----
Net earnings $ 15,010 2.09 $ 12,572 1.70
=========== ==== =========== ====
Net earnings per
common share $ .32 $ .27
=========== ===========
Cash dividends declared
per common share $ .04 $ .03
=========== ===========
Average common shares
outstanding 47,505,909 47,283,785
========== ==========
See accompanying Notes to the Consolidated Financial Statements.
2
<PAGE>
RICHFOOD HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Dollar amounts in thousands, except per share data)
- --------------------------------------------------------------------------------------------------------
<CAPTION>
(Unaudited)
Year-to-Date
--------------------------------------------------------
October 18, October 12,
1997 1996
(24 weeks) % (24 weeks) %
- --------------------------------------------------------------------------------------------------------
Sales $ 1,458,599 100.00 $ 1,493,023 100.00
Costs and expenses:
Cost of goods sold 1,300,710 89.18 1,337,504 89.58
Operating and adminis-
trative expenses 109,695 7.52 112,060 7.51
Interest expense 1,781 0.12 3,259 0.22
Interest income (1,856) (0.13) (1,596) (0.11)
------------ ------ ---------- ------
Earnings before income taxes 48,269 3.31 41,796 2.80
Income taxes 18,753 1.29 16,779 1.12
------------- ---- ------------- ----
Net earnings $ 29,516 2.02 $ 25,017 1.68
============= ==== ============= ====
Net earnings per
common share $ .62 $ .53
============= =============
Cash dividends declared
per common share $ .08 $ .06
============= =============
Average common shares
outstanding 47,470,114 47,223,435
========== ==========
See accompanying Notes to the Consolidated Financial Statements.
3
<PAGE>
RICHFOOD HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands)
<CAPTION>
- --------------------------------------------------------------------------------------------------------
October 18, May 3,
1997 1997
(Unaudited)
- --------------------------------------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 13,274 $ 10,416
Receivables, less allowance for doubtful
accounts of $3,538 and $3,445 116,992 104,739
Inventories 172,484 163,510
Other current assets 14,053 14,426
------------ ------------
Total current assets 316,803 293,091
------------ ------------
Notes receivable, less allowance for
doubtful accounts of $1,786 and $1,886 33,181 34,639
Property and equipment, net 122,368 121,594
Goodwill, net 85,903 87,520
Other assets 46,206 44,636
------------ ------------
Total assets $ 604,461 $ 581,480
============ ============
Liabilities and Shareholders' Equity Current liabilities:
Current installments of long-term debt $ 10,451 $ 10,656
Accounts payable 215,358 209,207
Accrued expenses and other current liabilities 50,159 51,360
------------ ------------
Total current liabilities 275,968 271,223
------------ ------------
Long-term debt 21,997 32,069
Deferred credits and other 18,583 19,538
Shareholders' equity:
Preferred stock, without par value:
Authorized shares - 5,000,000;
none issued or outstanding - -
Common stock, without par value:
Authorized shares - 90,000,000;
issued and outstanding shares
47,521,736 and 47,401,770 73,905 72,258
Retained earnings 214,008 186,392
------------ ------------
Total shareholders' equity 287,913 258,650
------------ ------------
Total liabilities and shareholders' equity $ 604,461 $ 581,480
============ ============
See accompanying Notes to the Consolidated Financial Statements.
4
<PAGE>
RICHFOOD HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
<CAPTION>
- --------------------------------------------------------------------------------------------------------
(Unaudited)
October 18, October 12,
1997 1996
(24 weeks) (24 weeks)
- --------------------------------------------------------------------------------------------------------
Operating activities:
Net earnings $ 29,516 $ 25,017
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 14,807 12,920
Provision for doubtful accounts 1,814 1,517
Other, net (54) (477)
Changes in operating assets and liabilities,
net of effects of acquisitions:
Receivables (10,665) (14,357)
Inventories (8,974) (9,801)
Other current assets 1,102 433
Accounts payable, accrued expenses
and other liabilities 5,816 49,486
----------- ----------
Net cash provided by operating activities 33,362 64,738
----------- ----------
Investing activities:
Acquisition, net of cash acquired -- (26,098)
Purchases of property and equipment (10,176) (10,038)
Issuance of notes receivable (4,636) (13,972)
Collections on notes receivable 2,692 5,760
Other, net (5,707) (6,113)
----------- ----------
Net cash used for investing activities (17,827) (50,461)
----------- ----------
Financing activities:
Net repayments on long-term debt (10,277) (9,316)
Proceeds from issuance of common stock
under employee stock incentive plans 922 810
Cash dividends paid on common stock (3,322) (2,361)
----------- ----------
Net cash used for financing activities (12,677) (10,867)
----------- ----------
Net increase in cash and cash equivalents 2,858 3,410
Cash and cash equivalents at beginning of period 10,416 17,415
----------- ----------
Cash and cash equivalents at end of period $ 13,274 $ 20,825
=========== ==========
See accompanying Notes to the Consolidated Financial Statements.
</TABLE>
5
<PAGE>
RICHFOOD HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1. The consolidated financial statements of Richfood Holdings, Inc. and
subsidiaries (the "Company") presented herein are unaudited (except
for the consolidated balance sheet as of May 3, 1997, which has been
derived from the audited consolidated balance sheet as of that date)
and have been prepared by the Company pursuant to the rules and
regulations of the Securities and Exchange Commission. The accounting
policies and principles used to prepare these interim consolidated
financial statements are consistent in all material respects with
those reflected in the consolidated financial statements included in
the Annual Report on Form 10-K for the fiscal year ended May 3, 1997
("fiscal 1997"). In the opinion of management, such consolidated
financial statements include all adjustments, consisting of normal
recurring adjustments and the use of estimates, necessary to
summarize fairly the Company's financial position and results of
operations. Certain information and note disclosures normally
included in consolidated financial statements prepared in accordance
with generally accepted accounting principles have been omitted
pursuant to such rules and regulations. These consolidated financial
statements should be read in conjunction with the consolidated
financial statements and notes thereto of Richfood Holdings, Inc. and
subsidiaries included in its Annual Report on Form 10-K for fiscal
1997. The results of operations for the twelve and twenty-four week
periods ended October 18, 1997, may not be indicative of the results
that may be expected for the fiscal year ending May 2, 1998 ("fiscal
1998").
Note 2. As of November 26, 1997, the Company entered into a definitive
agreement to acquire substantially all of the assets of Farm Fresh,
Inc. ("Farm Fresh"), a privately-held supermarket chain based in
Norfolk, Virginia. The transaction is expected to be effected through
a prepackaged voluntary reorganization of Farm Fresh under Chapter 11
of the U.S. Bankruptcy Code or other consensual proceeding, and is
subject to approval by the Bankruptcy Court and the holders of Farm
Fresh's 12.25% Senior Notes, due October 1, 2000, and Farm Fresh's
12.25% Senior Notes, Series A, due October 1, 2000 (collectively, the
"Senior Notes"), as well as required regulatory approvals and other
customary closing conditions. Holders of a majority of the Senior
Notes have indicated that they support and intend to vote in favor of
the transaction. Under the terms of the agreement, the Company will
not assume the Senior Notes or other indebtedness for money borrowed,
or Farm Fresh's lease obligations for previously-closed stores or
four currently-operated stores that will be closed in connection with
the proposed sale. The anticipated purchase price is expected to
consist of approximately $220 million cash, plus the value of certain
assumed capital leases, plus 1.5 million warrants for the purchase of
shares of the Company's common stock at an exercise price of $25 per
share with a term of five years following issuance. The exact amount
of the cash purchase price will vary depending on changes in Farm
Fresh's working capital and the capital lease obligations assumed by
the Company. Upon completion of the acquisition, which is expected to
occur in early 1998, Farm Fresh will operate as a separate,
wholly-owned subsidiary of the Company.
The above discussion is qualified in its entirety by reference to the
Asset Purchase Agreement, dated as of November 26, 1997, which is
attached as Exhibit 2.1, hereto, and incorporated herein by
reference.
6
<PAGE>
Note 3. On September 30, 1996, a wholly-owned subsidiary of the Company
acquired substantially all of the assets and assumed certain
liabilities of Norristown Wholesale, Inc. ("Norristown"), a wholesale
distributor of produce and other perishable items headquartered in
Norristown, Pennsylvania. Assets acquired primarily consisted of
inventory, accounts receivable, warehouse and transportation
equipment and a customer list. The Company also assumed the lease for
Norristown's transportation fleet. The Company accounted for the
acquisition under the purchase method of accounting and, accordingly,
the results of operations of the acquired business have been included
in the Company's Consolidated Statements of Earnings since the date
of acquisition.
Note 4. The Company is party to various legal actions that are incidental to
its business. While the outcome of such legal actions cannot be
predicted with certainty, the Company believes that the outcome of
any of these proceedings, or all of them combined, will not have a
material adverse effect on its consolidated financial position or
operations.
7
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
Sales of $719.5 million for the twelve week period ended October 18,
1997, consisted of $689.6 million of wholesale grocery sales and $71.4 million
of retail grocery sales. Wholesale grocery sales included $41.5 million of sales
to the Company's retail grocery division. Wholesale grocery sales for the second
quarter of fiscal 1998 decreased $21.5 million, or 3.0%, as compared to sales of
$711.1 million for the same period last fiscal year. This decrease was primarily
attributable to the expiration of the Acme Markets, Inc. ("Acme") frozen food
supply agreement (the "Acme Supply Agreement") in June 1997. Excluding sales to
Acme in fiscal 1997 under the Acme Supply Agreement, wholesale sales for the
second quarter of fiscal 1998 would have increased $17.2 million, or 2.6%. This
increase was primarily attributable to sales from the Norristown produce
business, which was acquired by the Company on September 30, 1996.
Sales of $1,458.6 million for the twenty-four week period ended October
18, 1997, consisted of $1,397.4 million of wholesale grocery sales and $145.3
million of retail grocery sales. Wholesale grocery sales included $84.1 million
of sales to the Company's retail grocery division. Wholesale grocery sales for
the first twenty-four weeks of fiscal 1998 decreased $35.8 million, or 2.5%, as
compared to sales of $1,433.2 million for the same period last fiscal year. This
decrease was primarily attributable to the expiration of the Acme Supply
Agreement in June 1997, offset in part by sales from the Norristown produce
business, which was acquired by the Company on September 30, 1996.
Retail grocery sales of $71.4 million and $145.3 million for the twelve
and twenty-four week periods ended October 18, 1997, respectively, decreased
$4.5 million, or 6.0%, and $7.7 million, or 5.0%, respectively, compared to the
same periods last fiscal year. In accordance with the Company's strategy of
focusing on the METRO format, during the fourth quarter of fiscal 1997, the
number of BASICS stores was reduced from five to two as a result of closing one,
selling another and temporarily closing a third store while it was being
converted to the METRO format. The decrease in sales in the fiscal 1998 periods,
compared to the same periods last fiscal year, resulting from the reduced number
of BASICS stores, was offset in part by sales from one new METRO store, which
opened in September 1996. Comparable store sales increased 1.0% for the second
quarter of fiscal 1998, compared to the second quarter of fiscal 1997, and
decreased 0.3% for the twenty-four week period ended October 18, 1997, compared
to the same period during fiscal 1997.
Gross margin was 10.91% and 10.82% of sales for the twelve and
twenty-four week periods ended October 18, 1997, compared to 10.49% and 10.42%,
respectively, of sales for the same periods last fiscal year. The increase in
gross margin was primarily attributable to the inclusion of the higher gross
margin Norristown produce business in the fiscal 1998 periods and the effects of
the Company taking advantage of certain buying opportunities during the same
periods.
Operating and administrative expenses were $54.0 million, or 7.50% of
sales, for the twelve week period ended October 18, 1997, compared to $55.9
million, or 7.55% of sales, for the same period last fiscal year. The decrease
in operating and administrative expenses as a percent of sales was primarily
attributable to the Company's continued focus on controlling costs and the
effects of certain productivity and efficiency initiatives in the Company's
retail operations, offset in part by the inclusion of Norristown's higher
operating expense ratio produce business in the fiscal 1998 results. Operating
8
<PAGE>
and administrative expenses were $109.7 million, or 7.52% of sales, for the
twenty-four week period ended October 18, 1997, compared to $112.1 million, or
7.51% of sales, for the same period last fiscal year.
Interest expense for the twelve and twenty-four week periods ended
October 18, 1997, was $0.9 million and $1.8 million, respectively, compared to
$1.6 million and $3.3 million for the same periods last fiscal year. The
decrease was primarily due to lower average debt levels for the fiscal 1998
periods, compared to the same periods of last fiscal year. On April 1, 1997, the
Company redeemed the remaining $47.5 million outstanding principal amount of its
10 5/8% Senior Subordinated Notes and in July 1997 repaid $9.0 million on the
Company's 6.15% Senior Notes.
The Company's effective income tax rate was 38.8% and 38.9% for the
twelve and twenty-four week periods ended October 18, 1997, respectively, as
compared to 40.1% for the same periods last fiscal year.
Net earnings for the twelve week period ended October 18, 1997, were
$15.0 million, or $0.32 per share, a 19.4% increase over net earnings of $12.6
million, or $0.27 per share, for the same period last fiscal year. Net earnings
for the twenty-four week period ended October 18, 1997, were $29.5 million, or
$0.62 per share, an 18.0% increase over net earnings of $25.0 million, or $0.53
per share, for the same period last fiscal year.
Liquidity and Capital Resources
As of November 26, 1997, the Company entered into a definitive
agreement to acquire substantially all of the assets of Farm Fresh, Inc., ("Farm
Fresh"). See note 2 to the Consolidated Financial statements for further
information regarding this transaction. In connection with the acquisition, the
Company intends to replace its current credit facilities with a new, five-year
revolving credit facility. Proposals have been received from a number of
financial institutions in this regard, and the Company, based on their
assurances, anticipates that it will be able to successfully establish such a
facility.
Cash and cash equivalents were $13.3 million at October 18, 1997,
compared to $10.4 million at May 3, 1997. Working capital was $40.8 million at
October 18, 1997, and $21.9 million at May 3, 1997.
Net cash provided by operating activities for the twenty-four week
period ended October 18, 1997, was $33.4 million. This amount primarily
consisted of net earnings of $29.5 million and depreciation and amortization of
$14.8 million, offset in part by changes in certain working capital accounts.
Net cash used for investing activities of $17.8 million for the
twenty-four week period ended October 18, 1997 primarily consisted of $10.2
million of capital expenditures. The Company continued to invest in its
wholesale distribution centers and equipment to maintain the efficiency of its
operations and also employed capital in connection with the conversion of an
existing BASICS store to the METRO format during the twenty-four week period
ended October 18, 1997. Net cash used for investing activities of $50.5 million
for the twenty-four week period ended October 12, 1996 included $26.1 million
for the acquisition of the Norristown produce business, which was acquired by
the Company on September 30, 1996.
Net cash used for financing activities of $12.7 million and $10.9
million for the twenty-four week periods ended October 18, 1997 and October 12,
1996, respectively, consisted primarily of the $9.0 million of annual principal
payments on the Company's 6.15% Senior Notes.
9
<PAGE>
The Company's total debt was $32.4 million at October 18, 1997,
compared to $42.7 million at May 3, 1997. Shareholders' equity increased to
$287.9 million at October 18, 1997, from $258.7 million at May 3, 1997. The
ratio of total debt to equity was 0.11 to 1 at October 18, 1997, and 0.17 to 1
at May 3, 1997.
The Company believes that it has the ability to continue to generate
adequate funds from its operations and through borrowings under long-term debt
facilities to maintain its competitive position and expand its business.
10
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. Submission of Matters of a Vote of Security Holders
The Company held its Annual Meeting of Shareholders on August 28, 1997.
The following proposals were submitted to the shareholders.
(1) to elect 12 directors of the Company to serve until the next annual
meeting of shareholders; (2) to approve the amendment of the Richfood
Holdings, Inc. Omnibus Stock Incentive Plan; and (3) to ratify the
appointment by the Board of Directors of Ernst & Young LLP to serve as
independent public accountants for the current fiscal year.
Shareholders elected all nominees for director, approved the amendment
of the Richfood Holdings, Inc. Omnibus Stock Incentive Plan and
ratified the appointment of Ernst & Young LLP. The number of votes cast
with respect to each of the above matters was as follows:
<TABLE>
<CAPTION>
Withheld
For Against Authority Abstain
-------------------------------------------------------
Election of Directors
<S> <C>
Donald D. Bennett 38,449,959 -- 22,765 --
Roger L. Gregory 38,451,262 -- 21,462 --
Grace E. Harris 38,450,892 -- 21,832 --
John C. Jamison 38,461,662 -- 11,062 --
G. Gilmer Minor, III 38,462,762 -- 9,962 --
Claude B. Owen, Jr. 38,462,012 -- 10,712 --
John F. Rotelle 38,359,210 -- 113,514 --
Albert F. Sloan 38,458,612 -- 14,112 --
John E. Stokely 38,367,309 -- 105,415 --
George H. Thomazin 38,462,612 -- 10,112 --
James E. Ukrop 38,460,809 -- 11,915 --
Edward Villanueva 38,364,247 -- 108,477 --
<CAPTION>
Non-
For Against Votes Abstain
-------------------------------------------------------
Amendment of Richfood
Holdings, Inc. Omnibus
Stock Incentive Plan 36,094,359 2,340,980 -- 37,385
--------------------
Non-
For Against Votes Abstain
-------------------------------------------------------
Appointment of Ernst &
Young LLP 38,457,858 2,934 -- 11,932
---------
</TABLE>
No other business came before the meeting.
