<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
_________
FORM 10-Q
(Mark one)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
-----
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 5, 1997
---------------
OR
____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____
Commission File Number 001-10811
---------
SMART & FINAL INC.
(Exact name of registrant as specified in its charter)
Delaware No. 95-4079584
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
4700 South Boyle Ave.
Los Angeles, California 90058
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (213) 589-1054
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 registrant had 22,382,813 shares of common stock outstanding as of NOVEMBER
14, 1997.
Number of Sequentially Numbered Pages: 15
Exhibit Index at Page: 15
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<PAGE>
Smart & Final Inc.
INDEX
PART I
FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Item 1. Financial Statements
Unaudited Consolidated Balance Sheets 2
Unaudited Consolidated Statements of Income 3
Unaudited Consolidated Statements of Cash Flows 4
Notes to Unaudited Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition 8
and Results of Operations
</TABLE>
PART II
OTHER INFORMATION
<TABLE>
<CAPTION>
<S> <C> <C>
Item 1. Legal Proceedings 12
2. Changes in Securities 12
3. Defaults upon Senior Securities 12
4. Submission of Matters to a Vote of Security Holders 12
5. Other Information 13
6. Exhibits and Reports on Form 8-K 13
</TABLE>
1
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
SMART & FINAL INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
October 5, December 29,
1997 1996
ASSETS (Unaudited)
-------- --------
<S> <C> <C>
Current assets:
Cash & cash equivalents $ 19,347 $ 16,795
Trade notes and accounts receivable, less
allowance for doubtful accounts of
$3,450 in 1997 and $2,568 in 1996 85,344 67,695
Inventories 135,887 125,721
Prepaid expenses 7,273 4,346
Deferred tax asset 6,134 6,134
-------- --------
Total current assets 253,985 220,691
Property, plant and equipment:
Land 35,630 39,079
Buildings and improvements 32,701 34,364
Leasehold improvements 61,252 60,943
Fixtures and equipment 148,136 129,953
-------- --------
277,719 264,339
Less - Accumulated depreciation and amortization 89,830 77,156
-------- --------
Net property, plant and equipment 187,889 187,183
Assets under capital leases, net 4,663 671
Goodwill 17,930 10,162
Deferred tax asset 5,814 4,157
Other assets 20,404 18,560
-------- --------
Total Assets $490,685 $441,424
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long term debt $ 10,749 $ 10,356
Bank line of credit 42,000 17,000
Accounts payable 65,849 70,936
Payable to Parent and affiliates 12,594 8,759
Accrued salaries and wages 8,524 9,940
Workers' compensation reserve 2,600 2,600
Other accrued liabilities 24,752 21,855
-------- --------
Total current liabilities 167,068 141,446
Long term liabilities:
Notes payable, net of current maturities 36,250 37,063
Bank debt 45,000 45,000
Obligations under capital leases 8,308 581
Other long term liabilities 2,812 -
Workers' compensation reserve, postretirement
and postemployment benefits 19,904 20,000
-------- --------
Total long term liabilities 112,274 102,644
Minority interest 1,655 1,679
Stockholders' equity:
Preferred stock, $1 par value (authorized-
10,000,000 shares; no shares issued) - -
Common stock, $ .01 par value (authorized-
100,000,000 shares; 22,243,978 shares issued
and outstanding in 1997 and 21,976,406 in 1996) 222 220
Additional paid-in capital 139,068 140,371
Cumulative translation loss (835) (835)
Retained earnings 71,233 55,899
-------- --------
Total stockholders' equity 209,688 195,655
-------- --------
Total liabilities and stockholders' equity $490,685 $441,424
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
2
<PAGE>
SMART & FINAL INC
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Sixteen Weeks Ended Forty Weeks Ended
--------------------------------- --------------------------------
October 5, October 6, October 5, October 6,
1997 1996 1997 1996
--------------- --------------- --------------- ---------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Sales $ 442,522 $ 406,448 $ 1,084,454 $996,190
Cost of sales, buying and occupancy 381,236 347,895 928,883 850,525
-------------- -------------- -------------- --------------
Gross margin 61,286 58,553 155,571 145,665
Operating and administrative expenses 49,516 44,468 121,590 113,089
Gain on sale of properties (1,770) (140) (1,840) (144)
-------------- -------------- -------------- --------------
Income from operations 13,540 14,225 35,821 32,720
-------------- -------------- -------------- --------------
Interest income and (expense):
Interest income 224 133 485 363
Interest expense (2,837) (1,246) (6,362) (2,796)
-------------- -------------- -------------- --------------
(2,613) (1,113) (5,877) (2,433)
Income before provision for income taxes
and minority share of net income 10,927 13,112 29,944 30,287
Provision for income taxes 4,227 5,054 11,505 11,720
-------------- -------------- -------------- --------------
6,700 8,058 18,439 18,567
Minority share of net income (loss) (140) 11 (24) 166
-------------- -------------- -------------- --------------
Income from consolidated subsidiaries 6,840 8,047 18,463 18,401
Equity earnings in unconsolidated subsidiary - 50 200 159
-------------- -------------- -------------- --------------
Net income $ 6,840 $ 8,097 $ 18,663 $ 18,560
============== ============== ============== ==============
Earnings per common share $ 0.30 $ 0.38 $ 0.82 $ 0.88
============== ============== ============== ==============
Dividend per common share $ 0.05 $ 0.05 $ 0.15 $ 0.15
============== ============== ============== ==============
Weighted average common shares and
common share equivalents 23,014,019 21,279,572 22,881,474 21,205,782
============== ============== ============== ==============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
<TABLE>
<CAPTION>
SMART & FINAL INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
Forty Weeks Ended
--------------------
October 5, October 6,
1997 1996
-------- --------
(Unaudited)
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $18,663 $18,560
Adjustments to reconcile net income to net
cash provided by operating activities:
(Gain) loss on disposal of fixed assets (1,840) (144)
Depreciation and amortization 19,411 14,978
Minority share of net income (24) 166
Equity (earnings) loss in unconsolidated subsidiary (200) (159)
(Increase) decrease in :
Trade notes and accounts receivable (13,120) (13,666)
Inventories (8,630) (5,048)
Prepaid expenses and other (2,913) (3,370)
Increase (decrease) in :
Accounts payable (5,903) 81
Payable to Parent and affiliates 3,835 5,066
Accrued liabilities (1,416) 1,729
Other liabilities 1,462 (574)
-------- --------
Net cash provided by operating activities 9,325 17,619
-------- --------
Cash Flows From Investing Activities:
Acquisition of property, plant and equipment (26,022) (26,581)
Proceeds from disposal of property, plant and equipment 10,416 391
Proceeds from redemption of municipal bonds - 225
Acquisition of municipal bonds - (325)
Acquisition of business (11,300) (1,468)
Other (2,752) (4,028)
-------- --------
Net cash used in investing activities (29,658) (31,786)
-------- --------
Cash Flows From Financing Activities:
Proceeds from issuance of common stock 3,260 820
Bank credit line 25,000 18,325
(Payments) borrowings on notes payable (2,054) 286
Quarterly dividend paid (3,321) (3,043)
-------- --------
Net cash provided by financing activities 22,885 16,388
-------- --------
Increase in cash and cash equivalents 2,552 2,221
Cash and cash equivalents at beginning of period 16,795 15,415
-------- --------
Cash and cash equivalents at end of period $ 19,347 $ 17,636
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
SMART & FINAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
Smart & Final Inc. (the "Company") is a Delaware corporation and is a
55.8 percent owned subsidiary of Casino USA, Inc. (the "Parent").
The consolidated balance sheet as of October 5, 1997, the consolidated
statements of income for the sixteen and forty weeks ended October 5, 1997, and
October 6, 1996, and cash flows for the forty weeks ended October 5, 1997 and
October 6, 1996 are unaudited. In the opinion of management, all adjustments
necessary for a fair presentation of these financial statements have been
included. Such adjustments consisted only of normal recurring items. Interim
results are not necessarily indicative of results for a full year.
These consolidated financial statements should be read in conjunction
with the consolidated financial statements and notes thereto included in the
Company's Form 10-K statement for the year ended December 29, 1996.
(2) EARNINGS PER COMMON SHARE
Earnings per common share is based on weighted average outstanding
common shares which include the common stock equivalents related to employee
stock options and a stock purchase agreement.
The Company will adopt SFAS No. 128, "Earnings per share", which is
effective for financial statements ending after December 15, 1997. Basic
earnings per common share were computed by dividing net income by the weighted
average number of shares outstanding during the year. The Pro forma below
illustrates the effects of financial reporting under the provisions of SFAS No.
128:
Sixteen Weeks Ended Forty Weeks Ended
------------------- ------------------
<TABLE>
<CAPTION>
October 5, October 6, October 5, October 6,
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Per Share Amounts
- --------------------------
Primary EPS as reported $0.30 $0.38 $0.82 $0.88
Effect of SFAS No. 128 $0.01 $0.02 $0.02 $0.03
----- ----- ----- -----
Pro forma basic EPS $0.31 $0.40 $0.84 $0.91
===== ===== ===== =====
</TABLE>
5
<PAGE>
(3) FISCAL YEARS
The Company's fiscal year ends on the Sunday closest to December 31.
Each fiscal year consists of twelve week periods in the first, second and fourth
quarters and a sixteen week period in the third quarter.
(4) DIVIDEND
On September 11, 1997, the Company declared a dividend of $0.05 per
share to stockholders of record at October 3, 1997. The dividend was paid on
October 31, 1997.
(5) INCOME TAXES
Tax sharing payments for state income taxes made by the Company to the
Parent were $2,224,000 and $1,535,000 in the forty weeks ended October 5, 1997
and October 6, 1996, respectively. The Company paid $8,075,000 and $8,555,000
in federal income taxes in the forty week period ended October 5, 1997 and
October 6, 1996, respectively.
(6) LEGAL ACTIONS
The Company has been named as defendant in various legal actions
arising in the normal conduct of its business. In the opinion of management,
after consultation with counsel, none of these actions are expected to result in
significant liability to the Company.
(7) LEASES
Lease expense to third-party lessors is included in cost of sales and
buying and occupancy expense in the sixteen and forty week periods ended October
5, 1997. Previously disclosed lease expense to affiliates, for the sixteen and
forty week periods ended October 6, 1996, has been reclassified to cost of sales
and buying and occupancy expense for comparability because the properties which
had been owned by affiliates were purchased by the Company on December 29, 1996.
In conjunction with the real estate that was acquired at December 29,
1996, from Casino USA and Casino Realty, the Company assumed certain capital and
operating leases. During the second quarter, the Company recorded capital lease
assets and related obligations at historical carry over basis of $4.4 million
and $8.5 million, respectively.
(8) ACQUISITION
On May 30, 1997, Port Stockton Food Distributors, Inc. acquired the
net assets of the Davis Lay foodservice division of Mallard's Food Products,
Inc., for $5.0 million in cash and a $0.5 million note.
6
<PAGE>
On September 26, 1997, the Company's wholly-owned subsidiary, American
Foodservice Distributors ("American Foodservice"), acquired the net assets of
two Florida foodservice distributors, Orlando Foodservice Inc. and Capricorn
Foods of Central Florida, Inc., from the same sellers for a total purchase price
of $1.3 million in cash and a $0.5 million note.
On September 29, 1997, American Foodservice acquired the net assets of
Southern Foods, a foodservice distributor located in Opa Locka, Florida, from
Continental Grain Company for $5.0 million in cash.
These acquisitions were accounted for as purchases and the acquisition
prices were allocated according to the fair value of the net assets acquired.
Operating results for the period subsequent to the dates of acquisition were
immaterial.
(9) INTEREST RATE COLLAR AGREEMENTS
The Company has entered into interest rate collar agreements with
various banks that effectively set interest rate limits on the Company's term
loans. The notional principal amount represented by these agreements at October
5, 1997 was $100 million. These agreements have interest rate ranges from 4.7%
to 8.0% and extend up to 7 years.
(10) GAIN ON SALE OF PROPERTIES
The Company recorded gains on the sale of properties of $1.8 million
and $0.1 million in 1997 and 1996, respectively. These gains resulted from the
sales of certain operating assets, including the sale of the Company's Vernon,
California distribution center in September 1997.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's discussion and analysis should be read in conjunction with the
accompanying consolidated financial statements and notes thereto and the
Company's Form 10-K statement for the year ended December 29, 1996.
SUMMARY.
Smart & Final Inc. (the "Company") reported net income of $6.8 million for
the sixteen weeks ended October 5, 1997, compared to net income of $8.1 million
for the sixteen weeks ended October 6, 1996.
For the forty weeks ended October 5, 1997, the Company reported net income
of $18.7 million compared to net income of $18.6 million for the forty weeks
ended October 6, 1996.
The decline in earnings for the third quarter and flat earnings for the
first three quarters of 1997 primarily reflect weak operating results in the
Company's Florida stores and foodservice distribution businesses. Sales growth
at stores outside the metropolitan Miami area has been slow and marketing and
distribution to these stores has been inefficient. Growth of stores and
foodservice volume has also strained distribution capabilities. The Company is
considering restructuring the Florida operations in the fourth quarter which
could result in a special charge of $0.25 to $0.30 per share.
RESULTS OF OPERATIONS.
The following table shows for the periods indicated, certain condensed
consolidated income statement data, expressed as a percentage of total sales.
<TABLE>
<CAPTION>
SIXTEEN WEEKS ENDED FORTY WEEKS ENDED
-------------------- ------------------------
OCTOBER 5, OCTOBER 6, OCTOBER 5, OCTOBER 6,
1997 1996 1997 1996
------ ------ ---------- ------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Sales:
Store sales 72.8% 76.1% 73.3% 76.3%
Food distribution sales 27.2 23.9 26.7 23.7
-------- -------- -------- --------
Total Sales 100.0% 100.0% 100.0% 100.0%
Cost of sales, buying and occupancy........... 86.2 85.6 85.7 85.4
-------- -------- -------- --------
Gross Margin.................................. 13.8 14.4 14.3 14.6
Operating and administrative expenses........ 11.2 10.9 11.0 11.3
Gain on sale of properties.................... (0.4) - (0.2) -
-------- -------- -------- --------
Income from operations.................... 3.0 3.5 3.3 3.3
-------- -------- -------- --------
Interest expense, net ........................ (0.6) (0.3) (0.5) (0.2)
-------- -------- -------- --------
Income before provision for income tax, and
minority share of net income................ 2.5 3.2 2.8 3.0
Provision for income taxes.................... 1.0 1.2 1.1 1.2
-------- -------- -------- --------
1.5 2.0 1.7 1.9
Minority share of net income.................. - - - -
-------- -------- -------- --------
Income from consolidated subsidiaries....... 1.5 2.0 1.7 1.8
Equity earnings in unconsolidated
subsidiaries.................................. - - - -
-------- -------- -------- --------
Net income................................ 1.5% 2.0% 1.7% 1.9%
======== ======== ======== ========
* Totals do not aggregate due to rounding.
</TABLE>
8
<PAGE>
BACKGROUND.
The Company continued its expansion program in 1996 and 1997 as shown in
the following table:
<TABLE>
<CAPTION>
THREE YEAR
QUARTER ENDED QUARTERS ENDED ENDED
------------------- ------------------- -------------
OCT. 5, OCT. 6, OCT. 5, OCT. 6, DECEMBER 29,
1997 1996 1997 1996 1996
-------- -------- -------- -------- -------------
<S> <C> <C> <C> <C> <C>
USA
Store count beginning 168 162 168 155 155
Stores opened:
In new markets - 1 - 8 12
In mature markets - 1 2 1 1
---- ---- ---- ---- ----
Total - 2 2 9 13
Relocations 2 2 5 4 6
Stores relocated/closed (2) (2) (7) (4) (6)
---- ---- ---- ---- ----
Store count ending 168 164 168 164 168
MEXICO
Store count beginning 5 3 5 3 3
New stores opened - - - - 2
---- ---- ---- ---- ----
Store count ending 5 3 5 3 5
---- ---- ---- ---- ----
Grand Total 173 167 173 167 173
==== ==== ==== ==== ====
</TABLE>
Mexico operations are not consolidated and are reported on the equity
basis.
Although new stores are important to the Company's continued growth and
profitability, each new store opening initially penalizes earnings because
stores are not immediately profitable. Historically, new stores opened in
existing market areas generally have achieved break even (after full allocation
of all corporate expenses) within the first six to eighteen months and new
stores opened in new market areas, which mature more slowly, generally have
achieved break even in approximately three years.
Each of the Company's fiscal years consists of twelve week periods in the
first, second and fourth quarters of the fiscal year and a sixteen week period
in the third quarter.
COMPARISON OF SIXTEEN WEEKS ENDED OCTOBER 5, 1997 WITH SIXTEEN WEEKS ENDED
OCTOBER 6, 1996.
Sales. Third quarter 1997 sales were $442.5 million, up 8.9% from the
comparable 1996 period. Smart & Final Stores Corporation ("Smart & Final")
store sales increased 4.1%. Store sales increased primarily as a result of the
new store openings and relocations in the United States which numbered 19 in
1996 and seven in the first three quarters of 1997.
Comparable store sales for the third quarter of 1997 increased 2.6% over
the prior year period. Comparable customer transactions for the third quarter
increased 4.2% over the third quarter of 1996. Average comparable transaction
size declined by 1.5%, to $31.38.
Foodservice distribution sales for the third quarter increased to $120.4
million, with strong growth at Port Stockton where sales increased 43.9% and at
Henry Lee with a sales increase of 3.0%.
9
<PAGE>
Cost of Sales, Buying and Occupancy. These costs totaled $381.2 million in
the third quarter of 1997, up 9.6% from the third quarter of 1996, consistent
with the increase in sales. As a percentage of sales, these costs were 86.2% in
the third quarter of 1997, compared to 85.6% in the prior year quarter.
Gross Margin. Gross margin increased 4.7% from $58.6 million in the third
quarter of 1996 to $61.3 million in the third quarter of 1997. As a percentage
of sales, gross margin declined from 14.4% of sales in the third quarter of 1996
to 13.8% of sales in the current quarter. The major factor in the reduced gross
margin percentage was the Low Price Program introduced in the first quarter of
1997 which reduced year to year margins by approximately 0.4% and due to the
current year higher mix of foodservice distribution sales which carry lower
gross margins than store sales.
Operating and Administrative Expenses. Operating and administrative
expenses for the third quarter of 1997 were $49.5 million, up $5.0 million, or
11.4%, from the third quarter of 1996. This increase in expenses was primarily
due to increased expenses in the Florida operations.
Gain on Sale of Properties. During the third quarter of 1997, the Company
recorded gains on the sale of properties of $1.8 million compared to $0.1
million in the third quarter of 1996. Included in the 1997 gain is approximately
$1.0 million resulting form the sale of the Company's Vernon, California
distribution center.
Income from Operations. Income from operations was $13.5 million for the
third quarter of 1997, down 4.8% from $14.2 million in the third quarter of
1996. The decrease is due primarily to weakness in Florida stores and
foodservice distribution operating results in the current quarter.
Interest Income and (Expense). Interest expense, net increased from $1.1
million in the third quarter of 1996 to $2.6 million in the third quarter of
1997. The increase is due to debt issued in connection with acquisition of real
estate assets from an affiliated company late in 1996 and due to increased bank
debt incurred to finance the Company's growth program.
COMPARISON OF FORTY WEEKS ENDED OCTOBER 5, 1997 WITH FORTY WEEKS ENDED OCTOBER
6, 1996.
Sales. For the first three quarters of 1997, sales were $1,084.5 million,
up 8.9% from the comparable 1996 period. Smart & Final store sales increased
4.6%. Store sales increased primarily as a result of the 26 new and relocated
stores opened since 1995. Comparable store sales increased 2.2% in the first
three quarters of 1997. Average comparable transaction size declined 0.8% to
$31.65 in the first three quarters of 1997.
Foodservice sales increased to $289.0 million with strong year to year
sales growth of 56.6% at Port Stockton and modest growth of 1.9% at Henry Lee,
which was hampered by distribution capacity constraints.
Cost of Sales, Buying and Occupancy. These costs totaled $928.9 million in
the first three quarters of 1997, up 9.2% from the first three quarters of 1996.
As a percentage of sales, these costs increased from 85.4% in the first three
quarters of 1996 to 85.7% in the first three quarters of the current ye ar.
Gross Margin. Gross margin increased 6.8% from $145.7 million in the first
three quarters of 1996 to $155.6 million in the comparable 1997 period. As a
percentage of sales, gross margin declined from 14.6% of sales in the first
three quarters of 1996 to 14.3% of sales in the current year, primarily due to
introduction of the Low Price Program in the first quarter of 1997.
Operating and Administrative Expenses. Operating and administrative
expenses for the first three quarters of 1997 were $121.6 million, up $8.5
million, or 7.5%, from the first three quarters of 1996. This decrease was due
to effective cost control and resulted in these expenses declining as a
percentage of sales from 11.4% in the first three quarters of 1996 to 11.2% in
the current year.
Gain on Sale of Properties. The Company recognized gains on the sale of
properties of $1.8 million during the first three quarters of 1997 compared to
$0.1 million in the comparable 1996 period. The 1997 gain includes $1.0 million
gain recognized in the sale of the Company's Vernon, California distribution
center.
Income from Operations. Income from operations was $35.8 million for the
first three quarters of 1997, up 9.5% from $32.7 million in the first three
quarters of 1996. The increase is consistent with the increase in sales achieved
in 1997.
10
<PAGE>
Interest Income and (Expense). Interest expense, net increased from $2.4
million in the first three quarters of 1996 to $5.9 million in the current year.
The increase is due to $38.0 million of debt issued in connection with the
acquisition of operating real estate from an affiliated company late in 1996 and
an increase in bank debt due to the company's growth program.
FINANCIAL CONDITION.
Cash and cash equivalents increased from $16.8 million at December 29,
1996, to $19.3 million at October 5, 1997. Cash provided by operating
activities for the forty weeks ended October 5, 1997 was $9.3 million. Cash
used for investing activities, consisting primarily of capital expenditures for
property, plant, and equipment of $26.0 million and $11.3 million to acquire
businesses, net of $10.4 million of proceeds from sale of fixed assets, was
$29.7 million. Cash used for payment of dividends was $3.3 million. Additional
cash was provided by $25.0 million of bank borrowings and $3.3 million of
proceeds from issuance of common stock.
Trade notes and accounts receivable increased $17.6 million to $85.3
million primarily as a result of strong growth in foodservice distribution
sales, which are primarily on credit terms, and an $8.5 million receivable
related to the sale of the Vernon distribution center.
Stockholders' equity increased by $14.0 million from $195.7 million at
December 29, 1996 to $209.7 million at October 5, 1997 as a result of the $18.7
million net income for the first forty weeks of 1997, the $3.3 million proceeds
from the issuance of common stock, net of the quarterly cash dividends of $3.3
million declared in the first three quarters of 1997, and a charge of $4.7
million to paid in capital as a result of assuming certain capital and operating
leases from Casino Realty as mentioned in Note 7 of the Notes to Consolidated
Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES.
The Company's primary source of liquidity is cash flow from operations and
retained earnings. Cash provided by operating activities was $9.3 million in
the first three quarters of 1997, down from $17.6 million in the comparable 1996
period. The decline is due to increased working capital requirements arising
from the company's growth.
At October 5, 1997 the Company had cash of $19.3 million, $209.7 million of
stockholders' equity, and $133.3 million of debt. The Company expects to be
able to fund future acquisitions and other cash requirements by a combination of
available cash, cash from operations, borrowings and proceeds from the issuance
of equity securities. The Company has $5.0 million of availability under its
$50.0 million bank credit line.
From time to time Smart & Final may publish forward-looking statements
about anticipated results. The Private Securities Litigation Reform Act of 1995
provides a safe harbor for forward-looking statements. In order to comply with
the terms of the safe harbor, the Company notes that such forward-looking
statements are based upon internal estimates which are subject to change because
they reflect preliminary information and management assumptions, and that a
variety of factors could cause the Company's actual results and experience
to differ materially from the anticipated results or other expectations
expressed in the Company's forward-looking statements. The factors which could
cause actual results or outcomes to differ from such expectation include the
extent of the Company's success in (i) changing market conditions, (ii)
unforeseen costs and expenses, (iii) ability to attract new customers and retain
existing customers, and (iv) gain or losses from sales along with the
uncertainties and other factors, including unusually adverse weather conditions,
described from time to time in the Company's SEC filings and reports. This
report includes "forward-looking statements" including, without limitation,
statements as to the Company's liquidity and availability of capital resources.
11
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
Not applicable.
ITEM 2 CHANGES IN SECURITIES
Not applicable.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5 OTHER INFORMATION
Not applicable.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description of Exhibit Pages
- ------ ---------------------- -----
<S> <C> <C>
10. 71 Participation Agreement dated as of April 16, 1997 (1), as amended
10. 75 First Amendment and Restatement dated as of June 20, 1997, to Participation
Agreement dated December 15, 1994 (1), as amended
10. 80 1997 Executive Severance Agreement*
10. 81 Agreement to Sell and Purchase Real Property and Escrow Instructions dated as of
September 1, 1997, as amended
10. 82 Agreement to Sell and Purchase Real Property and Escrow Instructions dated as of
September 12, 1997
10. 83 Letter Agreement dated as of September 18, 1997
10. 84 Asset Purchase Agreement dated as of September 26, 1997
10. 85 Asset Purchase Agreement dated as of September 26, 1997
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description of Exhibit Pages
- ------ ---------------------- -----
<S> <C> <C>
27 Financial Data Schedule
_______________________________________________________
</TABLE>
(1) Incorporated herein by reference to the corresponding Exhibit number
in the Company's Quarterly Report for the quarter ended June 15, 1997
on Form 10-Q, which was filed on July 29, 1997.
*Management contracts and compensatory plans, contracts and arrangements of the
Company
(b) Reports on Form 8-K
During the quarter ended October 5, 1997, the Company filed no reports on Form
8-K.
13
<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.
SMART & FINAL INC.
By:
Date: November 18, 1997 /s/ MARTIN A. LYNCH
__________________________________
Martin A. Lynch
Executive Vice President,
Principal Financial Officer, and
Principal Accounting Officer of the Company
14
<PAGE>
SMART & FINAL INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description of Exhibit Pages
- ------ ---------------------- -----
<S> <C> <C>
10.71 Participation Agreement dated as of April 16, 1997 (1), as amended
10.75 First Amendment and Restatement dated as of June 20, 1997, to Participation
Agreement dated December 15, 1994 (1), as amended
10.80 1997 Executive Severance Agreement*
10.81 Agreement to Sell and Purchase Real Property and Escrow Instructions dated as of
September 1, 1997, as amended
10.82 Agreement to Sell and Purchase Real Property and Escrow Instructions dated as of
September 12, 1997
10.83 Letter Agreement dated as of September 18, 1997
10.84 Asset Purchase Agreement dated as of September 26, 1997
10.85 Asset Purchase Agreement dated as of September 26, 1997
27 Financial Data Schedule
</TABLE>
- ---------------------------------------------
(1) Incorporated herein by reference to the corresponding Exhibit number
in the Company's Quarterly Report for the quarter ended June 15, 1997
on Form 10-Q, which was filed on July 29, 1997.
*Management contracts and compensatory plans, contracts and arrangements of the
Company
15
<PAGE>
EXHIBIT 10.71
FIRST AMENDMENT
TO
PARTICIPATION AGREEMENT
This FIRST AMENDMENT TO PARTICIPATION AGREEMENT (this "Amendment") is
entered into as of August 15, 1997 by and among Smart & Final Inc., a Delaware
corporation, Smart & Final Stores Corporation, a California corporation, and
American Foodservice Distributors, a California corporation, Fleet National
Bank, a national banking association, each of the banks listed on the signature
pages hereto, Credit Lyonnais Leasing Corp., a Delaware corporation, and Credit
Lyonnais New York Branch, a branch duly licensed under the laws of New York of a
banking corporation organized and existing under the laws of the Republic of
France.
WHEREAS, each of the parties hereto has entered into that certain
Participation Agreement dated as of April 16, 1997 (the "Participation
Agreement"); and
WHEREAS, each of the parties hereto desire to amend the Participation
Agreement to correct the definition of Consolidated Cash Flow as used therein.
NOW, THEREFORE, the parties hereto agree as follows (capitalized terms used
herein but not otherwise defined herein having the meanings ascribed to them in
the Participation Agreement):
1. Amendments. The definition of "Consolidated Cash Flow" as set forth in
----------
Exhibit A to the Participation Agreement shall be amended and restated in it
entirety to read as follows:
" `Consolidated Cash Flow' shall mean, at any date and for any period, the
sum of consolidated net income (excluding non-cash unusual items and
minority interest in earnings for such period), plus interest expense,
income taxes, depreciation, amortization and lease expense (to the extent
deducted in determining net income) for such period."
2. Governing Law. This Amendment shall be governed by the laws of the State of
-------------
New York without regard to the conflict of laws rules thereof.
3. Counterparts. This Amendment may be executed in any number of counterparts,
------------
all of which, taken together, shall constitute one complete document.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the date first above written.
CREDIT LYONNAIS NEW YORK BRANCH,
as Agent
By: /s/ David Fink
--------------
Its: First Vice President
--------------------
CREDIT LYONNAIS NEW YORK BRANCH,
as Lender
By: /s/ Dianne M. Scott
-------------------
Its: Vice President and Manager
--------------------------
BANQUE NATIONALE DE PARIS,
as Lender
By: /s/ C. Bettles
--------------
Its: Sr. V.P. and Manager
--------------------
By: /s/ J.L. Tourne
---------------
Its: V.P. and Deputy Manager
-----------------------
UNION BANK OF CALIFORNIA, N.A.,
as Lender
By: /s/ Terry Rocher
----------------
Its: Assistant Vice President
------------------------
<PAGE>
CREDIT LYONNAIS LEASING CORP.
as Equity Participant
By: /s/ L.M. Wertheim
-----------------
Its: Vice President/Secretary
------------------------
CIBC INC., as Lender
By: /s/
---
Its:___________________________
FLEET NATIONAL BANK, not in its
individual capacity, but solely as Owner
Trustee under the Trust Agreement, as the
Lessor
By: /s/ E.C. Hammer
---------------
Its: Attorney in Fact
----------------
SMART & FINAL, INC.
as Lessee
By: /s/ Donald G. Alvarado
----------------------
Its: Sr. V.P.
--------
SMART & FINAL STORES CORPORATION,
as Significant Sublessee
By: /s/ Donald G. Alvarado
----------------------
Its: Sr. V.P.
--------
<PAGE>
AMERICAN FOODSERVICE DISTRIBUTORS,
as Significant Sublessee
By: /s/ Donald G. Alvarado
----------------------
Its: V.P./ Secretary
---------------
<PAGE>
SECOND AMENDMENT
TO
PARTICIPATION AGREEMENT
This SECOND AMENDMENT TO PARTICIPATION AGREEMENT (THIS "AMENDMENT") is
entered into as of August 15, 1997 by and among Smart & Final Inc., a Delaware
corporation, Smart & Final Stores Corporation, a California corporation, and
Port Stockton Food Distributors, Inc., a California corporation, Fleet National
Bank, a national banking association, Credit Lyonnais Los Angeles Branch, a
branch duly licensed under the laws of California of a banking corporation
organized and existing under the laws of the Republic of France, Bank Leumi Le-
Israel B.M., a banking corporation organized and existing under the laws of
Israel, The Fuji Bank, Limited, Los Angeles Agency, an agency duly licensed
under the laws of California of a banking corporation organized and existing
under the laws of Japan, The Industrial Bank of Japan, Limited, Los Angeles
Agency, an agency duly licensed under the laws of California of a banking
corporation organized and existing under the laws of Japan, and Via Banque,
S.A., a banking corporation organized and existing under the laws the Republic
of France, Credit Lyonnais Leasing Corp., a Delaware corporation, and Credit
Lyonnais New York Branch, a branch duly licensed under the laws of New York of a
banking corporation organized and existing under the laws of the Republic of
France.
WHEREAS, each of the parties hereto has entered into that certain First
Amendment and Restatement dated as of June 20, 1997 to that certain
Participation Agreement dated as of December 15, 1994 (as so amended and
restated, the "Participation Agreement"); and
WHEREAS, each of the parties hereto desire to amend the Participation
Agreement to correct the definition of Consolidated Cash Flow as used therein.
NOW, THEREFORE, the Parties hereto agree as follows (capitalized terms used
herein but not otherwise defined herein having the meaning ascribed to them in
the Participation Agreement):
1. Amendments. The definition of "Consolidated Cash Flow" as set forth in
-----------
Exhibit A to the Participation Agreement shall be amended and restated in its
entirety to read as follows:
" `Consolidated Cash Flow' shall mean, at any date and for any period, the sum
of consolidated net income (excluding non-cash unusual items and minority
interest in earnings for such period), plus interest expense, income taxes,
depreciation, amortization and lease expense (to the extent deducted in
determining net income) for such period."
<PAGE>
2. Governing Law. This Amendment shall be governed by the laws of the State
-------------
of New York without regard to the conflict of laws rules thereof.
3. Counterparts. This Amendment may be executed in any number of
-------------
counterparts, all of which, taken together, shall constitute one complete
document.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the
date first above written.
CREDIT LYONNAIS LOS ANGELES BRANCH,
as Lender
By: /s/ Dianne M. Scott
-------------------
Its: Vice President and Manager
--------------------------
THE FUJI BANK, LIMITED, LOS ANGELES
AGENCY as Lender
By: /s/ Masahito Fukuda
-------------------
Its: Joint General Manager
---------------------
BANK LEUMI LE-ISRAEL B.M., as Lender
By: /s/ Jacques Delvoy
------------------
Its: Vice President
--------------
THE INDUSTRIAL BANK OF JAPAN, LIMITED,
LOS ANGELES AGENCY, as Lender
By: /s/ Vicente L. Timiraos
-----------------------
Its: Sr. V.P. & Sr. Mgr.
-------------------
<PAGE>
VIA BANQUE, S.A., as Lender
By: /s/ Christel Prot
-----------------
Its: Sous-Directeur
--------------
By: /s/ Pascal Arnoult
------------------
Its: Directeur
---------
CREDIT LYONNAIS NEW YORK BRANCH,
as Agent
By: /s/ David Fink
--------------
Its: First Vice President
--------------------
CREDIT LYONNAIS LEASING CORP.,
as Equity Participant
By: /s/ L.M. Wertheim
-----------------
Its: Vice President/Secretary
------------------------
SMART & FINAL, INC.
as Lessee
By: /s/ Donald G. Alvarado
----------------------
Its: Sr. V.P.
--------
FLEET NATIONAL BANK
not in its individual capacity, but solely as owner
Trustee under the Trust Agreement, as the Lessor
By: /s/ E.C. Hammer
---------------
Its: Attorney in Fact
----------------
<PAGE>
SMART & FINAL STORES CORPORATION,
as Permitted Sublessee
By: /s/ Donald G. Alvarado
----------------------
Its: Sr. V.P.
--------
PORT STOCKTON FOOD DISTRIBUTORS, INC.
as Permitted Sublessee
By: /s/ Donald G. Alvarado
----------------------
Its: Secretary
---------
<PAGE>
1997 EXECUTIVE SEVERANCE PLAN
Smart & Final Inc.
September 1997
<PAGE>
CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
<S> <C>
Article 1. Establishment, Term, and Purpose 1
Article 2. Definitions 1
Article 3. Participation 5
Article 4. General Severance Benefits 6
Article 5. Change-in-Control Severance Benefits 8
Article 6. Excise Tax Equalization Payment 10
Article 7. Form and Timing of Severance Benefits 12
Article 8. Legal Remedies 12
Article 9. Outplacement Assistance 13
Article 10. Noncompetition 13
Article 11. Successors and Assignment 13
Article 12. Miscellaneous 14
Appendix
</TABLE>
<PAGE>
SMART & FINAL INC.
1997 EXECUTIVE SEVERANCE PLAN
ARTICLE 1. ESTABLISHMENT, TERM, AND PURPOSE
1.1. ESTABLISHMENT OF THE PLAN. Smart & Final Inc. (hereinafter referred
to as the "Company") hereby establishes an executive severance plan to be known
as the "Smart & Final Inc. 1997 Executive Severance Plan" (the "Plan"). The Plan
shall become effective immediately upon September 12, 1997 (the "Effective
Date").
1.2. TERM OF THE PLAN. This Plan will commence on the Effective Date and
shall continue in effect for three (3) full calendar years. However, at the end
of such three-year (3) period and, if extended, at the end of each additional
year thereafter, the term of this Plan shall be extended automatically for one
(1) additional year, unless the Committee delivers written notice six (6) months
prior to the end of such term, or extended term, to each Participant, that the
Plan will not be extended. In such case, the Plan will terminate at the end of
the term, or extended term, then in progress.
However, in the event a Change in Control occurs during the original or any
extended term, this Plan will remain in effect for the longer of: (i) twenty-
four (24) months beyond the month in which such Change in Control occurred; (ii)
until all obligations of the Company hereunder have been fulfilled, and until
all benefits required hereunder have been paid to Participants.
1.3. PURPOSE OF THE PLAN. The purpose of the Plan is to provide certain
key employees of the Company employment protection and financial security in the
event of an involuntary termination ("General Severance"). The Plan also is
intended to provide certain key employees of the Company who have a qualifying
termination in connection with a change in control of the Company and who are
otherwise eligible under the Plan with enhanced severance benefits ("Change-in-
Control Severance") in lieu of General Severance.
ARTICLE 2. DEFINITIONS
Whenever used in this Plan, the following terms shall have the meanings set
forth below and, when the meaning is intended, the initial letter of the word is
capitalized:
2.1. "BASE SALARY" means the salary of record paid to a Participant as
annual salary, excluding amounts received under incentive or other bonus plans,
whether or not deferred.
2.2. "BENEFICIAL OWNER" shall have the meaning ascribed to such term in
Rule 13d-3 of the General Rules and Regulations under the Exchange Act.
<PAGE>
2.3. "BENEFICIARY" means the persons or entities designated or deemed
designated by a Participant pursuant to Section 10.2 herein.
2.4. "BOARD" means the Board of Directors of the Company.
2.5. "CAUSE" shall be defined as conduct of a Participant which is finally
adjudged to be knowingly fraudulent, deliberately dishonest or willful
misconduct. The Committee shall make the determination of whether Cause exists,
and after giving the Participant the opportunity to respond to the allegation
that Cause exists.
2.6. "CHANGE IN CONTROL" of the Company shall be deemed to have occurred
(as of a particular day, as specified by the Board) upon the occurrence of any
event described in this Section 2.7 as constituting a Change in Control.
A Change in Control will be deemed to have occurred as of the first day any
one (1) or more of the following paragraphs shall have been satisfied:
(a) Any Person (other than a trustee or other fiduciary holding securities
under an employee benefit plan of the Company, or a corporation owned
directly or indirectly by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the
Company), becomes the Beneficial Owner, directly or indirectly, of
securities of the Company, representing more than [TWENTY-FIVE] percent
([25]%) of the combined voting power of the Company's then outstanding
securities; or
(b) During any period of two (2) consecutive years (not including any
period prior to the Effective Date), individuals who at the beginning
of such period constitute the Board (and any new Director, whose
election by the Company's stockholders was approved by a vote of at
least two-thirds (2/3) of the Directors then still in office who either
were Directors at the beginning of the period or whose election or
nomination for election was so approved), cease for any reason to
constitute a majority thereof; or
<PAGE>
(c) The stockholders of the Company approve: (i) a plan of complete
liquidation of the Company; or (ii) an agreement for the sale or
disposition of all or substantially all the Company's assets; or (iii)
a merger, consolidation, or reorganization of the Company with or
involving any other corporation, other than a merger, consolidation, or
reorganization that would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least eighty percent (80%) of
the combined voting power of the voting securities of the Company (or
such surviving entity) outstanding immediately after such merger,
consolidation, or reorganization.
However, in no event shall a Change in Control be deemed to have occurred, with
respect to a Participant, if that Participant is part of a purchasing group
which consummates the Change-in-Control transaction. The Participant shall be
deemed "part of a purchasing group" for purposes of the preceding sentence if
the Participant is an equity participant or has agreed to become an equity
participant in the purchasing company or group (except for (i) passive ownership
of less than three percent (3%) of the voting equity securities of the
purchasing company; or (ii) ownership of equity participation in the purchasing
company or group which is otherwise deemed not to be significant, as determined
prior to the Change in Control by a majority of the continuing Nonemployee
Directors).
2.7. "CHANGE-IN-CONTROL SEVERANCE BENEFITS" means the payment of change-
in-control severance compensation as provided in Section 5.4 herein.
2.8. "CODE" means the United States Internal Revenue Code of 1986, as
amended.
2.9. "COMMITTEE" means the Compensation Committee of the Board, or any
other committee appointed by the Board to perform the functions of the
Compensation Committee.
2.10. "COMPANY" means Smart & Final Inc., a Delaware corporation
(including any and all subsidiaries), or any successor thereto as provided in
Article 9 herein.
2.11. "DISABILITY" shall mean, for all purposes of this Plan, the
incapacity of a Participant, due to injury, illness, disease, or bodily or
mental infirmity, to engage in the performance of substantially all of the usual
duties of employment with the Company, such Disability to be determined by the
Committee upon receipt and in reliance on competent medical advice from one (1)
or more
<PAGE>
individuals, selected by the Committee, who are qualified to give such
professional medical advice.
2.12. "EFFECTIVE DATE" means the date this Plan set forth above,
contingent upon approval of the Board, or such other date as the Board shall
designate in its resolution approving this Plan.
2.13. "EFFECTIVE DATE OF TERMINATION" means the date on which a Qualifying
Termination occurs which triggers the payment of Severance Benefits hereunder.
2.14. "EXCHANGE ACT" means the United States Securities Exchange Act of
1934, as amended.
2.15. "GENERAL SEVERANCE BENEFITS" means the payment of general severance
compensation as provided in Section 4.3 herein.
2.16. "GENERAL SEVERANCE PERIOD" shall mean, for a particular Participant,
the period commencing on the Participant's Effective Date of Termination and
continuing for one month for every year of service with the Company, subject to
a minimum General Severance Period of 12 months.
2.17. "GOOD REASON" shall mean, without the Participant's express written
consent, the occurrence of any one or more of the following:
(a) The assignment of the Participant to duties materially inconsistent
with the Participants authorities, duties, responsibilities, and status
(including offices, titles, and reporting requirements) as an employee
of the Company, or a reduction or alteration in the nature or status of
the Participants authorities, duties, or responsibilities from those
in effect during the immediately preceding fiscal year;
(b) Without the Participan consent, the Companys requiring the Participant
to be based at a location which is at least fifty (50) miles further
from the Participants current primary residence than is such residence
from the Companys current headquarters, except for required travel on
the Companys business to an extent substantially consistent with the
Participant s business obligations as of the Effective Date;
(c) A reduction by the Company in the Participants Base Salary as in effect
on the Effective Date or as the same shall be increased from time to
time;
<PAGE>
(d) A material reduction in the Participants level of participation in any
of the Companys short- and/or long-term incentive compensation plans,
or employee benefit or retirement plans, policies, practices, or
arrangements in which the Participant participates as of the Effective
Date; provided, however, that reductions in the levels of participation
in any such plans shall not be deemed to be "Good Reason" if the
Participants reduced level of participation in each such program
remains substantially consistent with the average level of
participation of other executives who have positions commensurate with
the Participants position; or
(e) The failure of the Company to obtain a satisfactory agreement from any
successor to the Company to assume and agree to perform this Agreement,
as contemplated in Article 11 herein.
2.18. "PARTICIPANT" means an officer of the Company who fulfills the
eligibility and participation requirements, as provided in Article 3 herein.
2.19. "PERSON" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof,
including a "group" as defined in Section 13(d).
2.20. "PLAN" means this 1997 Executive Severance Plan.
2.21. "QUALIFYING CHANGE-IN-CONTROL TERMINATION" means any of the events
described in Section 5.3 herein, the occurrence of which triggers the payments
of Change-in-Control Severance Benefits hereunder.
2.22. "QUALIFYING GENERAL TERMINATION" means any of the events described
in Section 4.2 herein, the occurrence of which triggers the payment of General
Severance Benefits hereunder.
2.23. "QUALIFYING TERMINATION" means either a Qualifying Change-in-Control
Termination or a Qualifying General Termination.
2.24. "RETIREMENT" shall have the meaning ascribed to such term in the
Company's tax-qualified retirement plan.
2.25. "SEVERANCE BENEFITS" means either General Severance Benefits or
Change-in-Control Severance Benefits.
2.26. "TIER I EXECUTIVE" means an officer who has been selected to
participate in the Plan and designated as Tier I Executive pursuant to Section
3.2.
<PAGE>
2.27. "TIER II EXECUTIVE" means an officer who has been selected to
participate in the Plan and designated as a Tier II Executive pursuant to
Section 3.2.
ARTICLE 3. PARTICIPATION
3.1. ELIGIBLE EMPLOYEES. Individuals eligible to participate in the Plan
shall include all officers of the Company, as determined by the Committee in its
sole discretion.
3.2. PARTICIPATION. Subject to the terms of the Plan, the Committee may,
from time to time select from all officers those who shall participate in the
Plan. Officers selected to participate in the Plan shall be designated as either
a Tier I Executive or a Tier II Executive and identified in the attached
Appendix to the Plan, as may be amended from time to time to reflect new
officers participating in the Plan or officers who have terminated Employment
with the Company.
ARTICLE 4. GENERAL SEVERANCE BENEFITS
4.1. RIGHT TO GENERAL SEVERANCE BENEFITS. A Participant shall be entitled
to receive from the Company General Severance Benefits, as described in Section
4.3 herein, a Participant's employment with the Company shall end for any reason
specified in Section 4.2 herein. Participants shall not be entitled to receive
General Severance Benefits if they are terminated for Cause, or if their
employment with the Company ends due to death, Disability, or Retirement.
4.2. QUALIFYING GENERAL TERMINATION. The occurrence of any one or more of
the following events shall trigger the payment of General Severance Benefits to
a Participant under this Plan:
(a) An involuntary termination of the Participant's employment by the
Company for reasons other than Cause, death, or Disability;
(b) A successor company fails or refuses to assume the Company's
obligations under this Plan, as required by Article 11 herein.
4.3. DESCRIPTION OF GENERAL SEVERANCE BENEFITS. In the event that a
Participant becomes entitled to receive General Severance Benefits, as provided
in Sections 4.1 and 4.2 herein, the Company shall pay to the Participant and
provide him or her with the following:
(a) Continued regular payments of the Participant's Base Salary, at the
highest annual rate in effect at any time up to and including the
Effective Date of Termination, through the end of the General Severance
Period;
<PAGE>
In the event a Participant obtains subsequent employment during the General
Severance Period, payments under this Section 4.3(a) shall be offset by
Base Salary payments received by the Participant from his or her
subsequent employer.
(b) An amount equal to the Participant's unpaid Base Salary and accrued
vacation pay through the Effective Date of Termination;
(c) An amount equal to the Participant's unpaid targeted annual bonus,
established for the plan year in which the Participant's Effective Date
of Termination occurs, adjusted for actual performance through the
Effective Date of Termination and multiplied by a fraction, the
numerator of which is the number of days completed in the then-existing
fiscal year through the Effective Date of Termination, and the
denominator of which is three hundred sixty-five (365);
<PAGE>
(d) A continuation of the welfare benefits of medical insurance, dental
insurance, and group term life insurance through the end of the General
Severance Period.
Benefits provided under this Section 4.3(d) shall be provided to
Participants at the same premium cost, and at the same coverage level,
as in effect as of the Participant's Effective Date of Termination.
However, in the event the premium cost and/or level of coverage shall
change for all employees of the Company, the cost and/or coverage
level, likewise, shall change for each Participant in a corresponding
manner.
In the event the Participant has available substantially similar benefits
from a subsequent employer those welfare benefits shall provide
secondary coverage for the remainder of the General Severance Period;
and
(E) A LUMP-SUM CASH PAYMENT OF THE ENTIRE BALANCE OF THE PARTICIPANT'S
COMPENSATION WHICH HAS BEEN DEFERRED UNDER THE COMPANY'S NONQUALIFIED
DEFERRED COMPENSATION PLAN(S) TOGETHER WITH ALL INTEREST THAT HAS BEEN
CREDITED WITH RESPECT TO SUCH DEFERRED COMPENSATION BALANCE.
4.4. TERMINATION FOR DISABILITY. If a Participant's employment is
terminated due to Disability, the Participant shall receive his or her Base
Salary through the Effective Date of Termination, at which point in time the
Participant's benefits shall be determined in accordance with the Company's
disability, retirement, insurance, and other applicable plans and programs then
in effect.
4.5. TERMINATION FOR RETIREMENT OR DEATH. If a Participant's employment is
terminated by reason of his or her Retirement or death, the Participant's
benefits shall be determined in accordance with the Company's retirement,
survivor's benefits, insurance, and other applicable programs of the Company
then in effect.
4.6. TERMINATION FOR CAUSE. If a Participant's employment is terminated
either: (i) by the Company for Cause; or (ii) by the Participant (other than for
Retirement), the Company shall pay the Participant his or her full Base Salary
and accrued vacation through the Effective Date of Termination, at the rate then
in effect, plus all other amounts to which the Participant is entitled under any
compensation plans of the Company, at the time such payments are due, and the
Company shall have no further obligations to the Participant under this Plan.
<PAGE>
ARTICLE 5. CHANGE-IN-CONTROL SEVERANCE BENEFITS
5.1. RIGHT TO CHANGE-IN-CONTROL SEVERANCE BENEFITS. A Participant shall be
entitled to receive from the Company Change-in-Control Severance Benefits, as
described in Section 5.4 herein, in lieu of General Severance Benefits, as
described in Section 4.3 herein, if there has been a Change in Control of the
Company and if, within the six (6) full calendar month period prior to the
effective date of a Change in Control, or within twenty-four (24) calendar
months following the effective date of a Change in Control, the Participant's
employment with the Company shall end for any reason specified in Section 5.3
herein.
Participants shall not be entitled to receive Change-in-Control Severance
Benefits if they are terminated for Cause, or if their employment with the
Company ends due to death or Disability, or due to a voluntary termination of
employment by the Participant without Good Reason.
5.2. SERVICES DURING CERTAIN EVENTS. IN THE EVENT A PERSON BEGINS A
TENDER OR EXCHANGE OFFER, CIRCULATES A PROXY TO SHAREHOLDERS OF THE COMPANY, OR
TAKES OTHER STEPS SEEKING TO EFFECT A CHANGE IN CONTROL, EACH PARTICIPANT AGREES
THAT HE OR SHE WILL NOT VOLUNTARILY LEAVE THE EMPLOY OF THE COMPANY AND WILL
RENDER SERVICES UNTIL SUCH PERSON HAS ABANDONED OR TERMINATED HIS OR ITS EFFORTS
TO EFFECT A CHANGE IN CONTROL, OR UNTIL SIX (6) MONTHS AFTER A CHANGE IN CONTROL
HAS OCCURRED; PROVIDED, HOWEVER, THAT THE COMPANY MAY TERMINATE THE
PARTICIPANT'S EMPLOYMENT FOR CAUSE AT ANY TIME, AND THE PARTICIPANT MAY
TERMINATE HIS OR HER EMPLOYMENT ANY TIME AFTER THE CHANGE IN CONTROL FOR GOOD
REASON.
5.3. QUALIFYING CHANGE-IN-CONTROL TERMINATION. The occurrence of any one
or more of the following events within twenty-four (24) calendar months
following the effective date of Change in Control of the Company shall trigger
the payment of Change-in-Control Severance Benefits to a Participant under this
Plan:
(a) An involuntary termination of the Participant's employment by the
Company for reasons other than Cause, death, Disability, Retirement, or
a voluntary termination by the Participant for Good Reason;
(b) A voluntary termination of the Participant's employment by a Tier I
Executive during the thirty (30) day period commencing on the one (1)
year anniversary of the Change in Control;
(c) A successor company fails or refuses to assume the Company's
obligations under this Plan, as required by Article 11 herein; or
<PAGE>
(d) The Company or any successor company breaches any of the provisions of
this Plan.
5.4. DESCRIPTION OF CHANGE-IN-CONTROL SEVERANCE BENEFITS. In the event
that a Participant becomes entitled to receive Change-in-Control Severance
Benefits, as provided in Sections 5.1 and 5.3 herein, the Company shall pay to
the Participant and provide him or her with the following:
(a) FOR TIER I EXECUTIVES: An amount equal to two (2) times the highest
rate of the Participant's annualized Base Salary rate in effect at any
time up to and including the Effective Date of Termination; or
FOR TIER II EXECUTIVES: An amount equal to the highest rate of the
Participant's annualized Base Salary rate in effect at any time up to
and including the Effective Date of Termination;
(b) FOR TIER I EXECUTIVES: An amount equal to two (2) times the
Participant's average annual bonus earned over the three (3) full
fiscal years prior to the Effective Date of Termination; or
FOR TIER II EXECUTIVES: An amount equal to the Participant's average annual
bonus earned over the three (3) full fiscal years prior to the
Effective Date of Termination;
(c) An amount equal to the Participant's unpaid Base Salary and accrued
vacation pay through the Effective Date of Termination;
(d) An amount equal to the Participant's unpaid targeted annual bonus,
established for the plan year in which the Participant's Effective Date
of Termination occurs, adjust to reflect actual performance through the
Effective Date of Termination and multiplied by a fraction, the
numerator of which is the number of days completed in the then-existing
fiscal year through the Effective Date of Termination, and the
denominator of which is three hundred sixty-five (365);
(e) FOR TIER I EXECUTIVES: A continuation of the welfare benefits of
medical insurance, dental insurance, and group term life insurance for
two (2) full years after the Effective Date of Termination; or
FOR TIER II EXECUTIVES: A continuation of the welfare benefits of medical
insurance, dental insurance, and group term life insurance for one (1)
full year after the Effective Date of Termination; or
Benefits provided under this Section 5.4(e) shall be provided to
Participants at the same premium cost, and at the same coverage level,
as in effect as of the Participant's Effective Date of Termination.
However, in the event
<PAGE>
the premium cost and/or level of coverage shall change for all
employees of the Company, the cost and/or coverage level, likewise,
shall change for each Participant in a corresponding manner;
(f) A continuation of the financial planning and tax services provided by
the Company to the Participant through the end of the calendar year in
which the Effective Date of Termination occurs; and
(g) A lump-sum cash payment of the entire balance of the Participant's
compensation which has been deferred under the Company's nonqualified
deferred compensation plan(s) together with all interest that has been
credited with respect to such deferred compensation balance.
5.5. TERMINATION FOR DISABILITY. Following a Change in Control of the
Company, if a Participant's employment is terminated due to Disability, the
Participant shall receive his or her Base Salary through the Effective Date of
Termination, at which point in time the Participant's benefits shall be
determined in accordance with the Company's disability, retirement, insurance,
and other applicable plans and programs then in effect.
5.6. TERMINATION FOR RETIREMENT OR DEATH. Following a Change in Control of
the Company, if a Participant's employment is terminated by reason of his or her
Retirement or death, the Participant's benefits shall be determined in
accordance with the Company's retirement, survivor's benefits, insurance, and
other applicable programs of the Company then in effect.
5.7. TERMINATION FOR CAUSE OR BY A PARTICIPANT OTHER THAN FOR GOOD REASON
OR RETIREMENT. Following a Change in Control of the Company, if a Participant's
employment is terminated either: (i) by the Company for Cause; or (ii) by the
Participant (other than for Retirement) and other than for Good Reason, the
Company shall pay the Participant his or her full Base Salary and accrued
vacation through the Effective Date of Termination, at the rate then in effect,
plus all other amounts to which the Participant is entitled under any
compensation plans of the Company, at the time such payments are due, and the
Company shall have no further obligations to the Participant under this Plan.
ARTICLE 6. EXCISE TAX EQUALIZATION PAYMENT
6.1. EXCISE TAX EQUALIZATION PAYMENT. In the event that a Participant
becomes entitled to Severance Benefits or any other payment or benefit under
this Plan, or under any other agreement with or plan of the Company (in the
aggregate, the "Total Payments"), if any of the Total Payments will be subject
to
<PAGE>
the tax (the "Excise Tax") imposed by Section 4999 of the Code (or any similar
tax that may hereafter be imposed), the Company shall pay to the Participant in
cash an additional amount (the "Gross-Up Payment") such that the net amount
retained by the Participant after deduction of any Excise Tax upon the Total
Payments and any Federal, state and local income tax and Excise Tax upon the
Gross-Up Payment provided for by this Section 6.1 (including FICA and FUTA),
shall be equal to the Total Payments. Such payment shall be made by the Company
to the Participant as soon as practical following the effective date of
termination, but in no event beyond thirty (30) days from such date.
6.2. TAX COMPUTATION. For purposes of determining whether any of the Total
Payments will be subject to the Excise Tax and the amounts of such Excise Tax:
(a) Any other payments or benefits received or to be received by the
Participant in connection with a Change in Control of the Company or
the Participant's termination of employment (whether pursuant to the
terms of this Plan or any other plan, arrangement, or agreement with
the Company, or with any Person whose actions result in a Change in
Control of the Company or any Person affiliated with the Company or
such Persons) shall be treated as "parachute payments" within the
meaning of Section 280G(b)(2) of the Code, and all "excess parachute
payments" within the meaning of Section 280G(b)(1) shall be treated as
subject to the Excise Tax, unless in the opinion of tax counsel as
supported by the Company's independent auditors and acceptable to the
Participant, such other payments or benefits (in whole or in part) do
not constitute parachute payments, or unless such excess parachute
payments (in whole or in part) represent reasonable compensation for
services actually rendered within the meaning of Section 280G(b)(4) of
the Code in excess of the base amount within the meaning of Section
280G(b)(3) of the Code, or are otherwise not subject to the Excise Tax;
(b) The amount of the Total Payments which shall be treated as subject to
the Excise Tax shall be equal to the lesser of: (i) the total amount of
the Total Payments; or (ii) the amount of excess parachute payments
within the meaning of Section 280G(b)(1) (after applying clause (a)
above); and
(c) The value of any noncash benefits or any deferred payment or benefit
shall be determined by the Company's independent auditors in accordance
with the principles of Sections 280G(d)(3) and (4) of the Code.
For purposes of determining the amount of the Gross-Up Payment, the
Participant shall be deemed to pay federal income taxes at the highest marginal
rate of federal income taxation in the calendar year in which the Gross-Up
Payment is to be made, and state and local income taxes at the highest marginal
<PAGE>
rate of taxation in the state and locality of the Participant's residence on the
Effective Date of Termination, net of the maximum reduction in federal income
taxes which could be obtained from deduction of such state and local taxes.
<PAGE>
6.3. SUBSEQUENT RECALCULATION. In the event the Internal Revenue Service
adjusts the computation of the Company under Section 6.2 herein so that the
Participant did not receive the greatest net benefit, the Company shall
reimburse the Participant for the full amount necessary to make the Participant
whole, plus a market rate of interest, as determined by the Committee.
ARTICLE 7. FORM AND TIMING OF SEVERANCE BENEFITS
7.1. FORM AND TIMING OF SEVERANCE BENEFITS. The Severance Benefits
described in Sections 4.3(b), 4.3(c), 4.3(e), 5.4(a), 5.4(b), 5.4(c), 5.4 (d),
and 5.4(g) herein shall be paid in cash to the Participant in a single lump sum
as soon as practicable following the Effective Date of Termination, but in no
event beyond thirty (30) days from such date.