11
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 2.1-Asset Purchase Agreement, dated as of November 26, 1997,
by and among Farm Fresh, Inc., Richfood Holdings, Inc.
and FF Acquisition, L.L.C.
Exhibit 11.1-Earnings Per Share Calculation
Exhibit 27.1-Financial Data Schedule
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
RICHFOOD HOLDINGS, INC.
Date: December 2, 1997 By /s/ John C. Belknap
--------------------
Executive Vice President
and Chief Financial Officer
Exhibit 2.1
ASSET PURCHASE AGREEMENT
by and among
FARM FRESH, INC.,
RICHFOOD HOLDINGS, INC.
and
FF ACQUISITION, L.L.C.,
dated as of
November 26, 1997
<PAGE>
<TABLE>
ASSET PURCHASE AGREEMENT
TABLE OF CONTENTS
<CAPTION>
Page
Number
------
<S> <C>
ARTICLE I Definitions............................................................................... 1
Section 1.1 Certain Definitions.................................................................. 1
ARTICLE II Commencement of Bankruptcy Case; Closing; Purchase and Sale............................... 8
Section 2.1 Commencement of Bankruptcy Case...................................................... 8
Section 2.2 Time and Place of Closing............................................................ 8
Section 2.3 Purchase and Sale of Assets and Assumption of Liabilities............................ 8
Section 2.4 Purchase Price....................................................................... 12
Section 2.5 Deliveries........................................................................... 13
Section 2.6 Inventory and Supplies in Transit.................................................... 14
Section 2.7 Allocation of Purchase Price......................................................... 15
ARTICLE III Representations and Warranties of Seller.................................................. 15
Section 3.1 Incorporation; Good Standing; Subsidiaries........................................... 15
Section 3.2 Authorization........................................................................ 16
Section 3.3 Title to and Sufficiency of Assets................................................... 17
Section 3.4 Contracts............................................................................ 17
Section 3.5 Litigation........................................................................... 18
Section 3.6 Labor Matters........................................................................ 18
Section 3.7 Employee Benefit Plans............................................................... 18
Section 3.8 Environmental Conditions............................................................. 19
Section 3.9 Compliance with Law.................................................................. 19
Section 3.10 Permits.............................................................................. 19
Section 3.11 Taxes................................................................................ 20
Section 3.12 Books and Records.................................................................... 20
Section 3.13 Real Property........................................................................ 20
Section 3.14 Intangibles.......................................................................... 21
Section 3.15 Fees and Expenses of Brokers and Others.............................................. 21
Section 3.16 Accounts Receivable.................................................................. 22
Section 3.17 Seller SEC Reports................................................................... 22
Section 3.18 Insurance............................................................................ 22
Section 3.19 Affiliated Transactions.............................................................. 23
Section 3.20 No Adverse Change.................................................................... 23
Section 3.21 Absence of Undisclosed Liabilities................................................... 23
Section 3.22 No Other Representations or Warranties............................................... 23
ARTICLE IV Representations and Warranties of Richfood and Buyer...................................... 24
Section 4.1 Organization; Incorporation; Good Standing........................................... 24
Section 4.2 Capitalization....................................................................... 24
Section 4.3 Authorization........................................................................ 24
- i -
<PAGE>
Section 4.4 Litigation........................................................................... 25
Section 4.5 Approvals, Consents, Etc............................................................. 25
Section 4.6 Availability of Financing............................................................ 25
Section 4.7 Richfood SEC Reports; Disclosure Statement........................................... 25
Section 4.8 Fees and Expenses of Brokers and Others.............................................. 26
ARTICLE V Covenants of Seller and Buyer............................................................. 26
Section 5.1 Investigation of Business; Access to Properties and Records.......................... 26
Section 5.2 Cooperation.......................................................................... 27
Section 5.3 Antitrust Compliance................................................................. 28
Section 5.4 Further Assurances................................................................... 28
Section 5.5 Conduct of Business.................................................................. 28
Section 5.6 Public Announcements................................................................. 30
Section 5.7 No Solicitation...................................................................... 30
Section 5.8 Bulk Sales Laws...................................................................... 31
Section 5.9 Subsidiaries......................................................................... 31
Section 5.10 IBT Agreement........................................................................ 31
Section 5.11 Environmental Testing and Remediation................................................ 31
Section 5.12 Audited Financial Statements......................................................... 34
ARTICLE VI Employees................................................................................. 34
Section 6.1 Employment Matters................................................................... 34
ARTICLE VII Tax Matters............................................................................... 35
Section 7.1 Transfer Taxes....................................................................... 35
Section 7.2 Withholding.......................................................................... 35
ARTICLE VIII Conditions of Buyer's Obligation to Close................................................. 35
Section 8.1 Representations, Warranties and Covenants of Seller.................................. 36
Section 8.2 HSR Act Waiting Period; Governmental Consents........................................ 36
Section 8.3 No Injunction or Government Action................................................... 36
Section 8.4 Bankruptcy Court Confirmation; Effectiveness of Plan................................. 36
ARTICLE IX Conditions to Seller's Obligation to Close................................................ 37
Section 9.1 Representations, Warranties and Covenants of Buyer................................... 37
Section 9.2 HSR Act Waiting Period; Governmental Consents........................................ 37
Section 9.3 No Injunction or Government Action................................................... 37
Section 9.4 Bankruptcy Court Confirmation; Effectiveness of Plan................................. 37
ARTICLE X Termination............................................................................... 38
Section 10.1 Termination.......................................................................... 38
Section 10.2 Procedure and Effect of Termination.................................................. 39
ARTICLE XI No Survival; Guarantee.................................................................... 40
Section 11.1 No Survival.......................................................................... 40
Section 11.2 Guarantee............................................................................ 40
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<PAGE>
ARTICLE XII Miscellaneous............................................................................. 40
Section 12.1 Brokers.............................................................................. 40
Section 12.2 Counterparts......................................................................... 40
Section 12.3 Governing Law........................................................................ 41
Section 12.4 Entire Agreement..................................................................... 41
Section 12.5 Expenses............................................................................. 41
Section 12.6 Notices.............................................................................. 41
Section 12.7 Successors and Assigns............................................................... 42
Section 12.8 Headings; Definitions................................................................ 42
Section 12.9 Amendments and Waivers............................................................... 42
Section 12.10 Interpretation....................................................................... 42
Section 12.11 Severability......................................................................... 43
</TABLE>
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<PAGE>
SCHEDULES AND EXHIBITS
EXHIBITS
Exhibit A Form of Richfood Warrant
Exhibit B Form of Assignment and Assumption Agreement
SCHEDULES
Schedule 1.1A December Statement of Working Capital
Schedule 1.1B Certain Matters Affecting Seller's Business
Schedule 1.1C Permitted Exceptions
Schedule 1.1D Stores
Schedule 2.3A Owned Real Property
Schedule 2.3B Leased Real Property
Schedule 2.3C Software
Schedule 2.3D Non-Assumed Contracts
Schedule 2.3E Executive Agreements
Schedule 2.3F Certain Excluded Liabilities
Schedule 2.4 Agreed Upon Accounting Principles for Preparation of
Final Statement of Working Capital
Schedule 2.7 Allocation of Purchase Price
Schedule 3.1 Subsidiaries
Schedule 3.2 Certain Required Filings and Consents
Schedule 3.4 Certain Matters Relating to Contracts
Schedule 3.5 Litigation
Schedule 3.6 Labor Matters
Schedule 3.7 Employee Benefit Plans
Schedule 3.8 Environmental Matters
Schedule 3.17 Seller SEC Reports
Schedule 3.19 Affiliated Transactions
Schedule 3.20 Adverse Changes
Schedule 4.2 Richfood Options, Warrants and Similar Rights
Schedule 4.7 Richfood SEC Reports
Schedule 5.5 Certain Planned Transactions
Schedule 5.11 Environmental Testing and Remediation
- iv -
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement"), dated as of
November 26, 1997, is by and among Farm Fresh, Inc., a Virginia corporation
("Seller" or the "Company"), Richfood Holdings, Inc., a Virginia corporation
("Richfood"), and FF Acquisition, L.L.C., a Virginia limited liability company
and wholly-owned subsidiary of Richfood ("Buyer").
WHEREAS, Seller owns the Assets and is or may be subject to
the Assumed Liabilities (as each such term is defined herein);
WHEREAS, Buyer desires to purchase the Assets and assume the
Assumed Liabilities from Seller, and Seller desires to sell the Assets and
assign the Assumed Liabilities to Buyer, upon the terms and subject to the
conditions set forth herein; and
WHEREAS, in connection with the transactions contemplated
herein, Seller, Richfood and Buyer have agreed that Seller shall commence the
Bankruptcy Case in the Bankruptcy Court in order to effect the Asset Purchase
pursuant to a Confirmation Order (as each such term is defined herein).
NOW, THEREFORE, in consideration of the premises and the
mutual promises contained herein, the parties hereto agree as follows:
ARTICLE I
Definitions
Section 1.1 Certain Definitions. As used in this Agreement,
the following terms shall have the following respective meanings:
"Accounts Receivable" shall have the meaning given in Section
2.3(a)(ix) hereof.
"Action" shall mean any action, suit, arbitration, inquiry,
proceeding or investigation by or before any court, arbitrator, governmental or
other regulatory or administrative agency or commission.
"Affiliate" shall mean, with respect to any Person, any other
Person that directly, or indirectly through one or more intermediaries, controls
or is controlled by or under common control with the Person specified.
"Asset Purchase" shall mean the consummation of the
transactions contemplated by this Agreement at the Closing.
"Assets" shall have the meaning given in Section 2.3(a)
hereof.
<PAGE>
"Assumed Liabilities" shall have the meaning given in Section
2.3(b) hereof.
"Bankruptcy Case" shall have the meaning given in Section
2.1(a) hereof.
"Bankruptcy Code" shall mean 11 U.S.C ss.ss. 101-1330, as
amended.
"Bankruptcy Court" shall mean the United States Bankruptcy
Court for the District of Delaware.
"Books and Records" shall mean originals or true and correct
copies of all of the books and records relating to the operation of Seller's
business that are in the possession or control of Seller or its Affiliates
including, without limitation: (a) all books of account, minute books and stock
record books; (b) surveys (boundary and topographical), fixture plans, building,
site and pylon sign drawings, structural drawings, electrical drawings,
mechanical drawings, as-built drawings, warranties and guarantees relating to
the condition of the improvements on the Properties and the Equipment; (c) the
job title, job description, rate of pay, hire date, job classification (i.e.,
full-time or part-time) and social security number of Seller's employees; (d)
cost schedules for land, buildings, leaseholds and equipment (including, without
limitation, cost, book value and date of acquisition) included in the Assets;
(e) the Contracts, Leases and Permits; and (f) copies of all in-Store pharmacy
data (including pharmacy customer profile lists) necessary for the continued
operation of the Stores.
"Cash" shall mean U.S. currency and coin change.
"Cash Portion of the Purchase Price" shall have the meaning
given in Section 2.4(a) hereof.
"Closing" shall mean the consummation of the transactions
contemplated by Section 2.3.
"Closing Capital Lease Liability" shall mean the Company's
book liability (both current and long-term) for capital leases included in the
Contracts (excluding the Capital Lease for Store 841), determined as of the
Closing Date in accordance with GAAP and in a manner consistent with the
Company's past practice and the December Balance Sheet.
"Closing Date" shall have the meaning given in Section 2.2
hereof.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, and any successor thereto and the regulations promulgated thereunder.
"Confidentiality Agreement" shall mean the confidentiality
agreement between DLJ, on behalf of Seller, and Richfood, dated January 22,
1997.
"Confirmation Order" shall have the meaning given in Section
8.4 hereof.
"Contracts" shall have the meaning given in Section
2.3(a)(viii) hereof.
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"December Balance Sheet" shall mean the audited consolidated
balance sheet of the Company as of December 28, 1996, together with the notes
thereto, in the form included in the Company's Annual Report on Form 10-K for
the fiscal year then-ended.
"December Statement of Working Capital" shall mean the special
purpose statement of consolidated working capital of the Company as of December
28, 1996, attached hereto as Schedule 1.1A.
"December Working Capital" shall mean $14,411,234, being the
amount equal to "current assets" minus "current liabilities" as reflected on the
December Statement of Working Capital.
"Disclosure Statement" shall have the meaning given in Section
2.1(b) hereof.
"DLJ" shall mean Donaldson, Lufkin & Jenrette Securities
Corporation, financial advisor to Seller.
"Environmental Laws" shall mean all Laws and all applicable
decrees, judgments, injunctions or other requirements of a Governmental
Authority issued, promulgated, approved or entered thereunder, as the same are
generally interpreted and enforced, relating to the environment, or imposing
liability or standards of conduct concerning any Hazardous Materials or
Petroleum Products or environmental protection, as the same are now or at any
time through the Closing Date in effect, together with any amendment or
re-authorization thereto or thereof including, without limitation: the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended by the Superfund Amendments and Reauthorization Act; the Resource
Conservation and Recovery Act of 1976, as amended; the Federal Water Pollution
Control Act, as amended; the Federal Clean Air Act, as amended; the Toxic
Substances Control Act, as amended; the Safe Drinking Water Act, as amended; the
Pollution Control Act of 1990, as amended; the Federal Insecticide, Fungicide
and Rodenticide Act, as amended; and comparable state and local Laws.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, and any successor thereto.
"E&Y" shall mean Ernst & Young LLP, independent accountants
for Richfood and Buyer.
"Equipment" shall have the meaning given in Section
2.3(a)(iii) hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Excluded Assets" shall have the meaning given in Section
2.3(a) hereof.
"Excluded Liabilities" shall have the meaning given in Section
2.3(b) hereof.
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<PAGE>
"Executive Agreements" shall have the meaning given in Section
2.3(a)(xix) hereof.
"Final Statement of Working Capital" shall mean the special
purpose statement of consolidated working capital of the Company as of the
effective time of Closing, to be prepared and delivered in accordance with
Section 2.4(b) hereof.
"Final Working Capital" shall mean an amount equal to "current
assets" minus "current liabilities" as reflected on the Final Statement of
Working Capital.
"Funded Debt" shall mean, without duplication, (i) all
indebtedness for borrowed money or which has been incurred in connection with
the acquisition of assets, in each case having a final maturity of one or more
than one year from the date of origin thereof (or which is renewable or
extendible at the option of the obligor for a period or periods more than one
year from the date of origin), including all payments in respect thereof that
are required to be made within one year from the date of any determination of
Funded Debt to the extent the obligation to make such payments shall constitute
a current liability of the obligor under GAAP, (ii) all accrued interest on
Funded Debt and (iii) all guaranties of Funded Debt of others.
"GAAP" shall mean generally accepted accounting principles as
in effect in the United States on the date of the subject financial statement.
"Governmental Authority" shall mean any federal, state,
municipal or other governmental department, commission, board, bureau, agency,
authority or instrumentality, or any court.
"Hazardous Materials" shall mean any hazardous material,
hazardous waste, infectious medical waste, hazardous or toxic substance defined
or regulated as such in or under any Environmental Law, including, without
limitation, materials exhibiting the characteristics of ignitability,
corrosivity, reactivity or extraction procedure toxicity, as such terms are now
or hereafter defined in connection with hazardous materials or hazardous wastes
or hazardous or toxic substances in any Environmental Law.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"Intangibles" shall have the meaning given in Section
2.3(a)(xi) hereof.
"Inventory" shall have the meaning given in Section 2.3(a)(iv)
hereof.
"JPM" shall mean J.P. Morgan & Co., Inc., financial advisor to
Richfood and Buyer.
"Knowledge" shall mean, with respect to any corporation, the
actual knowledge of the officers of such corporation after due inquiry, and with
respect to any other Person, the actual knowledge of such Person after due
inquiry.
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<PAGE>
"KPMG" shall mean KPMG Peat Marwick LLP, independent
accountants for Seller.
"Law" shall mean any federal, state, local or other statutory
or common law or governmental requirement of any kind, and the rules,
regulations and orders promulgated thereunder.
"Leased Properties" shall mean the Properties that are the
subject of the Leases.
"Leases" shall have the meaning given in Section 2.3(a)(ii)
hereof.
"Material Adverse Effect" means any material adverse change in
the condition (financial or otherwise) or results of operations of Seller,
considered in the aggregate taking into account all instances in which such term
is used to qualify a representation or warranty made by Seller herein; provided,
however, that Material Adverse Effect (and the word "material" and phrases of
like import) shall exclude any adverse changes or conditions as and to the
extent such changes or conditions relate to or result from (a) public or
industry knowledge of the transactions contemplated by this Agreement (including
but not limited to any action or inaction by Seller's employees, customers and
vendors), (b) general economic conditions or other conditions affecting the
industry in which Seller competes as a whole, including fluctuating conditions
resulting from the cyclicality of Seller's business, (c) any operating losses of
a nature and in an amount similar to those prevailing prior to the date hereof
or that are attributable to Seller's business at the stores that are the subject
of the Non-Assumed Contracts, (d) any action of the Bankruptcy Court in the
Bankruptcy Case, unless such actions are in violation of or are inconsistent
with, in any material respect, the terms of this Agreement, (e) the Excluded
Liabilities, and (f) those matters disclosed on Schedule 1.1B attached hereto.
"Non-Assumed Contracts" shall have the meaning given in
Section 2.3(a)(xviii) hereof.
"Noteholders" shall mean the record and beneficial owners of
Seller's 12.25% Senior Notes due 2000 and Seller's 12.25% Senior Notes, Series
A, due 2000.
"Owned Properties" shall have the meaning given in Section
2.3(a)(i) hereof.
"Partnership" shall have the meaning given in Section 3.1(c)
hereof.
"Permits" shall have the meaning given in Section 2.3(a)(x)
hereof.
"Petroleum Products" shall mean gasoline, diesel fuel, motor
oil, waste or used oil, heating oil, kerosene and any other petroleum products,
and their respective constituents.
"Permitted Exceptions" shall mean, collectively: (a) all
statutory or other liens for real estate taxes or assessments which are not yet
due or delinquent or the validity of
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which is being contested in good faith by Seller through appropriate proceedings
(including any interest and penalties on, in lieu of or for noncollection of or
additions to any such taxes or assessments), provided that in the aggregate the
foregoing amounts (to the extent constituting Assumed Liabilities) are accrued
for on the Final Statement of Working Capital; (b) all non-monetary liens,
covenants, charges, easements, restrictions and encumbrances contained (or
otherwise disclosed or identified in sufficient detail such that Buyer is put on
notice regarding the material facts of such liens, covenants, charges,
easements, restrictions and encumbrances) in the property and lease files
furnished to Buyer by Seller prior to the date hereof, including, without
limitation (i) all matters, conditions and states of fact so disclosed or
identified in title reports, surveys, correspondence or other documents located
in such files, and (ii) all leases, subleases, licenses, concessions or service
contracts, common area maintenance, reciprocal easement agreements, or other
operating maintenance or development agreements contained (or so disclosed or
identified) in such files; (c) all liens and encumbrances arising under
applicable Law; (d) with respect to any asset which consists of a leasehold
estate or possessory interest in real property, all mortgages, deeds of trust or
other matters of record to which the underlying fee estate in such real property
is subject; (e) all mechanics', carriers', workers', repairers' and similar
liens, provided that in the aggregate the accounts payable related to the
matters giving rise to such liens are accrued for on the Final Statement of
Working Capital; (f) any other non-monetary liens, charges, easements,
restrictions, encumbrances and other matters, if any, which do not, individually
or in the aggregate, materially adversely interfere with the continued use of
the property by Buyer as currently conducted by Seller; and (g) such other
matters as are disclosed on Schedule 1.1C attached hereto.
"Person" shall mean an individual, a partnership, a joint
venture, a limited liability company, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof.
"Plan" shall have the meaning given in Section 2.1(b) hereof.
"Properties" or "Property" shall mean, collectively, the
Stores, the Warehouse and the other real property Assets owned or leased by
Seller, all of which are identified on Schedule 2.3A or Schedule 2.3B attached
hereto.
"Purchase Price" shall have the meaning given in Section
2.4(a) hereof.
"Richfood Common Stock" shall mean shares of common stock,
without par value, of Richfood.
"Richfood SEC Reports" shall mean (a) Richfood's Annual Report
on Form 10-K for the fiscal year ended May 3, 1997, and (b) all documents filed
by Richfood with the SEC pursuant to Sections 13(a) and 13(c) of the Exchange
Act, any definitive proxy statements filed pursuant to Section 14 of the
Exchange Act and any report filed pursuant to Section 15(d) of the Exchange Act
following the filing of Richfood's Annual Report on Form 10-K for the fiscal
year ended May 3, 1997.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
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<PAGE>
"SEC" shall mean the Securities and Exchange Commission.
"Seller Benefit Plans" shall mean all pension, retirement,
profit-sharing, deferred compensation, stock option, employee stock ownership,
severance pay, vacation, bonus or other incentive plans, and all other employee
programs, arrangements or agreements, whether arrived at through collective
bargaining or otherwise, all medical, vision, dental and other health plans, all
life insurance plans, and all other employee benefit plans or fringe benefit
plans, including, without limitation, any "employee benefit plan," as that term
is defined in Section 3(3) of ERISA, currently adopted, maintained by, sponsored
in whole or in part by, or contributed to by Seller or any Affiliates thereof
for the benefit of employees, retirees, dependents, spouses, directors,
independent contractors or other beneficiaries and under which employees,
retirees, dependents, spouses, directors, independent contractors, or other
beneficiaries are eligible to participate.
"Seller SEC Reports" shall mean (a) Seller's Annual Report on
Form 10-K for the fiscal year ended December 28, 1996, and (b) all documents
filed by Seller with the SEC pursuant to Sections 13(a) and 13(c) of the
Exchange Act, any definitive proxy statements filed pursuant to Section 14 of
the Exchange Act and any report filed pursuant to Section 15(d) of the Exchange
Act following the filing of Seller's Annual Report on Form 10-K for the fiscal
year ended December 28, 1996.
"Software" shall have the meaning given in Section 2.3(a)(xiv)
hereof.
"Stores" shall mean, collectively, the retail stores listed on
Schedule 1.1D.
"Subsidiary" shall have the meaning given in Section 3.1(b)
hereof.
"Supplies" shall have the meaning given in Section 2.3(a)(v)
hereof.
"Warehouse" shall mean the dry grocery distribution facility
and offices located at Azalea Garden Road, Norfolk, Virginia.
"Warrants" shall mean warrants to purchase 1,500,000 shares of
common stock, without par value, of Richfood, with an exercise price of $25.00
per share and a term expiring five (5) years after the Closing Date, in the form
of Exhibit A to the Warrant Agreement.
"Warrant Agreement" shall mean the Warrant Agreement, dated as
of the Closing Date, between Richfood and the warrant agent to be specified
therein, in the form of Exhibit A attached hereto (subject only to such changes
as may be required to complete the dates specified therein and to identify the
warrant agent).
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<PAGE>
ARTICLE II
Commencement of Bankruptcy Case; Closing; Purchase and Sale
Section 2.1 Commencement of Bankruptcy Case. (a) As soon as
practicable after the date hereof, Seller shall commence a voluntary case (the
"Bankruptcy Case") under Chapter 11 of the Bankruptcy Code. Subject to
Richfood's cooperation, Seller shall use its commercially reasonable best
efforts to obtain Bankruptcy Court approval of the break-up fee and expense
reimbursement provisions of Section 10.2(b) hereof as early as practicable in
the Bankruptcy Case. Except as otherwise ordered by the Bankruptcy Court, the
parties hereto shall cooperate in good faith to obtain such Bankruptcy Court
orders as may be necessary to effect the Asset Purchase including, without
limitation, the Confirmation Order, as soon as practicable following the
commencement of the Bankruptcy Case. Any solicitation by Seller of its creditors
and equity security holders prior to commencement of the Bankruptcy Case shall
be conducted in accordance with Section 1126(b) of the Bankruptcy Code.
(b) Seller has delivered to Buyer a draft plan of
reorganization of Seller (the "Plan") and related draft disclosure statement
(the "Disclosure Statement") for use in connection with the Bankruptcy Case.
Such Plan and Disclosure Statement, as the same shall be amended from time to
time and filed with the Bankruptcy Court in the Bankruptcy Case, shall be in
form and substance in all material respects reasonably acceptable to Buyer
insofar as they relate to the transactions contemplated herein, it being
understood that: (i) the most recent drafts of the Plan and the Disclosure
Statement delivered to Buyer are acceptable to Buyer; and (ii) without limiting
the foregoing, Seller need not seek or obtain Buyer's acceptance of provisions
in the Plan or the Disclosure Statement relating to classification and treatment
of creditors and interest holders, the administration of the reorganized debtor
(including distribution mechanisms, corporate governance and resolution of
disputed claims and interests), or release provisions (other than as such
provisions relate to Buyer and its Affiliates).
Section 2.2 Time and Place of Closing. The Closing shall take
place at the offices of Hunton & Williams, Riverfront Plaza East Tower, 951 E.
Byrd Street, Richmond, Virginia 23219, or such other place as Richfood, Buyer
and Seller shall mutually agree, at 10:00 a.m., local time, on the date when the
conditions set forth in Articles VIII and IX shall first be fully satisfied or
duly waived (or, if such date is not a business day, then on the next business
day), or if Seller, Richfood and Buyer shall mutually agree on a different date,
the date upon which they shall have mutually agreed (such date being referred to
herein as the "Closing Date").
Section 2.3 Purchase and Sale of Assets and Assumption of
Liabilities. (a) Subject to the satisfaction or waiver of all of the conditions
set forth herein, on the Closing Date, Seller shall sell, convey, assign,
transfer and deliver to Buyer, and Buyer shall purchase, acquire, accept, assume
and pay for, all of Seller's right, title and interest as of the Closing Date in
and to all of the tangible and intangible assets, properties and rights (other
than the Excluded Assets described below) of Seller, wherever located
(hereinafter collectively referred to as the "Assets"), including, without
limitation:
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(i) all parcels of real property owned by Seller, all
of which are identified on Schedule 2.3A, together with all
buildings, fixtures and improvements located on or attached to
such real property, and all options, rights of first refusal,
licenses and permits (to the extent transferable), leases,
subleases, easements and rights-of-way which are appurtenant
to such real property, subject to the Permitted Exceptions
(the "Owned Properties");
(ii) all of the leases and subleases of real property
which are listed on Schedule 2.3B, and the related leasehold
interests, licenses, permits (to the extent transferable),
leases, subleases, easements and rights-of-way which are
appurtenant to and subject to such leasehold interests,
subject to the Permitted Exceptions (collectively, the
"Leases");
(iii) all of the vehicles and all of the machinery,
equipment, rolling stock, tools, furniture, fixtures,
leasehold improvements, pallets, phones, computer equipment,
order entry devices and other items of personal property which
are owned by Seller (collectively, the "Equipment");
(iv) all merchandise inventory owned by Seller or
which is in transit to the Warehouse or the Stores on the
Closing Date (the "Inventory");
(v) all supplies, containers, labels, packaging
material, maintenance supplies, raw food materials, fuel and
other similar items owned by Seller which are located at the
Properties or at vendors of Seller on the Closing Date (the
"Supplies");
(vi) the amount of all transferable deposits, prepaid
rent and prepaid expenses made by Seller for all Leases,
Contracts or Permits or otherwise relating to the Assets
transferred to Buyer;
(vii) all of Seller's Cash and cash equivalents
located at the Properties or on deposit in banking or
financial institutions in any accounts or safe deposit boxes,
and all checks, manufacturers' coupons, food-stamps and WIC
coupons located in or at the Properties or otherwise in
Seller's possession or control;
(viii) all contracts and agreements of Seller
relating to the operations of the Seller at the Properties,
including, without limitation, any purchase orders or supply
agreements for Inventory and Supplies relating to the
operation of the Properties to the extent provided herein
(including, without limitation, the Supply Agreement, dated as
of April 12, 1991, as amended, between Richfood, Inc., Seller
and certain of Seller's Affiliates, and the Milk and Meat
Supply Agreement, dated as of September 23, 1994, between
Richfood, Inc., Seller and certain of Seller's Affiliates);
leases of or agreements relating to the maintenance,
acquisition or use of the Properties or any vehicles,
machinery, equipment, rolling stock, tools, furniture,
fixtures, phones, computer equipment, computer software,
pallets, order entry devices
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and other items of personal property related thereto; and all
of Seller's rights with respect to, and interests in, any
consigned, licensed or bailed fixtures, equipment or inventory
including, without limitation, shelf end caps, displays, ice
chests and food and beverage dispensing equipment
(collectively, the "Contracts");
(ix) all accounts receivable owned by Seller,
including, without limitation, accounts receivable of the
Stores and the Warehouse (collectively, the "Accounts
Receivable");
(x) all licenses and permits pertaining to the
operation of Seller's business which are transferable or
assignable to Buyer under applicable Law (collectively, the
"Permits");
(xi) all trademarks, trade names, patents,
servicemarks, copyrights, logos, pending applications for the
foregoing and similar intangibles (collectively, the
"Intangibles");
(xii) originals or true and complete copies of all of
the Books and Records that are in the possession or control of
Seller or its Affiliates at Closing;
(xiii) all computer hardware owned by Seller or used
in the operation of Seller's business that is not leased by
Seller pursuant to a Contract;
(xiv) all computer software owned by Seller or used
in the operation of Seller's business that is not leased or
licensed by Seller pursuant to a Contract including, without
limitation, the software listed in Schedule 2.3C attached
hereto (the "Software");
(xv) (A) all rights of Seller under insurance
policies to which Seller is a party, a named insured or
otherwise the beneficiary of coverage (the "Insurance
Policies"), except directors' and officers' liability
insurance and except claims for business interruption
insurance relating to pre-Closing periods, and (B) copies of
insurance certificates that Seller has provided to third
parties pertaining to the Properties (including, without
limitation, the identity of the named insureds and loss
payees); and
(xvi) all insurance proceeds receivable by Seller
(except proceeds from claims for directors' and officers'
liability insurance and business interruption insurance
relating to pre-Closing periods) and all causes of action of
Seller relating to Seller's business (including, without
limitation, any causes of action arising out of any supply
agreements to which Seller is a party);
provided, however, that the property, assets, contracts, leases, and rights of
Seller described below (collectively, the "Excluded Assets") are expressly
excluded from the definition of
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"Assets" and the terms defined in Sections 2.3(a)(i)-(xvi) hereof, and from the
Asset Purchase:
(xvii) the Cash Portion of the Purchase Price and the
Warrants;
(xviii) the leases and contracts listed on Schedule
2.3D attached hereto (the "Non-Assumed Contracts");
(xix) the employment agreements listed on Schedule
2.3E attached hereto (the "Executive Agreements");
(xx) all Cash, Inventory, Accounts Receivable and
prepaid expenses owned by Seller and located at, or directly
relating to, leased premises that are the subject of
Non-Assumed Contracts;
(xxi) any licenses and permits pertaining to the
operation of Seller's business which are not legally
transferable and assignable to Buyer;
(xxii) all causes of action of Seller relating
specifically to the Non- Assumed Contracts;
(xxiii) all causes of action of Seller relating to
any actual or potential claim or demand against (A) any
current or former shareholder, director, officer, employee,
agent, attorney, advisor or consultant of Seller or FF
Holdings or any of their respective Affiliates, or (B) the
Noteholders, their steering committee and their respective
attorneys and advisors;
(xxiv) all causes of action of Seller relating to any
actual or potential preferential transfer or fraudulent
conveyance arising under federal or state Law, except to the
extent any such claim relates to Richfood or any of its
Affiliates;
(xxv) all letters of credit (including, but not
limited to, those posted to support Seller's workers'
compensation obligations and general liability and other
insurance obligations, policies and premiums), it being
understood that Buyer shall post substitute letters of credit
or make other satisfactory arrangements with the beneficiaries
of any such letters of credit that relate to Assumed
Liabilities in order to permit Seller to terminate such
letters of credit at Closing;
(xxvi) all rights of Seller under directors' and
officers' liability insurance policies, and all rights of
Seller with respect to claims for business interruption
insurance relating to pre-Closing periods; and
(xxvii) Seller's rights under this Agreement and the
Plan.
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(b) At the Closing, Buyer shall assume and agree to perform or
discharge, and indemnify, defend and hold Seller harmless from and against, all
of the liabilities and obligations of Seller arising out of, resulting from or
relating to the operation, ownership, use or occupancy of the Properties and the
Assets by Seller, whether arising before or after Closing and whether known or
unknown, fixed or contingent, including, without limitation, liabilities and
obligations (i) arising under the Leases, Contracts and Permits, (ii) arising
under purchase orders for inventory and supplies and services previously
delivered and provided and/or to be delivered or provided to the Properties
before, on or after the Closing Date, (iii) that are subject to coverage under
the Insurance Policies (whether such liabilities and obligations relate to the
Properties and Assets or to premises that are the subject of Non- Assumed
Contracts, it being understood that Buyer shall be responsible for the amount of
any retention or deductibles under such Insurance Policies and the amount of any
such liabilities or obligations in excess of such insurance) and (iv) which
Buyer has expressly agreed to assume pursuant to this Agreement (collectively,
the "Assumed Liabilities"). Except as specifically set forth herein, Buyer shall
not assume any liability or obligation of Seller, whether known or unknown,
fixed or contingent or otherwise. Without limiting the generality of the
foregoing, the parties agree that the Assumed Liabilities shall specifically
exclude: (i) Funded Debt of Seller as of the Closing Date; (ii) liabilities and
obligations arising under the Non-Assumed Contracts; (iii) any liability or
obligation of Seller to the extent arising out of, resulting from or relating
directly to the operation, ownership, use or occupancy of the premises that are
the subject of the Non-Assumed Contracts under applicable Environmental Law or
relating to Seller's use, storage, release, disposal or handling of Hazardous
Materials or Petroleum Products at or from such premises; (iv) any liability or
obligation of Seller arising out of, resulting from or related to the Executive
Agreements; (v) any liability or obligation of Seller for taxes, except as
provided in Section 7.1 hereof and except to the extent such taxes are
specifically identified and accrued for on the Final Statement of Working
Capital; (vi) Seller's obligations under this Agreement and Seller's costs and
expenses incurred in connection with this Agreement and the transactions
contemplated herein which remain outstanding on and after the Closing Date; and
(vii) any other liabilities or obligations that are specifically set forth on
Schedule 2.3F attached hereto (collectively, the "Excluded Liabilities").