7.2. WITHHOLDING OF TAXES. The Company shall be entitled to withhold from
any amounts payable under this Plan all taxes as legally shall be required
(including, without limitation, any United States federal taxes, and any other
state, city, or local taxes).
ARTICLE 8. LEGAL REMEDIES
8.1. PAYMENT OF LEGAL FEES. To the extent permitted by law, the Company
shall pay all legal fees, costs of litigation, prejudgment interest, and other
expenses incurred in good faith by the Participant as a result of the Company's
refusal to provide the Change-in-Control Severance Benefits to which the
Participant becomes entitled under this Plan, or as a result of the Company's
contesting the validity, enforceability, or interpretation of this Plan, or as a
result of any conflict between the parties pertaining to this Plan; provided,
however, that the Company shall be reimbursed by the Participant for all such
fees and expenses in the event the Participant fails to prevail with respect to
any one (1) material issue of dispute in connection with such legal action.
8.2. ARBITRATION. Participants shall have the right and option to elect
(in lieu of litigation) to have any dispute or controversy arising under or in
connection with this Plan settled by arbitration, conducted before a panel of
three (3) arbitrators sitting in a location selected by the Participant within
fifty (50) miles from the location of his job with the Company, in accordance
with the rules of the American Arbitration Association then in effect.
Judgment may be entered on the award of the arbitrator in any court having
proper jurisdiction. All expenses of such arbitration, including the fees and
expenses of the counsel for the Participant, shall be borne by the Company;
provided, however, that the Company shall be reimbursed by the Participant for
all such fees and expenses in the event the Participant fails to prevail with
respect to any one (1) material issue of dispute in connection with such legal
action.
<PAGE>
ARTICLE 9. OUTPLACEMENT ASSISTANCE
Following a Qualifying General Termination (as described in Section 4.2
herein) the Participant shall be reimbursed by the Company for the costs of all
outplacement services obtained by the Participant within the two (2) year period
after the effective date of termination; provided, however, that the total
reimbursement shall be limited to an amount equal to fifteen percent (15%) of
the Participant's Base Salary as of the effective date of termination.
ARTICLE 10. NONCOMPETITION
10.1. PROHIBITION ON COMPETITION. Without the prior written consent of the
Company, during the term of this Plan, and for the greater of twelve (12) months
following the expiration of this Plan, or any other period in which amounts are
paid hereunder, Participants shall not, as an employee or an officer, engage
directly or indirectly in any business or enterprise which is "in competition"
with the Company or its successors or assigns. For purposes of this Plan, a
business or enterprise will be deemed to be "in competition" if it is engaged in
any significant business activity of the Company or its subsidiaries within the
United States of America.
However Participants shall be allowed to purchase and hold for investment
less than three percent (3%) of the shares of any corporation whose shares are
regularly traded on a national securities exchange or in the over-the-counter
market.
10.2. DISCLOSURE OF INFORMATION. Participants recognize that they have
access to and knowledge of certain confidential and proprietary information of
the Company which is essential to the performance of their duties as employees
of the Company. Participants will not, during or after the term of their
employment by the Company, in whole or in part, disclose such information to any
person, firm, corporation, association, or other entity for any reason or
purpose whatsoever, nor shall he make use of any such information for their own
purposes.
10.3. COVENANTS REGARDING OTHER EMPLOYEES. During the term of this Plan,
and for a period of twenty four (24) months following the termination of a
Participant's employment, each Participant agrees not to attempt to induce any
employee of the Company to terminate his or her employment with the Company,
accept employment with any competitor of the Company, or to interfere in a
similar manner with the business of the Company.
ARTICLE 11. SUCCESSORS AND ASSIGNMENT
11.1. SUCCESSORS TO THE COMPANY. The Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation, or otherwise)
of all or substantially all of the business and/or assets of the Company or of
any division or subsidiary thereof to expressly assume and agree to perform the
<PAGE>
Company's obligations under this Plan in the same manner and to the same extent
that the Company would be required to perform them if no such succession had
taken place. Failure of the Company to obtain such assumption and agreement
prior to the effective date of any such succession shall be a breach of this
Plan and shall entitle Participants to compensation from the Company in the same
amount and on the same terms as they would be entitled to hereunder if they had
terminated their employment with the Company voluntarily for Good Reason. Except
for the purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Effective Date of Termination.
11.2. ASSIGNMENT BY THE PARTICIPANT. This Plan shall inure to the benefit
of and be enforceable by each Participant's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees, and
legatees. If a Participant dies while any amount would still be payable to him
or her hereunder had he or she continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Plan, to the Participant's Beneficiary. If the Participant has not named a
Beneficiary, then such amounts shall be paid to the Participant's devisee,
legatee, or other designee, or if there is no such designee, to the
Participant's estate.
ARTICLE 12. MISCELLANEOUS
12.1. NOTICE OF TERMINATION. Any termination by the Company for Cause or
by a Participant for Good Reason shall be communicated by Notice of Termination.
For purposes of this Plan, a "Notice of Termination" shall mean a written notice
which shall indicate the specific termination provision in this Plan relied
upon, and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Participant's employment under
the provision so indicated.
12.2. EMPLOYMENT STATUS. Except as may be provided under any other
agreement between a Participant and the Company, the employment of the
Participant by the Company is "at will," and, prior to the effective date of a
Change in Control, may be terminated by either the Participant or the Company at
any time, subject to applicable law.
12.3. BENEFICIARIES. Each Participant may designate one or more persons or
entities as the primary and/or contingent Beneficiaries of any Severance
Benefits owing to the Participant under this Plan. Such designation must be in
the form of a signed writing acceptable to the Committee. Participants may make
or change such designations at any time.
12.4. GENDER AND NUMBER. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine; the plural shall
include the singular, and the singular shall include the plural.
<PAGE>
12.5. SEVERABILITY. In the event any provision of this Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included. Further, the captions
of this Plan are not part of the provisions hereof and shall have no force and
effect.
12.6. MODIFICATION. No provision of this Plan may be modified, waived, or
discharged unless such modification, waiver, or discharge is agreed to in
writing and signed by each affected Participant and by an authorized member of
the Committee, or by the respective parties' legal representatives and
successors.
12.7. APPLICABLE LAW. To the extent not preempted by the laws of the
United States, the laws of the state of California, shall be the controlling law
in all matters relating to this Plan.
<PAGE>
APPENDIX
TIER I EXECUTIVES
TO BE PROVIDED.
TIER II EXECUTIVES
TO BE PROVIDED.
<PAGE>
AGREEMENT TO SELL AND PURCHASE REAL PROPERTY
AND ESCROW INSTRUCTIONS
-----------------------
THIS AGREEMENT TO SELL AND PURCHASE REAL PROPERTY AND ESCROW INSTRUCTIONS
("Agreement"), is entered into as of August 1, 1997, by and between SMART &
FINAL INC., a Delaware corporation ("Seller"), and FRED KAYNE, or assignee
("Purchaser"), with reference to the following facts and constitutes (i) a
contract of purchase-and-sale between the parties, and (ii) escrow instructions
to Commonwealth Land Title Company, 888 West 6th Street, Los Angeles, California
90017 ("Escrow Holder").
RECITALS
--------
A. Seller is the owner of that certain real property, together with any
and all easements, covenants and other rights appurtenant to such real property
(the "Premises") which are located in the City and County of Los Angeles, State
of California and described as follows: Buildings A and C including underlying
land, and Land D all as identified on Exhibit A hereto and legally described in
Exhibit B, both of which Exhibits are attached to and made a part of this
Agreement by this reference. The Premises, together with any buildings and
improvements on such Premises and all of the rights, benefits, easements and
appurtenances, and all right, title and interest of Lessor in the land lying in
all streets, highways and rights-of-way abutting the Premises are collectively
referred to herein as the "Property". The Property is more commonly known as
4700 S. Boyle Avenue, 4719 S. Boyle Avenue, and 4820 Alcoa Avenue, Los Angeles
(Vernon), California 90058. If there is any variance between the description
above and the legal description on the preliminary title report approved by
Purchaser, then the parties agree that the legal description shown on such
preliminary title report shall supersede the above description.
B. Seller desires to sell the Property to Purchaser, and Purchaser desires
to purchase the Property from Seller.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:
1. Purchase Price. The purchase price for the Property is Nine Million
--------------
One Hundred Thousand and No/100 Dollars ($9,100,000.00) which sum shall be paid
by Purchaser to Seller as follows:
a. Initial Deposit. Immediately upon opening escrow Purchaser
---------------
agrees to deposit into escrow a signed copy of this Agreement along with the sum
of One Hundred Thousand and No/100 Dollars ($100,000.00) as a deposit on account
of the purchase price. The deposit shall be made payable to, and be held by
Escrow Holder. All deposits shall be held in an interest bearing account until
the Close of Escrow (as defined below), with the interest credited to the
Purchaser. The deposit shall be refundable to Purchaser until all of Purchaser's
and Seller's contingencies as set forth in Article 3 have been satisfied, at
which time the deposit will become non-refundable and applied to the purchase
price at the Close of Escrow or as liquidated damages
1
<PAGE>
in the event Purchaser defaults as set forth in Article 6 hereof. Seller may
elect to terminate this Agreement if the deposit is not delivered to Escrow
Holder within the time provided.
b. Balance of Purchase Price. On or before the Close of Escrow (as
-------------------------
defined below), Purchaser shall deposit into escrow the balance of the purchase
price in cash, certified check, wire transfer, or other readily available funds
required to be deposited or paid by Purchaser for payment of expenses, fees,
prorations and the like.
2. Escrow.
------
a. Commencement Date. As used in this Agreement, the term
-----------------
"Commencement Date" means the date on which both parties have received an
original signed version of this Agreement.
b. Opening Escrow. As soon as possible following the Commencement
--------------
Date, but in any event not later than five (5) calendar days, a signed copy of
this Agreement shall be deposited with Escrow Holder in order to open an escrow
to complete the purchase and sale of the Property. In the event Escrow Holder
requires any additional escrow instructions for the opening of escrow, such
additional instructions shall be drawn by Escrow Holder and executed by
Purchaser and Seller within forty-eight (48) hours from delivery of such
additional instructions. Any additional instructions shall contain Escrow
Holder's standard provisions except where inconsistent with the terms and
conditions of this Agreement. Should any conflict arise between the additional
instructions and this Agreement, then the terms and conditions of this Agreement
shall control notwithstanding the fact the additional instructions may have been
executed later in time.
c. Close of Escrow. For purposes of this Agreement, the "Close of
---------------
Escrow" shall be the date that the grant deed conveying the Property to
Purchaser is recorded in the Official Records of Los Angeles County, California.
Close of Escrow shall be at the office of Escrow Holder on or before fifteen
(15) days following the end of the Due Diligence Period (as defined below)
(unless extended as provided for in this Agreement), or earlier upon three (3)
days' prior written notice by Purchaser to Seller and Escrow Holder.
3. CONDITIONS OF PURCHASE AND SALE.
-------------------------------
a. Due Diligence. Purchaser's obligation to purchase the Property is
-------------
subject to, and conditioned upon, the satisfactory performance of such research,
investigations, studies and other due diligence concerning the Property as
Purchaser, in its sole discretion, deems appropriate (the "Due Diligence").
Purchaser shall have from the Commencement Date to and including 5:00 p.m. on
the forty-fifth (45th) day following the Commencement Date (the "Due Diligence
Period") to conduct its Due Diligence. Purchaser shall be entitled to terminate
its obligations under this Agreement upon providing notice of the same to Seller
within the Due Diligence Period, in which case the rights of the parties shall
be governed by Article 4 of this Agreement.
2
<PAGE>
b. Purchaser's Financial Information. Within seven (7) days following
---------------------------------
following the Commencement Date, Purchaser shall provide Seller with a personal
financial statement, including a schedule summarizing Purchaser's stock
portfolio (the "Financial Information"). Seller shall have five (5) days
following receipt of the Financial Information to request further or additional
supporting documentation which, in Seller's reasonable determination, is
necessary in order to evaluate Purchaser's Financial Information, in which case,
Purchaser shall reasonably cooperate in providing Seller with such information.
Purchaser's obligations with respect to the delivery of the Financial
Information, and Seller's review thereof, is for informational purposes only,
and Seller's approval thereof shall not be a condition to the Close of Escrow.
b. Preliminary Title Report. Within ten (10) days from the
------------------------
Commencement Date, Seller shall order and deliver to Purchaser a preliminary
title report from Commonwealth Land Title Company which shall be accompanied by
all underlying documents of record (the preliminary title report and underlying
documents being collectively referred to as the "PTR") which shall reflect the
condition of title to the Property as of a date not earlier than the
Commencement Date. If Purchaser does not receive the PTR within the 10-day
period, all time frames identified below as a condition of purchase and the date
for Close of Escrow shall be extended by the same number of days the receipt of
the PTR is delayed, up to a maximum of seven (7) days, at which time Seller
shall be deemed in default of its obligations under this Article 3(b).
Purchaser shall have fifteen (15) days after receipt of the PTR within which to
approve or send written objection to any item, exception, or condition shown on
the PTR other than current taxes. Those items not objected to in writing within
the 15-day period shall be deemed approved by Purchaser. If Purchaser
disapproves in writing of any items, exceptions or conditions shown on the PTR
within the 15-day period, Seller shall have seven (7) days from the date of any
such notice in which to cause the same to be removed, or to otherwise satisfy
Purchaser with respect to the same. If Seller is unable to cure or remove all
disapproved items from the PTR within such time frame, Purchaser may either (i)
waive its objections and accept title to the Property in its then-current
condition, or (ii) terminate this Agreement by giving notice to Seller (with a
copy to Escrow Holder) within five (5) days of Seller notifying Purchaser that
it is unable to cure or remove such items. If Purchaser duly exercises its
right of termination under this section then Escrow Holder shall return the
Deposit to Purchaser as Purchaser's sole remedy. If Purchaser fails to exercise
its right of termination under this section, then Purchaser shall be required to
accept any and all uncured title defects and lack of insurability, without
postponement of the Closing Date or reduction in the Purchase Price and without
any claim against Seller on account thereof.
c. Physical Inspection. Purchaser shall have until the expiration of
-------------------
the Due Diligence Period to conduct and approve all tests and studies it deems
advisable, including but not limited to, environmental, geological, feasibility,
structural and pest control, engineering and traffic studies, and to satisfy
itself that it will be able to obtain any and all permits, licenses,
authorizations, concessions, variances and approvals from all applicable
governmental authorities relating to its use of the Property, to obtain
verification of the zoning of the Property for Purchaser's intended use of the
Property. If Purchaser does not provide Seller with written notice of its
election to terminate the Agreement within the Due Diligence Period, this
condition shall be deemed waived by Purchaser.
3
<PAGE>
d. Right of Entry. Purchaser and Purchaser's employees, agents,
--------------
authorized representatives and contractors may enter upon the Property at all
reasonable times upon at least twenty-four (24) hours' prior telephonic notice
to Mr. Robert Wess or Mr. John Kosinski at the offices of Seller for the
purposes of inspecting the Property including, but not limited to, making or
performing such inspections, tests, borings, surveys, studies and samplings
("Tests") as Purchaser deems necessary or advisable. Purchaser agrees to return
the Property to its original condition immediately after each and all such
inspections and Tests. Purchaser agrees to indemnify Seller and hold Seller
harmless from and against all claims, losses, liabilities, damages, expenses,
costs, or fees, including reasonable attorneys' fees, arising from any injury to
or death of persons, or damage to or loss of property, resulting from the
conduct of any inspections or Tests caused by Purchaser or Purchaser's
employees, agents and representatives. Purchaser shall promptly deliver to
Seller, at no cost or expense to Seller, copies of any and all environmental
information Purchaser has obtained or hereafter obtains with respect to the
Property. The license hereby granted shall be deemed revoked upon termination of
this Agreement, except that the indemnity obligations of Purchaser hereunder
shall survive any termination of this Agreement.
e. Approval of Lease. The parties shall have entered into a Lease
-----------------
described in Article 19 below prior to the expiration of the Due Diligence
Period, and effective only upon and as of the Close of Escrow. Purchaser shall
prepare and deliver the Lease to Seller not later than seven (7) days before the
end of the Due Diligence Period.
f. Racking. As part of the purchase price, Purchaser is acquiring
-------
between 100,000 - 125,000 square feet of racking and related fixtures (the
"Racking") located at the Property. The parties shall prepare and initial a
schedule of such Racking prior to the expiration of the Due Diligence Period,
which schedule shall be appended to this Agreement as Exhibit "C".
4. TERMINATION OF AGREEMENT. If a party exercises its right to terminate
------------------------
this Agreement in accordance with an express provision providing for such right,
Escrow Holder shall return to each party all funds and documents deposited by it
into escrow and Purchaser and Seller shall each pay one-half ( 1/2) of Escrow
Holder's fee; provided, however, if this Agreement is terminated by Seller due
either to Purchaser's failure to place the Deposit into escrow, Purchaser shall
pay the entire fee charged by Escrow Holder.
5. SALE LIMITATION. It is expressly understood and acknowledged by
---------------
Purchaser and Seller that Purchaser is not purchasing any right, title or
interest in or to the name "Smart & Final", or any other trade name, trade
dress, logo or other identifying mark or intangible property right in or to
Seller's business.
6. LIQUIDATED DAMAGES. IN THE EVENT PURCHASER FAILS TO CLOSE THE
------------------
TRANSACTION, EVEN THOUGH ALL DUE DILIGENCE MATTERS AND CONDITIONS TO CLOSING
HAVE BEEN SATISFIED, SELLER AND PURCHASER AGREE THAT BY PLACING THEIR INITIALS
HERE, PURCHASER: (____) AND SELLER: (____) THAT SELLER SHALL RETAIN THE
DEPOSIT OF ONE HUNDRED THOUSAND AND NO/100 DOLLARS ($100,000.00) AS LIQUIDATED
DAMAGES FOR BREACH OF CONTRACT. PURCHASER AND SELLER AGREE
4
<PAGE>
THAT IT WOULD BE IMPRACTICAL OR EXTREMELY DIFFICULT TO FIX ACTUAL DAMAGES IN
CASE OF PURCHASER'S DEFAULT, AND THE SUM OF ONE HUNDRED THOUSAND AND NO/100
DOLLARS ($100,000.00) IS A REASONABLE ESTIMATE OF THE DAMAGES WHICH WOULD BE
SUFFERED BY SELLER UNDER THE CIRCUMSTANCES EXISTING AT THE TIME THIS AGREEMENT
IS ENTERED INTO, AND SELLER SHALL RETAIN SUCH SUM AS THE SOLE RIGHT OF DAMAGES
FOR BREACH OF CONTRACT. IN PLACING THEIR INITIALS IN THE SPACE PROVIDED, EACH
PARTY SPECIFICALLY CONFIRMS THE ACCURACY OF THE STATEMENTS MADE ABOVE AND THE
FACT THAT EACH PARTY WAS REPRESENTED BY COUNSEL WHO EXPLAINED THE CONSEQUENCES
OF THE PROVISION AT THE TIME THIS AGREEMENT WAS MADE.
7. TITLE AND TITLE INSURANCE. At the Close of Escrow, Seller will
-------------------------
deliver to Purchaser a grant deed conveying fee simple title to the Purchaser
as evidenced by an ALTA policy of title insurance (Seller shall pay for the CLTA
portion and Purchaser shall pay for the ALTA portion as provided in Article
17(e) below), in the amount of the purchase price, insuring Purchaser's interest
in the Property. Title to be conveyed by Seller shall be free of liens and
encumbrances except for current real estate taxes, those matters (as of the date
of the PTR) approved in writing by Purchaser.
8. POSSESSION. Upon the Close of Escrow, Purchaser shall receive
----------
possession of the Property free and clear of all tenants' uses and occupancies
with the exception of and subject to Seller's right to extend its period of
occupancy pursuant to Article 19 herein. Seller shall indemnify and hold
Purchaser harmless from tenants other than Seller claiming a right to possession
arising before the closing date.
9. "AS IS" PURCHASE AND SALE. Purchaser agrees that it is purchasing the
-------------------------
Property in "AS IS" condition, and subject to all faults of every kind and
nature whatsoever, whether latent or patent, and whether now or hereafter
existing. Purchaser agrees to, and at Close of Escrow shall, warrant and
represent to Seller that Purchaser investigated and inspected the Property to
its complete satisfaction including, but not by way of limitation, all physical
conditions on or relating to the Property, its surface and subsurface, its
construction, the income to be derived from the property, the habitability,
merchantability, marketability, or fitness for a particular purpose of the
Property, all zoning or other governmental restrictions or requirements or other
matters which relate or apply to the Property, and that, except as specifically
set forth in this agreement, Purchaser purchases and accepts the Property on the
basis of its inspection and subject to any regulations and codes which are or
may be imposed upon the Property by any governmental or quasi-governmental
authority having jurisdiction thereof. Purchaser further agrees, represents and
warrants to Seller that, except as specifically set forth in this agreement,
Purchaser has not relied, and will not rely, upon any surveys or data supplied
by Seller, or any statements, or the failure to make any statements, by Seller
or Seller's agents, contractors or employees, or by any person acting or
purporting to act, on behalf of Seller other than the express warranties of
Seller set forth below. Purchaser specifically agrees that, except as
specifically set forth in this Agreement, and except as may be required under
the Lease (as defined below) Seller shall not be obligated to do any restoration
nor be responsible for any work or improvements
5
<PAGE>
necessary to cause the Propertynto meet any applicable laws, ordinances,
regulations or codes, or be suitable for any particular use.
10. CASUALTY OR CONDEMNATION. If prior to the Close of Escrow any portion
------------------------
of the Property is acquired or condemned by eminent domain (except the street
dedication identified by the City of Vernon on the Boyle Avenue frontage of the
Property), inversely condemned or sold in lieu of condemnation, for any public
or quasi-public use or purpose ("Condemned") or destroyed by fire or other
casualty, Purchaser may either (i) terminate this Agreement, or (ii) elect to
nevertheless purchase the Property, in which case Purchaser shall close this
transaction and receive an assignment from Seller of any insurance proceeds
payable as a result of such casualty or condemnation award recovered or
recoverable by Seller, and this Agreement shall continue in full force and
effect.
11. COMMISSION. Any and all commissions, compensation or other broker's or
----------
finder's fee expenses incident to this sale shall be paid by Seller to CB
Commercial and Trammell Crow Company.
12. ASSIGNMENT. This Agreement may not be assigned by either party without
----------
the consent or approval of the other party, which consent shall not be
unreasonably withheld.
13. WARRANTIES OF SELLER. Seller represents and warrants that:
--------------------
a. Seller is a corporation, duly organized, validly existing and in
good standing under the laws of the State of Delaware, and the owner of and has
full right and power and authority to sell, convey and transfer the Property, as
provided in this agreement.
b. Until the Close of Escrow, Seller shall maintain the Property in
its present condition, ordinary wear and tear excepted.
c. To the best of Seller's actual knowledge, there is no litigation
pending or threatened which will affect the Property which Seller has heretofore
not disclosed to Purchaser.
d. This agreement has been duly executed by Seller and constitutes a
valid, binding and enforceable obligation of Seller.
e. Seller has not actually received any written notice of (i) any
pending widening, modification or realignment of the streets abutting the
Property, or (ii) any proposed eminent domain action, or (iii) any uncured
violation of any law, ordinance or regulation (including but not limited to
zoning, building, fire, health and safety).
f. To the best of Seller's actual present knowledge without
undertaking any further investigation, and except as otherwise disclosed to
Purchaser in writing: (i) there are no Hazardous Materials installed or stored
in or otherwise existing at, on, in or under the Property which are in violation
of any Environmental Laws or which are or have been at any time in amounts or
concentrations sufficient to require the reporting of such materials to any
governmental authority, and (ii) no Hazardous Materials were previously
installed, stored or
6
<PAGE>
existed at the Property in violation of any Environmental Laws. Seller hereby
agrees to indemnify and hold harmless Purchaser, Purchaser's employees, agents,
and any successors to Purchaser's interest in the chain of title to the
Property, from and against any and all liability, (i) including all foreseeable
and unforeseeable consequential damages, directly or indirectly arising out of
the use, generation, storage, or disposal of Hazardous Materials by Seller or
any prior owner or operator of the Property, and (ii) including without
limitation, the cost of any required or necessary repair, cleanup, or
detoxification and the preparation of any closure or other required plans,
whether such action is required or necessary prior to or following transfer of
title to the Property as a result of Seller's breach of the representations and
warranties set forth herein. Notwithstanding the foregoing, Seller's indemnity
shall not include any liability or responsibility for any release, repair,
cleanup or detoxification caused by or arising from the conduct or negligence of
Purchaser, its employees, agents, or any successors in interest after Seller
vacates the Property, including but not limited to any demolition, renovation or
construction activities undertaken by Purchaser. Seller's obligations pursuant
to the foregoing indemnity shall survive the Close of Escrow.
As used herein, the term "Hazardous Materials" shall mean any hazardous
or toxic materials, substances or wastes, pollutants or contaminants defined,
listed or regulated by the Environmental Laws (defined below) or any other
federal, state, county, or local law, regulation, order or common law decision,
including but not limited to (i) any petroleum products and/or by-products
(including any fraction thereof), flammable substances, explosives, radioactive
materials, hazardous or toxic wastes, substances or materials, known carcinogens
or any other materials, contaminants or pollutants which pose a hazard to the
Property or to persons on or about the Property or cause the Property to be in
violation of any Environmental Laws, (ii) asbestos in any form which is friable,
(iii) urea formaldehyde in foam insulation or any other form, (iv) transformers
or other equipment which contain dielectric fluid containing levels of
polychlorinated biphenyls in excess of fifty (50) parts per million or any other
more restrictive standard then prevailing, (v) medical wastes and biohazards,
(vi) radon gas, and (vii) any other chemical, material or substance exposure to
which is prohibited, limited or regulated by any governmental authority or may
or could pose a hazard to the health and safety of the occupants of the Property
or the owners and/or occupants of property adjacent to or surrounding the
Property.
As used herein, the term "Environmental Laws" means and includes any
law, ordinance, regulation or requirement now or hereinafter in effect relating
to land use, soil, surface water, groundwater (including the protection,
cleanup, removal, remediation or damage thereof), human health and safety or any
other environmental matter, including, without limitation, the following laws as
the same may be amended from time to time: the Comprehensive Environmental
Response Compensation and Liability Act of 1980 (42 U.S.C. (S)9601, et seq.),
------
the Solid Waste Disposal Act, as amended by the Resource Conservation and
Recovery Act (42 U.S.C. (S)(S) 6901 et seq.), the Emergency Planning and
------
Community Right to Know Act (42 U.S.C. (S)(S) 11001 et seq.), the Clean Air Act
-- ---
(42 U.S.C. (S)(S) 7401 et seq.), the Clean Water Act (33 U.S.C. (S)(S) 1251 et
-- --- --
seq.), the Toxic Substances Control Act (15 U.S.C. (S)(S) 2601 et seq.), the
- --- -- ---
Hazardous Materials Transportation Act (49 U.S.C. (S)(S) 1801 et seq.), the
-- ---
Occupational Safety and Health Act (29 U.S.C. (S)(S) 651 et seq.), the Federal
-- ---
Insecticide, Fungicide and Rodenticide Act (7 U.S.C. (S)(S) 136 et seq.), and
-- ---
the Safe Drinking Water Act (42 U.S.C. (S)(S) 300f et seq.), as any of the same
-- ---
may be amended from time to time, and any state or local law dealing with
environmental matters, and any regulations, orders, rules, procedures,
7
<PAGE>
guidelines and the like promulgated in connection therewith, regardless of
whether the same are in existence on the date of this Agreement.
14. DELIVERIES AT CLOSING.
---------------------
a. Seller's Deliveries at Closing. On or before the Close of Escrow,
------------------------------
in addition to having satisfied any other obligations set forth in this
Agreement, Seller shall deliver or cause to be delivered to Purchaser and/or
Escrow Holder, as applicable, the following properly executed and acknowledged
documentation:
(i) A duly executed and acknowledged Grant Deed, conveying title to
the Property to Purchaser;
(ii) The FIRPTA Affidavit;
(iii) The Lease;
(iv) The Memorandum of Right of First Refusal;
(v) Incumbency Certificates, certified copies of Board of Director
resolutions, or other appropriate evidence of the due execution, delivery and
authorization of documents executed by Seller in connection with this Agreement
and the transactions contemplated hereunder as Purchaser may reasonably request;
(vi) Seller's share of the closing costs, expenses and prorations;
(vii) Additional Escrow Instructions required by Escrow Holder; and
(viii) Any other documents reasonably necessary to consummate the
purchase and sale described herein.
b. Purchaser's Deliveries at Closing. On or before the Close of
---------------------------------
Escrow, in addition to having satisfied any other obligations set forth in this
Agreement, Purchaser shall deliver or cause to be delivered to Seller and/or
Escrow Holder, as applicable, the following properly executed and acknowledged
documentation:
(i) The purchase price;
(ii) The Lease;
(iii) Purchaser's share of the closing costs, expenses and
prorations;
(iv) Incumbency Certificates, certified copies of Board of Director
resolutions, or other appropriate evidence of the due execution, delivery and
authorization of documents executed by Purchaser in connection with this
Agreement and the transactions contemplated hereunder as Seller may reasonably
request;
8
<PAGE>
(v) Additional Escrow Instructions required by Escrow Holder; and
(vi) Any other documents reasonably necessary to consummate the
purchase and sale described herein.
15. ACCEPTANCE LIMITS. In the event this agreement is not executed by
-----------------
Purchaser by close of business on or before July 30, 1997, the offer to sell
the Property contained herein shall automatically become null and void.
16. ESCROW CHARGES. Upon Close of Escrow, Purchaser and Seller direct
--------------
Escrow Holder to deduct from Purchaser's and Seller's accounts the following:
a. One-half(1/2) the total escrow fee from Purchaser's account and
one-half (1/2) from Seller's account.
b. Cost of drawing the deed from Seller's account.
c. Cost of recording the deed from Purchaser's account.
d. Cost of documentary transfer tax from Seller's account.
e. Cost of the CLTA policy of title insurance from Seller's account.