Section 2.4 Purchase Price. (a) Subject to adjustment as
provided in subsection (b) of this Section 2.4 and in Section 5.11(f) hereof,
the purchase price for the Assets (the "Purchase Price") shall be (i) TWO
HUNDRED FIFTY ONE MILLION THREE HUNDRED FIFTY THOUSAND Dollars ($251,350,000)
plus (ii) the Warrants plus (iii) the assumption of the Assumed Liabilities
minus (iv) an amount equal to the Closing Capital Lease Liability (the
difference between the amounts described in clauses (i) and (iv) being referred
to herein as the "Cash Portion of the Purchase Price").
(b)(i) Within thirty (30) days after the Closing Date, Seller
shall prepare and deliver to Buyer a draft Final Statement of Working Capital,
which shall be prepared in accordance with Schedule 2.4 attached hereto.
(ii) If Buyer has no objections to the draft Final Statement
of Working Capital, such draft shall be certified by Seller and shall constitute
the Final Statement of Working Capital. If Buyer has any objections to the draft
Final Statement of Working
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Capital, it will deliver a detailed statement describing its objections to
Seller within twenty-one (21) days after receiving the draft Final Statement of
Working Capital. Buyer and Seller will use their reasonable best efforts to
resolve any such objections. If a final resolution is not obtained within thirty
(30) days after Seller has received the statement of objections, Buyer and
Seller will select a nationally-recognized independent accounting firm mutually
acceptable to them to resolve any remaining objections (the "Arbitrator") in
accordance with subsection (iii) hereof. If Buyer and Seller are unable to agree
on the choice of an Arbitrator, they will select a nationally-recognized
independent United States accounting firm by lot (after excluding KPMG and E&Y).
(iii) For each unresolved objection to the draft Final
Statement of Working Capital, Buyer and Seller will each submit to the
Arbitrator a written statement setting forth such party's proposed resolution
and any supporting data and analysis. The Arbitrator, following "baseball style"
arbitration, will select either Buyer's or Seller's proposed resolution of each
objection. Seller will revise the draft Final Statement of Working Capital as
appropriate to reflect the resolution of Buyer's objections (as agreed upon by
Seller and Buyer or as determined by the Arbitrator) and deliver it to Buyer
within ten (10) days after the resolution of such objections. Such revised
statement shall be certified by Seller and shall constitute the Final Statement
of Working Capital.
(iv) To the extent that the Final Statement of Working
Capital, as certified by Seller, shows that Final Working Capital is less than
December Working Capital, Seller shall pay such difference to Buyer in
immediately available funds within two (2) business days of delivery of such
Final Statement of Working Capital. To the extent that the Final Statement of
Working Capital, as certified by Seller, shows that Final Working Capital is
greater than December Working Capital, Buyer shall pay such excess to Seller in
immediately available funds within two (2) business days of delivery of such
Final Statement of Working Capital. All payments made pursuant to this Section
2.4(b)(iv) shall be accompanied by accrued interest thereon from the Closing
Date at the rate of 8.0% per annum.
(v) If any unresolved objections are submitted to an
Arbitrator for resolution, as provided above, then Buyer and Seller will share
the fees and expenses of the Arbitrator on a pro rata basis reflecting the
dollar amount of issues resolved in each party's favor.
(vi) Seller will, and will cause KPMG to, make available to
Buyer and its advisors the work papers used in preparing the draft Final
Statement of Working Capital and the Final Statement of Working Capital, and
will provide access to those employees of Seller and KPMG involved in the
preparation thereof, at reasonable times and upon reasonable notice at any time
during the preparation by Seller of the draft Final Statement of Working Capital
and the resolution of any objections with respect thereto.
Section 2.5 Deliveries. (a) At the Closing, Seller shall
deliver the following to Buyer:
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(i) special warranty deeds, bills of sale,
endorsements, assignments, leases, subleases and other
instruments of transfer and conveyance of the Assets, in form
reasonably acceptable to Buyer and Seller; provided, however,
that any such instruments shall be without representation or
warranty by, or recourse to, Seller, except as otherwise
specifically provided herein;
(ii) possession at the Properties of all Books and
Records;
(iii) a certificate of Seller (signed on behalf of
Seller by its President or a Vice President) that the
conditions set forth in Section 8.1 have been satisfied
(except as waived by Buyer); and
(iv) a secretary's certificate in customary form,
including incumbency certificates with respect to the officers
of Seller who execute this Agreement and any other agreements,
certificates or other documents in connection with the Asset
Purchase.
(b) At the Closing, Buyer shall deliver the following to
Seller:
(i) the Cash Portion of the Purchase Price, by wire
transfer of immediately available funds in such amount to the
bank account or accounts designated by Seller (or by such
other means as are agreed upon by Buyer and Seller);
(ii) the Warrants, registered in the name of Seller
or such assignees as may be designated in or pursuant to the
Plan;
(iii) assumption agreements, leases or subleases with
respect to the Contracts, Leases and other obligations assumed
by Buyer substantially in the form attached hereto as Exhibit
B or in such other form as shall be reasonably acceptable to
Buyer and Seller;
(iv) a certificate of Buyer (signed on behalf of
Buyer by its President or a Vice President) that the
conditions set forth in Section 9.1 have been satisfied
(except as waived by Seller); and
(v) a secretary's certificate in customary form,
including incumbency certificates with respect to the officers
of Buyer who execute this Agreement and any other agreements,
certificates or other documents in connection with the Asset
Purchase.
Section 2.6 Inventory and Supplies in Transit. Inventory and
Supplies ordered in the ordinary course of business, delivery of which is not
received on or prior to the Closing Date by Seller, shall become the property of
Buyer. Buyer shall pay the vendor for the Inventory and Supplies in accordance
with the invoice terms and conditions including any applicable transportation
charges, and Buyer shall not be entitled to reimbursement of all or any portion
of such payment from Seller.
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Section 2.7 Allocation of Purchase Price. The Purchase Price
(including the Assumed Liabilities to the extent such liabilities constitute
part of the amount realized by Seller for federal income tax purposes, but
excluding any interest payable upon the adjustment of the Purchase Price
pursuant to Section 2.4(b)) shall be allocated among the Assets as set forth in
Schedule 2.7 attached hereto. Buyer, Richfood and Seller shall each report the
federal, state and local income and other tax consequences of the transactions
contemplated by this Agreement in a manner consistent with such allocation,
including but not limited to the preparation and filing of Form 8594 under
Section 1060 of the Code (or any successor form or successor provision of any
future tax law) with their respective federal income tax returns for the taxable
year that includes the Closing Date, and none of Buyer, Richfood or Seller will
take any position inconsistent with such allocation unless otherwise required by
applicable Law; provided, however, that Buyer's cost for the Assets may differ
from the amount so allocated to the extent necessary to reflect Buyer's
capitalized acquisition costs other than the amount realized by Seller.
ARTICLE III
Representations and Warranties of Seller
Seller hereby represents and warrants to Buyer and Richfood as
follows:
Section 3.1 Incorporation; Good Standing; Subsidiaries. (a)
Seller is duly incorporated and validly existing under the laws of Virginia and
has all requisite corporate power and corporate authority to own its properties
and assets and to carry on its business as it is now being conducted. Seller is
in good standing under the laws of Virginia and is duly qualified to transact
business in Virginia. Seller is duly qualified to do business, and is in good
standing, in each other jurisdiction where the failure to be so qualified would
have a Material Adverse Effect. Except as set forth in Schedule 3.1 attached
hereto, Seller is not the record or beneficial owner of any equity, partnership,
membership or other interest in any Person.
(b) With respect to each Person listed on Schedule 3.1 that is
a corporation (a "Subsidiary"), such Schedule accurately sets forth its name and
jurisdiction of incorporation. Each Subsidiary is duly incorporated, validly
existing and in good standing in its jurisdiction of incorporation, and has all
requisite corporate power and corporate authority to own its properties and
assets and to carry on its business as it is now being conducted. Each
Subsidiary is duly qualified to do business, and is in good standing, in each
other jurisdiction where the failure to be so qualified would have a Material
Adverse Effect. All of the issued and outstanding shares of capital stock of
each Subsidiary have been duly authorized and are validly issued, fully paid and
nonassessable, and are owned of record and beneficially by Seller, free and
clear of any and all restrictions on transfer (other than restrictions under the
Securities Act and state securities laws), mortgages, liens, encumbrances,
pledges, security interests, options, warrants, purchase rights, contracts,
commitments, equities, claims and demands, except Permitted Exceptions. There
are no outstanding or authorized options, warrants, purchase rights, conversion
rights, exchange rights, subscription rights or other contracts or commitments
that could require Seller to sell,
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transfer or otherwise dispose of any capital stock of any of the Subsidiaries or
that could require any Subsidiary to issue, sell or otherwise cause to become
outstanding any of its own capital stock. There are no outstanding stock
appreciation, phantom stock, profit participation or similar rights with respect
to any Subsidiary, and there are no voting trusts, proxies or other agreements
or understandings with respect to the voting of any capital stock of any
Subsidiary.
(c) With respect to each Person listed on Schedule 3.1 that is
a partnership (a "Partnership"), such Schedule accurately sets forth (i) its
name and jurisdiction of organization, and (ii) the nature and extent of
Seller's and its Subsidiaries' interests in each Partnership. Each Partnership
is duly organized, validly existing and in good standing in its jurisdiction of
organization, and has all requisite partnership power and partnership authority
to own its properties and assets and to carry on its business as it is now being
conducted. Each Partnership is duly qualified to do business, and is in good
standing, in each other jurisdiction when the failure to be so qualified would
have a Material Adverse Effect. The interests of Seller and its Subsidiaries in
the Partnerships are owned free and clear of any restrictions on transfer (other
than restrictions under the Securities Act and state securities laws),
mortgages, liens, encumbrances, pledges, security interests, options, warrants,
purchase rights, contracts, commitments, equities, claims and demands, except
Permitted Exceptions. There are no outstanding contracts or commitments that
could require any of the Partnerships to admit additional participants or
require Seller or any Subsidiary to sell, transfer or otherwise dispose of its
interest in any Partnership or contribute any additional capital to any
Partnership.
Section 3.2 Authorization. All requisite corporate action has
been taken by Seller to authorize the execution and delivery of this Agreement
and all of the other documents, instruments and agreements required hereby from
Seller, and the consummation of the transactions contemplated hereby and thereby
by Seller. This Agreement has been, and all of the other documents, instruments
and agreements required hereby from Seller will as of the Closing Date be, duly
executed and delivered by Seller and constitute the valid and binding
obligations of Seller (assuming due authorization and execution by the other
parties thereto), enforceable in accordance with their respective terms, subject
to bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights and general equitable principles (whether enforcement is
sought in equity or at law). Except as described on Schedule 3.2 attached
hereto, neither the execution and delivery of this Agreement and the other
documents, instruments and agreements required thereby from Seller, nor the
consummation by Seller of the transactions contemplated hereby or thereby, will
(i) violate any provision of the Articles of Incorporation or Bylaws of Seller,
(ii) conflict with or result in a breach of any terms and provisions of, or
constitute a default under, any indenture, mortgage, contract or other agreement
to which Seller is a party or by which Seller is bound or (iii) violate any Law,
writ, injunction or decree applicable to Seller or any of its properties or
assets, except, in the case of subsection (ii) above, for violations, breaches
or defaults that would not have a Material Adverse Effect. Except for (i) any
applicable filings or reports under the Exchange Act and the HSR Act, (ii) any
required consents, approvals or authorizations or orders of, or filings with,
the Bankruptcy Court, and (iii) those required filings, registrations, consents
and approvals that are listed on Schedule 3.2 attached hereto or which, if not
obtained, would not have a Material Adverse Effect, no filing or registration
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with, and no permit, authorization, consent or approval of, any Governmental
Authority is necessary or required in connection with the execution and delivery
of this Agreement or the other documents, instruments and agreements required
hereby from Seller by Seller, or for the consummation by Seller of the
transactions contemplated herein or therein.
Section 3.3 Title to and Sufficiency of Assets. Seller has, or
will on the Closing Date have, good and marketable fee simple title to all of
the Owned Properties, and valid leasehold interests in all of the Leased
Properties, in each case free and clear to Seller's Knowledge from all
mortgages, pledges, liens, encumbrances or security interests, except for
Permitted Exceptions. Seller has delivered to Buyer, or otherwise made
available, originals or true copies of all deeds, leases and subleases relating
to the Properties that are within Seller's possession or control. Seller has, or
will on the Closing Date have, good and valid title to the other owned Assets to
be transferred hereunder on the Closing Date, free and clear to Seller's
Knowledge of all mortgages, pledges, liens, encumbrances or security interests,
except for Permitted Exceptions. The Assets include all tangible and intangible
assets, contracts and rights necessary or required for the operation of the
businesses of Seller as they are presently conducted, except for the Excluded
Assets.
Section 3.4 Contracts. Seller has provided to Buyer true and
complete copies of all of the Contracts (including all amendments or
modifications thereto) or, in the case of oral Contracts, true and complete
written summaries of the terms thereof, that constitute: (a) a lease of any
interest in any real property; (b) a lease of any personal property with
aggregate annual rental payments in excess of $50,000; (c) an option to acquire
or lease any interest in real property or a right of first refusal with respect
thereto; (d) an agreement to purchase or sell a capital asset or an interest in
any business entity for a price in excess of $50,000 or a right of first refusal
with respect thereto; (e) an agreement relating to the borrowing or lending of
money or the purchase or sale of securities; (f) a guaranty, contribution
agreement or other agreement that includes any indemnification, contribution or
support obligation involving an aggregate liability in excess of $50,000; (g) an
agreement with any third person limiting in any respect the ability of Seller to
compete in any line of business or with any person; (h) a supply or requirements
agreement or other agreement with a vendor; (i) any employment or consulting
agreements to which Seller is a party or by which it is bound involving an
amount in excess of $10,000 individually or $100,000 in the aggregate; and (j)
any other agreement involving an amount over its term in excess of $100,000 that
cannot be terminated prior to an expenditure of $10,000 or less; provided,
however, that Seller shall have no obligation pursuant to this sentence to
deliver to Buyer copies of purchase orders entered into by Seller in the
ordinary course of business. Except as set forth in Schedule 3.4 attached hereto
and subject to Section 365 of the Bankruptcy Code, each Contract is in full
force and effect and, to Seller's Knowledge, is enforceable in accordance with
its terms (except as the enforcement thereof may be limited or otherwise
affected by bankruptcy, insolvency, reorganization, moratorium or other laws
generally affecting the rights of creditors and subject to general equity
principles (whether considered at law or in equity)). Seller has performed on a
timely basis each material term, covenant and condition of each of the Contracts
that is to be performed by it. Except as set forth in Schedule 3.4 attached
hereto, no event has occurred that would, with the passage of time or compliance
with any applicable notice requirements, constitute a default by Seller or, to
Seller's Knowledge, any other party under any of the Contracts, and, to Seller's
Knowledge,
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no party to any of the Contracts intends to cancel, terminate or exercise any
option under any of the Contracts. Except as set forth on Schedule 3.4 attached
hereto, Seller has made no prior assignment of the Contracts or any of its
rights or obligations thereunder.
Section 3.5 Litigation. Except as set forth in Schedule 3.5
attached hereto, there are no Actions pending or, to Seller's Knowledge,
threatened against Seller which could reasonably be expected to have a Material
Adverse Affect.
Section 3.6 Labor Matters. (a) Except as set forth in Schedule
3.6 attached hereto: (i) there is no unfair labor practice charge or complaint
against Seller pending or, to Seller's Knowledge, threatened before the National
Labor Relations Board or any other comparable authority; (ii) no grievance or
arbitration proceeding arising out of or under collective bargaining agreements
is pending and, to Seller's Knowledge, no claims therefor exist or have been
overtly threatened; and (iii) there is no Action of any kind pending or, to
Seller's Knowledge, proposed or threatened against Seller relating to
employment, employment practices, terms and conditions of employment or wages
and hours and which, in the case of clause (iii) hereof, could reasonably be
expected to have a Material Adverse Effect.
(b) Except as described in Schedule 3.6 attached hereto: (i)
Seller does not have any collective bargaining relationship or duty to bargain
with any Labor Organization (as such term is defined in Section 2(5) of the
National Labor Relations Act, as amended), and Seller has not recognized any
Labor Organization as the collective bargaining representative of any of its
employees; (ii) Seller has not been notified by any Labor Organization that it
intends to organize all or any portion of Seller's workforce or the persons
employed at any Store or other Property operated by Seller; and (iii) Seller has
no Knowledge of any active organizational attempts by any Labor Organization at
any of Seller's locations. For purposes of clause (iii), "active organizational
attempts" shall mean actual distribution of authorization cards to employees by
a Labor Organization, distribution of union literature at or in any of the
Seller's locations, telephone solicitation of employees by any union
representative, visits to employees' homes by any union representative, off-site
meetings of employees with a union representative, or the formation of any
employee committees for the purposes of organizing all or any portion of
Seller's workforce.
Section 3.7 Employee Benefit Plans. (a) No Seller Benefit Plan
is a defined benefit plan (within the meaning of Section 3(35) of ERISA) or is
or has been (within any period for which the statute of limitations on the
assessment of withdrawal liability under Title IV of ERISA remains open) a
multiemployer plan (within the meaning of Section 3(37) of ERISA). All Seller
Benefit Plans are in compliance with the applicable provisions (including,
without limitation, any funding requirements or limitations) of ERISA, the Code
and any other applicable Laws, other than breaches or violations which could not
reasonably be expected to have a Material Adverse Effect. Except as described in
Schedule 3.7 attached hereto, no Seller Benefit Plan provides for
post-retirement medical benefit obligations (other than COBRA obligations) or is
a funded welfare benefit plan.
(b) Schedule 3.7 hereto is a true and correct list of all
Seller Benefit Plans. Seller has provided Buyer with access to true and correct
copies of each governing document
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for each Seller Benefit Plan, together with the most recent summary plan
description, annual report, actuarial valuation and audited financial statement
for each such plan.
Section 3.8 Environmental Conditions. (a) Except as set forth
in Schedule 3.8 attached hereto and except for such violations as could not
reasonably be expected to have a Material Adverse Effect: (i) Seller has not
used, stored, treated, transported, manufactured, refined, handled, produced or
disposed of any Hazardous Materials or Petroleum Products on, under, at, from or
in any way affecting any properties or assets now or previously owned or
operated by Seller, in any manner which constitutes a violation of any
Environmental Law; and (ii) to Seller's Knowledge, no prior owner of any such
property or asset or any tenant, subtenant, prior tenant or prior subtenant
thereof has used Hazardous Materials or Petroleum Products on, under, at, from
or in any way affecting any such property or asset, in any manner which
constitutes a violation of any Environmental Law.
(b) Except as set forth on Schedule 3.8 attached hereto and
except for such matters that could not reasonably be expected to have a Material
Adverse Effect: (i) Seller does not have any obligations or liabilities, whether
absolute or contingent, accrued or unaccrued, asserted or unasserted, that have
been or are imposed by reason of or based upon any provision of any
Environmental Laws; (ii) to Seller's Knowledge, no pending claims have been made
against Seller or pertaining to any properties or assets now or previously owned
or operated by Seller that have been or are imposed by reason of or based upon
any provision of any Environmental Laws; and (iii) no presently outstanding
citations or notices have been received by Seller pertaining to Seller or to any
properties or assets now or previously owned or operated by Seller that relate
to or are based upon any provision of any Environmental Laws.
(c) Seller has received all licenses and permits that are
required of it under applicable Environmental Laws to conduct its businesses,
and Seller is in compliance with the terms and conditions of all such licenses
and permits, except where the failure to receive or comply with any such license
or permit could not reasonably be expected to have a Material Adverse Effect.
Seller has not received any pending, unresolved notices or claims that it is a
potentially responsible party in connection with any claim or notice asserted
pursuant to 42 U.S.C. Section 9601 et seq., or any state superfund law.
(d) Except as set forth on Schedule 3.8 attached hereto, to
the Knowledge of Seller there are no underground storage tanks, and no friable
asbestos, located on any of the Properties.
Section 3.9 Compliance with Law. The conduct of Seller's
business and Seller's use of the Assets and performance under the Contracts does
not violate or conflict with, and has not violated or conflicted with, any Law,
where such violation or conflict could reasonably be expected to have a Material
Adverse Effect.
Section 3.10 Permits. Seller possesses all licenses and
permits required to operate its business as it is currently conducted, except
where the failure to obtain any such licenses or permits would not have a
Material Adverse Effect. No representation or warranty is made by Seller with
respect to the transferability of such licenses and permits to
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Buyer. Seller agrees to use its reasonable best efforts prior to and after
Closing to assist Buyer in effecting the transfer of the Permits to Buyer (it
being understood that such best efforts shall not require Seller to incur any
out-of-pocket expenses in connection therewith, unless Buyer shall agree to
reimburse Seller promptly for such expenses).
Section 3.11 Taxes. Seller has filed all required tax returns
and reports relating to the Assets, the Contracts and its business. All taxes of
Seller that have become due pursuant to the foregoing tax returns have been
paid. The Books and Records to be transferred to Buyer contain, in all material
respects, all information and documents (including, without limitation, properly
completed Forms W-9) necessary to comply with all tax information reporting and
tax withholding requirements relating to Seller's business or the Assets. There
are no unpaid taxes (including additions to tax, penalties and interest),
withholdings or other governmental charges the non-payment of which could
adversely affect any of the Assets or the use thereof after Closing or could
cause Buyer to incur any liability, except for those tax liabilities (if any)
that are specifically included among the Assumed Liabilities. No taxing
authority has asserted any claim for the assessment of any such tax liability
(including additions to tax, penalties and interest), withholding or other
governmental charges. The provision for taxes reflected on the December Balance
Sheet is adequate, in all material respects, to cover all tax liabilities of
Seller with respect to any taxable year or taxable period ending on or before
December 28, 1996, and nothing has occurred subsequent to that date to make any
such provision inadequate. All taxes related to taxable periods of the Company
ending subsequent to December 28, 1996, have been paid or are adequately
reserved for, in all material respects, on the Books and Records of Seller. None
of the Assets is subject to a "safe harbor lease" under former Section 168(f)(8)
of the Code. The Assets will include all tangible personal property owned by
Seller as of the Closing Date (except inventory located at or directly relating
to leased premises that are the subject of Non-Assumed Contracts), and Seller
shall not effect more than two (2) sales of tangible personal property (other
than the sale of the Assets contemplated hereunder and sales of inventory)
between December 31, 1997, and the Closing Date.
Section 3.12 Books and Records. The Books and Records,
considered in the aggregate, are complete and correct in all material respects
but subject, in the case of accounting and financial records, to the
requirements of GAAP.
Section 3.13 Real Property. Schedules 2.3A and 2.3B set forth
true and correct lists of all real property owned or leased, respectively, by
Seller, except the Excluded Assets. With respect to each such Property, except
as set forth on Schedules 2.3A or 2.3B or as described in Seller's property and
lease files provided to Buyer prior to the date hereof, and subject to the
Permitted Exceptions:
(a) there are no pending or, to Seller's Knowledge, threatened
condemnation proceedings relating to such Property, and Seller has received no
notice of any pending or threatened lawsuits or administrative Actions relating
to such Property or other matters affecting adversely the current use, occupancy
or value thereof;
(b) to Seller's Knowledge, the legal description for such
Property contained in the deed thereof or lease therefor describes such Property
fully and adequately, the
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buildings and improvements are located within the boundary lines of the
described Property, are not in violation of applicable setback requirements,
zoning laws and ordinances (and none of the properties or buildings or
improvements thereon are subject to "permitted non-conforming use" or "permitted
non-conforming structure" classifications) and do not encroach on any easement
which may burden the Property, and the Property does not serve any adjoining
property for any purpose inconsistent with the use of the Property, and the
Property is not located within any flood plain or subject to any similar type
restriction for which any permits or licenses necessary to the use thereof have
not been obtained;
(c) to Seller's Knowledge, Seller has received all approvals
of governmental authorities (including licenses and permits) required in
connection with Seller's ownership, occupation or operation of all facilities
located on such Property, which facilities have been operated and maintained by
Seller in accordance with applicable Law;
(d) there are no leases, subleases, licenses, concessions or
other agreements, written or oral, to which Seller or any of its Affiliates is a
party granting to any other party or parties the right of use or occupancy of
any portion of the Property;
(e) there are no outstanding options or rights of first
refusal granted by Seller or any of its Affiliates to purchase the Property, or
any portion thereof or interest therein;
(f) there are no parties (other than Seller) in possession of
the Property, other than tenants under any leases or subleases disclosed in
Schedule 2.3A or 2.3B, who are in possession only of space to which they are
entitled;
(g) to Seller's Knowledge, all facilities located on the
Property are supplied with utilities and other services necessary for the
operation of such facilities, including gas, electricity, water, telephone,
sanitary sewer and storm sewer, all of which services are adequate in accordance
with all applicable Laws and are provided via public roads or via permanent,
irrevocable, appurtenant easements benefitting the Property; and
(h) to Seller's Knowledge, such Property abuts on and has
direct vehicular access to a public road, or has access to a public road via a
permanent, irrevocable, appurtenant easement benefitting the Property.
Section 3.14 Intangibles. Seller owns the entire right, title
and interest in and to the owned Intangibles and Software, and holds under valid
and subsisting licenses (which are included among the Contracts) the licensed
Intangibles and Software, except for such defects in title or licenses that
could not reasonably be expected to have a Material Adverse Effect. There are no
Actions instituted, pending or, to Seller's Knowledge, proposed or threatened by
any third party pertaining to or challenging Seller's use of or right to use any
of the Intangibles or Software, which Actions could reasonably be expected to
have a Material Adverse Effect.
Section 3.15 Fees and Expenses of Brokers and Others. Seller
is not committed to any liability for any brokers' or finders' fees or any
similar fees in connection
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with the conveyance of the Assets to Buyer and has not retained any broker or
other intermediary to act on its behalf in connection with the transactions
contemplated by this Agreement, except that Seller has retained DLJ to represent
it in connection with such transactions. Pursuant to a separate agreement with
Seller, DLJ will be paid a fee upon the consummation of the transactions
contemplated by this Agreement. Such fee and all other fees and expenses
(including, without limitation, attorneys' and accountants' fees and the fees
and expenses of Alliance Capital Group) of Seller and its Affiliates in
connection with the transactions contemplated herein shall be paid in full by
Seller or such Affiliates, and shall not be included among the Assumed
Liabilities.
Section 3.16 Accounts Receivable. The Accounts Receivable all
have arisen from bona fide transactions in the ordinary course of business.
Seller makes no representation or warranty as to the collectibility or
negotiability of the Accounts Receivable.
Section 3.17 Seller SEC Reports. The Seller SEC Reports
complied, as of their respective dates of filing, in all material respects with
all applicable requirements of the Securities Act, the Exchange Act and the
rules and regulations of the SEC. Each of the balance sheets (including the
related notes and schedules) included in the Seller SEC Reports fairly presented
in all material respects the consolidated financial position of the Seller as of
the respective dates thereof, and the other related financial statements
(including the related notes and schedules) included therein fairly presented in
all material respects the results of operations and cash flows of Seller for the
respective fiscal periods or as of the respective dates set forth therein
(subject, in the case of any unaudited interim financial statements, to (i)
year-end and audit adjustments consistent in scope with past practice, and (ii)
the omission of certain footnotes). Each of the financial statements (including
the related notes and schedules) included in the Seller SEC Reports (i) complied
as to form with the applicable accounting requirements and rules and regulations
of the SEC, and (ii) was prepared in accordance with GAAP consistently applied
during the periods presented, except as otherwise noted therein (subject, in the
case of any unaudited interim financial statements, to (i) year-end and audit
adjustments consistent in scope with past practice, and (ii) the omission of
certain footnotes). Except as set forth on Schedule 3.17 attached hereto, since
December 28, 1996, Seller has timely filed all reports, registration statements
and other filings to be filed by it with the SEC; all of such filings through
the date hereof are listed on Schedule 3.17 attached hereto.
Section 3.18 Insurance. With respect to each insurance policy
(including policies providing property, casualty, liability and workers'
compensation coverage and bond and surety arrangements) to which Seller is a
party, a named insured or otherwise the beneficiary which is still in effect or
under which Seller has any continuing rights or obligations: (a) the policy is
legal, valid, binding, enforceable and in full force and effect; (b) the policy
will continue to be legal, valid, binding, enforceable and in full force and
effect on identical terms following the consummation of the transactions
contemplated hereby; (c) neither Seller nor any other party to the policy is in
breach or default thereunder (including with respect to the payment of premiums
or the giving of notices), and no event has occurred that, with notice or the
lapse of time, would constitute such a breach or default, or permit termination,
modification or acceleration under the policy; and (d) no party to the policy
has repudiated any provision thereof. Seller has been covered during the past 5
years
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by insurance in scope and amount customary and reasonable for the businesses in
which it has been engaged during such period.
Section 3.19 Affiliated Transactions. Except as set forth in
Schedule 3.19, since December 30, 1995, Seller has not purchased, licensed or
leased or otherwise acquired any property or assets or obtained any services
from, or sold, licensed, leased or otherwise disposed of any property or assets
or provided any services to, any employee, shareholder, officer or director
involving an amount in excess of $50,000 in any instance or $250,000 in the
aggregate (except for services provided as an employee, officer or director of
Seller and remuneration therefor and except for sales of goods in the ordinary
course), or any Affiliate of any of the foregoing. Except as set forth on
Schedule 3.19, Seller does not owe any amount or have any contractual obligation
or commitment to any of the foregoing (other than compensation for current
services not yet due and payable and reimbursement of expenses arising in the
ordinary course of business and other than obligations owed to employees and
officers in their capacities as such in the ordinary course of business) and
none of the foregoing owes any amount or has any contractual obligation or
commitment to Seller (other than obligations owed by employees and officers in
their capacities as such).
Section 3.20 No Adverse Change. Except as set forth in
Schedule 3.20, since December 28, 1996, there has not been: (a) any loss,
damage, condemnation or destruction to any of the properties of Seller that has
had a Material Adverse Effect (whether covered by insurance or not); (b) any
labor dispute or disturbance, litigation or any event or condition of any
character that could have a Material Adverse Effect; (c) any mortgage, pledge,
lien or encumbrance made on any of the properties or assets of Seller, except
for Permitted Exceptions; or (d) any sale, transfer or other disposition of
assets of Seller other than in the ordinary course of business or as
contemplated by this Agreement.
Section 3.21 Absence of Undisclosed Liabilities. The Seller
does not have any liabilities or obligations of any kind, whether absolute,
accrued, asserted or unasserted, contingent or otherwise, that would be required
to be reflected on or accrued or reserved against in a consolidated balance
sheet of Seller or disclosed in the notes thereto in accordance with GAAP,
except liabilities, obligations or contingencies (a) that were (i) reflected on
or accrued or reserved against in the December Balance Sheet, or disclosed in
the notes thereto, or (ii) incurred after the date of such balance sheet in the
ordinary course of business and consistent with past practices and which,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect, or (b) relating to claims filed or arising in
connection with the Bankruptcy Case. Seller is not subject to any judgment,
order, writ, injunction, decree, rule or regulation, which could reasonably be
expected to have a Material Adverse Effect; provided, however, that no
representation or warranty is made with respect to the Excluded Assets or the
Excluded Liabilities.
Section 3.22 No Other Representations or Warranties. Except
for the representations and warranties specifically set forth in this Article
III, or elsewhere in this Agreement or in any other agreement, document or
instrument delivered by Seller pursuant hereto, Seller makes no other express or
implied representations or warranties with respect to the Assets, the Contracts
or the transactions contemplated in this Agreement.
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ARTICLE IV
Representations and Warranties of Richfood and Buyer
Each of Richfood and Buyer jointly and severally represents
and warrants to Seller as follows:
Section 4.1 Organization; Incorporation; Good Standing. Buyer
is a limited liability company duly organized, validly existing and in good
standing under the laws of the Commonwealth of Virginia, and has all requisite
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted. Richfood is a corporation duly incorporated,
validly existing and in good standing under the laws of the Commonwealth of
Virginia, and has all requisite corporate power and corporate authority to own,
lease and operate its properties and to carry on its business as now being
conducted.
Section 4.2 Capitalization. (a) Richfood's authorized equity
capitalization consists of 90,000,000 shares of Richfood Common Stock and
5,000,000 shares of preferred stock, without par value. As of the close of
business on October 18, 1997, 47,521,736 shares of Richfood Common Stock and no
shares of Richfood preferred stock were issued and outstanding. Such shares of
Richfood Common Stock constituted all of the issued and outstanding shares of
capital stock of Richfood as of such date. All issued and outstanding shares of
Richfood Common Stock have been duly authorized and validly issued and are fully
paid and nonassessable, are not subject to and have not been issued in violation
of any preemptive rights and have not been issued in violation of any federal or
state securities laws. Except as set forth on Schedule 4.2 attached hereto,
Richfood is not a party to any outstanding options, warrants, subscriptions or
other rights to purchase or acquire any shares of its capital stock, nor is
Richfood a party to any contractual obligation pursuant to which it is obligated
to sell or issue any shares of its capital stock. All outstanding shares of
Richfood Common Stock are duly listed on the New York Stock Exchange.
(b) All of the shares of Richfood Common Stock to be issued
upon exercise of the Warrants have been duly authorized for issuance and, when
issued in accordance with the Warrant Agreement, will be validly issued, fully
paid and nonassessable, and will not be subject to and will not be issued in
violation of any preemptive rights.