If Purchaser requires an ALTA policy, Purchaser shall pay the incremental
difference in premium.
f. All real estate taxes and assessments shall be prorated to the
Close of Escrow and deducted from the respective accounts.
g. Cost of the commission payable to CB Commercial from Seller's
account.
h. All other costs shall be charged in accordance with Los Angeles
County custom.
17. MISCELLANEOUS.
-------------
a. Required Actions of Purchaser and Seller. Purchaser and Seller
----------------------------------------
agree to execute all instruments and documents and to take all other action
(including the deposit of additional funds) required to consummate the purchase
and sale provided for by this agreement, and shall use their best efforts to
close escrow in accordance with the provisions hereof.
b. Time is of the Essence. Time is of the essence of this agreement
----------------------
and failure to comply with this provision shall be a material breach of this
agreement.
c. Attorney's Fees. In any action between the parties seeking
---------------
enforcement of any of the terms and provisions of this agreement, the escrow or
in connection with the Property, the prevailing party in that action shall be
entitled to recover from the other party (in addition to such damages,
injunctive relief or other relief as may be available) its
9
<PAGE>
reasonable costs and expenses, including court costs and attorney's fees. Each
of the parties agrees to submit jurisdiction in any such case to the court, so
long as the proceeding is still pending therein, and the parties agree that Los
Angeles County, California shall be the appropriate venue for any such action.
In addition to the foregoing, the prevailing party shall be entitled to recover
from the other party the attorney's fees incurred to enforce any judgment
against the other party to this agreement. This provision is severable from
other provisions of this agreement and shall survive any judgment and not be
deemed merged into it.
d. Notices. All notices and demands shall be given in writing and
-------
delivered personally or by reputable overnight delivery (such as Federal
Express), or by registered or certified mail with postage prepaid and return
receipt requested. Notice shall be considered given when personally served, or
on the date of delivery as shown by the addressee's registry or certification
receipt. Notices shall be addressed to the parties at the addresses which
appear above their signatures. IF TO SELLER, NOTICES SHALL BE TO THE ATTENTION
OF THE DIRECTOR OF PROPERTY MANAGEMENT.
e. Binding on Successors. This agreement inures to the benefit of,
---------------------
and is binding on, the parties, their respective heirs, personal
representatives, successors and permitted assigns.
f. Counterparts. This agreement, and all amendments and supplements
------------
to it, may be executed in counterparts, and all counterparts together shall be
construed as one document.
g. Captions. The captions heading the various articles and
--------
paragraphs of this agreement are for convenience and shall not be considered to
limit, expand, define or modify the contents of the respective articles and
paragraphs. Masculine, feminine or neuter gender, and the singular and the
plural number, shall be considered to include the other whenever the context so
requires.
h. Controlling Law. This agreement shall be interpreted under the
---------------
laws of the State of California.
i. Entire Agreement. This agreement constitutes the entire agreement
----------------
between the parties and supersedes all prior discussions, negotiations and
agreements, whether written or oral. Any amendment to this agreement, including
any oral modification supported by new consideration, must be reduced to writing
and signed by both parties before it will be effective.
j. Waiver. No waiver by a party of any provision or any breach of
------
this agreement shall be considered a waiver of any other provision, or any
subsequent breach of the same or any other provision, including the time of
performance of any such provision. The exercise by a party of any remedy
provided in this agreement or at law shall not prevent the exercise by that
party of any other remedy provided for in this agreement or at law.
10
<PAGE>
k. Addendum. Any attached addendum which is signed or initialed by
--------
the parties shall be deemed a part of this agreement and wherever there is a
conflict in provisions those in the addendum shall prevail.
l. Insurance. Seller shall maintain insurance at the Property
---------
through the Close of Escrow, in commercially reasonable amounts and coverages.
Thereafter, Seller shall maintain insurance at the Property in the amounts and
coverages provided for in the Lease.
m. FIRPTA. As required under the Foreign Investment In Real Property
------
Tax Act, prior to Close of Escrow Seller shall provide Purchaser with an
affidavit executed under penalty of perjury that Seller is not a "foreign
person".
n. Invalid Provision. If any provision of this agreement is held to
-----------------
be illegal, invalid or unenforceable under present or future law, such provision
shall be fully severable; this agreement shall be construed and enforced as if
such illegal, invalid or unenforceable provision had never comprised a part of
this agreement and the remaining provisions of this agreement shall remain in
full force and effect and shall not be affected by such illegal, invalid, or
unenforceable provisions or by its severance from this agreement.
18. EXTENSION OF OCCUPANCY OF PROPERTY BY SELLER.
--------------------------------------------
Purchaser acknowledges and is fully aware that Seller is currently
occupying the Property and intends to relocate it warehouse and offices to a new
location. Purchaser agrees to allow Seller to occupy the Property after the
Close of Escrow for a period not to exceed: (i) September 15, 1998 for an area
of approximately 25,000 - 30,000 square feet adjacent to the Office portion of
the building. (ii) October 15, 1998 for the Office portion of the building
identified as "B" on Exhibit "C" attached hereto, and (iii) November 15, 1998
for the entire Property. The terms and conditions of Seller's occupancy of the
Property shall be set forth in a written Lease to be entered into between Seller
and Purchaser upon Close of Escrow, which terms and conditions shall include the
following:
a. Monthly rent of One Hundred Five Thousand and No/100 Dollars
($105,000.00) per month on a triple-net basis beginning with the Commencement
Date and continuing until Seller has fully vacated the Property.
b. Seller agrees to use its commercially reasonable best efforts to
vacate the Property on or before the dates stated above. If Seller fails to
vacate within the time frames set forth above, the rent payable under the Lease
will be increased as follows:
(i) $5,000.00 per day for each day beyond September 15, 1998 for
the 25,000 - 30,000 square feet adjacent to the office building portion of the
Premises;
(ii) $5,000.00 per day for each day beyond October 15, 1998 for
the office building portion of the Premises; and
(iii) $10,000.00 per day for each day beyond November 15, 1998 for
the entire Premises until Seller has fully and finally vacated the Property.
11
<PAGE>
c. Seller shall execute any documents reasonably required by
Purchaser's lender for the purpose of subordinating the Lease to the lien of
such lender.
20. RIGHT OF FIRST REFUSAL. In addition to the Property which is the
----------------------
subject of this Agreement Seller also owns the real property identified as
Building "B" on Exhibit "A" attached to this Agreement. If at any time prior to
September 30, 2000, Seller shall receive a bona fide offer from any third person
to purchase Building "B", Seller shall deliver to Purchaser written notice of
the terms of such offer and of the intention of Seller to accept same.
Purchaser or Purchaser's nominee shall have the right for a period of twenty
(20) days after receipt of Seller's notice to notify Seller of its desire to
purchase Building "B" for the purchase price and on the terms specified in
Seller's notice; and if the Purchaser or Purchaser's nominee does not elect
within the 20-day period to purchase Building "B" on the terms and conditions in
Seller's notice, then Seller may, without further notice, sell Building "B" to
such third person provided the sale is subject to the terms and conditions
contained in Seller's notice. This right of first refusal shall be applicable
to any and all subsequent offers to purchase received by Seller's successors and
assigns.
The parties agree to execute a Memorandum of Right of First Refusal, or
similar document, in recordable form, and to thereafter record the same in the
official records of Los Angeles County in connection with the Close of Escrow,
for the purpose of creating a public record of the rights granted under this
Article 20.
For purposes of this Article 20, "third person" shall mean any person,
partnership, firm or corporation other than the Seller; and this Article shall
not apply in the case of an inter-corporation transaction, an inter-corporation
merger, a transfer to the shareholders of or between the shareholders of the
Seller's corporation or any of its subsidiaries or affiliates, or transfers by
virtue of liquidation or merger, or transfers among the shareholders or partners
to members of their families, whether by inter vivos transaction, by will, or
according to operation of law in the event of a death; provided, however, that
the right of first refusal granted hereunder shall survive and shall be binding
upon any such subsidiary, affiliate or successor entity.
12
<PAGE>
The parties hereby agree to sell and purchase the Property on the terms and
conditions stated, and acknowledge receipt of a copy of this agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement to Sell and
Purchase Real Property and Escrow Instructions as of the date first above
written.
SELLER: PURCHASER:
SMART & FINAL INC.
a Delaware corporation By: /s/ Fred Kayne
4700 S. Boyle Avenue --------------
Vernon, CA 90058 FRED KAYNE
By: /s/ Martin A. Lynch
------------------- Date: August 1, 1997
--------------
Title: Executive V.P. and CFO
----------------------
By: /s/ Donald G. Alvarado
----------------------
Title: Sr, V.P., Law/Development
-------------------------
Date: August 1, 1997
--------------
13
<PAGE>
FIRST AMENDMENT TO AGREEMENT TO SELL AND
PURCHASE REAL PROPERTY AND ESCROW INSTRUCTIONS
This First Amendment to Agreement to Sell and Purchase Real Property and
Escrow Instructions ("First Amendment") is entered into as of September 17,
1997, by and between SMART & FINAL INC., a Delaware corporation ("Seller"), and
FRED KAYNE, or assignee ("Purchaser"), with reference to the following facts:
A. Seller and Purchaser have heretofore entered into an AGREEMENT TO SELL
AND PURCHASE REAL PROPERTY AND ESCROW INSTRUCTIONS dated as of August 1, 1997
("the Agreement") for that certain real property commonly known as 4700 S. Boyle
Avenue, 4719 S. Boyle Avenue, and 4820 Alcoa Avenue, Los Angeles (Vernon),
California 90058. ("the Property").
B. Escrow for the sale of the Property is open at Fidelity National Title
Company and is known as Escrow No. 614131-PB.
C. The parties wish to further amend the Agreement to provide for certain
assurances regarding certain matters with respect to the Closing as set forth
herein. Purchaser is unwilling to purchase the Property from Seller without
assurances that such matters will be satisfied in a timely fashion.
NOW, THEREFORE, the parties agree as follows:
1. Unless otherwise specified herein, all capitalized terms in this First
Amendment shall have the same meanings as set forth in the Agreement.
2. Article 3e is hereby amended to read in its entirety as follows:
"e. Approval of Lease. The parties shall have entered into a Lease
-----------------
described in Article 19 below prior to and effective only upon and as of the
Close of Escrow."
3. Article 3 is hereby amended to add the following:
"g. End of Due Diligence Period and Waiver of Contingencies. The
-------------------------------------------------------
parties hereby agree and acknowledge that the Due Diligence Period has expired.
Purchaser hereby waives any and all remaining conditions and/or contingencies to
Closing under the Agreement, except as may be specifically agreed to in this
First Amendment."
4. Article 13f is hereby amended to add the following:
"f. Environmental Condition on Land D. Notwithstanding the
---------------------------------
foregoing, the parties are informed that a 45' deep concrete pit as well as some
apparent environmental conditions (collectively the "Land D Conditions") exist
at the empty lot identified as "Land D" in the Agreement, and more particularly
described as 4820 Alcoa Avenue, Los Angeles (Vernon),
<PAGE>
California. Seller expressly indemnifies and holds harmless Purchaser from all
liability and damages with respect to such Land D Conditions, as provided in
this Article 13f, and agrees to be responsible for any compliance or remediation
that may hereafter be required in connection with such Land D Conditions."
5. Article 13 of the Agreement is hereby amended to add the following:
"g. Removal of Underground Storage Tank. On or before the earlier of
-----------------------------------
(i) Seller's vacation of the Property, or (ii) November 15, 1998 (the "Outside
Completion Date"), Seller shall cause the underground storage tank(s) ("UST(s)")
at the Property identified in that certain corrective action report from the
City of Vernon dated July 14, 1997, to be removed in accordance with applicable
laws, including the Environmental Laws, and to conduct any borings and/or soil
remediation that may be required in connection therewith. Compliance with this
Article 13g shall be accomplished by the delivery of a certificate from the
governmental agency having jurisdiction over such removal demonstrating
compliance with the requirements for appropriate removal of the UST(s), together
with a certificate from the contractor performing the removal that the UST(s)
has been removed in accordance with applicable laws."
h. Roof and Air Conditioning Repair. Seller agrees to contribute the
--------------------------------
sum of One Hundred Thousand Dollars ($100,000.00) towards the repair of the roof
and air conditioning system at the Property, which amount shall be delivered to
Purchaser in the form of a credit against the Purchase Price at Closing.
i. Title XIX Fire Certification. On or before the earlier of the (i)
----------------------------
Outside Completion Date, or (ii) such date as may be required by the Vernon Fire
Department, Seller shall complete the Title XIX Fire Certification with respect
to the Property and any improvements located thereon.
j. Furniture, Fixtures and Equipment. Notwithstanding the provisions
---------------------------------
of Article 3f of the Agreement Seller agrees to sell and deliver to Purchaser,
as part of the Property to be acquired by Purchaser at the Closing and without
any increase in the Purchase Price payable under the Agreement, only the
following items of personal property:
A. Generator together with the attached 500 gallon approved tank;
B. Cardboard Baler;
C. Intercom and Music System in Warehouse;
D. Tables and chairs for the three (3) meeting rooms located in the
4719 South Boyle Avenue Building (also known as the Smart "U"
Building); and
E. All racking located in the east end of the 4700 South Boyle Avenue
Building as identified on Exhibit "C" attached to the Agreement.
2
<PAGE>
6. This First Amendment is entered into in conjunction with the
Agreement, and it is intended by the parties that it be integrated into the
Agreement. Except as amended herein all other terms and conditions of the
Agreement shall remain in full force and effect.
7. This First Amendment may be executed in counterparts, each of
which shall be an original, but all of which shall together constitute but one
and the same instrument. Facsimile signatures of this First Amendment shall have
the same binding effect as original signatures.
IN WITNESS WHEREOF, the parties have executed this First Amendment to
Agreement to Sell and Purchase Real Property and Escrow Instructions as of the
date first above written.
SELLER: PURCHASER:
SMART & FINAL INC.
a Delaware corporation By: /s/ Fred Kayne
4700 S. BOYLE AVENUE ------------------
Vernon, CA 90058 FRED KAYNE
By: /s/ Dennis Chiavelli Date: September 17, 1997
-------------------- ------------------
Title: Executive Vice President
------------------------
By: Donald G. Alvarado
------------------
Title: Senior Vice President
---------------------
Date: September 18, 1997
------------------
3
<PAGE>
AGREEMENT TO SELL AND PURCHASE REAL PROPERTY
AND ESCROW INSTRUCTIONS
THIS AGREEMENT TO SELL AND PURCHASE REAL PROPERTY AND ESCROW
INSTRUCTIONS ("Agreement"), dated as of the date specified below in the List of
Particulars, by and between Seller and Buyer is entered into with reference to
the recitals set forth below and constitutes (i) a contract of purchase and sale
between the parties, and (ii) escrow instructions to Escrow Holder. The
following terms shall have the meanings specified, when used in this Agreement.
LIST OF PARTICULARS
-------------------
Date of Agreement: September 12, 1997
Seller: CERTIFIED GROCERS OF CALIFORNIA, LTD.
a California corporation
2601 South Eastern Avenue
Los Angeles, CA 90040
Attention: Mr. Daniel T. Bane
Phone: (213) 723-7476, ext.4281
Facsimile: (213) 888-2915
Buyer: SMART & FINAL STORES CORPORATION,
a California corporation
4700 South Boyle Avenue
Los Angeles, CA 90058
Attention: Mr. Robert J. Wess
Phone: (213) 586-8563
Facsimile: (213) 581-4756
Taxpayer Identification
of Buyer: 95-4297897
Trustee: State Street Bank & Trust Co.
<PAGE>
Property: That certain irregularly shaped parcel comprising
approximately 23.73 acres at the southwestern corner of
Eastern Avenue and Sheila Street, in the City of
Commerce, as more particularly described in Exhibit "A"
attached to this Agreement and incorporated by reference,
and as depicted in the site plan attached to this
Agreement as Exhibit "B" and incorporated by reference.
Purchase Price: Ten Million Five Hundred Thousand Dollars ($10,500,000),
as may be adjusted pursuant to Article 2 herein, payable
as provided in this Agreement.
Initial Deposit: Five Hundred Thousand Dollars ($500,000)
Escrow Holder: Commerce Escrow Company
1545 Wilshire Boulevard, Suite 600
Los Angeles, CA 90017
Attention: Ms. Tina Debow
Phone: (213) 484-0855
Facsimile: (213) 484-0417
Title Company: Old Republic Title Company
101 E. Glenoaks Boulevard
Glendale, CA 91209-9003
Attention: Mr. Michael Slinger
Phone: (800) 228-4853
Facsimile: (818) 549-4328
Brokers: Investment Development Services, Inc.
CB Commercial Real Estate Group, Inc.
Cushman & Wakefield of California, Inc.
Closing Date: July 1, 1998, unless advanced or extended as provided in
this Agreement.
Outside Closing Date: December 31, 1998 unless extended as provided in this
Agreement
<PAGE>
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE 1
PURCHASE AND SALE
-----------------
1.1 Purchase and Sale. Subject to the terms and conditions of this
-----------------
Agreement, including the foregoing List of Particulars, Seller agrees to sell to
Buyer, and Buyer agrees to purchase from Seller, all of Seller's right, title
and interest in and to the Property, together with any and all of the rights,
benefits, easements and appurtenances, and all right, title and interest of
Seller in the land east of the property line to be created pursuant to the Lot
Line Adjustment (as defined below) lying in all streets, highways and rights-of-
way abutting the Property. Buyer may at any time prior to the Closing Date,
transfer its rights to acquire the Property to a special-purpose real estate
leasing facility in the form of a trust, established for Buyer by a group of
banks. For purposes of this Agreement the term "Buyer" shall be deemed to apply
to Smart & Final Stores Corporation, a California corporation, notwithstanding
the fact that title to the Property may ultimately be held in the name of
Trustee. The sale pursuant to this Agreement excludes (i) the land and
improvements (the "Western Property") west of the property line to be created
pursuant to the Lot Line Adjustment, (ii) all development rights, easements and
other rights appurtenant to the Western Property, and (iii) any credits or other
rights (collectively, the "Credits") with the SCAQMD and/or Los Angeles County
Sanitation District with respect to an emissions and sewer discharges existing
with respect to ownership and operation of the Property and/or the Western
Property prior to the Closing. At Closing, Buyer shall execute such documents
as Seller may reasonably request confirming that the Credits are being retained
by Seller. Seller's retention of the Credits shall be limited to the extent
that Seller's retention would prevent Buyer from obtaining a sewer connection
for discharge for the Property improved with a high-flexibility, non-mechanized
warehouse of approximately 517,000 square feet with approximately 60,000 square
feet of internal warehouse offices (the "Improvements"). Without limiting
Section 5.7.2, Buyer acknowledges that all sewer connection and operating
discharge fees for the Property and the Improvements shall be at the sole cost
and expense of Buyer.
<PAGE>
ARTICLE 2
PURCHASE PRICE
--------------
2.1 Purchase Price. The Purchase Price for the Property shall be paid
--------------
by Buyer to Seller through Escrow as follows:
2.2 Initial Deposit. Buyer shall deposit with Escrow Holder the
---------------
Initial Deposit in immediately available funds within two (2) business days of
Buyer's execution of this Agreement, but in no event later than September 19,
1997. The Initial Deposit is to be invested by Escrow Holder in an interest
bearing Federally insured account, at a financial institution acceptable to
Buyer and Seller, which designates Buyer as the account holder. Any interest
which is earned on the Initial Deposit will be held by Escrow Holder and applied
to the Purchase Price. At Buyer's option, the Initial Deposit may be divided
among mutually acceptable Federally insured financial institutions, such that no
institution is holding more than One Hundred Thousand Dollars ($100,000.00).
The Initial Deposit shall be released to Seller by Escrow Holder upon the
receipt by Escrow Holder and Seller of Buyer's approval of Buyer's Studies as
set forth in Section 3.1.2 below without further instructions to Escrow Holder.
2.3 Payment for Vacation of Warehouse Buildings. Within three (3)
-------------------------------------------
business days following delivery of notice by Seller to Buyer of Seller's
complete vacation of all of the warehouse and other buildings located on the
Property excluding (i) the 3-story office building (the "Office Building") and
---------
(ii) an area around the Office Building shown on Exhibit "E" as Seller's
Construction Zone (the "Construction Zone"), and provided that such date is at
least three (3) business days prior to the Closing Date, Buyer will pay to
Seller the additional sum of Seven Hundred Fifty Thousand Dollars ($750,000)
outside of Escrow. This amount received by Seller will be credited against the
Purchase Price at the Close of Escrow. As used in this Agreement, "complete
vacation" and "vacate" mean as to a specified portion of the Property that
Seller shall have permanently ceased business operations and removed or
abandoned in place its moveable personal property. Seller shall be considered
to have performed a "complete vacation" of an area even if the utility lines
shown on Exhibit "E" continue to be used to serve the areas not vacated and the
vacated areas are used for access to the areas not vacated; provided that
nothing in this Section 2.3 shall create any easement for the benefit of Seller
to maintain utilities on the Property for the benefit of the Western Property
after the Closing.
<PAGE>
2.4 Payment for Vacation of Entire Property. Within three (3) business
---------------------------------------
days following delivery of notice by Seller to Buyer of Seller's complete
vacation of the entire Property excluding (i) the Data Center (as defined
---------
below), (ii) the portions of the Office Building serving the Data Center, and
(iii) the Construction Zone (such excluded portions being sometimes referred to
herein collectively as the "Reserved Areas"), and provided that such date is at
least three (3) business days prior to the Closing Date, Buyer will pay to
Seller the additional sum of Seven Hundred Fifty Thousand Dollars ($750,000)
outside of Escrow. This amount received by Seller will be credited against the
Purchase Price at the Close of Escrow. As used herein, the term "Data Center"
means the portion of the Building described on Exhibit "F," together with all
utilities shown on Exhibit "E" necessary for the operation of Seller's business
within that portion of the Building and rights of ingress and egress through the
Building and Property between that portion of the Building and public streets
and sidewalks.
2.5 Vacancy Incentive Price Increases. Upon performance by Seller,
---------------------------------
Buyer will make certain incentive price increases (the "Incentive Price
Increases") at the Close of Escrow as an incentive to Seller to vacate the
Property as soon as possible. The Incentive Price Increases shall be earned by
Seller for each day prior to the Closing Date that Seller has accomplished the
complete vacation of the Property and otherwise satisfied the conditions
described in clauses (i), (iii), (iv) and (v) of Section 5.9.1, as evidenced by
delivery to Buyer of Seller's notice of vacancy as follows:
<TABLE>
<CAPTION>
# of Days prior Maximum Incentive
to July 1, 1998 $/Day Price Increases
- ------------------ ------- -----------------
<S> <C> <C>
1-30 $ 5,000 $150,000
31-62 $ 7,500 $232,500
63-92 $10,000 $300,000
--------
Total Possible Incentive Price Increases $682,500
</TABLE>
2.6 Late Delivery Penalty. So long as Buyer shall have performed all
---------------------
of its obligations under this Agreement, shall have satisfied the conditions
described in clauses (i) and (ii) of Section 5.9.2, and is otherwise ready,
willing and able to proceed with the Closing on the Closing Date, there shall be
a reduction in the Purchase Price of the sum of Ten Thousand Dollars
($10,000.00) for each such day the Closing is delayed after the Closing Date
solely by reason of Seller's inability to accomplish the complete vacation of
the Property and otherwise satisfy the conditions described in
<PAGE>
clauses (i), (iii), (iv) and (v) of Section 5.9.1. The reduction in the Purchase
Price under this Section 2.6 shall be limited to a maximum of Five Hundred
Thousand Dollars ($500,000.00).
2.7 Cash at Closing. The balance of the Purchase Price, subject to
---------------
adjustment pursuant to Section 5.6 hereof, shall be deposited with Escrow Holder
in immediately available funds, on or before the Close of Escrow.
ARTICLE 3
APPROVALS AND CONDITIONS
------------------------
3.1 Conditions. The obligations of Buyer under this Agreement shall be
----------
subject to and contingent upon satisfaction of the following conditions within
the time periods specified below:
3.1.1 Approval of Title. Buyer shall have approved, been deemed to
-----------------
have approved or have waived objections to the condition of title pursuant to
Article 4 below within the time periods provided for therein.
3.1.2 Inspection of Property. Buyer may, at Buyer's sole cost and
----------------------
risk, inspect the physical condition and operations of the Property on or before
close of business on September 15, 1997 (the "Contingency Period"). During the
Contingency Period Buyer and its agents, employees, contractors and consultants
(collectively "Buyer's Representatives") shall, at their sole cost and expense,
conduct and approve such environmental, geological, feasibility, engineering and
other tests, surveys, title, appraisals and all other inspections and
investigations they deem necessary in their sole and complete discretion
(collectively "Buyer's Studies"). Buyer hereby gives notice to Seller of
Buyer's approval of Buyer's Studies. If Escrow has been opened by such date,
Buyer shall also provide Escrow Holder with notice of any approvals together
with irrevocable written instructions to release the Initial Deposit to Seller.
If Escrow has not been opened by the expiration of the Contingency Period, then
Buyer's approval of Buyer's Studies shall be accompanied by (and shall not be
effective unless and until Seller receives) payment of the Initial Deposit in
immediately available funds. Buyer's failure to disapprove of Buyer's Studies
shall be deemed an approval thereof. If Buyer disapproves Buyer's Studies the
Escrow shall terminate and Buyer shall receive a return of the Initial Deposit
and any other funds paid on account of the Purchase Price, in which event
neither party will have any further obligation or liability regarding the
acquisition of the Property. The Closing Date and the Outside
<PAGE>
Closing Date shall be further extended for the period of any delay in Seller's
performance of the Lot Line Adjustment (as defined below) due to Buyer's entry
onto the Property pursuant to this Section 3.1.2.
-----
3.1.3 Lot Line Adjustment. Seller shall have until the Close
-------------------
of Escrow to cause a lot line adjustment (the "Lot Line Adjustment") to be
recorded in the Official Records of Los Angeles County, which adjustment is
necessary in order for the Property to be conveyed to Buyer in accordance with
all applicable subdivision laws and regulations.
3.1.4 Delivery of Property. Seller shall have delivered the
--------------------
property with the Site Work (as defined in Section 5.8) completed.
3.2 Delivery of Property No Later Than the Outside Closing Date.
-----------------------------------------------------------
In the event that Seller is unable to deliver the Property with the Site Work
completed and close Escrow by the Outside Closing Date, Buyer shall elect either
to (i) terminate Escrow and receive a return of the Initial Deposit and any
other funds paid on account of the Purchase Price, in which event neither party
will have any further obligation or liability regarding the acquisition of the
Property, or (ii) waive any condition (other than the Lot Line Adjustment)
related to delivery or condition of the Property and proceed with the purchase
of the Property. In the event Buyer chooses to waive such conditions, Seller
shall not be required to proceed with any uncompleted Site Work; however, the
Purchase Price shall be adjusted as provided in Section 2.6 above. If Buyer
fails to give Escrow Holder and Seller notice of termination of the Escrow or
waiver of any condition related to delivery or condition of the Property within
five (5) days after the Outside Closing Date, Buyer shall be deemed to have
elected to terminate Escrow and receive a return of the Initial Deposit and any
other funds paid as provided in clause (i) of the first sentence of this Section
3.2
3.3 Consequences of Termination or Non-Termination of This Agreement.
----------------------------------------------------------------
3.3.1 If this Agreement is terminated by Buyer pursuant to
Section 3.1 or Section 3.2 above, the following shall occur: (i) the Initial
Deposit, and any other payment made by Buyer to Escrow Holder or Seller towards
the Purchase Price, together with interest accrued thereon, deposited by Buyer
with Escrow Holder pursuant to Section 2.2, shall be refunded to Buyer; (ii) any
documents deposited with Escrow Holder by either party shall be returned to the
party depositing the same; (iii) Buyer shall return to Seller all documents
delivered by Seller to Buyer pursuant to
<PAGE>
this Agreement, and (iv) Buyer shall pay any applicable Escrow and title
cancellation charges. Upon completion of all of the foregoing, this Agreement
shall be deemed terminated and neither party shall have any further rights
against or obligations to the other hereunder, except those obligations and
indemnifications which are expressly stated to survive the termination of this
Agreement.
3.3.2 If this Agreement is not terminated by Buyer at the end
of the Contingency Period pursuant to Section 3.1 above, the Initial Deposit
shall be released by Escrow Holder to Seller and thereafter the Initial Deposit
and the amounts paid by Buyer pursuant to Sections 2.3 and 2.4 shall be
nonrefundable to Buyer for any reason whatsoever, unless the Closing does not
occur due to a failure of Seller to satisfy any of the conditions described in
clauses (i), (iii), (iv) and (v) of Section 5.9.1.
ARTICLE 4
CONDITION OF TITLE
------------------
4.1 Permitted Exceptions. Buyer agrees to accept title to the Property
--------------------
subject only to the following matters (collectively the "Permitted Exceptions"):
4.1.1 Liens for current real property taxes and any general or
special assessments or bonds that are not delinquent as of the Closing.
4.1.2 Those matters of record which Buyer approves, is deemed to
approve, or waives its objections as to, pursuant to Section 4.2, below.
4.1.3 Those matters shown on any survey which Buyer elects to
obtain, that are not reflected in the Title Report (as defined in Section 4.2
below).
4.1.4 The Title Company's standard printed exceptions.
4.1.5 Matters arising out of the Lot Line Adjustment.
4.1.6 Those matters affecting the title to the Property created by
or with the consent of Buyer.