Section 4.3 Authorization. (a) All requisite action has been
taken by Buyer to authorize the execution and delivery of this Agreement and all
of the other documents, instruments and agreements required hereby from Buyer,
and the consummation of the transactions contemplated hereby and thereby by
Buyer. This Agreement has been, and all of the other documents, instruments and
agreements required hereby from Buyer will as of the Closing be, duly executed
and delivered by Buyer and constitute the valid and binding obligations of Buyer
(assuming due execution and delivery by the other parties thereto), enforceable
in accordance with their respective terms, subject to bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights and
general equitable principles (whether enforcement is sought in equity or at
law). Neither the execution and delivery of this Agreement and the other
documents, instruments and agreements required hereby from Buyer by Buyer, nor
the consummation by Buyer of the transactions
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contemplated hereby or thereby, will (i) violate any provision of Buyer's
Articles of Organization or Operating Agreement or (ii) conflict with or result
in a breach of any terms and provisions of, or constitute a default under, any
indenture, mortgage, contract or other agreement to which Buyer or any of its
Affiliates is a party or by which Buyer or any of its Affiliates are bound that
could materially interfere with the consummation of the Asset Purchase.
(b) All requisite corporate action has been taken by Richfood
to authorize the execution and delivery of this Agreement, the Warrant
Agreement, the Warrants and all of the other documents, instruments and
agreements required hereby from Richfood, and the consummation of the
transactions contemplated hereby and thereby by Richfood. This Agreement has
been, and all of the other documents, instruments and agreements required hereby
from Richfood (including, without limitation, the Warrant Agreement and the
Warrants) will as of the Closing be, duly executed and delivered by Richfood and
constitute the valid and binding obligations of Richfood (assuming due execution
and delivery by the other parties thereto), enforceable in accordance with their
respective terms, subject to bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting creditors' rights and general equitable principles
(whether enforcement is sought in equity or at law). Neither the execution and
delivery of this Agreement and the other documents, instruments and agreements
required hereby from Richfood by Richfood (including, without limitation, the
Warrant Agreement and the Warrants), nor the consummation by Richfood of the
transactions contemplated hereby or thereby, will (i) violate any provision of
Richfood's Articles of Incorporation or Bylaws or (ii) conflict with or result
in a breach of any terms and provisions of, or constitute a default under, any
indenture, mortgage, contract or other agreement to which Richfood or any of its
Affiliates is a party or by which Richfood or any of its Affiliates are bound
that could materially interfere with the consummation of the Asset Purchase.
Section 4.4 Litigation. There is no Action pending, or, to
either Richfood's or Buyer's Knowledge, threatened against Richfood or Buyer,
which could reasonably be expected to prevent the Closing.
Section 4.5 Approvals, Consents, Etc. Except for any
applicable filings or reports under the Exchange Act and the HSR Act, no
consent, authorization, waiver by or filing with any governmental agency is
required in connection with the execution or performance of this Agreement by
Richfood or Buyer or the consummation by Richfood or Buyer of the transactions
contemplated hereby.
Section 4.6 Availability of Financing. Buyer has available to
it sufficient cash funds, from Richfood or otherwise, to pay in full the Cash
Portion of the Purchase Price.
Section 4.7 Richfood SEC Reports; Disclosure Statement. (a)
The Richfood SEC Reports complied, as of their respective dates of filing, in
all material respects with all applicable requirements of the Securities Act,
the Exchange Act and the rules and regulations of the SEC. Each of the balance
sheets (including the related notes and schedules) included in the Richfood SEC
Reports fairly presented in all material respects the consolidated
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financial position of Richfood as of the respective dates thereof, and the other
related financial statements (including the related notes and schedules)
included therein fairly presented in all material respects the results of
operations and cash flows of Richfood for the respective fiscal periods or as of
the respective dates set forth therein (subject, in the case of any unaudited
interim financial statements, to (i) year-end and audit adjustments consistent
in scope with past practice, and (ii) the omission of certain footnotes). Each
of the financial statements (including the related notes and schedules) included
in the Richfood SEC Reports (i) complied as to form with the applicable
accounting requirements and rules and regulations of the SEC, and (ii) was
prepared in accordance with GAAP consistently applied during the periods
presented, except as otherwise noted therein (subject, in the case of any
unaudited interim financial statements, to (i) year-end and audit adjustments
consistent in scope with past practice, and (ii) the omission of certain
footnotes). Since May 3, 1997, Richfood has timely filed all reports,
registration statements and other filings to be filed by it with the SEC; all of
such filings through the date hereof are listed on Schedule 4.7 attached hereto.
(b) Any information provided by Richfood to Seller in writing
specifically for inclusion in the Disclosure Statement shall be provided in good
faith within the meaning of Section 1125(e) of the Bankruptcy Code.
Section 4.8 Fees and Expenses of Brokers and Others. Neither
Richfood nor Buyer is committed to any liability for any brokers' or finders'
fees or any similar fees in connection with the conveyance of the Assets to
Buyer, except that Richfood has retained JPM to represent it in connection with
the transactions contemplated by this Agreement. Pursuant to a separate
agreement with Richfood, JPM will be paid a fee upon the consummation of the
transactions contemplated by this Agreement. Such fee and all other fees and
expenses (including, without limitation, attorneys' and accountants' fees) of
Richfood, Buyer and their respective Affiliates in connection with the
transactions contemplated herein shall be paid in full by Richfood.
ARTICLE V
Covenants of Seller and Buyer
Section 5.1 Investigation of Business; Access to Properties
and Records. (a) After the date hereof, Seller shall afford to Buyer and its
authorized representatives reasonable access to the Properties, Books and
Records, officers, employees and agents of Seller during normal business hours
and upon reasonable notice, in order that Buyer may have the opportunity to make
such investigations in connection with the Asset Purchase as it desires, it
being understood that: (i) Seller, in its reasonable discretion, may deny or
restrict any access (A) to materials in Seller's possession that are not
primarily related to Seller's business, if such access would constitute a breach
of an existing confidentiality agreement between Seller and a third party, (B)
to materials related exclusively to the Excluded Assets and Excluded
Liabilities, and (C) in the event Buyer is in breach of this Agreement; (ii)
such investigation shall not under any circumstances unreasonably interfere with
Seller's operations, activities or employees; (iii) Buyer and Seller shall take
reasonable action (including entering into joint defense agreements, as
appropriate) to preserve any applicable
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attorney-client privileges; and (iv) such investigations shall not involve any
"Phase II" or other environmental testing without Seller's prior consent.
(b) Any information provided to Buyer or its representatives
pursuant to this Agreement shall be held by Buyer and its representatives in
accordance with, and shall be subject to the terms of, the Confidentiality
Agreement, which is hereby incorporated in this Agreement as though fully set
forth herein, and in accordance with such other terms and conditions as may
otherwise be agreed upon by the parties.
(c) Buyer shall hold all of the Books and Records existing on
the Closing Date in accordance with Buyer's normal record retention policy from
time to time in effect (copies of which will be provided to Seller), and Buyer
shall not destroy or dispose of any thereof except in accordance with such
policy. Following the Closing Date, Buyer shall afford Seller, its accountants,
counsel and other representatives, during normal business hours, upon at least
48 hours' notice, reasonable access to the Books and Records (including the
right to copy such materials at Seller's expense) and to Buyer's employees to
the extent that such access may be requested (without unreasonably disrupting
Buyer's personnel and operations) for any legitimate purpose without charge to
Seller (other than for Buyer's reasonable out-of-pocket expenses); provided,
however, that nothing herein shall limit or waive any of Seller's rights of
discovery.
Section 5.2 Cooperation. (a) Upon the terms and subject to the
conditions of this Agreement, each of Richfood, Buyer and Seller shall use its
best efforts to take, or cause to be taken, and to assist and cooperate with the
other in doing all things reasonable, necessary, proper or advisable under any
applicable Law to consummate and make effective in the most expeditious manner
practicable, the transactions described herein, including without limitation,
using such best efforts to obtain all necessary or appropriate authorizations,
permits, consents, exemptions, orders, waivers, licenses or other approvals from
Governmental Authorities (it being understood and agreed that "best efforts"
shall in no event include (i) any material payments to third parties, or (ii)
following commencement of the Bankruptcy Case, any actions which require
Bankruptcy Court approval that have not been approved or upheld by the
Bankruptcy Court). In addition, each of Richfood, Buyer and Seller shall use its
best efforts to assist and cooperate with the other in obtaining estoppel
certificates and subordination and non-disturbance agreements from the landlords
and mortgagees of the premises that are the subject of the Leases (it being
understood and agreed that (i) obtaining any such certificates or agreements
shall not be a condition to Closing nor shall the failure to obtain any such
certificates or agreements constitute a breach of this Agreement by Seller, and
(ii) "best efforts" shall in no event include (A) any payments to third parties,
or (B) following commencement of the Bankruptcy Case, any actions which require
Bankruptcy Court approval that have not been approved or upheld by the
Bankruptcy Court).
(b) Except as otherwise specified herein, Buyer shall pay all
registration, filing, license, permit or similar fees and charges in connection
with the transactions contemplated by this Agreement and the cost of all title
insurance, title reports, engineering and building inspections and property
surveys and other tests or reports obtained by Buyer.
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Section 5.3 Antitrust Compliance. Seller and Buyer shall
promptly file or cause to be filed with the Antitrust Division of the United
States Department of Justice and the Federal Trade Commission pursuant to the
HSR Act all requisite documents and notifications in connection with the
transactions contemplated by this Agreement. Buyer shall pay the filing fee
incurred in connection with such filings under the HSR Act. Each of Seller and
Buyer shall promptly inform the other of any material communication from the
Federal Trade Commission, the Department of Justice or any other Governmental
Authority regarding any of the transactions contemplated hereby. If either
Seller or Buyer or any Affiliate thereof receives a request for additional
information or documentary material from any such Governmental Agency with
respect to the transactions contemplated hereby, then such party will endeavor
in good faith to make, or cause to be made, as soon as reasonably practicable
and after consultation with the other party, an appropriate response in
compliance with such request. Buyer and Seller will each promptly advise the
other in respect of any understandings, undertakings or agreements (oral or
written) which Buyer or Seller proposes to make or enter into with the Federal
Trade Commission, the Department of Justice or any other government or
Governmental Authority in connection with the transactions contemplated hereby.
Section 5.4 Further Assurances. Each of Seller and Buyer
agrees that, from time to time, whether before, at or after the Closing, it
shall execute, deliver and record such further instruments of conveyance and
transfer and take such other action as may be necessary or desirable to carry
out the purposes and intents of this Agreement.
Section 5.5 Conduct of Business. Except as otherwise expressly
contemplated by this Agreement, prior to Closing Seller will conduct its
operations according to its ordinary and usual course of business and consistent
with past practice, and will use its reasonable best efforts to preserve intact
its business organization, to keep available the services of its officers and
employees and to maintain satisfactory relationships with licensors, licensees,
suppliers, contractors, distributors, customers and others having business
relationships with it; provided, however, that following commencement of the
Bankruptcy Case, Seller's obligations pursuant to this Section shall be subject
to its obligations as a debtor-in-possession under the Bankruptcy Code and to
any orders of the Bankruptcy Court. Without limiting the generality of the
foregoing, and except as otherwise expressly provided in this Agreement, prior
to the Closing, Seller will not, without the prior written consent of Buyer:
(i) amend its Articles of Incorporation or bylaws;
(ii) authorize for issuance or issue, sell or deliver
(whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or
otherwise) any stock of any class or any other securities or
interests, except as required by the terms of any Seller
Benefit Plan existing on the date hereof, or any options,
warrants, rights or other securities outstanding as of the
date hereof and disclosed pursuant to this Agreement;
(iii) split, combine or reclassify any shares of its
capital stock or declare, set aside or pay any dividend or
other distribution (whether in cash,
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stock or property or any combination thereof) in respect of
its capital stock, or redeem or otherwise acquire any of its
securities;
(iv) except in the ordinary course of business (A)
incur or assume any Funded Debt not currently outstanding
other than debtor-in-possession financing, (B) enter into,
assume, guarantee or otherwise become liable or responsible
for any capitalized leases not listed and identified as such
on Schedule 2.3B hereto, (C) assume, guarantee, endorse or
otherwise become liable or responsible for the obligations of
any person, (D) make any loans, advances or capital
contributions to, or investments in, any other Person, (E)
enter into any contract or agreement, or alter, amend, modify
or exercise any option under any existing Contract, other than
in the ordinary course of business or in connection with the
transactions contemplated by this Agreement or (F) authorize
any single capital expenditure which is in excess of $500,000
or capital expenditures which are, in the aggregate, in excess
of $1.0 million, other than capital expenditures pursuant to
Contracts entered into prior to the date hereof or reflected
in Seller's fiscal 1997 capital budget previously furnished to
Buyer;
(v) adopt or amend (except as may be required by Law
or as provided in this Agreement) any Seller Benefit Plan or
any bonus, profit sharing, compensation, severance,
termination, stock option, stock appreciation right,
restricted stock, pension, retirement, deferred compensation,
employment, severance or other employee benefit agreements,
trusts, plans, funds or other arrangements for the benefit or
welfare of any director, officer or employee, or (except for
normal increases in the ordinary course of business that are
consistent with past practices and that, in the aggregate, do
not result in a material increase in benefits or compensation
expense) increase in any manner the compensation or fringe
benefits of any director, officer or employee or pay any
benefit not required by any existing plan or arrangement
(including, without limitation, the granting of stock options,
stock appreciation rights, shares of restricted stock or
performance units) or enter into any contract, agreement,
commitment or arrangement to do any of the foregoing;
(vi) except as set forth on Schedule 5.5 attached
hereto, acquire, sell, lease or dispose of any material assets
outside the ordinary course of business;
(vii) take any action other than in the ordinary
course of business and in a manner consistent with past
practice with respect to accounting policies or practices;
(viii) make any tax election or settle or compromise
any federal, state, local or foreign tax liability, which
election, settlement or compromise could reasonably be
expected to adversely affect any of the Assets or Buyer's use
thereof after Closing or could reasonably be expected to be
binding on Buyer after Closing;
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(ix) settle any claims, liabilities or obligations
(absolute, accrued or unasserted, contingent or otherwise), if
the terms of such settlement could reasonably be expected to
adversely affect any of the Assets or Buyer's use thereof
after Closing or could reasonably be expected to be binding on
Buyer after Closing; or
(x) take any action that would or is reasonably
likely to result in any of the conditions set forth in Article
VIII not being satisfied as of the Closing Date; or
(xi) agree in writing or otherwise to take any of the
foregoing actions.
Section 5.6 Public Announcements. (a) The parties hereto have
agreed upon the form of a joint press release with respect to the transactions
contemplated in this Agreement, which release shall be issued as soon as
practicable following the execution and delivery hereof. From the date hereof
until the Closing Date, no party hereto (nor any of their respective Affiliates)
shall make any other public announcements or public disclosures regarding the
Asset Purchase or the terms of this Agreement without the consent of the other
(which consent shall not be unreasonably withheld) except to the extent that
such disclosure is required by applicable Law or legal process or by applicable
stock exchange listing agreement. Notwithstanding the foregoing, the parties may
communicate with their respective employees, customers, suppliers, creditors,
shareholders, relevant Governmental Authorities, the Bankruptcy Court, and the
other parties in interest with respect to any reorganization or restructuring as
may be necessary and appropriate in connection with the implementation and
consummation of the terms of this Agreement.
Section 5.7 No Solicitation. Seller agrees that except as
otherwise ordered by the Bankruptcy Court, it shall not, after the date hereof
and before the Closing Date, directly or indirectly, through any officer,
director, employee, agent, Affiliate or otherwise, solicit, initiate or
encourage submission of proposals or offers from any person relating to any
acquisition or purchase of all or (other than in the ordinary course of
business) a substantial portion of the assets of, or any equity interest in,
Seller or any business combination involving any Seller or, except to the extent
required by the Bankruptcy Court or by fiduciary obligations under applicable
Law as advised by counsel, participate in any negotiations regarding, or furnish
to any other person any information with respect to, or otherwise cooperate in
any way with, or assist or participate in, facilitate or encourage, any effort
or attempt by any other person to do or seek any of the foregoing. Except as
otherwise ordered by the Bankruptcy Court, Seller shall promptly advise Buyer if
any such proposal or offer, or any inquiry or contact with any person with
respect thereto, is made, shall promptly inform Buyer of all the terms and
conditions thereof, and shall furnish to Buyer copies of any such written
proposal or offer and the contents of any communications in response thereto.
Seller shall not waive any provisions of any "standstill" agreements between
Seller and any party, except to the extent that such waiver is required by the
Bankruptcy Court or is, as advised by counsel, required by fiduciary obligations
under applicable Law.
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Section 5.8 Bulk Sales Laws. Buyer hereby waives compliance by
Seller with the requirements of any bulk sales or bulk transfer Laws applicable
to the transactions contemplated herein.