4.2 Approval of Title. Buyer acknowledges receipt of a preliminary
-----------------
title report together with copies of all documents shown as exceptions therein
(the "Title Report") disclosing the condition of title to the Property. By
notice delivered to Seller
<PAGE>
on September 16, 1997, Buyer approved and disapproved certain items in the Title
Report. Seller will have 10 days after receipt of Buyer's notification of any
disapproved exceptions or other objections to title in which to advise Buyer
that:
(i) Seller will cause the disapproved exceptions or other
objections to title to be removed or remedied or obtain appropriate
endorsements to the Title Policy on or before the Closing Date; or
(ii) Seller will not cause the disapproved exceptions or other
objections to title to be removed or remedied or cause appropriate
endorsements to the Title Policy to be issued.
(iii) If Seller does not notify Buyer of its election within the 10
day period, Seller will be deemed to have elected to not cause the
disapproved exceptions to be removed.
If Seller elects to not cause the disapproved exceptions or other
objections to title to be removed or remedied or cause appropriate endorsement
to the Title Policy to be issued, Buyer will have two (2) business days to
elect, as its sole remedy, to:
(i) proceed with the purchase and acquire the Property subject to
the disapproved exceptions and other objections to title without
reduction in the Purchase Price; or
(ii) cancel the Escrow and this Agreement by written notice to
Seller and Escrow Holder, in which case the Deposit and any interest
accrued thereon will be returned to Buyer and the cancellation costs,
if any, will be equally borne by Seller and by Buyer.
If Buyer does not give Seller notice of its election within two (2)
business days, Buyer will be deemed to have elected to proceed with this
transaction.
4.3 Title Policy. As a condition to the Closing, Title Company shall
------------
be prepared to issue a CLTA Owner's Title Insurance Policy (the "Title Policy")
to Buyer (or Trustee as applicable) on the Closing Date. Such policy shall be a
CLTA Owner's Title Insurance policy unless Buyer elects, by appropriate escrow
instructions to Escrow Holder, to cause Title Company to issue an ALTA Owner's
Title Insurance Policy in place of the CLTA Title Policy. If Buyer elects to
have an ALTA policy
<PAGE>
issued, Buyer shall pay to Escrow Holder all costs which are in excess of the
costs and premium that would have been incurred for a CLTA policy. Buyer shall
obtain, at its sole cost, any survey or survey update required in connection
with the Title Policy and shall bear all costs associated with the issuance by
the Title Company of an ALTA extended coverage lender's policy of title
insurance insuring its lender or lenders in the amount of any financing secured
by the Property. The Title Policy shall be in the amount of the Purchase Price,
for the protection of Buyer (or Trustee as applicable) as a fee owner of the
Property, subject only to the Permitted Exceptions. Buyer's election to obtain
an extended coverage policy will not delay the Closing or the expiration of the
Contingency Period and Buyer's inability to obtain an extended coverage policy
or any such endorsements will not be deemed to be a failure of any condition to
Closing.
ARTICLE 5
CLOSING
-------
5.1 Closing Through Escrow. The purchase of the Property shall be
----------------------
consummated by means of an escrow established with Escrow Holder. The date on
which Escrow Holder receives Buyer's Initial Deposit shall be referred to as the
"Opening of Escrow." The parties shall close the Escrow on or before the Outside
Closing Date. Although the parties have agreed and are bound to the Outside
Closing Date, the terms "Closing" and "Close of Escrow" as used herein shall
mean that date when a grant deed conveying the Property to Buyer is recorded in
the Official Records of Los Angeles County, California (the "Official Records").
This Agreement shall be deposited with Escrow Holder and shall constitute escrow
instructions to Escrow Holder from Buyer and Seller, together with such
instructions and general provisions and conditions consistent with the terms of
this Agreement which Escrow Holder may reasonably request. Buyer and Seller
agree to execute promptly any such supplemental escrow instructions requested by
Escrow Holder. In the event of any conflict or inconsistency between such
general provisions and conditions of such supplemental escrow instructions and
the provisions of this Agreement, the provisions of this Agreement shall
control.
5.2 Duties of Escrow Holder. The duties of the Escrow Holder shall
-----------------------
be as follows: (i) retain and safely keep all funds, documents and instruments
deposited with it pursuant to this Agreement; (ii) disburse the Initial Deposit;
(iii) upon the Closing, deliver to the parties entitled thereto all funds,
documents and instruments to be delivered through the Escrow Holder pursuant to
this Agreement; and (iv) upon the Closing, cause the recordation of the
documents required for this transaction in the
<PAGE>
Official Records. Escrow Holder is instructed to (v) request that the amount of
the documentary transfer tax due be shown on a separate paper and affixed to the
Grant Deed by the County Recorder after the permanent record thereof is made;
(vi) comply with the terms of this Agreement which specifically apply to the
Escrow Holder and comply with the terms of any additional instructions jointly
executed by Buyer and Seller; (vii) deposit all monies held by Escrow Holder in
an interest bearing account according to further written instructions signed by
Buyer and not in conflict with the terms of this Agreement; and (viii) upon the
Closing, cause the Title Company to issue to Buyer the Title Policy in the
amount of the Purchase Price insuring Buyer (or Trustee as applicable) as the
fee owner of the Property and, if applicable, the lender's policy of title
insurance referred to in Section 4.3 above.
5.3 Reporting. To the extent the transaction contemplated hereby
---------
involves a real estate transaction within the purview of Section 6045 of the
Internal Revenue Code of 1986, as amended, the Escrow Holder shall have sole
responsibility to comply with the requirements of Section 6045 of the Internal
Revenue Code (and any similar requirements imposed by state or local law), which
in part requires the Escrow Holder to report real estate transactions closing
after December 31, 1986 by, among other things, preparing and causing to be
filed Internal Revenue Service Form 1099-B and any applicable additional
statements in connection therewith. Seller's U.S. employer identification
number is 95-0615250. Escrow Holder shall hold Buyer, Seller and their counsel
free and harmless from and against any and all liability, claims, demands,
damages and costs, including reasonable attorneys' fees and other litigation
expenses, arising or resulting from the failure or refusal of the Escrow Holder
to comply with such reporting requirements.
5.4 Seller's Obligations at Closing. Prior to the Closing, Seller
-------------------------------
shall deliver to Escrow Holder the following documents (all duly executed and
acknowledged by Seller, where required):
5.4.1 Grant Deed. A Grant Deed, executed and acknowledged by
----------
Seller and conveying the Property to Buyer or Trustee as applicable, in the form
of Exhibit "C" hereto.
5.4.2 Foreign Person. An affidavit of Seller certifying that
--------------
Seller is not a "foreign person," as defined in the federal Foreign Investment
in Real Property Tax Act of 1980, and the 1984 Tax Reform Act, as amended, and a
properly executed Form 590 or other evidence sufficient to establish that Buyer
is not required to withhold any portion of the Purchase Price under the
California Revenue and Taxation Code.
<PAGE>
5.4.3 Evidence of Authority. A copy of the duty adopted
---------------------
resolution of the governing body of Seller, certified as true and complete as of
Closing, authorizing the execution, delivery and performance by Seller of this
Agreement and the documents required hereby, and designating one or more persons
to execute such documents such entity's name in connection with this Agreement,
together with an incumbency certificate for each person executing documents on
behalf of Seller with specimen signatures for such persons.
5.5 Buyer's Obligations at Closing. Prior to the Closing, Buyer
------------------------------
shall deliver to Escrow Holder the following (all duly executed and acknowledged
by Buyer, where required):
5.5.1 Purchase Price. The balance of the Purchase Price (subject
--------------
to adjustment pursuant to Sections 2.5 and 5.6 of this Agreement) in immediately
available funds, due credit being given for the Initial Deposit and other
payments or credits made in favor of Buyer, including interest earned thereon
for funds held by Escrow Holder.
5.5.2 Evidence of Authority. A copy of the duly adopted
---------------------
resolution of the governing body of Buyer, certified as true and complete as of
Closing, authorizing the execution, delivery and performance by Buyer and any
permitted assignee of Buyer hereunder, of this Agreement and the documents
required hereby, and designating one or more persons to execute such documents
in each such entity's name in connection with this Agreement, together with an
incumbency certificate for each person executing documents on behalf of Buyer
with specimen signatures for such persons.
5.6 Closing Costs. Seller shall pay the following closing costs:
-------------
all of Seller's attorneys' fees and costs; one-half (1/2) of the fees and costs
due to Escrow Holder for services rendered as escrow agent; any county transfer
taxes and recording fees payable upon recordation of the Grant Deed; one-half of
any city transfer taxes payable upon recordation of the Grant Deed and all
premiums and charges relating to the issuance of the Title Policy. Buyer shall
pay the following closing costs: all of Buyer's attorneys' fees and costs; one-
half (1/2) of the fees and costs due to Escrow Holder for services rendered as
escrow agent; one-half of any city transfer taxes payable upon recordation of
the Grant Deed any additional premium for an ALTA Owner's Policy of Title
Insurance if Buyer elects to receive same, including the cost of any survey or
survey update and the cost of any title endorsements to the Title Policy; and
premium for an ALTA Leader's Policy of Title Insurance in connection with
<PAGE>
Buyer's financing; and any recording fees payable upon recordation of any
financing documents.
5.7 Proration. Real estate and personal property taxes and other
---------
assessments with respect to the Property (other than with respect to the
transfer thereof) for the year in which the Closing occurs, shall be prorated to
the Closing, as set forth below. The provisions of this Section 5.7 shall
survive the Closing.
5.7.1 Taxes. If the Closing shall occur before the tax rate or
-----
the assessed valuation of the Property are fixed for the then-current year, then
the apportionment of taxes shall be upon the basis of the tax rate for the
Property for the preceding year applied to the latest assessed valuation of the
Property. Subsequent to the Closing, when the tax rate and the assessed
valuation of the Property are fixed for the year in which the Closing occurs,
the parties agree to adjust the proration of taxes outside of Escrow and, if
necessary, to refund or repay such sums as shall be necessary to effect such
adjustment. If the Property is not assessed as a separate parcel for tax or
assessment purposes, then such taxes and assessments attributable to the
Property shall be determined by Seller with notice to and subject to Buyer's
approval (which approval shall not be unreasonably withheld) at least five (5)
business days prior to the Closing Date. If, as of the Closing, the Property is
not being treated as a separate tax parcel, then within thirty (30) days after
the Closing, Buyer shall, at its sole cost and expense, have the Property
assessed separately for tax and assessment purposes,
5.7.2 Utilities. No provision has been made for the proration of
---------
water charges, fuel charges or utility charges (including, without limitation,
telephone, gas and electricity) as Seller shall terminate its account with the
providers of all such services, and Buyer shall, prior to the Closing, make
application to the providers of such services for the continuation of such
services in the name of Buyer, or its designee, including the provision of any
deposits that might be required. It is anticipated that in connection with all
services referred to in the preceding sentence, the meters will be read on or
about the Closing, and Seller shall be responsible for paying the bills for such
services accruing prior to the Closing and shall be entitled to a refund of its
deposits, if any, and Buyer shall be responsible for the payment of all such
accounts accruing on or after the Closing. If at Seller's option any such
accounts are not handled in this manner, then they shall be prorated as of the
Closing.
5.7.3 Post-Closing Reconciliation. If any of the prorations
---------------------------
stated above cannot be definitely calculated on the Closing, then they shall be
estimated at the Closing and definitely calculated as soon after the Closing as
feasible.
<PAGE>
5.8 Delivery of Possession. Upon the satisfaction or waiver (if
----------------------
applicable) of any and all other conditions precedent to this Agreement, the
purchase and sale transaction contemplated in this Agreement shall be finally
consummated and Seller shall deliver possession of the Property to Buyer upon
the Close of Escrow. Seller will (i) perform demolition of existing buildings,
removal of all other on-site improvements, and preparation to a rough grade,
with existing utilities in the adjacent street, (ii) cause to be removed all
asbestos-containing materials within the improvements being demolished and
removed, (iii) cause to be removed from the Property all other hazardous
materials on or under the Property to the extent such removal is required by
applicable laws, statutes, ordinances or regulations as a condition to new
construction on the Property, and (iv) provide copies to Buyer of any
certificates, closure letters or other documentation customarily issued by
governmental authorities having jurisdiction over the removal of such asbestos
and hazardous materials in connection with that removal by Seller (collectively,
the "Site Work").
5.9 Conditions Precedent to Closing.
-------------------------------
5.9.1 Conditions Precedent to Buyer's Obligations. Buyer's
-------------------------------------------
obligations with respect to this transaction are subject to: (i) Seller's
delivery to Escrow Holder on or before the Closing of the items described in
Section 5.4, (ii) Title Company's willingness to deliver the Title Policy
subject only to the Permitted Exceptions, (iii) all of Seller's representations
and warranties as set forth in Section 10.1 being true and correct in all
material respects as of the Closing, (iv) Seller delivering the Property with
the Site Work completed, and (v) the Lot Line Adjustment having been completed.
5.9.2 Conditions Precedent to Seller's Obligations. Seller's
--------------------------------------------
obligations with respect to this transaction are subject to: (i) Buyers delivery
to Escrow Holder on or before the Closing of the items described in Section 5.5,
(ii) Buyer's representations and warranties as set forth in Section 10.2 being
true and correct in all material respects as of the Closing, and (iii) the Lot
Line Adjustment having been completed.
5.9.3 Simultaneous Delivery; Conditions Concurrent. All documents
--------------------------------------------
and other items to be delivered on the Closing shall be deemed to have been
delivered simultaneously, and no individual delivery shall be effective until
all such items have been delivered.
5.9.4 Pre-Closing Covenants of Seller. Seller covenants that
-------------------------------
until the Closing it will cause the Property to be insured under policies of
liability
<PAGE>
insurance customary for properties such as the Property, and that it will not
enter into any material contract with respect to the Property which would be
binding on Buyer after the Closing without Buyer's consent, which shall not be
unreasonably withheld.
ARTICLE 6
RISK OF LOSS
------------
6.1 Casualty. Since Buyer is acquiring the Property in any
--------
unimproved condition, damage to or injury occurring to the Property by fire,
storm, accident or any other casualty or cause shall not affect the obligations
of the parties under this Agreement.
6.2 Condemnation. Buyer shall determine the risk of potential
------------
condemnation of the Property. If any condemnation occurs prior to the Closing
this transaction shall be consummated as provided in this Agreement and Seller
shall be entitled to retain all awards made by the condemning authority in
respect of such condemnation except that Seller shall assign to Buyer at the
Closing the amount of the award attributable solely to the Property as
unimproved land. Any award for any improvements on the Property or for
relocation expenses or otherwise with regard to other than the Property as
unimproved land shall be the sole property of Seller.
ARTICLE 7
DESIGN AND CONSTRUCTION OF IMPROVEMENTS
---------------------------------------
7.1 Warehouse Design and Construction. As soon as is practicable
---------------------------------
following the Close of Escrow, Buyer intends to construct a high-flexibility,
non-mechanized warehouse of approximately 517,000 square feet with integral
warehouse offices (the "Improvements"), in a design to be determined. Seller
will have the right to approve the final design plan prior to the Closing, which
approval will not be unreasonably withheld. A general contractor will be
selected who is mutually acceptable to both parties. Investment Development
Services (IDS) will act as a development and construction manager for the
Improvements, in a compensated role to be defined in a separate agreement
between IDS and Buyer, which shall be diligently negotiated by IDS and Buyer.
Seller acknowledges that IDS has, through its past activities with Seller,
information and knowledge regarding Seller and the Property which is of a
confidential nature. Seller hereby consents to the disclosure of such
<PAGE>
confidential information to Buyer by IDS; provided that Buyer holds such
information in confidence.
7.2 Acquisition of Adjacent Parcels. Buyer has informed Seller that
-------------------------------
Buyer is considering the acquisition of those parcels adjacent to north of the
Property on Sheila Street from Eastern Avenue to Fitzgerald Avenue, and north to
Washington Boulevard, as set forth in Exhibit "D" attached to this Agreement.
Buyer's obligations to close Escrow are not contingent upon the acquisition of
any of the adjacent parcels. If, at any time after the Close of Escrow, Buyer
applies with applicable governmental authorities for the vacation of the alley
running parallel and north of Sheila Street, between Fitzgerald Avenue and
Eastern Avenue, Seller agrees not to object to such application, and further
agrees to provide Buyer will all necessary and reasonable cooperation in making
such application at no cost or expense to Seller; provided Seller shall not be
required to limit or restrict the development or operation of any other
properties or businesses owned by Seller.
ARTICLE 8
POST-CLOSING MATTERS
--------------------
8.1 Ownership and Financing of Property.
-----------------------------------
8.1.1 Lease Agreement. Buyer has informed Seller that in the
---------------
event that Buyer transfers its rights to acquire the Property to a trust for
purposes of furthering its financing arrangements as set forth in Section 1.1
above, such trust will become the lessor ("Lessor") of the Property and the
Improvements and Buyer shall be the Lessee pursuant to a Lease Agreement with a
maximum term of thirty-five (35) years (the "Lease Term") from the Close of
Escrow. Pursuant to such Lease Agreement, Buyer may at any point during the
Lease Term freely exercise options to renew and continue the Lease Agreement as
provided by its terms and conditions, or substitute another financing structure
of similar type, so long as the final maturity date of the financing does not
exceed the thirty-five (35) year period. In the alternative, Buyer may,
pursuant to the Lease Agreement, purchase the Property from Lessor for the
"Termination Value" as defined below, and if desired, enter into another type of
financing so long as the final maturity date of any such financing does not
exceed the overall thirty-five (35) year period. Buyer shall provide Seller
with quarterly certificates as to the status of the Lease Agreement and related
financing documents (and any replacement thereof or substitute therefor)
confirming that Buyer is not in default thereunder and the status of
construction of the Project (as defined below) and
<PAGE>
the amount of Project Expenses (as defined below), in form and content
reasonably satisfactory to Seller. As used in this Article 8, the following
terms shall have the following meanings:
"Project" means an approximately 517,000 square foot warehouse on
the Property constructed with standard materials and containing mezzanine
offices not to exceed 85,000 square feet, together with on-site parking to
accommodate approximately 134 truck trailers and code required automobile
parking, and site improvements to the Property for utilities, ingress and
egress, safety and security.
"Project Expenses" means the costs incurred by Buyer for the
following with respect to the initial construction of the Project: (a) the
acquisition of the Property, (b) demolition, remediation and site
preparation, (c) construction of the Project, (d) Buyer's lender and
appraiser fees and expenses, (e) developer and builder fees and expenses,
(f) permit and governmental fees, (g) architectural and engineering fees
and expenses, and (h) interest on funds borrowed to pay Project Expenses.
Project Expenses exclude costs of interior furniture and fixtures,
warehouse racking, warehouse equipment, and any costs incurred after a
certificate of occupancy or comparable evidence of the completion of the
initial construction of the Project is issued.
"Default Costs" means interest and expenses which by the terms of
Buyer's financing documents are added to the cost Buyer must pay to
repurchase or otherwise redeem the Property from Buyer's lenders.
"Termination Value" means the sum of Project Expenses and Default
Costs.
8.1.2 Right of First Refusal. In the event that Buyer wishes to
----------------------
sublease 50,000 or more square feet (the "First Refusal Space") of the Property
to an unaffiliated entity, Seller shall have a right of first refusal to
sublease such First Refusal Space as provided herein. Prior to commencing
negotiations for a lease of the First Refusal Space with an unaffiliated entity,
Buyer shall give Seller written notice that it intends to commence those
negotiations (the "Negotiation Notice"). Prior to entering into a binding
agreement for the lease of the First Refusal Space on the Property to an
unaffiliated entity, Buyer shall deliver to Seller a copy of the term sheet or
letter of intent which has been signed by the proposed subtenant and Buyer
("Signed Proposal") setting forth the basic terms for the proposed sublease
transaction. If Seller
<PAGE>
wishes to enter into a sublease on the terms and conditions set forth in the
Signed Proposal, Seller shall deliver to Buyer by 5:00 p.m. Los Angeles time on
the date (the "Response Deadline") that is the later of (a) twenty (20) business
days after Seller's receipt of the Negotiation Notice, and (b) five (5) business
days after Buyer's delivery of the Signed Proposal, written notice to Buyer
confirming that it wishes to lease such space on the terms specified. If Seller
fails to respond by the Response Deadline, Buyer may proceed to finalize its
sublease transaction with the unaffiliated entity within six (6) months after
delivery of the Signed Proposal to Seller, and Seller shall have no further
right to sublease such space on the Property unless (i) no lease transaction is
entered into with the specified unaffiliated entity, or the term of the sublease
to the unaffiliated entity expires or is otherwise terminated or (ii) the terms
of the proposed sublease transaction are modified, as referenced below. If the
terms of the proposed sublease are modified such that the net present value
(using a 10% interest rate) of the economic terms benefitting Buyer are reduced
by more than 2% from the terms presented to Seller in the Signed Proposal, Buyer
shall once again submit a Signed Proposal to Seller and Seller must respond by
the Response Deadline as noted above if it wishes to sublease the space on the
terms set forth in the new signed proposal. It is understood and agreed that if
Seller wishes to sublease space identified in a term sheet submitted by Buyer,
it must lease the entire amount of the space identified in such letter, on terms
and conditions identical to those specified in such letter or term sheet,
including, without limitation, approval of such sublease by Buyer's lender.
8.1.3 Option to Repurchase. Upon the Close of Escrow, Buyer shall
--------------------
convey to Seller a one-time option whereby Seller will have the right, but not
the obligation, to (a) be the assignee of Buyer's option to acquire the Property
(including improvements thereupon), pursuant to the Lease Agreement, for a price
equal to the Termination Value, or (b) if the Lease Agreement is no longer in
effect, to acquire the Property (including all improvements thereupon) from
Buyer for a price (the "Option Price") equal to the Project Expenses, on the
terms and conditions contained in this Section 8.1.3. Upon the occurrence of an
Option Trigger Date (as defined below) Buyer shall give Seller a notice ("Option
Notice") that an Option Trigger Date has occurred. Within ten (10) business
days after receiving an Option Notice, Seller have the right, but not the
obligation, to elect to acquire the Property (including improvements thereupon)
as follows:
(i) If the Option Notice is given after an Option Trigger Date
described in clause (iii) below, Seller may instruct Buyer to purchase
---
the Property for the Termination Value on its behalf pursuant to the
Lease Agreement by depositing into an escrow account a sum equal to
the
<PAGE>
Termination Value. Any amounts in excess of the Termination Value
required to purchase the Property (including all improvements
thereupon) pursuant to the Lease Agreement shall be paid by Buyer.
Any funds deposited in that escrow by Seller shall remain Seller's
funds, and under Seller's control, until the closing of the purchase
pursuant to the Lease Agreement.
(ii) If the Option Notice is given after an Option Trigger Date
other than that described in clause (iii) below, Seller may purchase
---
the Property (including all improvements thereupon) for a price equal
to the Option Price.
As used herein, the term "Option Trigger Date" means:
(iii) So long as the Lease Agreement is in effect, the date that
is one hundred eighty (180) days prior to the date upon which Buyer
intends to terminate the Lease Agreement, if Buyer then no longer
occupies, or as of the termination of the Lease Agreement will cease
to occupy, the Property.
(iv) If the Lease Agreement is not in effect, and no prior Option
Notice has been given, the date that is one hundred eighty (180) days
prior to the date upon which Buyer intends to cease to occupy the
Property.
(v) If the Lease Agreement is not in effect, and no prior Option
Notice has been given, the date upon which Buyer ceases to occupy the
Property.
(vi) If no prior Option Notice has been given, the date that is
thirty-five (35) years after the Closing.
In the event that Seller wishes to transfer such option to a third party, Buyer
will have the right of first refusal to acquire such option, upon the terms and
conditions agreed upon between Seller and the third party. Upon any exercise of
the option provided for in this Section 8.1.3, Buyer shall be obligated to
convey title to Seller in the same condition that it existed on the Closing,
subject to no (a) monetary liens or encumbrances, or (b) leases including
without limitation the Lease Agreement. Seller's option rights shall be
contained in an option agreement to be recorded at Closing. If any Option
Trigger Date shall occur and Buyer fails to give an Option Notice, Seller
<PAGE>
may at any time after the Option Trigger Date give Buyer an Option Notice, which
will have the same effect as if that Option Notice were given by Buyer to
Seller. The closing of Seller's acquisition of the Property shall take place
through escrow and shall close within one hundred eighty (180) days after the
Option Notice unless a different closing date is required pursuant to the Lease
Agreement.
ARTICLE 9
DEFAULT AND REMEDIES
--------------------
9.1 Default by Buyer.
----------------
9.1.1 Buyer's Breach. In the event (a) Buyer fails to make timely
--------------
payment of any of the amounts described in Sections 2.2, 2.3 or 2.4, (b) Buyer
notifies Seller that Buyer does not intend to proceed with the Closing or (c)
provided that Seller has performed all of its obligations under this Agreement,
the Close of Escrow and the consummation of the transactions herein contemplated
do not occur by reason of any default by Buyer (each of (a), (b) and (c) being
referred to in this Article 9 as a "Buyer's Breach"), Seller shall be entitled,
subject to the conditions enumerated below, to recover from Buyer its Actual
Damages (as defined below) attributable to Buyer's Breach of its obligations
under this Agreement.
9.1.2 Actual Damages. Actual Damages is defined as the sum of the
--------------
amounts described in clauses (i), (ii) and (iii) below, plus Seller's reasonable
attorneys' fees and costs in connection with or arising out of Buyer's Breach.
(i) An amount representing the excess of the sum of $10,500,000
over the value of the Property on the date of Buyer's breach, such
value to be determined by an appraisal as described below;
(ii) An additional sum which represents Seller's actual cost of
demolition on the Property; and
(iii) An additional sum which represents the costs of relocation
incurred by Seller. This additional sum is understood to include
without limitation additional facilities costs for their minimum
period of commitment by Seller. Relocation costs shall be reduced by
the economic value of betterments in equipment (including software)
and related improvements, attributable to the relocation activity. As
used
<PAGE>
herein, the term "betterment" means an increase in capacity or
utility of an item over that existing prior to its relocation that
does not arise merely because the relocated item is replaced with a
new item or has a different location. For example, a software upgrade
would be a betterment. The replacement of a piece of furniture that
serves the same function in the relocated space as in the existing
space would not be a betterment so long as it is comparable in
utility.
Actual Damages are agreed by the parties not to include any claim by
---
Seller for punitive damages or like elements. If the appraised value of the
Property as established by the appraisal as described herein exceeds
$10,500,000, the excess amount will further reduce Actual Damages as calculated
under this Section.
9.1.3 Appraisal. The appraisal for purposes of Section 9.1.2(i)
---------
above shall be prepared by an MAI certified appraiser with demonstrated
experience in industrial land appraisals within Los Angeles County, and as
agreed upon by Seller and Buyer. The appraiser shall determine the value of the
Property in a condition assuming all of the Site Work had been completed
(whether or not the case) and that the Property can be used for a use consistent
with the Improvements, and shall be determined as of the date of Buyer's Breach.
9.4.1 Certain Conditions to Recovery. The following conditions
------------------------------
precedent shall each have been satisfied prior to any recovery by Seller of
Actual Damages:
(i) Seller shall have delivered a written notice to both Buyer
and to Escrow Holder that Seller has performed each of its obligations
under this Agreement, including, but not limited to, those obligations
of Seller set forth in Articles 3 and 5 of this Agreement required to
be performed by Seller as of the time of Buyer's Breach. Seller's
notice shall further state that Seller wishes to have its claim of
Buyer's breach and its claim for damages associated with that breach
submitted to and adjudicated by an arbitrator under the rules and
auspices of the American Arbitration Association ("AAA").
9.1.5 Arbitration of Buyer's Breach and Actual Damages.
------------------------------------------------
(i) Within five (5) business days of the date of Seller's notice,
each party shall propose a list of no less than two (2) and no more
than five (5) arbitrators each of whom is an approved panel member of
AAA
<PAGE>
familiar with handling commercial real property disputes. The
first name listed on both lists shall be chosen as the arbitrator to
hear Seller's claim. Each list shall also designate the name of one
(1) arbitrator who, if the parties' lists do not contain any common
names, shall appoint one (1) arbitrator from its list who together,
within five (5) business days of notification by Seller will propose
the name of a third arbitrator who shall be qualified under the same
criteria. The chosen arbitrator shall hear Seller's claim within
sixty (60) days after completion of the appraisal described in Section
9.1.3 above or as soon as practicable in the discretion of arbitrator.
The decision of the arbitrator shall be binding upon both Seller and
Buyer and may be entered in any court of competent jurisdiction.
(ii) The determination of the arbitrator shall be limited to the
sole issues of Seller's claim for Actual Damages caused by Buyer's
Breach and any dispute as to the existence of Buyer's Breach.
(iii) The arbitrator shall prepare and provide to the parties a
written decision on all matters subject to the arbitration, including
factual findings and the reasons that form the basis of the
arbitrator's decision. The arbitrator shall not have the power to
commit errors of law or legal reasoning, and the award of the
arbitrator shall be subject to vacation or correction for any such
error or any other grounds specified in Code of Civil Procedure
Section 1286.2 or Section 1286.6. The award of the arbitrator shall
be mailed to the parties no later than thirty (30) days after the
close of the arbitration hearing or as soon as practicable in the
discretion of arbitrator. The arbitration proceeding shall be
reported by a certified shorthand court reporter. Written transcripts
of the proceedings shall be prepared and made available to the
parties.
(iv) The provisions of the California Evidence Code shall apply
to the arbitration hearing.
(v) The costs of arbitration and the appraisal shall be borne by
the non-prevailing party unless the arbitrator determines otherwise.
Any Deposit which shall have been nonrefundable at the time of the
alleged breach shall be applicable to any Actual Damages to be paid by
Buyer to Seller under this Section 9.1.