Section 5.9 Subsidiaries. Prior to Closing, Seller shall
either (a) subject to approval by the Bankruptcy Court, cause the Subsidiaries
to be merged with and into Seller, with Seller to be the surviving corporation
in such mergers, or (b) if the foregoing mergers are not approved by the
Bankruptcy Court, convey all assets held by the Subsidiaries, together with all
liabilities of the Subsidiaries that are of the type included among the Assumed
Liabilities, to Seller, and the capital stock of the Subsidiaries shall
constitute an Excluded Asset (it being understood that any sales, use, transfer,
recording or other similar taxes and fees that result from such conveyance that
would not otherwise arise in a merger of the Subsidiaries with and into Seller
shall be the responsibility of Seller).
Section 5.10 IBT Agreement. Seller agrees that, prior to
Closing and at Buyer's request, Seller shall give notice to International
Banking Technologies, Inc. ("IBT"), in accordance with the License Agreement,
dated February 15, 1988, as amended, between Seller and IBT, that Buyer has
declined to accept the assignment of Seller's obligations under such License
Agreement (the "IBT Notice"). Buyer agrees to indemnify and hold Seller harmless
from and against any and all losses, damages, costs, expenses, liabilities,
obligations and claims of any kind including, without limitation, reasonable
legal fees and expenses, that Seller may suffer or incur as a result of (a)
Seller giving the IBT Notice at Buyer's request, or (b) Buyer's decision to
decline to accept assignment of Seller's obligations under such License
Agreement.
Section 5.11 Environmental Testing and Remediation.
(a) Definitions. When used in this Section 5.11:
(i) "Remediation" shall mean the cost-effective
clean-up, abatement, removal, remediation, operation and maintenance and
on-going monitoring which, consistent with current Site use, Buyer or Seller
would be required to perform by the Virginia Department of Environmental Quality
("DEQ") under applicable Environmental Laws to meet the Clean-up Levels with
respect to soil or groundwater contamination resulting from any release of
Petroleum Products from the four former underground storage tanks owned or
operated by Seller or its predecessors into soil or groundwater at or near the
Stores located at 2250 Airline Boulevard, Portsmouth, Virginia ("Store 210") and
608 East Mercury Boulevard, Hampton, Virginia ("Store 295" and, collectively
with Store 210, the "Sites") as disclosed by previous sampling at the Sites, the
Phase II Study and Additional Sampling.
(ii) "Costs of Remediation" shall mean the direct
costs of implementing the Remediation on a net present value, after-tax basis.
(iii) "Third Party Environmental Consultant" shall
mean a qualified environmental consultant (either nationally recognized or
recognized in the eastern region of the United States) with an office in
Virginia and experience in addressing releases of Petroleum Products from
underground storage tanks in Virginia, the selection of which has
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been mutually agreed on by the parties hereto. If the parties hereto are unable
to mutually agree on the selection of a Third Party Environmental Consultant,
the Third Party Environmental Consultant shall be selected by lot from a group
of four such consultants; two such consultant's names shall be submitted by
Buyer, and two such consultant's names shall be submitted by Seller.
(b) Phase II Study.
(i) Buyer shall engage O'Brien & Gere Engineers, Inc.
("O'Brien & Gere") to conduct soil and groundwater sampling and other tests, at
Buyer's expense, in accordance with the initial sampling attached hereto as
Schedule 5.11 (the "Phase II Study"). The Phase II Study shall be completed and
the results provided to Buyer and Seller in draft form within 21 days of the
execution of this Agreement.
(ii) If the Third Party Environmental Consultant
determines that the Phase II Study is not sufficient to delineate the vertical
and horizontal extent of Petroleum Products in the soil and groundwater (A) on
the Sites, (B) migrating off-site from the Sites or (C) migrating from off-Site
sources onto the Sites, so as to allow the Third Party Environmental Consultant
to perform a Risk Assessment (as defined below) and, if necessary, to determine
the Costs of Remediation and Property Damage Estimates (as defined below), the
parties hereto agree that additional samples may be required ("Additional
Sampling"). The parties hereto agree to use their respective good faith efforts
to minimize the number of samples required consistent with the goals of the
Phase II Study. Any such Additional Sampling (including the locations therefor),
if required, must be agreed upon by Buyer and Seller in advance and must be
completed no later than 21 days after the results of the Phase II Study are
provided to Buyer and Seller in draft form. The parties hereto also recognize
that permission from third parties may be required to sample off-Site if
Petroleum Products have migrated off-Site from either or both of the Sites. The
parties hereto agree to use their respective best efforts to obtain such
permission (it being understood that "best efforts" shall in no event include
any payments to third parties). With respect to Store 295, the parties agree to
seek such permission to sample off-Site as soon as practicable after execution
of this Agreement; provided, however, if permission is not granted within 14
days after receipt of the results of the Phase II Study, the parties agree to
proceed in reliance upon the then-available information.
(c) Risk Assessment/Clean-up Levels. Within five business days
after execution of this Agreement, Buyer and Seller shall jointly engage the
Third Party Environmental Consultant to perform a site specific risk assessment
of each Site, which shall include a receptor survey ("Risk Assessment") in order
to determine if, and to what extent, soil and groundwater Remediation is
necessary to satisfy the provisions relating to remediation of spills under the
Virginia Underground Storage Tank Regulations, 9 VAC 25- 580-210 et. seq.
("Clean-up Levels") and, if Remediation is determined to be necessary, to
estimate the Costs of Remediation. The protocol for the Risk Assessment shall be
consistent with generally accepted industry practice, in accordance with the
Virginia DEQ Storage Tank Program Technical Manual (5/9/97) and the standards of
remediation used by DEQ in assessing Petroleum Product releases from similar
facilities in the vicinity of the Sites, under similar circumstances.
- 32 -
<PAGE>
The Risk Assessment shall be completed within 14 days after
the later of the parties' receipt of (i) the results of the draft Phase II
Study, or (ii) the results of the Additional Sampling in draft form. The
Clean-up Levels developed by the Third Party Consultant shall be submitted by
the parties to the DEQ for approval. If the DEQ imposes more stringent Clean-up
Levels, the DEQ-imposed Clean-up Levels shall be used in determining the Cost of
Remediation. If the parties fail to receive approval from the DEQ for the
Clean-up Levels established by the Risk Assessment within 14 days after the
Third Party Environmental Consultant's completion thereof, and Remediation is
determined to be required, the Clean-up Levels established by the Risk
Assessment will be used to develop the Costs of Remediation, unless the Buyer
and Seller agree otherwise. The cost of the Third Party Environmental
Consultant's preparation of the Risk Assessment shall be paid by Buyer.
(d) Costs of Remediation. The Third Party Environmental
Consultant thereafter shall prepare an estimate of the Costs of Remediation for
review by Buyer and Seller within seven days after the Clean-up Levels have been
established in accordance with paragraph (c) above. Buyer and Seller shall have
an opportunity to review and comment in writing (with copies to the other party)
upon the Third Party Environmental Consultant's estimates of the Costs of
Remediation. Buyer or Seller may communicate with the Third Party Environmental
Consultant only after providing reasonable notice to and allowing the other
party to participate in such communication; provided, however, that the Third
Party Environmental Consultant's final estimate of the Costs of Remediation
shall be binding upon the parties. The cost of the Third Party Environmental
Consultant's preparation of the estimate of the Costs of Remediation shall be
borne equally by Buyer and Seller.
(e) Property Damage Estimates. If the Phase II Study or
Additional Sampling demonstrates that Petroleum Products in concentrations above
the Clean-up Levels have migrated off-Site from either or both of the Sites
impacting off-Site properties, Buyer and Seller shall select, by mutual
agreement, a real estate appraisal company or other appropriate professional
("Real Estate Professional") to determine the extent of any diminution in the
value of such off-Site properties as a result of such migration ("Property
Damage Estimates"). The Real Estate Professional shall use generally accepted
methodologies for quantifying the diminution in value of such off-Site
properties which results from groundwater and soils being impacted by Petroleum
Products from underground storage tank releases; such methodologies shall, at a
minimum, include a comparison to comparable commercial facilities in the
vicinity of the Sites, under similar circumstances. If the parties are unable to
select the Real Estate Professional by mutual agreement, they shall select the
Real Estate Professional by lot from a group of four such professionals, two
submitted by each party. The cost of preparing the Property Damage Estimates
shall be borne equally Buyer and Seller. The Real Estate Professional shall
prepare any Property Damage Estimates not later than February 13, 1998.
(f) If the sum of the aggregate Costs of Remediation plus the
Property Damage Estimates (such sum being referred to as the "Environmental
Claim") related to both Sites exceeds $250,000, then at Seller's election either
(i) the amount of the Environmental Claim in excess of $250,000 shall be deemed
to constitute a current liability for purposes of the Final Statement of Working
Capital, or (ii) Seller shall retain ownership of either or both of the Sites
(and the lease thereof shall be included among the Non-Assumed Contracts), so
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<PAGE>
that the Environmental Claim is less than $250,000, provided that if Seller
retains ownership of Store 210 pursuant to this Section, the Purchase Price
shall be reduced by $4.0 million, and if Seller retains ownership of Store 295
pursuant to this Section, the Purchase Price shall be reduced by $2.0 million.
(g) In no event shall the sampling, Risk Assessment, DEQ
approval of the Clean-up Levels (or lack thereof), estimates of the Costs of
Remediation, Property Damage Estimates (or the failure to receive estimates of
the Costs of Remediation or Property Damage Estimates) or any review period
provided hereunder delay the Closing beyond February 28, 1998.
(h) This Section 5.11 shall be the sole remedy of Buyer and
Richfood against Seller with respect to any soil or groundwater contamination
resulting from any release of Petroleum Products from the four former
underground storage tanks owned or operated by Seller or its predecessors into
soil or groundwater at or near the Sites.
Section 5.12 Audited Financial Statements. At Buyer's request
and at Buyer's expense, Seller shall cause KPMG to prepare and deliver to Buyer,
within 45 days after Seller's January 3, 1998, fiscal year end, audited
consolidated financial statements of Seller for the three fiscal years in the
period ended January 3, 1998. Seller shall cooperate in a manner consistent with
its past practice in the preparation of such financial statements. Such
financial statements shall comply with the requirements of Regulation S-X under
the Securities Act.
ARTICLE VI
Employees
Section 6.1 Employment Matters.
(a) Buyer and Seller agree that those executive employment
agreements listed under Item 7 of Schedule 3.7 attached hereto (excluding the
Executive Agreements) shall be included among the Contracts assumed by Buyer at
the Closing, it being understood that: (i) Seller shall be responsible for any
severance benefit obligations set forth therein payable to persons whose
employment with Seller is terminated prior to the Closing Date; and (ii) Buyer
shall be responsible for any severance benefit obligations set forth therein to
persons whose employment with Seller is terminated on or after the Closing Date.
(b) Buyer agrees that, on the Closing Date, it shall offer
employment on an at-will basis to persons employed by Seller immediately prior
to such date at the Stores or at Seller's administrative home office (but
excluding the parties to the Executive Agreements) (it being understood that
each offer of employment will be subject to the prospective employee agreeing to
release Buyer and its Affiliates from any liability for the pre-closing
activities of Seller and its Affiliates). Buyer further agrees to offer
employment on an at-will basis to persons employed by Seller on the Closing Date
at Seller's retail grocery stores that are the subject of Non-Assumed Contracts,
on a seniority basis, as positions become
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<PAGE>
available at purchased Stores after the Closing Date, and Richfood agrees to
cause Richfood, Inc. to offer employment on an at-will basis to persons employed
by Seller on the Closing Date at the Warehouse at Richfood, Inc.'s warehouse in
Mechanicsville, Virginia ("Richfood's Warehouse"), on a seniority basis, as
positions become available at Richfood's Warehouse after the Closing Date (it
being understood that each offer of employment will be subject to the
prospective employee agreeing to release Buyer and its Affiliates from any
liability for the pre-closing activities of Seller and its Affiliates). Offers
of employment at the Stores or at such administrative home office shall be based
on compensation and benefits in effect at the Stores or such administrative home
office, as the case may be, for similarly-situated employees at the date of
employment, as amended from time to time thereafter. Offers of employment at
Richfood's Warehouse shall be based on compensation and benefits in effect at
Richfood's Warehouse for similarly-situated employees at the date of employment,
as amended from time to time thereafter. Former employees of Seller who are
employed by Buyer or Richfood, Inc. pursuant to this subsection shall be granted
past service credit for eligibility, vesting (except in the case of any Buyer
defined benefit pension plan in which an employee may become eligible to
participate) and any service qualifications for benefits, but not for benefit
accrual purposes. Except as specifically provided in any Contract assumed by
Buyer, Buyer does not undertake to retain or maintain any specific benefit or
level of benefits for former employees of Seller after the Closing Date.
ARTICLE VII
Tax Matters
Section 7.1 Transfer Taxes. Except to the extent otherwise
provided herein, Buyer shall pay, and shall indemnify and hold harmless Seller
from and against, all sales, use, transfer, real property transfer, documentary
stamp, recording and other similar taxes and fees (including any interest and
penalties with respect to any such taxes or fees) arising out of or in
connection with the transactions effected pursuant to this Agreement. Seller and
Buyer shall cooperate in filing all necessary documentation and tax returns with
respect to such taxes.
Section 7.2 Withholding. For purposes of withholding under
Section 1445 of the Code, Seller represents that it is not a "foreign person" as
defined in Section 1445(f)(3) of the Code. Seller shall provide to Buyer prior
to the Closing Date any certificate or affidavit necessary to substantiate
exemption from such withholding.
ARTICLE VIII
Conditions of Buyer's Obligation to Close
Buyer's obligation to consummate the transactions contemplated
hereby shall be subject to the satisfaction on or prior to the Closing Date, or
waiver by Buyer, of all of the following conditions:
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<PAGE>
Section 8.1 Representations, Warranties and Covenants of
Seller. The representations and warranties of Seller contained in this Agreement
shall be true and correct (a) in all respects on and as of the Closing Date (as
to the representations and warranties set forth in Section 3.6(b) hereof and as
to representations and warranties specifically qualified or limited by the term
"Material Adverse Effect," the word "material" or phrases of like import), and
(b) in all material respects on and as of the Closing Date (as to
representations and warranties not qualified or limited by the term "Material
Adverse Effect," the word "material" or phrases of like import), in each case
with the same effect as though such representations and warranties had been made
on and as of such date, except for representations and warranties that speak as
of a specific date or time other than the Closing Date (which need only be true
and correct as of such date or time), and the covenants and agreements of Seller
to be performed on or before the Closing Date in accordance with this Agreement
shall have been duly performed in all material respects.
Section 8.2 HSR Act Waiting Period; Governmental Consents. The
HSR Act and the regulations promulgated thereunder shall have been complied
with, and all waiting periods applicable under the HSR Act shall have expired or
been terminated, and all governmental filings, approvals and consents shall have
been accomplished, transferred or obtained that are necessary in order that the
transactions contemplated hereby may be accomplished in compliance with Law.
Section 8.3 No Injunction or Government Action. At the Closing
Date, there shall be in effect no Decree of Prohibition, and no Governmental
Authority shall have commenced any Action or threatened, in writing, to commence
any Action, seeking a Decree of Prohibition. For purposes of Sections 8.3 and
9.3 hereof, "Decree of Prohibition" shall mean any injunction, restraining
order, decree of any nature, of or with any Governmental Authority or body of
competent jurisdiction, that restrains or prohibits the consummation of the
transactions contemplated by this Agreement.
Section 8.4 Bankruptcy Court Confirmation; Effectiveness of
Plan.
(a) The sale of the Assets contemplated by this Agreement to
Buyer (i) shall continue, at all times prior to the Confirmation Order described
below, to be identified and included in the Plan filed in the Bankruptcy Case,
and (ii) shall be confirmed by the Bankruptcy Court in an order entered on the
docket by the Clerk of the Bankruptcy Court which (A) as to the transactions
contemplated in this Agreement is in form and substance acceptable in all
material respects to Buyer in its reasonable discretion (it being understood
that the provisions of the Confirmation Order relating to classification and
treatment of creditors and interest holders, the administration of the
reorganized debtor (including distribution mechanisms, corporate governance and
resolution of disputed claims and interests), or release provisions (other than
as such provisions relate to Buyer and its Affiliates) need not be acceptable to
Buyer), (B) shall provide, pursuant to Section 363(f) of the Bankruptcy Code,
that the sale is free and clear of any interest in the Assets, (C) shall by its
terms afford Buyer the protections set forth in Section 363(m) of the Bankruptcy
Code, (D) has not been reversed, stayed, modified or amended and (E) as to which
the time for filing a notice of appeal or petition for certiorari, or request
for reargument or further review or rehearing shall have expired (the
"Confirmation Order").
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<PAGE>
(b) All conditions to the Effective Date (as defined in the
Plan), other than consummation of the Asset Purchase contemplated herein, shall
have been satisfied or waived in accordance with the Plan.