<PAGE>
(vi) NOTICE: BY INITIALING IN THE SPACE BELOW, EACH PARTY IS
AGREEING TO HAVE ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN
THIS SECTION 9.1 DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY
CALIFORNIA LAW AND IS GIVING UP ANY RIGHTS IT MIGHT POSSESS TO HAVE
THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY INITIALING IN THE
SPACE BELOW, EACH PARTY IS GIVING UP ITS JUDICIAL RIGHTS TO DISCOVERY
AND APPEAL, UNLESS THOSE RIGHTS ARE SPECIFICALLY INCLUDED IN THIS
SECTION 9.1. IF EITHER PARTY REFUSES TO SUBMIT TO ARBITRATION AFTER
AGREEING TO THIS SECTION 9.1, IT MAY BE COMPELLED TO ARBITRATE UNDER
THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. THE PARTIES'
AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY.
WE HAVE READ AND UNDERSTOOD THE FOREGOING AND AGREE TO SUBMIT DISPUTES
ARISING OUT OF THIS SECTION 9.1 TO NEUTRAL AND BINDING ARBITRATION.
__________________________________________
Buyer's Initials Seller's Initials
9.2 Default by Seller. SUBJECT TO PARAGRAPH 3.2, IN THE EVENT THE
-----------------
CLOSE OF ESCROW AND THE CONSUMMATION OF THE TRANSACTIONS HEREIN CONTEMPLATED DO
NOT OCCUR BY REASON OF ANY DEFAULT BY SELLER, BUYER SHALL BE ENTITLED TO EITHER
(i) TERMINATE THIS AGREEMENT AND THE ESCROW AND RECOVER FROM SELLER THE DEPOSIT
AND ITS OUT-OF-POCKET COSTS FOR BUYER'S STUDIES IN AN AMOUNT NOT TO EXCEED
$100,000.00, OR (ii) SEEK THE SPECIFIC PERFORMANCE HEREOF.
9.3 Waiver of Right to Record Lis Pendens. AS PARTIAL CONSIDERATION
-------------------------------------
FOR SELLER ENTERING INTO THIS AGREEMENT, BUYER EXPRESSLY WAIVES ANY RIGHT (AT
COMMON LAW OR OTHERWISE) TO RECORD OR FILE A LIS PENDENS OR A NOTICE OF PENDENCY
OF ACTION OR SIMILAR NOTICE AGAINST ALL OR ANY PORTION OF THE PROPERTY IN
CONNECTION WITH ANY ALLEGED DEFAULT BY SELLER HEREUNDER. UNLESS IT SATISFIES
THE FOLLOWING CONDITIONS PRECEDENT, (1) THE OUTSIDE CLOSING DATE SHALL HAVE
OCCURRED, AND (2) WITHIN SIXTY
<PAGE>
(60) DAYS AFTER THE OUTSIDE CLOSING DATE, BUYER SHALL (A) NOTIFY THE ESCROW
HOLDER AND SELLER IN WRITING OF ITS ELECTION TO SEEK SPECIFIC PERFORMANCE AND
(B) DEPOSIT WITH ESCROW HOLDER THE PURCHASE PRICE IN IMMEDIATELY AVAILABLE FUNDS
WITHOUT ANY ADJUSTMENTS EXCEPT FOR PRORATIONS. SUCH ELECTION NOTICE SHALL: (i)
REPRESENT TO ESCROW HOLDER AND SELLER THAT BUYER IS READY, WILLING AND ABLE TO
PERFORM ALL OF BUYER'S OTHER OBLIGATIONS THAT WERE PERFORMABLE ON THE OUTSIDE
CLOSING DATE; AND (ii) IRREVOCABLY INSTRUCT ESCROW HOLDER TO DELIVER THE
PURCHASE PRICE TO SELLER IMMEDIATELY UPON SELLER'S DEPOSIT OF THE EXECUTED GRANT
DEED AND FIRPTA CERTIFICATE WITH ESCROW HOLDER.
___________________ __________________
Buyer's Initials Seller's Initials
ARTICLE 10
REPRESENTATIONS AND WARRANTIES
------------------------------
10.1 Representations and Warranties of Seller. Seller represents and
----------------------------------------
warrants to Buyer all of the following, as of the date hereof and as of the
Closing:
10.1.1 Authority. Seller has the full power and authority to enter
---------
into and comply with the terms of this Agreement. The execution, delivery and
performance of this Agreement by Seller have been duly authorized and approved
by all requisite action, and no other authorizations or approvals (other than
the Lot Line Adjustment), whether of governmental bodies or otherwise, will be
necessary in order to enable Seller to enter into or to comply with the terms of
this Agreement.
10.1.2 Binding Effect of Documents. This Agreement and all other
---------------------------
documents and certificates executed and delivered by Seller in connection with
the transactions contemplated by this Agreement constitute legal, valid and
binding obligations of Seller, enforceable against Seller in accordance with
their respective terms. Neither this Agreement nor anything provided to be done
under this Agreement violates or shall violate any contract, document,
understanding, agreement or instrument to which Seller is a party or by which it
is bound.
<PAGE>
10.1.3 Absence of Litigation. Except as disclosed to Buyer, to
---------------------
Seller's knowledge, Seller has not been served with, or received a copy of, a
complaint in litigation which will affect the Property.
10.1.4 Absence of Material Change. Except as disclosed to Buyer,
--------------------------
to Seller's knowledge, Seller has not received any written notice from a
governmental agency of (i) any pending widening, modification or realignment of
the streets abutting the Property, or (ii) any proposed eminent domain action;
or (iii) any uncured violation of any law, ordinance or regulation (including
but not limited to zoning, building, fire, health and safety) with respect to
portions of the Property other than improvements.
10.1.5 Absence of Hazardous Materials. To Seller's knowledge, and
------------------------------
except as otherwise disclosed to Buyer in writing (including without limitation
the reports described in Schedule 12.2): (i) there are no Hazardous Materials
installed or stored in or otherwise existing at, on, in or under the Property
which are in violation of any Environmental Laws or which are or have been at
any time in amounts or concentrations sufficient to require the reporting of
such materials to any governmental authority, and (ii) no Hazardous Materials
were previously installed, stored or existed at the Property in violation of any
Environmental Laws.
As used herein, the term "Hazardous Materials" shall mean any
hazardous or toxic materials, substances or wastes, pollutants or contaminants
defined, listed or regulated by the Environmental Laws (defined below) or any
other federal, state, county, or local law, regulation, order or common law
decision, including but not limited to (i) any petroleum products and/or by-
products (including any fraction thereof), flammable substances, explosives,
radioactive materials, hazardous or toxic wastes, substances or materials, known
carcinogens or any other materials, contaminants or pollutants which pose a
hazard to the Property or to persons on or about the Property or cause the
Property to be in violation of any Environmental Laws, (ii) asbestos in any form
which is friable, (iii) urea formaldehyde in form insulation or any other form,
(iv) transformers or other equipment which contain dielectric fluid containing
levels of polychlorinated biphenyls in excess of fifty (50) parts per million or
any other more restrictive standard then prevailing, (v) medical wastes and
biohazards, (vi) radon gas, and (vii) any other chemical, material or substance
exposure to which is prohibited, limited or regulated by any governmental
authority or may or could pose a hazard to the health and safety of the
occupants of the Property or the owners and/or occupants of property adjacent to
or surrounding the Property.
<PAGE>
As used herein, the term "Environmental Laws" means and includes any
law, ordinance, regulation or requirement now or hereinafter in effect relating
to land use, soil, surface water, groundwater (including the protection,
cleanup, removal, remediation or damage thereof), human health and safety or any
other environmental matter, including, without limitation, the following laws as
the same may be amended from time to time: the Comprehensive Environmental
Response Compensation and Liability Conservation and Recovery Act (42 U.S.C.
(S)(S) 9601, et seq.), the Solid Waste Disposal Act, as amended by the Resource
-------
Conservation and Recovery Act (42 U.S.C. (S)(S) 6901 et seq.), the Emergency
-------
Planning and Community Right to Know Act (42 U.S.C. (S)(S) 11001 et seq.), the
-------
Clean Air Act (42 U.S.C. (S)(S) 7401 et seq.), the Clean Water Act (33 U.S.C.
-------
(S)(S) 1251 et seq.), the Toxic Substances Control Act (15 U.S.C. (S)(S) 2601 et
------- --
seq.), the Hazardous Materials Transportation Act (49 U.S.C. (S)(S) 1801 et
- ---- --
seq.), the Occupational Safety and Health Act (29 U.S.C. (S)(S) 651 et seq.),
-------
the Federal Insecticide Fungicide and Rodenticide Act (7 U.S.C. (S)(S) 136 et
--
seq.), and the Safe Drinking water Act (42 U.S.C. (S)(S) 300f et seq.), as any
- ---- -------
of the same may be amended from time to time, and any state or local law dealing
with environmental matters, and any regulations, orders, rules, procedures,
guidelines and the like promulgated in connection therewith, regardless of
whether the same are in existence on the date of this Agreement.
10.1.6 Limitations on Seller's Warranties.
----------------------------------
As used in this Agreement, the words "Seller's knowledge" or
words of similar import shall be deemed to mean, and shall be limited
to, the actual (as distinguished from implied, imputed or
constructive) knowledge of Daniel Bane, David Woodward or Robert Ling
without any duty of inquiry or investigation.
If at or prior to the Closing, (A) Buyer shall become aware
(whether through its own efforts, by notice from Seller or otherwise)
that any of the representations or warranties made herein by Seller,
are untrue, inaccurate or incorrect and shall give Seller notice
thereof at or prior to the Closing, or (B) Seller shall notify Buyer
that a representation or warranty made herein by Seller, is untrue,
inaccurate or incorrect, then Seller may, in its sole discretion,
elect by notice to Buyer to adjourn the Closing one or more times for
up to thirty (30) days in the aggregate in order to cure or correct
such untrue, inaccurate or incorrect representation or warranty. If
any such representation or warranty is either (1) immaterial or (2)
material but not materially untrue, inaccurate or incorrect, and is
not cured or corrected by Seller, on or before the
<PAGE>
Outside Closing Date (whether or not the Closing is adjourned as
provided above), Buyer shall nevertheless be deemed to, and shall,
waive such misrepresentation or breach of warranty and shall
consummate the transactions contemplated hereby without any reduction
of or credit against the Purchase Price. If any such representation or
warranty is both (1) material and (2) materially untrue, inaccurate or
incorrect, and is not cured or corrected by Seller, on or before the
Closing Date (whether or not the Closing is adjourned as provided
above), then Buyer, as its sole remedy for any and all such materially
untrue, inaccurate or incorrect material representations or
warranties, shall elect either (x) to waive such misrepresentations or
breaches of warranties and consummate the transactions contemplated
hereby without any reduction of or credit against the Purchase Price,
or (y) to terminate this Agreement by notice given to Seller on the
Outside Closing Date, in which event, this Agreement shall be
terminated and neither party shall have any further rights,
obligations or liabilities hereunder, except for the Surviving
Obligations, and except that Buyer shall be entitled to a return of
the Deposit provided Buyer is not otherwise in default hereunder.
Buyer acknowledges and agrees that (x) at or prior to the Closing,
Buyer's rights and remedies in the event any of Seller's
representations or warranties made in this Agreement are untrue,
inaccurate or incorrect shall be only as provided in this Section
10.1.6(ii), and (y) if the Closing does not occur, Buyer hereby
expressly waives, relinquishes and releases all other rights or
remedies available to it at law, in equity or otherwise (including,
without limitation, the right to seek damages from Seller) as a result
of any of Seller's representations or warranties made in this
Agreement being untrue, inaccurate or incorrect.
In the event the Closing occurs, notwithstanding anything
contained in Section 10.1.6(ii) or elsewhere in this Agreement to the
contrary, Buyer hereby expressly waives, relinquishes and releases any
right or remedy available to it at law, in equity or under this
Agreement to make a claim against Seller for damages that Buyer may
incur, or to rescind this Agreement and the transactions contemplated
hereby, as the result of any of Seller's representations or warranties
being untrue, inaccurate or incorrect if Buyer knew, should have known
or is deemed to have known that such representation or warranty was
untrue, inaccurate or incorrect at the time of the Closing and Buyer
nevertheless closes title hereunder. For example, Purchaser shall be
"deemed to have known" that a representation or warranty was untrue,
inaccurate or
<PAGE>
incorrect at the time of the Closing to the extent that the Property
information furnished or made available to or otherwise obtained by
Buyer contains information which is inconsistent with such
representation or warranty. The provisions of this Section 10.1.6(iii)
shall survive the Closing.
10.2 Representations and Warranties of Buyer. Buyer represents and
---------------------------------------
warrants to Seller all of the following, as of the date hereof and as of the
Closing:
10.2.1 Authority. Buyer is a duly qualified and registered
---------
corporation in the State of California, and has the full power and authority to
enter into and comply with the terms of this Agreement. The execution, delivery
and performance of this Agreement by Buyer have been duly authorized and
approved by all requisite action, and no other authorizations or approvals,
whether of governmental bodies or otherwise, will be necessary in order to
enable Buyer to enter into or to comply with the terms of this Agreement.
10.2.2 Binding Effect of Documents. This Agreement and all other
---------------------------
documents and certificates executed and delivered by Buyer in connection with
the transactions contemplated by this Agreement constitute legal, valid and
binding obligations of Buyer, enforceable against Buyer in accordance with their
respective terms. Neither this Agreement nor anything provided to be done under
this Agreement violates or shall violate any contract, document, understanding,
agreement or instrument to which Buyer is a party or by which it is bound.
10.3 Breach of Representations and Warranties. If Seller or Buyer
----------------------------------------
believes that the other party is in breach of the representations and warranties
set forth in Sections 10.1 or 10.2 above, then such party shall provide express
written notice of any claim of breach or default to the alleged breaching or
defaulting party, and such alleged breaching or defaulting party shall have five
(5) business days in which to cure such alleged default; provided, however, that
no such cure period may extend beyond the Closing.
10.4 Accuracy and Survival of Representations and Warranties. Each of
-------------------------------------------------------
the representations and warranties of Seller and Buyer contained in this
Agreement and in any document or certificate delivered in connection herewith is
at the date hereof and as of the Closing shall be true and correct in all
material respects. The representations and warranties set forth in or made
pursuant to Sections 10.1 and 10.2 shall remain operative and shall survive the
Closing for a period of six (6) months.
<PAGE>
ARTICLE 11
BROKERS' COMMISSIONS
--------------------
11.1 Brokers' Commissions. Seller and Buyer each represent and
--------------------
warrant to the other that neither has employed, retained or consulted any
broker, agent or other finder with respect to the Property except as provided in
the List of Particulars, and Seller and Buyer shall each indemnify, defend and
hold the other harmless from and against any and all claims, demands, causes of
action, debts, liabilities, judgments and damages, including, without
limitation, costs and reasonable attorneys' fees incurred in connection with the
foregoing, which may be asserted or recovered against the other on account of
any brokerage fee, commission of other compensation arising in breach of this
representation and warranty. Seller shall pay Brokers a commission for such
services pursuant to separate agreements delivered to and approved by Seller in
writing prior to the date hereof. Buyer has no obligation to pay Brokers.
Seller shall have no obligation to pay Brokers a commission or any other
compensation for their services if Buyer does not consummate its purchase of the
Property and pay the Purchase Price, except to the extent the Brokers are
entitled to compensation under their separate agreements in the event the
Closing does not occur due to a Seller Default under this Agreement. Neither
Seller nor Buyer shall have any obligation to pay any commission or fee to any
agent or broker other than Brokers who may have introduced Brokers to Buyer or
have provided any other assistance to Brokers or Buyer. The agreements of
Seller and Buyer set forth in this Article 11 shall survive the Closing and any
termination of this Agreement.
ARTICLE 12
ACCESS
------
12.1 Access to Property. From the date hereof until the Closing,
------------------
after reasonable prior notice from Buyer to Seller or IDS, Seller shall provide
Buyer and Buyer's agents with access to the Property. Buyer's inspection of the
Property shall not unreasonably disrupt the business operations or quiet
enjoyment of any tenants of the Property. Buyer shall be liable for any damage
or injury to any person or property occasioned by the acts of Buyer, Buyers
employees, agents or representatives during any such inspection, and Buyer
shall, and does hereby, indemnify, defend and hold harmless Seller and its
officers, directors, agents and employees from any and all liens, claims,
demands or liability resulting therefrom. Prior to entry onto the Property by
<PAGE>
Buyer or any of Buyer's employees, agents or representatives, Buyer shall
deliver to Seller evidence reasonably satisfactory to Seller that Buyer
maintains: (i) comprehensive general liability insurance covering Buyer's
operations in the minimum amount of Two Million Dollars ($2,000,000) per
occurrence, and (ii) workers' compensation insurance covering Buyers employees.
The indemnification by Buyer contained in this Section shall survive the Closing
and any termination of this Agreement, as the case may be.
12.2 Access to Operating Information. Upon the opening of Escrow,
-------------------------------
Seller shall provide Buyer and Buyer's agents with copies of the engineering and
environmental studies, surveys, title reports, permits and books and records
covering and relating to the operation of the Property, to the extent that these
documents are available or under Seller's control and relate directly to the
demolition of the existing improvements on the Property, the environmental
condition of the Property and other construction issues, except appraisals and
information which is privileged, confidential or proprietary. Buyer expressly
agrees that Seller shall furnish copies of such documents and information to
Buyer for informational purposes only and without representation or warranty as
to the accuracy or completeness of the contents of such materials. Buyer
covenants and agrees that Buyer will not rely on such documents and information
and will conduct its own due diligence on the matters contained in such
documents and information. All books and records provided to Buyer in
connection with Buyer's inspection of the Property will be held by Buyer in
strict confidence and solely for the purpose of enabling Buyer to evaluate
Buyer's purchase of the Property pursuant to this Agreement. Buyer acknowledges
receipt of the due diligence materials described on Schedule 12.2.
ARTICLE 13
MISCELLANEOUS MATTERS
---------------------
13.1 Notices. All notices, demands or requests required or permitted
-------
to be given pursuant to this Agreement shall be in writing. If not otherwise
provided hereunder, all notices, demands or requests to be sent to any party
hereto shall be deemed to have been properly given or served by delivering the
same personally to each party, by sending the same through a nationally
recognized, overnight courier service, by depositing the same in the United
States mail, addressed to such party, postage prepaid, and registered or
certified with return receipt requested, or by telecopy with an original to
follow by United States mail at the addresses for such parties indicated on the
List of Particulars. All notices, demands and requests shall be
<PAGE>
effective when personally delivered to the addressee, a hard copy
electronically-generated confirmation of facsimile transmission is received by
the sender or received by overnight courier, or upon the third day after being
deposited in the United States mail in accordance with the foregoing.
13.2 Time. Time is of the essence in this Agreement and each and
----
every provision of this Agreement.
13.3 Binding Effect. This Agreement shall bind and inure to the
--------------
benefit of the parties hereto and their respective heirs, executors,
administrators, legal representatives, successors and assigns.
13.4 Merger of Agreement. Unless otherwise specified in this
-------------------
Agreement, all the terms and conditions of this Agreement shall not survive the
Closing and shall be merged into the Grant Deed and Bill of Sale from Seller to
Buyer.
13.5 Severability. If all or any portion of any of the provisions of
------------
this Agreement shall be declared invalid, illegal or unenforceable bylaws
applicable thereto, then such invalidity, illegality or unenforceability shall
not affect any other provision of this Agreement,
13.6 Captions. The titles or captions of the provisions of this
--------
Agreement are merely for convenience of reference and are not representations of
matters included or excluded from such provisions.
13.7 Entire Agreement. The parties hereto expressly acknowledge and
----------------
agree that, with regard to the subject matter of this Agreement and the
transactions contemplated herein, there are no oral agreements between the
parties hereto and this Agreement, including the defined terms and all exhibits
and addenda, if any, attached hereto, embodies the final and complete agreement
between the parties, supersedes all prior and contemporaneous negotiations,
offers, proposals, agreements, commitments, promises, acts, conduct, course of
dealing, representations, statements, assurances and understandings, whether
oral or written, and may not be varied or contradicted by evidence of any such
prior or contemporaneous matter or by evidence of any subsequent oral agreement
of the parties hereto.
13.8 No Modifications Except in Writing. No modification hereof shall
----------------------------------
be binding unless so forth in writing and signed by the party or patties to be
bound by the modification.
<PAGE>
13.9 Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of California.
13.10 Interpretation. The doctrine that any ambiguity contained in a
--------------
contract shall be construed against the party whose counsel has drafted the
contract is expressly waived by each of the parties hereto with respect to this
Agreement.
13.11 Further Assurances. In addition to the acts and deeds recited
------------------
herein and contemplated to be performed, executed and/or delivered by either
Seller or Buyer, Seller and Buyer shall perform, execute and/or deliver or cause
to be performed, executed and/or delivered on the Closing, or if necessary,
after the Closing, any and all further acts, deeds and assurances as may, from
time to time, be reasonably required to consummate the transactions contemplated
in this Agreement.
13.12 Agreement Not to Be Recorded; Confidentiality. Seller and
---------------------------------------------
Buyer acknowledge and agree that neither this Agreement nor any memorandum or
summary hereof shall be recorded or filed in any public records or files and any
such recording or filing by any person, whether or not a party to this
Agreement, shall be a violation of this Agreement and shall be considered null
and void. Seller and Buyer further acknowledge and agree that, prior to the
Closing, neither Seller nor Buyer shall disclose any material term of this
Agreement to any party not affiliated with or advising Seller or Buyer, without
the prior written consent of the other party hereto. Seller and Buyer further
acknowledge that either party may enforce any breach of such confidentiality by
seeking injunctive relief, or by suit for damages, or both, or by any other
legal means. This provision shall survive the Closing or the termination of
this Agreement.
13.13 Attorney's Fees and Expenses. If either party to this
----------------------------
Agreement brings suit to enforce this Agreement, then the prevailing party shall
be entitled to recover from the other party reasonable attorneys' fees and costs
incurred by the prevailing party and to receive an award therefor from a court
of competent jurisdiction.
13.14 Assignment. Buyer shall not assign this Agreement without
----------
obtaining Seller's's prior written consent, which consent shall not be
unreasonably withheld; provided further, however, that Buyer may assign this
Agreement at Closing without Seller's prior written consent to the Trustee or
another trustee acting in a similar capacity to Trustee for purposes of Buyer's
financing arrangements. No such assignment shall release Buyer from any
obligations under this Agreement.
<PAGE>
13.15 Days. Except where specified as "business" days, the term
----
"days" means calendar days. The term "business days" means calendar days other
than Saturday or Sunday when national banks are open for business in Los
Angeles, California.
ARTICLE 14
PROPERTY "AS-IS"
----------------
14.1 No Side Agreements or Representations; As-is Purchase. Buyer
-----------------------------------------------------
represents, warrants and covenants to Seller that Buyer will, during the
Contingency Period, independently and personally inspect the Property and
Improvements, if any, and that Buyer has entered into this Agreement based upon
its rights and intentions to make such personal examination and inspection.
Buyer agrees that Buyer will accept the Property, in its then condition AS-IS
AND WITH ALL ITS FAULTS, including without limitation, any faults and conditions
specifically referenced in this Agreement. No person acting on behalf of Seller
is authorized to make, and by execution hereof, Buyer acknowledges and agrees
that, except as specifically provided in Section 10.1 of this Agreement, Seller
has not made, does not make and specifically negates and disclaims any
representations, warranties, promises, covenants, agreements or guaranties of
any kind or character whatsoever, whether express or implied, oral or written,
past, present or future, of, as to, concerning or with respect to the Property.
Buyer further acknowledges and agrees that having been given the
opportunity to inspect the Property and review information and documentation
affecting the Property, Buyer is relying solely on its own investigation of the
Property and review of such information and documentation, and not on any
information provided or to be provided by Seller. Buyer further acknowledges
and agrees that any information made available to Buyer or provided or to be
provided by or on behalf of Seller with respect to the Property was obtained
from a variety of sources and that Seller has not made any independent
investigation or verification of such information and makes no representations
as to the accuracy or completeness of such information except as may otherwise
be provided herein. Buyer agrees to fully and irrevocably release all such
sources of information and preparers of information and documentation to the
extent such sources or preparers are Seller or Seller's employees, officers,
directors, representatives, agents, servants, attorneys, affiliates, parent
companies, subsidiaries, successors or assigns from any and all claims that they
may now have or hereafter acquire against such sources and preparers of
information for any costs, loss, liability, damage, expense, demand, action or
cause of action arising from such information or documentation. Seller is not
liable or bound in any manner by any oral or
<PAGE>
or written statements, representations or information pertaining to the
Property, or the operation thereof, furnished by any of the foregoing entities
and individuals or any other individual or entity. Buyer further acknowledges
and agrees that to the maximum extent permitted by law, the sale of the Property
as provided for herein is made on an "AS-IS" condition and basis with all
-----
faults, and that Seller has no obligations to make repairs, replacements or
improvements except for the Site Work.
14.2 Release. Except as expressly provided in this Agreement,
-------
including with respect to Seller's obligation to perform the Site Work, Buyer
and anyone claiming by, through or under Buyer hereby fully and irrevocably
releases Seller and each of its employees, officers, directors, representatives,
agents, servants, attorneys, affiliates, parent companies, subsidiaries,
successors and assigns, and all persons, firms, corporations and organizations
acting on their behalf, from any and all claims that it may now have or
hereafter acquire against Seller or any of its employees, officers, directors,
representatives, agents, servants, attorneys, affiliates, parent companies,
subsidiaries, successors and assigns, and all persons, firms, corporations and
organizations acting on their behalf for any costs, loss, liability, damage,
expenses, demand, action or cause of action arising from or related to any
construction defects, errors, omissions or other conditions, latent or
otherwise, geotechnical and seismic, affecting the Property or any portion
thereof including, without limitation, (1) environmental matters (other than
those matters included within the Site Work) which were:
(i) Described or referred to in any environmental audit obtained
by Buyer; or
(ii) Reasonably discoverable by prudent investigation during the
Contingency Period; or
(iii) Otherwise disclosed by Seller to Buyer or discovered by
Buyer at any time prior to the Closing;
And (2) the items described in Section 14.1 above.
This release includes claims of which Buyer is presently unaware or
which Buyer does not presently suspect to exist which, if known by Buyer, would
materially affect Buyer's release to Seller. Buyer specifically waives the
provision of California Civil Code Section 1542, which provides as follows:
"A general release does not extend to claims which the creditor does not
know or expect to exist in his favor at the
<PAGE>
time of executing the release, which if known to him must have materially
affected the settlement with the debtor."
It is understood and agreed that the Purchase Price has been adjusted
by prior negotiations to reflect that all of the Property is sold by Seller and
purchased by Buyer subject to the foregoing. It is not contemplated that the
Purchase Price will be increased if costs to Buyer associated with the Property
prove to be less than expected nor will the Purchase Price be reduced if the
Buyer's plan for the Property leads to higher cost projections. The sole remedy
of the Buyer will be to terminate this agreement as provided herein prior to the
end of the Contingency Period.
_________________________ ___________________________
Buyer's initials Seller's initials
IN WITNESS WHEREOF, the parties hereto have executed this Purchase and
Sale Agreement and Joint Escrow Instructions to become effective as of the date
first written above.
SELLER:
CERTIFIED GROCERS OF CALIFORNIA, LTD.
a California corporation
By: /s/ Robert M. Ling, Jr.
-----------------------
Name: Robert M. Ling, Jr.
-------------------
Title: Vice President & General Counsel
--------------------------------
<PAGE>
BUYER:
SMART & FINAL STORES CORPORATION,
a California corporation
By: /s/ Donald G. Alvarado
----------------------
Name: Donald G. Alvarado
------------------
Title: Sr. VP Law/Development
----------------------
By: /s/ Robert Wess
---------------
Name: Robert Wess
-----------
Title: Vice President
--------------
The undersigned, a duly authorized
representative of Escrow Holder, hereby
accepts this Agreement and agrees to act as
Escrow Holder in accordance herewith.
COMMERCE ESCROW COMPANY
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
<PAGE>
[Logo of Wells Fargo Bank]
September 18, 1997
Smart & Final, Inc.
4700 South Boyle Avenue
Los Angeles, CA 90058
Attention: Richard Phegley, Treasurer
Dear Richard:
I am pleased to advise you that Wells Fargo Bank, N.A. ("WFB") has approved for
use by Smart & Final, Inc. an uncommitted short term money market facility in
the principal amount of up to fifty million dollars ($50,000,000), subject to
the following terms and conditions:
BORROWER: Smart & Final, Inc. ("BORROWER")
------------
PRINCIPAL AMOUNT: Up to fifty million dollars ($50,000,000). Advances under
this facility shall be made in multiples of five million
dollars ($1,000,000) up to an aggregate of $50,000,000.00
outstanding at any one time. WFB shall not have any
commitment or obligation to make any advances and each
advance will be made only in WFB's sole discretion.
INTEREST RATE: A fixed rate of interest as quoted by WFB on the date of each
advance.
TERM OF ADVANCE: As mutually agreed by WFB and ("BORROWER") at the time
------------
of each advance provided that no advance shall have a term
exceeding ninety (90) days and no advance shall mature after
December 17, 1998. Principal and interest of each advance
shall be payable at the maturity of each advance. WFB shall
have the option of assigning or selling participations in any
advances.
PURPOSE: For working capital requirements.
EFFECTIVE DATE: September 18, 1997.
TERMINATION DATE: At any time upon written notice by either ("BORROWER")
-----------
or WFB, provided, however, that such termination shall not
affect any advance outstanding at the time of termination. In
any event, this line of credit will expire no later than
September 17, 1998.
<PAGE>
September 18, 1997
Page 2
DOCUMENTATION: 1. Note as enclosed.
2. Supporting documentation, including Board Resolution,
Certificate of Incumbency and Authorized Signatures.
OTHER TERMS: 1. Continued maintenance of a financial conditional
satisfactory to WFB.
2. Provision in a timely manner to WFB of quarterly
unaudited financial statements and an audited fiscal
year-end report certified by a nationally recognized
accounting firm. Provision of 10Q and 10K reports as
available.