ARTICLE IX
Conditions to Seller's Obligation to Close
Seller's obligation to consummate the transactions
contemplated by this Agreement is subject to the satisfaction on or prior to the
Closing Date, or waiver by Seller, of all of the following conditions:
Section 9.1 Representations, Warranties and Covenants of
Buyer. The representations and warranties of Buyer contained in this Agreement
shall be true and correct (a) in all respects on and as of the Closing Date (as
to representations and warranties specifically qualified or limited by the word
"material" or phrases of like import), and (b) in all material respects on and
as of the Closing Date (as to representations and warranties not so qualified or
limited), in each case with the same effect as though such representations and
warranties had been made on and as of such date, except for representations and
warranties that speak as of a specific date or time other than the Closing Date
(which need only be true and correct as of such date or time), and the covenants
and agreements of Buyer to be performed on or before the Closing Date in
accordance with this Agreement shall have been duly performed in all material
respects.
Section 9.2 HSR Act Waiting Period; Governmental Consents. The
HSR Act and the regulations promulgated thereunder shall have been complied
with, and all waiting periods applicable under the HSR Act shall have expired or
been terminated, and all governmental filings, approvals and consents shall have
been accomplished, transferred or obtained that are necessary in order that the
transactions contemplated hereby may be accomplished in compliance with Law.
Section 9.3 No Injunction or Government Action. At the Closing
Date, there shall be in effect no Decree of Prohibition, and no Governmental
Authority shall have commenced any Action or threatened, in writing, to commence
any Action, seeking a Decree of Prohibition.
Section 9.4 Bankruptcy Court Confirmation; Effectiveness of
Plan.
(a) The sale of the Assets contemplated by this Agreement to
Buyer (i) shall continue at all times prior to the Confirmation Order to be
identified and included in the Plan filed in the Bankruptcy Case, and (ii) shall
be confirmed by the Bankruptcy Court in a Confirmation Order.
(b) All conditions to the Effective Date (as defined in the
Plan), other than consummation of the Asset Purchase contemplated herein, shall
have been satisfied or waived in accordance with the Plan.
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<PAGE>
ARTICLE X
Termination
Section 10.1 Termination. This Agreement may be terminated at
any time prior to the Closing by:
(a) the mutual consent of Seller and Buyer as set forth in a
written termination agreement;
(b) Buyer if: (i) the break-up fee and expense reimbursement
provisions contemplated in Section 10.2(b) hereof are disapproved by the
Bankruptcy Court, or if such provisions are not approved by the Bankruptcy Court
at least five (5) days prior to confirmation of the Plan (if the Bankruptcy Case
is a "prepackaged" bankruptcy) or within forty-five (45) days after commencement
of the Bankruptcy Case (if the Bankruptcy Case is not a "prepackaged"
bankruptcy), or if such approval, once obtained, is thereafter revoked,
rescinded, stayed or modified in any material respect; (ii) an order with
respect to the Bankruptcy Case shall be entered by the Bankruptcy Court, or the
Seller shall file an application for an order with respect to the Bankruptcy
Case, seeking the appointment of (A) a trustee under Section 1104 of the
Bankruptcy Code, or (B) an examiner with enlarged powers relating to the
operation of Seller's business (powers beyond those set forth in Section
1106(a)(3) and (4) of the Bankruptcy Code) under Section 1106(b) of the
Bankruptcy Code; (iii) an order with respect to the Bankruptcy Case shall be
entered by the Bankruptcy Court converting such case to a case under Chapter 7
of the Bankruptcy Code; (iv) an application for any of the orders described in
clauses (ii) and (iii) of this subsection shall be made by a Person other than
the Seller and such application is not contested by the Seller in good faith or
the relief requested is granted in an order that is not stayed pending appeal;
(v) Seller fails to perform its obligations pursuant to Section 5.5 hereof in
any material respect in reliance upon the proviso set forth in the first
sentence of such Section; or (vi) an event occurs that would be prohibited by
Section 5.7 in any material respect in the absence of a Bankruptcy Court order
or requirement permitting or requiring such event;
(c) Seller if, prior to the commencement of the Bankruptcy
Case, a Person or group shall have made a bona fide proposal with respect to the
acquisition of all of Seller's outstanding capital stock, or all or
substantially all of Seller's assets, that the Board of Directors of Seller
believes, in good faith after consultation with its financial advisors, is more
favorable, from a financial point of view, to the creditors and shareholders of
Seller than the proposal set forth in this Agreement (a "Superior Proposal");
provided, that Buyer does not make, within five business days of receiving
notice of such third party proposal, an offer that the Board of Directors of
Seller believes, in good faith after consultation with its financial advisors,
is at least as favorable, from a financial point of view, to Seller's creditors
and shareholders as such Superior Proposal; or
(d) either Seller or Buyer if the Closing has not occurred by
the close of business on February 28, 1998, and if the failure to consummate the
transactions contemplated by this Agreement on or before such date did not
result from the failure by the
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<PAGE>
party seeking termination of this Agreement to fulfill any covenant provided for
herein that is required to be fulfilled prior to Closing.
Section 10.2 Procedure and Effect of Termination. (a) In the
event of termination of this Agreement by either or both of Seller and Buyer
pursuant to Section 10.1, written notice thereof shall forthwith be given by the
terminating party to the other party hereto, and this Agreement shall thereupon
terminate and become void and have no effect, the transactions contemplated
hereby shall be abandoned without further action by the parties hereto and,
subject to subsection (b) hereof, the parties hereto waive and release any claim
or Action with respect thereto, except that the Confidentiality Agreement and
any provisions of this Agreement relating to the responsibility for expenses
incurred in connection with the transactions contemplated by this Agreement
shall survive the termination of this Agreement; provided, however, that such
termination shall not relieve any party hereto of any liability for any willful,
material breach of this Agreement prior to such termination (except that the
break-up fee and expense reimbursement provisions of Section 10.2(b) hereof
shall be the sole remedy of Buyer and Richfood in the event of a termination
that is the subject of such provisions).
(b) Notwithstanding the foregoing:
(i) in the event that this Agreement is terminated by
Seller pursuant to Section 10.1(c) hereof, then Seller shall
pay to Buyer a break-up fee in an amount equal to $4.0
million;
(ii) in the event that (A) this Agreement is
terminated by Buyer pursuant to Section 10.1(b)(i), 10.1(b)(v)
or 10.1(b)(vi) hereof, (B) this Agreement is terminated by
Buyer pursuant to Section 10.1(d) hereof, and the failure to
complete the Closing by the date set forth in such Section is
solely a result of a material breach by Seller of its
obligations hereunder or (C) this Agreement is terminated or
rejected under Section 365 of the Bankruptcy Code in the
Bankruptcy Case (other than solely as a result of a material
breach by Buyer of its obligations hereunder) and, in the case
of (A), (B) or (C), within one year thereafter the Bankruptcy
Court approves any agreement for the purchase of all or
substantially all of the Assets or any other transaction
involving the acquisition of a majority of the outstanding
equity ownership of Seller by any Person or Persons other than
Buyer or any of its Affiliates (other than a recapitalization
involving the creditors of Seller or FF Holdings), then Seller
shall pay to Buyer a break-up fee in an amount equal to $4.0
million; or
(iii) in the event that (A) this Agreement is
terminated by Buyer pursuant to Section 10.1(b) hereof, (B)
this Agreement is terminated by Buyer pursuant to Section
10.1(d) hereof, and the failure to complete the Closing by the
date set forth in such Section is solely a result of a
material breach by Seller of its obligations hereunder or (C)
this Agreement is terminated or rejected under Section 365 of
the Bankruptcy Code in the Bankruptcy Case (other than solely
as a result of a material breach by Buyer of its obligations
hereunder) and, in the case of (A), (B) or (C), within one
year thereafter the
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<PAGE>
Bankruptcy Court approves any recapitalization involving the
creditors of Seller or FF Holdings resulting in the
acquisition of a majority of the outstanding equity ownership
of Seller by any Person or Persons other than Buyer or any of
its Affiliates, then Seller shall reimburse Buyer for its
actual out-of-pocket expenses incurred in connection with the
transactions contemplated herein (including, without
limitation, the fees and expenses of Buyer's financial
advisors, environmental consultants, accountants and legal
counsel), not to exceed $1.0 million in the aggregate.
Any amount payable pursuant to this Section shall be due two business days after
written demand by Buyer following the occurrence of any of the foregoing events,
and shall be paid by wire transfer of immediately available federal funds.
ARTICLE XI
No Survival; Guarantee
Section 11.1 No Survival. All representations and warranties
of the parties contained in this Agreement or in any Schedule hereto shall
terminate as of and shall not survive Closing. All covenants and agreements of
the parties contained in this Agreement shall survive Closing.
Section 11.2 Guarantee. By execution of this Agreement,
Richfood hereby: (a) agrees to cause Buyer to perform in full all of Buyer's
obligations under this Agreement, and (b) unconditionally guarantees, jointly
and severally with Buyer, the full performance by Buyer of all the terms,
provisions, representations, warranties and obligations of Buyer under this
Agreement.
ARTICLE XII
Miscellaneous
Section 12.1 Brokers. Except for the retention of DLJ by
Seller and JPM by Richfood and Buyer, each party represents and warrants to the
other that it has not engaged the services of any broker or finder in connection
with this Agreement or the transactions contemplated hereby that would be
entitled to a fee or commission from the other party. Each party agrees to
indemnify and hold the other party harmless from and against any claim for
commissions, finder's fees or any similar payment in connection with this
Agreement or the transactions contemplated hereby asserted by any broker or
finder claiming to have been employed by or on behalf of the indemnifying party
and its Affiliates.
Section 12.2 Counterparts. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement, and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties.
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<PAGE>
Section 12.3 Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the Commonwealth of Virginia
without reference to the choice of law principles thereof.
Section 12.4 Entire Agreement. This Agreement (including any
agreements incorporated herein) and the Schedules and Exhibits hereto, together
with the Confidentiality Agreement, contain the entire agreement between the
parties with respect to the subject matter hereof and there are no other
agreements, understandings, representations or warranties between the parties.
This Agreement is not intended to confer upon any person not a party hereto (or
a party's successors and assigns permitted by Section 12.7) any rights or
remedies hereunder.
Section 12.5 Expenses. Except as otherwise expressly set forth
in this Agreement, whether or not the Asset Purchase is consummated, all other
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such costs
and expenses.
Section 12.6 Notices. All notices and other communications
hereunder shall be sufficiently given for all purposes hereunder if in writing
and delivered personally, sent by nationally recognized overnight delivery
service or, to the extent receipt is confirmed, facsimile or other electronic
transmission service to the appropriate address or number as set forth below:
(a) if to Seller, to:
Farm Fresh, Inc.
7530 Tidewater Drive
Norfolk, Virginia 23505
Attention: President
Fax No.: 757-480-6714
with a copy to:
Dechert Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, Pennsylvania 19103
Attention: David E. Schulman
Fax No.: 215-994-2222
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<PAGE>
(b) if to Richfood or Buyer, to:
Richfood Holdings, Inc.
FF Acquisition, L.L.C.
c/o Richfood Holdings, Inc.
4860 Cox Road
Glen Allen, Virginia 23060
Attention: John E. Stokely
President & Chief Executive Officer
Fax No.: 804-915-6010
with a copy to:
Hunton & Williams
Riverfront Plaza, East Tower
951 E. Byrd Street
Richmond, Virginia 23219
Attention: Gary E. Thompson
Fax No.: 804-788-8218
or at such other address and to the attention of such other person as a party
may designate by written notice to the other party.
Section 12.7 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that no party hereto shall be
entitled to assign its rights or delegate its obligations under this Agreement
without the express prior written consent of the other party hereto.
Section 12.8 Headings; Definitions. This section and article
headings contained in this Agreement are inserted for convenience of reference
only and shall not affect the meaning or interpretation of this Agreement. All
references to Sections or Articles contained herein mean Sections or Articles of
this Agreement unless otherwise stated. All capitalized terms defined herein are
equally applicable to both the singular and plural forms of such terms.
Section 12.9 Amendments and Waivers. This Agreement may not be
modified or amended except by an instrument or instruments in writing signed by
the party against whom enforcement of any such modification or amendment is
sought. Any party hereto may, only by an instrument in writing, waive compliance
by the other party hereto with any term or provision of this Agreement on the
part of such other parties hereto to be performed or complied with. The waiver
by any party hereto of a breach of any term or provision of this Agreement shall
not be construed as a waiver of any subsequent breach.
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<PAGE>
Section 12.10 Interpretation. It is understood and agreed that
neither the specification of any dollar amount in the representations and
warranties contained in this Agreement nor the inclusion of any specific item in
the Schedules or Exhibits is intended to imply that such amounts or higher or
lower amounts, or the items so included or other items, are or are not material,
or are required to be included in the Schedules, and neither party shall use the
fact of the setting of such amounts or the fact of the inclusion of any such
item in the Schedules in any dispute or controversy between the parties as to
whether any obligation, item or matter is or is not material or are required to
be included in the Schedules, for purposes of this Agreement.
Section 12.11 Severability. Any provision of this Agreement
which is invalid or unenforceable shall be ineffective to the extent of such
invalidity or unenforceability, without affecting in any way the remaining
provisions hereof.
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been signed by or on
behalf of each of the parties as of the day first above written.
FARM FRESH, INC.
By: //s// Ronald E. Johnson
-------------------------------------
Name: Ronald E. Johnson
Title: Chairman, President, CEO
RICHFOOD HOLDINGS, INC.
By: //s// John E. Stokely
-------------------------------------
Name: John E. Stokely
Title: President and CEO
FF ACQUISITION, L.L.C.
By: //s// John E. Stokely
-------------------------------------
Name: John E. Stokely
Title: President
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<TABLE>
EXHIBIT 11.1
RICHFOOD HOLDINGS, INC.
COMPUTATION OF NET EARNINGS PER COMMON SHARE
(Dollar amounts in thousands, except per share data)
<CAPTION>
Second Quarter Ended
-------------------------------
October 18, October 12,
1997 1996
------------ ------------
<S> <C>
NET EARNINGS:
Net earnings $ 15,010 $ 12,572
============ ============
PRIMARY EARNINGS PER COMMON SHARE:
Weighted average number of
common shares outstanding 47,505,909 47,283,785
Net additional common shares
issuable upon exercise of dilutive
options, determined by
treasury stock method 378,775 575,087
------------ ------------
Common shares and equivalents 47,884,684 47,858,872
============ ============
Net earnings per common share (a) $ 0.31 $ 0.26
============ ============
FULLY DILUTED EARNINGS PER COMMON SHARE:
Common shares and equivalents 47,884,684 47,858,872
Net additional common shares
issuable upon exercise of dilutive
options, determined by
treasury stock method
using quarter-end market price,
if higher than average price 52,375 -
------------ ------------
Common shares and equivalents (b) 47,937,059 47,858,872
============ ============
Net earnings per common share (a) $ 0.31 $ 0.26
============ ============
NOTE: (a) Dilution is less than 3%.
(b) The Company does not have any other potentially dilutive securities.
<PAGE>
EXHIBIT 11.1
RICHFOOD HOLDINGS, INC.
COMPUTATION OF NET EARNINGS PER COMMON SHARE
(Dollar amounts in thousands, except per share data)
<CAPTION>
Year-to-Date
-------------------------------
October 18, October 12,
1997 1996
------------ ------------
NET EARNINGS:
Net earnings $ 29,516 $ 25,017
============ ============
PRIMARY EARNINGS PER COMMON SHARE:
Weighted average number of
common shares outstanding 47,470,114 47,223,435
Net additional common shares
issuable upon exercise of dilutive
options, determined by
treasury stock method 368,950 554,994
------------ ------------
Common shares and equivalents 47,839,064 47,778,429
============ ============
Net earnings per common share (a) $ 0.62 $ 0.52
============ ============
FULLY DILUTED EARNINGS PER COMMON SHARE:
Common shares and equivalents 47,839,064 47,778,429
Net additional common shares
issuable upon exercise of dilutive
options, determined by
treasury stock method
using quarter-end market price,
if higher than average price 62,652 3,620
------------ ------------
Common shares and equivalents (b) 47,901,716 47,782,049
============ ============
Net earnings per common share (a) $ 0.62 $ 0.52
============ ============
NOTE: (a) Dilution is less than 3%.
(b) The Company does not have any other potentially dilutive securities.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE COMPANY'S
CONSOLIDATED FINANCIAL STATEMENTS FOR THE TWENTY-FOUR WEEK PERIOD ENDED OCTOBER
18, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-02-1998
<PERIOD-END> OCT-18-1997
<CASH> 13,274
<SECURITIES> 0
<RECEIVABLES> 120,530
<ALLOWANCES> 3,538
<INVENTORY> 172,484
<CURRENT-ASSETS> 316,803
<PP&E> 237,706
<DEPRECIATION> 115,338
<TOTAL-ASSETS> 604,461
<CURRENT-LIABILITIES> 275,968
<BONDS> 0
<COMMON> 73,905
0
0
<OTHER-SE> 214,008
<TOTAL-LIABILITY-AND-EQUITY> 604,461
<SALES> 1,458,599
<TOTAL-REVENUES> 1,458,599
<CGS> 1,300,710
<TOTAL-COSTS> 1,300,710
<OTHER-EXPENSES> 109,695
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,781
<INCOME-PRETAX> 48,269
<INCOME-TAX> 18,753
<INCOME-CONTINUING> 29,516
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29,516
<EPS-PRIMARY> 0.62
<EPS-DILUTED> 0.62
</TABLE>