WIRE INSTRUCTIONS: WFB will wire monies to the following instructions only. Any
changes must by communicated to WFB in writing and signed by
an authorized signer.
Bank Name : Wells Fargo Bank, N.A.
ABA Number : 121000248
Credit To : Smart & Final, Inc.
Account Number : 4159-391218
COMMITMENT FEE: It is understood that this facility does not constitute a
commitment by WFB to lend at any time and that any advance
hereunder shall be at WFB's sole discretion. Accordingly, no
commitment fee will be payable to WFB.
GOVERNING LAW: This letter is governed by and construed under the laws of
the State of California.
ARBITRATION: 1. Arbitration. Upon the demand of any party, any Dispute
-----------
shall be resolved by binding arbitration (except as set
forth in paragraph 5 below) in accordance with the terms
of this letter. A "Dispute" shall mean any action,
dispute, claim or controversy of any kind, whether in
contract or tort, statutory or common law, legal or
equitable, now existing or hereafter arising under or in
connection with, or in any way pertaining to, this letter
or the enclosed note, or any past, present or future
extensions of credit and other activities, transactions
or obligations of any kind related directly or indirectly
to this letter or the enclosed note, including without
limitation, any of the foregoing arising in connection
with the exercise of any self-help, ancillary or other
remedies pursuant to this letter or the enclosed note.
Any party may by summary proceedings bring an action in
court to compel arbitration of a Dispute. Any party who
fails or refuses to submit to arbitration following a
lawful demand by any other party shall bear all costs and
expenses incurred by such other party in compelling
arbitration of any Dispute.
<PAGE>
September 18, 1997
Page 3
2. Governing Rules. Arbitration proceedings shall be
---------------
administered by the American Arbitration Association
("AAA") or such other administrator as the parties shall
mutually agree upon in accordance with the AAA Commercial
Arbitration Rules. All Disputes submitted to arbitration
shall be resolved in accordance with the Federal
Arbitration Act (Title 9 of the United States Code),
notwithstanding any conflicting choice of law provision
in this letter or the enclosed note. The arbitration
shall be conducted at a location in California selected
by the AAA or other administrator. If there is any
inconsistency between the terms hereof and any such
rules, the terms and procedures set forth herein shall
control. All statutes of limitation applicable to any
Dispute shall apply to any arbitration proceeding. All
discovery activities shall be expressly limited to
matters directly relevant to the Dispute being
arbitrated. Judgment upon any award rendered in an
arbitration may be entered in any court having
jurisdiction; provided however, that nothing contained
herein shall be deemed to be a waiver by any party that
is a bank of the protections afforded to it under 12
U.S.C. (S)91 or any similar applicable state law.
3. No Waiver; Provisional Remedies, Self-Help and
-----------------------------------------------
Foreclosure. No provision hereof shall limit the right
-----------
of any party to exercise self-help remedies such as
setoff, foreclosure against or sale of any real or
personal property collateral or security, or to obtain
provisional or ancillary remedies, including without
limitation injunctive relief, sequestration, attachment,
garnishment or the appointment of a receiver, from a
court of competent jurisdiction before, after or during
the pendency of any arbitration or other proceeding. The
exercise of any such remedy shall not waive the right of
any party to compel arbitration hereunder.
4. Arbitrator Qualifications and Powers; Awards.
--------------------------------------------
Arbitrators must be active members of the California
State Bar or retired judges of the state or federal
judiciary of California, with expertise in the
substantive law applicable to the subject matter of the
Dispute. Arbitrators are empowered to resolve Disputes by
summary rulings in response to motions filed prior to the
final arbitration hearing. Arbitrators (i) shall resolve
all Disputes in accordance with the substantive law of
the state of California, (ii) may grant any remedy or
relief that a court of the state of California could
order or grant within the scope hereof and such ancillary
relief as is necessary to make effective any award, and
(iii) shall have the power to award recovery of all costs
and fees, to impose sanctions and to take such other
actions as they deem necessary to the same extent a judge
could pursuant to the Federal Rules of Civil Procedure,
the California Rules of Civil Procedure or other
applicable law. Any Dispute in which the amount in
controversy is $5,000,000 or less shall be decided by a
single arbitrator who shall not render an award of
greater than $5,000,000 (including damages, costs, fees
and expenses). By submission to a single arbitrator, each
party expressly waives any right or claim to recover more
than $5,000,000. Any Dispute in which the amount in
controversy exceeds $5,000,000 shall
<PAGE>
September 18, 1997
Page 4
be decided by majority vote of a panel of three
arbitrators; provided however, that all three arbitrators
must actively participate in all hearings and
deliberations.
5. Judicial Review. Notwithstanding anything herein to the
---------------
contrary, in any arbitration in which the amount in
controversy exceeds $25,000,000, the arbitrators shall be
required to make specific, written findings of fact and
conclusions of law. In such arbitrations (i) the
arbitrators shall not have the power to make any award
which is not supported by substantial evidence or which
is based on legal error, (ii) an award shall not be
binding upon the parties unless the findings of fact are
supported by substantial evidence and the conclusions of
law are not erroneous under the substantive law of the
state of California, and (iii) the parties shall have in
addition to the grounds referred to in the Federal
Arbitration Act for vacating, modifying or correcting an
award the right to judicial review of (A) whether the
findings of fact rendered by the arbitrators are
supported by substantial evidence, and (B) whether the
conclusions of law are erroneous under the substantive
law of the state of California. Judgment confirming an
award in such a proceeding may be entered only if a court
determines the award is supported by substantial evidence
and not based on legal error under the substantive law of
the state of California.
6. Miscellaneous. To the maximum extent practicable, the
-------------
AAA, the arbitrators and the parties shall take all
action required to conclude any arbitration proceeding
within 180 days of the filing of the Dispute with the
AAA. No arbitrator or other party to an arbitration
proceeding may disclose the existence, content or results
thereof, except for disclosures of information by a party
required in the ordinary course of its business, by
applicable law or regulation, or to the extent necessary
to exercise any judicial review rights set forth herein.
If more than one agreement for arbitration by or between
the parties potentially applies to a Dispute, the
arbitration provision most directly related to this
letter or the enclosed note or the subject matter of the
Dispute shall control. This arbitration provision shall
survive termination, amendment or expiration of this
letter or the enclosed note and any relationship between
the parties.
If the above terms and conditions are acceptable to you, please indicate by
signing and returning the enclosed copy of this letter and the original note.
<PAGE>
September 18, 1997
Page 5
We sincerely appreciate the opportunity to provide you with this competitive
source of short-term funding and look forward to your active use of this
facility.
WELLS FARGO BANK, N. A.
/s/ Kathleen Barnes
- -------------------
Name Kathleen Barnes
Vice President
- --------------------------------
Title
Accepted By:
SMART & FINAL, INC.
/s/ Richard Phegley
- -------------------------------------------
Name Richard Phegley
Vice President and Treasurer
- -------------------------------------------
Title
Enclosures
<PAGE>
NOTE
----
$50,000,000 September 18, 1997
For value received, the undersigned, Smart & Final, Inc. ("Borrower"), hereby
promises to pay to the order of WELLS FARGO BANK, N. A. ("WFB"), in United
States dollars and in immediately available funds at 707 Wilshire Boulevard, Los
Angeles, California, the principal sum of fifty million dollars ($50,000,000) or
so much thereof as may be outstanding hereunder, whichever is less, together
with interest from the date of each advance on the daily unpaid principal
balance of said advance. Each advance hereunder shall be repaid on the date
mutually agreed by Borrower and WFB at the time of making such advance, together
with interest thereon at the rate per annum mutually agreed by Borrower and WFB
at the time of making of such advance, provided that all principal and interest
outstanding on December 17, 1998 shall be due and payable on such date.
WFB shall not be obligated to make any advance hereunder and any advances
will be made solely in WFB's discretion.
Interest on each advance hereunder shall be computed on the basis of a year
of 360 days for the actual number of days elapsed. Any amount of principal not
paid when due hereunder shall thereafter bear interest at a rate per annum equal
to 1% in excess of the rate announced within WFB from time to time as its "Prime
Rate." Interest not paid when due shall thereafter bear like interest as the
principal.
In the event any advance hereunder is prepaid prior to the maturity date
agreed upon for that advance, the Borrower shall reimburse WFB on demand for any
loss incurred by WFB as a result of such prepayment, including any loss of
income resulting from WFB's reinvestment or reemployment of the amount prepaid
at a rate which is less than the interest rate agreed upon for such advance.
WFB is authorized to record on the schedule attached to and made a part of
this Note (a) the date, amount, maturity date and rate of interest agreed upon
by WFB and Borrower with respect to each advance and (b) all payments received
by WFB hereunder. Such schedule shall be prima facie evidence of the matters so
----- -----
recorded, provided that WFB's failure to make any such entries shall not affect
Borrower's obligations hereunder.
This Note is referred to in, and is entitled to the benefits of, that certain
letter agreement between WFB and the Borrower of even date herewith.
Borrower hereby waives diligence, presentment, demand, protest and notice of
any kind whatsoever. Borrower promises to pay costs of collection and reasonable
attorneys' fees if default is made in the payment of this Note.
In the event of nonpayment when due of principal of or interest on this Note,
the whole amount of principal and interest shall, at the option of the holder of
this Note, become immediately due and payable.
<PAGE>
Advances under this Note may be requested, and the interest rate quoted by
WFB agreed to, by any authorized officer of the undersigned. The undersigned
hereby authorizes WFB to rely upon the telephonic or written instruction of any
person identifying himself or herself as an authorized officer of the
undersigned without any obligation on the part of WFB to confirm the identity or
authority of such persons.
This Note shall be governed by and construed under the laws of the State of
California.
IN WITNESS WHEREOF, the undersigned has caused this Note to be executed by
its officer or officers thereunto duly authorized and directed by appropriate
corporate authority.
SMART & FINAL, INC.
/s/ Richard Phegley
-------------------
Name
Vice President & Treasurer
--------------------------
Title
2
<PAGE>
SCHEDULE TO NOTE OF (SMART & FINAL, INC.)
-----------------------------------------
DATED (SEPTEMBER 1, 1997)
-------------------------
Principal Maturity Principal Interest Paid
Date of Amount of Date of Amount Amount Through Principal Notation
Advance Advance Advance Paid Paid Date Balance Made By
- ------- ------- ------- ---- ---- ---- ------- -------
3
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered
into as of the 26th day of September, 1997, by and among (i) AMERICAN
FOODSERVICE DISTRIBUTORS, a California corporation (the "Buyer"), (ii) ORLANDO
FOODSERVICE, INC. and CAPRICORN FOODS OF CENTRAL FLORIDA, INC., each of which is
a Florida corporation (the "Companies"), (iii) MICHAEL G. ALTIF ("Altif"), and
(iv) FREDERICK COE ("Coe") (Altif and Coe, collectively, the "Shareholders").
RECITALS
--------
A. The Shareholders own all of the outstanding shares of the
Companies.
B. The Companies are engaged in the wholesale distribution of food
and related equipment and supplies in Central Florida (the "Business") and is
interested in selling substantially all of its assets and discontinuing the
Business.
C. Buyer desires to purchase and the Companies desires to sell
substantially all of the Companies' assets, on the terms and conditions set
forth below.
ACCORDINGLY, in consideration of the foregoing and the mutual
covenants set forth below, the parties agree as follows:
AGREEMENT
---------
1. PURCHASE AND SALE OF ASSETS.
---------------------------
1.1 Transfer of Purchased Assets. In consideration of the payment of the
----------------------------
purchase price set forth in Section 1.5 below, the Companies shall sell, assign
and deliver to Buyer, on the Closing Date (as defined in Section 2.1 below),
free and clear of any and all liens, charges, claims, encumbrances, pledges,
security interests, community property rights, equities, liabilities, debts,
obligations, restrictions on transfer or other defects in title of any kind or
nature, whether known or unknown, fixed or contingent, except for the Assumed
Liabilities (as defined in Section 1.3 below), and Buyer shall purchase and
accept, all assets, properties, rights, titles and interests of every kind and
nature owned or leased by the Companies and used in connection with the Business
as of the Closing Date, whether tangible or intangible, real or personal, and
wherever located and by whomever possessed (the "Purchased Assets"), including,
without limitation, the following, but excluding the Excluded Assets (as defined
in Section 1.2 below):
(a) all deposits, cash and cash equivalents, securities and investments;
(b) all accounts and notes receivable, whether or not evidenced by a note;
(c) all prepayments, prepaid taxes and expenses, credits and deferred
charges;
1
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(d) all interests in real property (including, without limitation, land,
buildings, fixtures and improvements thereon, and easements, licenses,
rights of way, permits and other appurtenants thereto) whether owned
in fee, leased, subleased or otherwise;
(e) all raw materials, packaging, spare parts, work-in-process, finished
goods, inventories and supplies;
(f) all machinery, equipment, computers, telephone systems, furniture,
automobiles, trucks, tractors, trailers, vehicles and other tangible
personal property;
(g) all rights, title and interests in and to all patents, copyrights,
trademarks, trade names, service marks, service names, logos, and
identifying marks and styles, including, without limitation, the names
"Orlando Foodservice" and "Capricorn Foods of Central Florida" and any
variant thereof;
(h) all rights under the contracts, agreements, orders, leases, licenses
and arrangements listed on Schedule 1.1(h) hereto, to the extent
---------------
assignable;
(i) all rights under all permits, licenses, variances, approvals and other
authorizations obtained from foreign, federal, state or local
governments or governmental agencies or other similar rights, to the
extent assignable;
(j) all claims, insurance, warranties, guarantees, refunds, causes of
action, rights of recovery, rights of set-off and rights of recoupment
of every kind and nature, other than those relating exclusively to the
Excluded Assets or the Excluded Liabilities;
(k) all insurance, warranty and condemnation proceeds received after the
date hereof with respect to damage, non-conformance or loss to the
Purchased Assets;
(l) all books, ledgers, files, documents, correspondence, brochures,
lists, studies, reports, data, business records and other printed or
written materials (including, without limitation, records pertaining
to past and current customer accounts, suppliers, distributors,
personnel and agents);
(m) all rights to receive mail and other communications addressed to the
Companies (including, without limitation, the payments for accounts or
notes receivable);
(n) all rights, title and interests in and to all confidential business
and technical information, trade secrets and proprietary rights of the
Business; and
(o) the Business and all goodwill associated therewith.
2
<PAGE>
1.2 Excluded Assets. Notwithstanding the foregoing, the following
---------------
assets are expressly excluded from the purchase and sale contemplated hereby
(the "Excluded Assets") and, as such, are not included in the Purchased Assets:
(a) the Companies' and the Shareholders' rights under or pursuant to this
Agreement;
(b) all minute books, stock books, corporate seal and other corporate
records that relate exclusively to the Companies' organization,
existence and capitalization;
(c) all contracts, agreements, orders, leases, licenses and arrangements
which are not expressly specified to be assumed by the Buyer or which
are not transferable to Buyer;
(d) all claims, insurance, warranties, guarantees, refunds, causes of
action, rights of recovery, rights of set-off and rights of recoupment
that relate exclusively to the Excluded Assets or the Excluded
Liabilities; and
(e) certain notes payable listed on Schedule 3.5 hereto which are marked
------------
"not included"; and
(f) the right to receive mail and other communications addressed to the
Companies that relates exclusively to the Excluded Assets or the
Excluded Liabilities.
1.3 Limited Assumption of Liabilities. Subject to the terms and
---------------------------------
conditions of this Agreement, from and after the Closing Date, Buyer shall
assume and agree to pay, defend, discharge and perform as and when due only the
following specific liabilities and obligations of the Companies which relate
exclusively to the Business (the "Assumed Liabilities"):
(a) certain of the Companies' notes payable listed on Schedule 1.3(b)
---------------
hereto;
(b) all liabilities and obligations under the contracts, agreements,
orders, leases, licenses and arrangements expressly assumed by and
transferred to Buyer on the Closing Date, but excluding any
liabilities or obligations relating to or arising out of (i) any
breach or default occurring thereunder on or prior to the Closing
Date, (ii) any violation of law, tort or infringement occurring with
respect thereto on or prior to the Closing Date, or (iii) any related
action, complaint, proceeding, investigation, claim or demand; and
(c) all current liabilities of the Companies, reflected on the Companies'
balance sheet as at the Financials Date (as defined below) which have
not been discharged or paid and such additional liabilities of the
same kind and type which have subsequently arisen in the ordinary
course of business consistent with past business practices.
1.4 Excluded Liabilities. Notwithstanding anything to the contrary
--------------------
contained in this Agreement and regardless of whether such liability or
obligation is disclosed herein or on any Exhibit or
3
<PAGE>
Schedule hereto, Buyer shall not assume or in any way be responsible or liable
for any liabilities or obligations of the Companies or the Shareholders or any
other liabilities or obligations whatsoever related to the operation of the
Business or condition of the Purchased Assets at any time on or prior to the
Closing Date (the "Excluded Liabilities"), except as specifically provided in
subsections (a) - (c) of Section 1.3 above. Without limiting the generality of
the foregoing, the Excluded Liabilities shall include, without limitation:
(a) all obligations, commitments or liabilities of or claims against the
Companies and/or the Shareholders, arising out of or in connection
with the transfer and sale of the Purchased Assets hereunder;
(b) all license fees, sales taxes, and the documentary stamps on the
promissory note described in Section 1.5(c) below shall be at the
expense of the new division of Buyer;
(c) all liabilities and obligations for foreign, federal, state or local
taxes arising from the operation of the Business on or prior to the
Closing Date or as a result of the consummation of the transactions
contemplated by the Agreement;
(d) all liabilities and obligations for any damage or injury to person or
property arising from the ownership, possession or use of any products
manufactured or sold by the Companies on or prior to the Closing Date;
(e) all liabilities and obligations arising from the operation of the
Business on or prior to the Closing Date in connection with any law,
statute, rule, regulation, order or decree of any foreign, federal,
state or local governmental or regulatory authority (including,
without limitation, those relating to business conduct, public health
and safety, occupational health and safety and the environment);
(f) all liabilities and obligations related to employees, agents,
independent contractors and consultants of the Companies incurred on
or prior to the Closing Date (including, without limitation, all
accrued vacation and sick pay and all other obligations under any
employee benefit plans); and
(g) all liabilities and obligations of the Companies and/or any
Shareholder whatsoever not expressly assumed by Buyer in accordance
with subsections (a) - (c) of Section 1.3 above.
1.5 Purchase Price. The total purchase price (the "Purchase Price") for
--------------
the Purchased Assets to be acquired by Buyer on the Closing Date shall consist
of the following:
(a) the sum of the assumption of the Assumed Liabilities;
(b) A check for One Million Three Hundred Twenty-Five Dollars
($1,325,000.00) to be delivered at the Closing;
4
<PAGE>
(c) Five Hundred Thousand Dollars ($500,000) in the form of a promissory
note bearing interest at the rate of six and one-half percent (6.5%)
per annum, guaranteed by AFD's parent corporation, Smart & Final Inc.,
due and payable in four equal annual installments commencing on the
first anniversary date of the closing of the transaction; and
(d) the additional amounts to be calculated and paid as provided on
Exhibit A hereto (the "Additional Purchase Price Payments"), there
being no certainty or guarantee that any Additional Purchase Price
Payments shall be payable hereunder.
1.6 Allocation of Purchase Price. The parties agree to allocate the
----------------------------
Purchase Price among the Purchased Assets for purposes of federal and state
income and franchise taxes in the manner provided on Exhibit B hereto.
---------
2. THE CLOSING.
-----------
2.1 The Closing. The purchase and sale of the Purchased Assets shall
-----------
take place at 10:00 a.m. (local time) on September 26, 1997, at the offices of
Buyer or at such other time and place as may be mutually agreed upon in writing
by Buyer, the Companies and the Shareholders. The time and date of purchase and
sale, as the same may be postponed or accelerated from time to time, are
referred to in this Agreement as the "Closing" and the "Closing Date,"
respectively.
2.2 Deliveries to be Made at Closing. On the Closing Date, the
--------------------------------
Companies and the Shareholders shall deliver to Buyer such deeds, warranty bills
of sale, assignments and other instruments satisfactory to Buyer and its counsel
as are necessary or desirable to transfer the Purchased Assets, against receipt
of such assumption agreements satisfactory to the Companies and the Shareholders
and their counsel as are necessary or desirable to assume the Assumed
Liabilities, and the parties shall deliver the other items contemplated by
Sections 6 and 7. All deliveries shall be considered to have taken place
simultaneously as a single transaction, and no delivery shall be considered to
have been made until all deliveries are completed. With respect to any Purchased
Assets sold hereunder which cannot be physically delivered at the Closing
because they are in the possession of third parties, the Companies shall give
irrevocable instructions to such third parties that all rights, title and
interests in such Purchased Assets have been vested in Buyer.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDERS.
------------------------------------------------------------------
The Companies and each Shareholder, jointly and severally,
represents and warrants to Buyer as follows:
3.1 Ownership of the Purchased Assets. The Companies have good and
---------------------------------
marketable title to all the Purchased Assets. The Purchased Assets are owned by
the Companies, and at the Closing will be delivered to Buyer, free and clear of
any and all liens, charges, claims, encumbrances, pledges, security interests,
community property rights, equities, liabilities, debts, obligations,
restrictions on
5
<PAGE>
transfer or other defects in title of any kind or nature, whether known or
unknown, fixed or contingent, except for the Assumed Liabilities.
3.2 Authority to Enter Agreement; Enforceability. The Companies and
--------------------------------------------
each Shareholder have the right, power, legal capacity and authority to enter
into and to carry out the terms and provisions of this Agreement (including,
without limitation, the sale and delivery of the Purchased Assets being sold
pursuant to this Agreement) and the other agreements to be entered into by the
Companies and/or that Shareholder in connection with the consummation of this
Agreement without obtaining the approval or consent of any other party or
authority, and this Agreement and such other agreements constitute the legal,
valid and binding agreements of each of the Companies and each of the
Shareholders, enforceable against it or him in accordance with their respective
terms.
3.3 Organization and Standing. The Companies are each corporations duly
-------------------------
organized, validly existing and in good standing under the laws of the State of
Florida with full power and authority (corporate and other) to own, lease and
operate its property and carry on the Business as now conducted. The Companies
are currently doing business in those jurisdictions set forth on Schedule 3.3A,
-------------
and are qualified to do business in each such jurisdiction. The Companies'
books and records (including, without limitation, the minute books, stock books
and stock ledger) are complete and correct in all material respects and fairly
reflect the conduct of the Business. Attached hereto as Schedule 3.3B are
-------------
complete copies of the Companies' Articles of Incorporation and By-Laws, as
amended to date.
3.4 Subsidiaries. The Companies have no subsidiaries (that is, a
------------
corporation or other entity in which it has an equity interest or over which it
is in a position to exercise control, directly or indirectly).
3.5 Financial Statements. Schedule 3.5 to this Agreement contains the
-------------------- ------------
Companies' consolidated balance sheets as at June 30, 1997, and its related
consolidated statements of income and retained earnings and statements of cash
flows for the period ended June 30, 1997. The foregoing financial statements
(i) are in accordance with the books and records of the Companies and were
prepared in accordance with generally accepted accounting principles applied on
a basis consistent with prior periods and (ii) fairly present the Companies'
financial condition and results of operations and cash flows as at the dates and
for the periods specified. The Companies have no liabilities or obligations,
whether contingent or absolute, direct or indirect, matured or unmatured, which
are not shown or provided for on Schedule 3.5, except those incurred in the
ordinary course of business since June 30, 1997, and the Companies and the
Shareholders know of no basis for the assertion of any such liabilities or
obligations. June 30, 1997, which is the date of the most recent unaudited
balance sheet, is sometimes referred to below as the "Financials Date".
3.6 Absence of Certain Changes. Since the Financials Date, except as
--------------------------
disclosed on Schedule 3.6 to this Agreement, there has not been:
------------
(a) any change in the condition (financial or other), net worth, assets,
liabilities, capitalization, prospects, business, properties or results of
operations of the Companies other than
6
<PAGE>
changes (i) described in the Schedules to this Agreement or (ii) made
or incurred in the ordinary course of business;
(b) any employment or other contracts or commitments entered into by the
Companies, except as described in the Schedules to this Agreement;
(c) any sale, assignment, transfer or other disposition of any assets or
properties, the latest cost of which on the accounting records of the
Companies exceeds $10,000, excluding any inventory or supplies
disposed of in the ordinary course of business consistent with past
practices;
(d) any capital expenditure, capital addition or capital improvement
involving an amount in excess of $10,000;
(e) any mortgage, lien, pledge, encumbrance, or security interest created
on any property or asset, tangible or intangible, except purchase
money security interests created in the ordinary course of business
consistent with past practices;
(f) any dividend or other distribution declared, paid or made or agreed to
on any shares of common stock of the Companies, or any purchase or
redemption of, or any agreement for the purchase or redemption of, any
such shares;
(g) any damage, destruction or loss (whether or not covered by insurance)
adversely affecting the properties, Business or prospects of the
Companies;
(h) any increase in the compensation payable or to become payable by the
Companies to any officer, director or other employee, agent,
independent contractor or consultant or any Shareholder, or any
declaration, payment, commitment or obligation of any kind for the
payment by the Companies of any bonus, additional salary or
compensation, any worker compensation claims or any retirement,
termination or severance benefits, to officers, directors, employees,
agents, independent contractors, consultants or Shareholders, other
than pursuant to existing written commitments of the Companies
otherwise disclosed in the Schedules to this Agreement;
(i) any change in the amount of any notes or other obligations payable by
the Companies to officers, directors, employees, agents, independent
contractors, consultants or Shareholders;
(j) any labor disturbances adversely affecting or threatening the Business
or operations of the Companies;
(k) any revocation or termination, or any notice of any threatened
revocation or termination, of any permit or license issued to the
Companies or, to the extent the Companies' Busi-
7
<PAGE>
ness or prospects may be materially and adversely affected by such
termination, to any of its employees, independent contractors,
consultants or agents;
(l) any loan by the Companies to any person or entity (except for normal
extension of trade credit and reasonable and customary advances for
business related expenses incurred in the ordinary course of business)
or any guaranty by the Companies of any loan;
(m) any change or anticipated change in the relationship between the
Companies and any of its customers, vendors, suppliers, employees,
agents, independent contractors or consultants which materially and
adversely affects the properties, prospects or business of the
Companies;
(n) any other event or condition which has adversely affected the
properties, business or prospects of the Companies; or
(o) any agreement or commitment obligating the Companies to do any of the
things set forth in this Section 3.6.
3.7 Accounts Receivable. Schedule 3.7 to this Agreement contains a
------------------- ------------
complete and accurate list of the Companies' accounts receivable as at the
Financials Date, together with an accurate aging thereof. Said accounts
receivable and all accounts receivable which have arisen since the Financials
Date (i) are valid and enforceable claims for the sales and services which give
rise to such accounts, and (ii) are subject to no defenses or offsets and are
fully collectible in the ordinary course of business without resort to legal
proceedings, subject to any reserves contained in the financial statements
contained in Schedule 3.5 to this Agreement.
------------
3.8 Inventories. All inventories reflected on the Companies' unaudited
-----------
balance sheet as at the Financials Date and all inventories which have been
acquired since that date are stated on the Companies' books and records at the
lower of average cost or market and are in good and salable condition and are
not obsolete.
3.9 Prepaid Items, Accounts Payable and Accrued Expenses. The
------------------------------------------- --------
Companies' unaudited balance sheet as at the Financials Date presents fairly the
prepaid items, accounts payable and accrued expenses of the Companies as at and
for the Financials Date. All prepaid items, accounts payable and accrued
expenses incurred after the Financials Date were incurred in the ordinary course
of business and are usual and normal in amount, both individually and in the
aggregate.
3.10 Tax Matters. The Companies have each properly prepared and filed
-----------
returns for and paid in full all federal, state, local and foreign taxes,
assessments, additions to taxes, penalties and interest with respect thereto, to
the extent such filings and payments are required prior to the Closing Date and
there is no known outstanding or proposed deficiency or assessment by any
federal, state, local or foreign government with respect to any tax period.
The amounts set up as reserves for taxes on the financial statements contained
in Schedule 3.5 to this Agreement are sufficient for the payment of all accrued
------------
and unpaid federal income, accumulated earnings or other federal taxes, and
state, local
8
<PAGE>
or foreign income, franchise, real property, personal property, sales, use,
withholding and all other taxes imposed on the either of the Companies or their
property or payable by either of them, including interest, additions to taxes
and penalties, if any, with respect thereto, whether known or unknown and
whether disputed or not, as of the Closing Date, the dates of the respective
financial statements and for all periods prior thereto. The Companies' federal,
state and local tax returns have not been audited , and neither the Companies
nor either Shareholder are aware of any proposed audit by the Internal Revenue
Service or any foreign, state or local taxing authority. The Companies have not
made a Section 341(f) election under the Internal Revenue Code of 1986, as
amended. The Companies have provided Buyer with true and complete copies of all
federal, state, local and foreign tax returns filed by the Companies as of
December 31, 1996, including all amendments and adjustments, if any, to such
returns.
3.11 Employees, Agents, Independent Contractors and Consultants;
-----------------------------------------------------------
Collective Bargaining Agreements. Schedule 3.11 to this Agreement contains a
- -------------------------------- -------------
true and complete list of all employees, agents, independent contractors and
consultants of the Companies, their respective rates of compensation, any
increases in such rates contemplated by existing contractual arrangements and
all bonuses, deferred compensation, profit-sharing, pension, retirement,
vacation or other compensation benefits to which they are, or may in the future
become, entitled pursuant to existing contractual arrangements or Companies
practices. The Companies have paid in full to all employees, agents, independent
contractors and consultants all wages, salaries, commissions, bonuses and other
direct compensation for all services performed by them, except for such payments
as are not yet due. The Companies are in compliance with all laws and
regulations respecting employment and employment practices, terms and conditions
of employment, wages and hours, employee benefit plans and taxes (including
withholding taxes) relating to employment or to personal services provided to
the Companies. No employee, agent, independent contractor or consultant of the
Companies is in material violation of any employment agreement, consulting
agreement, proprietary information nondisclosure agreement or any other contract
or agreement with the Companies or, to the best of the Companies' and the
Shareholders' knowledge, such an agreement or contract with any previous
employer or other third party. Neither the Companies nor any Shareholder have
any knowledge or information to the effect that any of the Companies' employees
intend to terminate his or her employment relationship with the Companies or
that any of the Companies' agents, independent contractors or consultants intend
to terminate his or her contractual relationship with the Companies. There are
no agreements, commitments or other obligations of the Companies, whether oral
or written, which would prevent or obstruct the dismissal of any of the
Companies' employees, agents, independent contractors or consultants.
3.12 Real Property. Schedule 3.12A to this Agreement contains a true and
------------- --------------
complete description of all land, easements, rights-of-way, plants, warehouses,
office buildings, stores and other buildings and real property owned, leased,
rented or occupied by the Companies. All such real property owned, leased,
rented or occupied by the Companies is owned, leased, rented or occupied free
and clear of all mortgages, security interests, liens, pledges, charges,
encumbrances, claims, liabilities, debts, equities, restrictions on transfer or
other defects in title of any kind or nature. All such real property owned,
leased, rented or occupied by the Companies complies in all material respects
with all applicable federal, state and local land use, zoning, subdivision,
building, earthquake hazard
9
<PAGE>
reduction, health, safety, environmental and other laws, statutes, ordinances,
rules and regulations. All buildings and all fixtures, mechanical systems and
roofs and structural systems in such buildings are in good operating condition
and repair, ordinary wear and tear excepted. Schedule 3.12B to this Agreement
--------------
contains a true and complete list of all leases entered into by the Companies
with respect to such property. Such leases are in full force and effect and are
enforceable in accordance with their terms. Except as set forth on Schedule
--------
3.12B to this Agreement, none of such leases have been amended or modified.
- -----
Neither the Companies nor, to the best of the Companies' and the Shareholders'
knowledge, the other parties thereto are in material breach or default under any
of such leases; and no event has occurred which with notice or lapse of time, or
both, could constitute a material breach or default by the Companies or, to the
best of the Companies' and the Shareholders' knowledge, the other parties
thereto under such leases or could accelerate any obligation or create any lien
or encumbrance under such leases. The Companies have not assigned any of their
interests in such leases or sublet any portion of the leased premises covered by
such leases. No claim has been asserted or, to the best of the Companies' and
the Shareholders' knowledge, exists that is adverse to the rights of the
Companies to the continued possession of the leased premises under such leases.
The existing Lease to the Companies' premises at 2450 Shader Road, Orlando,
Florida, has expired and the Companies are currently on a month-to-month lease.
3.13 Tangible Personal Property. Section 3.13A to this Agreement contains
-------------------------- -------------
a true and complete list describing and specifying the location of all vehicles,
equipment, furniture, fixtures, leasehold improvements and all other tangible
personal property or assets, used, owned, possessed or leased by, or in the
possession of, the Companies in connection with the Business that have book
values of $10,000 or more. Except as set forth in Schedule 3.13B to this
--------------
Agreement, all personal property owned, used, possessed or leased by the
Companies is owned, used, possessed or leased by the Companies free and clear of
all material liens, claims, charges, pledges, security interests, encumbrances,
liabilities, debts, equities, restrictions on transfer or other defects in title
of any kind or nature. All items of personal property owned, used, possessed or
leased by the Companies are in good operating condition and repair, normal wear
and tear excepted. All leases pursuant to which the Companies holds any items
of personal property are listed on Schedule 3.13B to this Agreement and are in
--------------
full force and effect and are enforceable in accordance with their terms.
Except as set forth on Schedule 3.13B, none of such leases have been amended or
--------------
modified. Neither the Companies nor, to the best of the Companies' and the
Shareholders' knowledge, the other parties thereto are in material breach or
default under any of such leases; and no event has occurred which with notice or
lapse of time, or both, could constitute a material breach or default by
Companies or, to the best of the Companies' and the Shareholders' knowledge, the
other parties thereto under such leases or could accelerate any obligation or
create any lien or encumbrance under such leases. The Companies has not
assigned any of its interest in such leases. No claim has been asserted or, to
the best of the Companies' and the Shareholders' knowledge, exists that is
adverse to the rights of the Companies to the continued possession of the leased
property under such leases.
3.14 Intangible Property. Section 3.14 to this Agreement contains a true
------------------- ------------
and complete list of all patents, copyrights, trademarks, service marks, trade
names, logos and identifying marks and styles used by the Companies in
connection with the Business (the "Intangible Property"). Except as disclosed
on Schedule 3.14 to this Agreement, each of the Companies owns and has the full
-------------
right to
10
<PAGE>
use its name and all the Intangible Property in each jurisdiction in which it
conducts business. Neither of the Companies has infringed or is currently
infringing any trade mark, service mark, trade name, patent, copyright, logo or
identifying mark, or wrongfully using any trade secret, of any third party.
3.15 Contracts and Agreements. Schedule 3.15 contains a true and
------------------------ -------------
complete list of the following agreements, contracts, leases (other than the
leases already listed on Schedule 3.12 and Schedule 3.13 to this Agreement) or
------------- -------------
other obligations or commitments, whether written or oral (collectively
"Contracts"), to which either or both of the Companies is a party or by which it
or its property is bound, including (i) contracts with employees, agents,
independent contractors, consultants, advisors, salespersons or sales
representatives not cancelable at will without cost or other liability by reason
of such termination; (ii) contracts with customers; (iii) contracts with
suppliers or manufacturers of products sold by the Companies in the ordinary
course of business; (iv) bonus, deferred or incentive compensation, group
insurance or other employee benefit plans; (v) collective bargaining contracts;
(vi) leases as lessor or lessee; (vii) advertising or public relations
contracts; (viii) conditional sales contracts, security agreements, pledge
agreements, trust receipts or any other agreements or arrangements whereby any
of the assets of the Companies are subject to a lien, encumbrance, charge or
other restriction; (ix) mortgages, indentures, notes or other instruments for or
relating to any borrowing of money or the extension of credit or the deferred
purchase of property; (x) guarantees of any obligations for the borrowing of
money or otherwise, or any other agreements of guarantee or indemnification
(other than endorsements made for collection in the ordinary course of
business); (xi) agreements or arrangements for the purchase or sale of any
assets other than in the ordinary course of business; (xii) continuing contracts
for future purchase of materials, supplies or equipment; (xiii) agreements,
contracts or commitments relating to the issuance of any securities; (xiv)
agreements, contracts or commitments relating to the acquisition of assets,
capital stock or ownership interests of any business enterprise; (xv)
agreements, contracts, or commitments with any officer, director or Shareholder
of the Companies; (xvi) contracts restricting doing business in any areas or in
any way limiting competition; and (xvii) any other contracts (other than
contracts entered into in the ordinary course of business) to be performed in
whole or in part more than 30 days from the date hereof calling for aggregate
payments by the Companies in excess of $3,000 per month and which are not
terminable without cost or liability on 30-days' notice. Except as set forth
on Schedule 3.15, none of the Contracts have been amended or modified. Each of
-------------
the Contracts is in full force and effect and is enforceable in accordance with
its terms. Neither the Companies nor, to the best of the Companies' and the
Shareholders' knowledge, the other parties thereto are in material breach or
default under any such Contracts and no event has occurred which with notice or
lapse of time, or both, could constitute a material breach or default under any
such Contract or could accelerate any obligation or create any lien or
encumbrance under any such Contract. The Companies has not assigned any of its
interest in the Contracts. No claim has been asserted or, to the best of the
Companies' and the Shareholders' knowledge, exists that is adverse to the rights
of the Companies under any of the Contracts.
3.16 Insurance. Schedule 3.16 to this Agreement contains a true and
--------- -------------
complete list of all life, fire, casualty, liability and all other insurance
policies maintained by the Companies, all of which are in full force and effect
in the amounts provided therein. To the best of the Companies' and the
Shareholders' knowledge, there is no threat by any of the insurers to terminate
or materially increase the premiums payable under any such insurance policies
due to the activities or loss experience of the
11
<PAGE>
Companies, and each of the Companies is in compliance in all respects with the
conditions contained in such policies. Such policies cover the property and
assets of the Companies in amounts and against losses and risks such as are
generally maintained for comparably situated businesses.
3.17 Litigation. Except as set forth on Schedule 3.17 to this Agreement,
---------- -------------
there is no suit, action or legal, administrative, arbitration or other
proceeding pending, filed or initiated by, against or affecting the Companies or
its properties, and neither the Companies nor any Shareholder knows of any suit,
action or legal, administrative, arbitration or other proceeding threatened by,
against or affecting the Companies or their properties or, with respect to
matters arising out of the Business, pending or threatened by, against or
affecting the Shareholders or any of the Companies' officers or directors.
Neither the Companies nor any Shareholder knows of any event or circumstance
which could form the basis of any such suit, action, proceeding or
investigation.
3.18 Compliance with Law and Other Instruments. The business and
-----------------------------------------
operations of the Companies have been and are being conducted in accordance with
all applicable laws, statutes, ordinances, rules and regulations of all
authorities (including, without limitation, those relating to business conduct,
public health and safety, occupational health and safety and the environment).
Neither of the Companies is in violation or breach of, or in default under, any
term or provision of its Articles of Incorporation or its Bylaws or of any
order, judgment, writ, injunction, decree, license or permit of any court or any
governmental or regulatory authority or of any indenture, mortgage, deed of
trust, lease, contract, instrument, commitment or other agreement or
arrangement, or subject to any restriction of any kind or character, which might
materially and adversely affect the Companies or their properties, business or
prospects. Neither the execution and delivery of this Agreement or the other
agreements to be entered into by the Companies and/or any Shareholder pursuant
to this Agreement, nor the consummation of the transactions contemplated by this
Agreement and such other agreements, will conflict with, or result in a
violation or breach of, or constitute a default under, any term or provision of
the Companies' Certificate of Incorporation or Bylaws or any order, judgment,
writ, injunction, decree, license, permit, law, statute, ordinance, rule or
regulation of any court or any governmental or regulatory authority or any
indenture, mortgage, deed of trust, lease, contract, instrument, commitment or
other agreement or arrangement to which the Companies or any Shareholder is a
party or by which they or their properties are bound.
3.19 Conflicts of Interest. Except as set forth on Schedule 3.19 to this
--------------------- -------------
Agreement, no Shareholder or any entity controlled by any Shareholder or, to the
best of the Companies' and the Shareholders' knowledge, no director, officer or
employee of the Companies or any relative of a Shareholder (i) owns, directly or
indirectly, any interest in excess of 5% in, or is an employee or representative
of or consultant to, any corporation, firm, association or other business entity
or organization which is, or is engaged in business as, a competitor, customer
or supplier of the Companies; (ii) owns, directly or indirectly, in whole or in
part, any tangible or intangible property which the Companies is using or the
use of which is necessary for the conduct of the Business (including, without
limitation, any inventory, buildings, machinery or equipment); or (iii) has any
cause of action or other claim whatsoever against or owes any amount to the
Companies. Altif has disclosed to Buyer that he owns more than five percent (5%)
of the capital stock of Floriana Pasta Company, to which ownership Buyer hereby
consents provided Altif remains a passive investor in such company.
12
<PAGE>
3.20 Licenses and Permits. Schedule 3.20 to this Agreement contains a
--------------------
true and complete list of all licenses, permits, orders, approvals and other
authorizations issued to the Companies and its employees, which are in full
force and effect and which in any way relate to the Business. The Companies and
its employees or agents have all licenses, permits, orders, approvals and other
authorizations required for the conduct of the Business as presently conducted
and, to the best of the Companies' and the Shareholders' knowledge, no
suspension or cancellation of any of them is threatened. The Shareholders hereby
agree to reasonably cooperate with Buyer in transferring the USDA permit and any
other licenses or permits which require signatures or other evidence of the
Shareholders' agreement to such transfer after the Closing Date.
3.21 Benefit Plans.
-------------
(a) Schedule 3.21 to this Agreement contains a true and complete
-------------
list of all group insurance programs and other benefit plans provided for the
Companies' employees. Except as disclosed in Schedule 3.21, neither of the
-------------
Companies has any Employee Plans. For purposes of this Section, the term
"Employee Plan" includes all present (including those terminated or transferred
within the past two years) plans involving the Companies providing any benefits
to any current or former employee of the Companies which are subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"). The term
Employee Plan includes, but is not limited to, pension, retirement, profit
sharing and stock bonus plans and includes any Employee Plan that is a multi-
employer plan as defined in Section 3(37) of ERISA.
(b) Neither the Companies nor any other person or entity which
together with the Companies would be considered a single employer under Section
4001(b)(1) of ERISA is or has been a party to or has any employees who are
covered by any multiemployer plan as defined in Section 3(37) of ERISA.
(c) Each Employee Plan is now, and has always been, established,
maintained and operated in all material respects in accordance with all
applicable laws (including but not limited to ERISA and the Internal Revenue
Code of 1986, as amended, and regulations thereunder) and in accordance with the
plan documents. All communications with respect to any Employee Plan by any
person acting or purporting to act on behalf of the Companies (including but
limited to the members of any plan committee, all plan fiduciaries, plan
administrators, the Companies and the Companies' employees) accurately reflect,
and have always accurately reflected, in all material respects the documents and
operations of any Employee Plan. There is no unfunded liability for vested or
nonvested benefits under any Employee Plan. All material reports, forms and
other documents required to be filed with any governmental entity with respect
to any Employee Plan have been timely filed and are accurate. There is no
pending or, to the best knowledge of the Companies and the Shareholders,
threatened litigation or arbitration concerning or involving any Employee Plan
by any employee of the Companies covered under such Employee Plan.
(d) No complaints by any governmental entity have been filed or,
to the best of the Companies' and the Shareholders' knowledge, have been
threatened with respect to any Employee
13
<PAGE>
Plan. To the best of the Companies' and the Shareholders' knowledge, no
complaints by an employee have been filed or are threatened to be filed with
respect to any Employee Plan.
3.22 Brokerage and Finders' Fees. Neither the Companies nor any
---------------------------
Shareholder has incurred any liability to any broker, finder or agent for any
brokerage fees, finders' fees or commissions with respect to the transactions
contemplated by this Agreement.
3.23 Suppliers and Customers. No single supplier or customer listed on
-----------------------
Schedule 3.23, nor any supplier who is a material source of supply of any goods
- -------------
essential to the Business, has (i) canceled or otherwise terminated, or made any
threat to cancel or otherwise terminate, its relationship with the Companies or
(ii) materially decreased its sale of services or supplies to the Companies or
its purchase of products therefrom or made any threat with respect thereto.
Schedule 3.23 contains a true and complete list of the principal customers and
- -------------
suppliers of the Companies.
3.24 Bank and Financial Accounts. Schedule 3.24 is a true and complete
--------------------------- -------------
list of all names and locations of all banks and other financial institutions at
which the Companies maintains accounts, the account number of each such account,
and the names of all persons authorized to make withdrawals therefrom.
3.25 Powers of Attorney. Except as set forth on Schedule 3.25, there are
------------------ -------------
no persons holding a power of attorney on behalf of the Companies.
3.26 Officers and Directors. The officers and directors of the Companies
----------------------
are as set forth on Schedule 3.26 to this Agreement.
-------------
3.27 Hazardous Materials. During any period in which either of the
-------------------
Companies has owned, leased, rented or occupied any real property (the "Real
Property") and, to the best of the Companies' and the Shareholders' knowledge,
during any period prior to the period in which the Companies has owned, leased,
rented or occupied the Real Property, there has been no storage, use,
manufacture, generation, disposal, treatment or release of any Hazardous
Materials (as defined below) on, under or about the Real Property or transport
of Hazardous Materials to or from the Real Property. For the purposes of this
Section, the term "Hazardous Materials" shall mean flammable explosives,
radioactive materials, hazardous wastes, toxic substances or any other materials
which are included within the definition of "hazardous materials", "hazardous
substances", "hazardous wastes", or "toxic substances", under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended,
(42 U.S.C. (S)(S) 9601 et seq.) or any other federal, state and local laws or
-- ---
ordinances pertaining to industrial hygiene, soil and ground water or
environmental conditions, including, without limitation, asbestos in
any form and urea formaldehyde insulation. The use of the Real Property is in
compliance with all local, state and federal statutes, laws, ordinances, rules
and regulations regarding Hazardous Materials. Without limiting the generality
of the foregoing, neither any of the Shareholders nor the Companies has, with
respect to the Real Property:
(a) Received any notice from the Environmental Protection Agency, the
Occupational Safety and Health Agency, or any other federal, state
or local governmental or regulatory agency
14
<PAGE>
or regional office with responsibility for health, environmental
protection, waste disposal, toxic materials, underground tanks,
water quality, sanitation, public works or industrial hygiene of any
violation or potential violation of any applicable federal, state or
local statutes, laws, rules, ordinances or regulations relating to
any Hazardous Materials; or
(b) Been the subject of an enforcement, cleanup, removal, closure,
quarantine or other governmental or regulatory action instituted,
completed or, to the best of the Companies' and the Shareholders'
knowledge threatened, with respect to any Hazardous Materials; or
(c) Received or, to the best of the Companies' and the Shareholders'
knowledge, been threatened with a claim by a third party against the
Companies or its assets relating to damage, contribution, cost
recovery compensation, loss or injury resulting from any Hazardous
Materials; or
(d) Imposed or had imposed on the Real Property, at any time for any
period of time, a condition to or restriction on the use, ownership,
occupancy or transferability of the Real Property or any part thereof,
including, without limitation, a closure or limitation of access, due
to the use, manufacture, storage, disposal or transport of Hazardous
Materials on, under, about or across the Real Property; or
(e) Conducted, or learned of the conduct by a third person or governmental
body of, any environmental audit or other investigation into the
presence or condition of Hazardous Materials on, under, about,
neighboring or affecting the Real Property, which audit or
investigation concluded, directly or indirectly, that there existed
actual or potential liability or obligation under any of the laws,
regulations or ordinances regarding Hazardous Materials to remove,
repair, clean-up, detoxify, quarantine, or otherwise remedy a
condition involving Hazardous Materials on the Real Property; or
(f) Received any information regarding any of the properties bordering or
surrounding the Real Property, or any of the properties containing
water or other materials used in connection with the Business, that
any of the events described in items (a) through (e) has occurred with
respect to those properties.
3.28 Full Disclosure. At the date of this Agreement the Companies and
---------------
the Shareholders have, and at the Closing Date the Companies and the
Shareholders will have, disclosed to Buyer all material events, conditions and
facts known to the Companies and/or either Shareholder which affect the
Business, operations and prospects of the Companies and which are reasonably
required for Buyer to evaluate the acquisition of the Purchased Assets and the
related assumption of the Assumed Liabilities. No representations or warranties
by the Companies or either Shareholder contained in this Agreement or in any
document, statement, certificate, exhibit, report or schedule furnished or to be
furnished hereunder contain or will contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statement and facts
contained therein not misleading.
15
<PAGE>
4. REPRESENTATIONS AND WARRANTIES OF BUYER.
---------------------------------------
Buyer represents and warrants to the Companies and the Shareholders as
follows:
4.1 Organization and Standing. Buyer is a corporation duly organized,
-------------------------
validly existing and in good standing under the laws of the State of California,
with full power and authority (corporate and other) to carry on its business and
to enter into and carry out the terms of this Agreement.
4.2 Authority to Enter Agreement; Enforceability. Except for the
--------------------------------------------
requirement that the terms and conditions of this Agreement and the other
agreements to be entered into by Buyer in connection with the consummation of
this Agreement be approved by Buyer's Board of Directors, which approval has not
yet been obtained, (i) Buyer has the right, power and authority to enter into
and to carry out the terms of this Agreement and such other agreements, without
obtaining the approval or consent of any other party or authority, and (ii) this
Agreement and such other agreements constitute the legal, valid and binding
agreements of Buyer, enforceable against it in accordance with their respective
terms.
4.3 Compliance with Law and Other Instruments. Except for the
-----------------------------------------
requirement that the terms and conditions of this Agreement and the other
agreements to be entered into by Buyer in connection with the consummation of
this Agreement be approved by Buyer's Board of Directors, which approval has not
yet been obtained, neither the execution and delivery of this Agreement or such
other agreements, nor the consummation of the transactions contemplated by this
Agreement and such other agreements, will conflict with, or result in a
violation or breach of, or constitute a default under, any term or provision of
Buyer's Articles of Incorporation or Bylaws or any order, judgment, writ,
injunction, decree, license, permit, law, statute ordinance, rule or regulation
of any court or any governmental or regulatory authority or any indenture,
mortgage, deed of trust, lease, contract, instrument, commitment or other
agreement or arrangement to which Buyer is a party or by which it or its
properties are bound.
4.4 Brokerage and Finders' Fees. Buyer has not incurred any liability
---------------------------
to any broker, finder or agent for any brokerage fees, finders' fees or
commissions with respect to the transactions contemplated by this Agreement.
5. COVENANTS OF THE PARTIES.
------------------------
5.1 Operation of the Business of the Companies. During the period from
------------------------------------------
and after the date of this Agreement and until the Closing Date, the Companies
and the Shareholders covenant and agree that, unless they obtain Buyer's prior
written consent to the contrary, or except as specifically authorized in this
Agreement, the Companies shall, and the Shareholders shall cause the Companies
to,:
16
<PAGE>
(a) make, amend and terminate contracts only in the ordinary course of
business;
(b) refrain from suffering or refrain from creating any security interest,
encumbrance or restriction on its properties or assets, except in the
ordinary course of business consistent with past practices;
(c) refrain from disposing of any of its properties or assets, except in
the ordinary course of business consistent with past practices;
(d) refrain from entering into or becoming a party to any employment,
consulting or sales representation agreement, except in the ordinary
course of business consistent with past practices;
(e) refrain from increasing the rate of compensation paid or payable by it
to any of its officers, directors, employees, agents, independent
contractors or consultants, except pursuant to existing contractual
obligations, and from making loans or advances to officers, directors,
agents, employees, independent contractors, consultants or the
Shareholders, or any member of the families of any of them, except for
advances for reasonable business expenses in accordance with past
practices;
(f) refrain from paying or agreeing to pay any bonus, extra compensation,
pension or severance pay under any pension plan or otherwise, except
pursuant to existing contractual obligations;
(g) maintain its books accounts and records in the usual, regular and
ordinary manner and in compliance with all applicable laws;
(h) meet its obligations under all contracts and not become in default
thereunder;
(i) maintain all of its assets in good repair, order and condition,
ordinary wear and tear excepted;
(j) refrain from granting or committing to grant any options, warrants,
conversion or other rights to subscribe, purchase or otherwise acquire
any shares of stock of the Companies or other ownership interest of
the Companies or issuing or committing to issue any stock of the
Companies or other securities convertible into shares of the stock of
the Companies or other ownership interest;
(a) not declare, set aside, or pay any dividend or distribution with
respect to the stock or other ownership interest of the Companies;
(b) not directly or indirectly redeem, purchase or otherwise acquire or
commit to acquire any stock or other ownership interest of the
Companies;
(c) refrain from changing its Certificate of Incorporation or Bylaws;
17
<PAGE>
(d) refrain from borrowing or agreeing to borrow any funds other than
under existing banking relationships, in the ordinary course of
business consistent with past practices;
(e) refrain from guaranteeing or agreeing to guarantee the obligations of
others;
(f) refrain from waiving or committing to waive any rights of substantial
value except for good and valuable consideration;
(g) refrain from cancelling or materially amending any insurance policy
except in exchange for a new policy with at least the same coverage;
(h) refrain from entering into any transaction which would in any
significant respect change the character of the business conducted by
the Companies; and
(i) operate in such manner as to assure that the representations and
warranties of the Companies and the Shareholders set forth in this
Agreement will be true, correct and complete on and as of the Closing
Date.
5.2 Access to Information and Records. Each of the Companies covenants
---------------------------------
and agrees, and the Shareholders covenant and agree to cause the Companies, to
give Buyer and its counsel, accountants and other representatives (collectively,
"Buyer's Representatives") full access, during normal business hours, throughout
the period prior to the Closing Date, to all of the Companies' assets,
properties, contracts, commitments, books and records, and to cause the
Companies to furnish Buyer and Buyer's Representatives during such period with
all information concerning its affairs as they reasonably may request. No
investigation or inquiry made by Buyer or Buyer's Representatives hereunder
shall in any way affect or lessen the representations and warranties made by the
Companies and the Shareholders under this Agreement.
5.3 Best Efforts; Further Assurances. Each party to this Agreement
--------------------------------
shall use his or its best efforts to cause the satisfaction of all conditions to
the consummation of this Agreement which are in the control of such party and to
cooperate as necessary in the satisfaction of all other conditions to the
consummation of this Agreement. Each party hereto will, from time to time after
the execution and consummation of this Agreement, execute and deliver such
instruments, documents and assurances and take such further actions as the other
parties may reasonably request to carry out the purpose and intent of this
Agreement.
5.4 Publicity. All notices to third parties and all other publicity
---------
concerning this Agreement and the transactions contemplated by this Agreement
shall be jointly planned and coordinated between Buyer, on the one hand, and the
Companies and the Shareholders, on the other hand. No party shall make a
unilateral press release or public announcement in this regard without the prior
written approval of the other parties except as may be required by law. The
Confidentiality Agreement previously entered into by the parties shall remain in
effect up through the Closing.
18
<PAGE>
5.5 Trade Secrets, Non-Competition, Etc. As a material inducement to
-----------------------------------
Buyer to enter into and consummate this Agreement, the Companies and the
Shareholders agree that, after the Closing Date:
(a) Trade Secrets. The Companies and the Shareholders shall not,
-------------
without the prior written consent of Buyer, except as may be required by law,
governmental rules and regulations or litigation between the parties, disclose
or use, in any way, any confidential business or technical information or trade
secret of the Companies, whether or not conceived of or prepared by the
Companies or either Shareholder (the "Trade Secrets"), including without
limitation any information concerning any procedures, operations, investments,
techniques, data, compilations of information, records, financing, costs,
employees, purchasing, accounting, marketing, merchandising, sales, customers,
salaries, pricing, profits, plans for future development, and the identity,
requirements, preferences, practices and methods of doing business of specific
parties with whom the Companies transacts business, and all other information
which is related to any service or business of the Companies; all of which Trade
Secrets will be the exclusive and valuable property of Buyer.
(b) Tangible Items. All customer lists, patents, copyrights,
--------------
trademarks, trade names, files, records, documents, drawings, plans,
specifications, manuals, books, forms, receipts, notes, reports, memoranda,
studies, data, calculations, recordings, catalogues, compilations of
information, correspondence and all copies, abstracts and summaries of the
foregoing and all physical items related to the business of the Companies, other
than a merely personal item, whether of a public nature or not, and whether
prepared by the Companies or either Shareholder or not, are and shall be the
exclusive property of Buyer and shall not be removed from the premises of Buyer,
without the prior written consent of Buyer.
(c) Solicitation of Customers. During the period commencing on
-------------------------
the Closing Date and ending four years from that date (such period not to
include any period of violation hereof by the Companies or a Shareholder or
period which is required for litigation to enforce this Section 5.5(c)), neither
the Companies nor either Shareholder shall directly or indirectly, either for
its or his own benefit or purposes or for the benefit or purposes of any other
person, solicit, call on, interfere with, accept any business from, attempt to
divert or entice away any person or firm who was or is a customer of the
Companies prior to or on the Closing Date or is a customer of Buyer after the
Closing Date, if such business involves the wholesale distribution of food or
related equipment or supplies.
(d) Solicitation of Employees. During the period commencing on
-------------------------
the Closing Date and ending four years from that date (such period not to
include any period of violation hereof by the Companies or a Shareholder or
period which is required for litigation to enforce this Section 5.5(d)), neither
the Companies nor either Shareholder shall directly or indirectly, employ or
offer to employ, call on, solicit, interfere with, attempt to direct or entice
away any prior or existing employee or independent contractor of the Companies
in any capacity if that person possesses or has knowledge of any Trade Secrets.
19
<PAGE>
(e) Noncompetition.
--------------
(i) As used herein, the term "Competitive Activity" shall
mean any participation in, assistance of business from, engagement in business
with, or assistance, promotion or organization of, any person, partnership,
corporation, firm, association or other business organization, entity or
enterprise by the Companies or either Shareholder which, directly or indirectly,
is engaged in, or hereinafter engages in the wholesale distribution of food or
related equipment or supplies.
(ii) During the period commencing on the Closing Date and
ending on four years from that date (any such period not to include any period
of violation hereof by the Companies or either Shareholder or period which is
required for litigation to enforce this Section 5.5(e)), neither the Companies
nor either Shareholder shall engage in any Competitive Activity in any of the
following geographic areas:
(A) the State of Florida;
(B) Aruba;
(C) St. Maarten/St. Martin;
(D) Nevis;
(E) St. Croix;
(F) Trinidad/Tobago;
(G) Turks/Caicos;
(H) Grenada;
(I) Peru;
(J) El Salvador;
(K) Barbados;
(L) Belize;
(M) Curacao;
(N) St. Eustatius;
(O) Antigua;
20
<PAGE>
(P) British Virgin Island;
(Q) Grand Cayman;
(R) Mexico-Cancun;
(S) Colombia;
(T) Nicaragua;
(U) Honduras;
(V) Dominican Republic;
(W) Ecuador;
(X) Bonaire;
(Y) St. Kitts;
(Z) St. Thomas;
(AA) Jamaica;
(BB) Bahamas;
(CC) Anguilla;
(DD) Venezuela;
(EE) Costa Rica; and
(FF) Guatemala.
(f) Exception for Employment Agreements. A Shareholder shall
-----------------------------------
not be deemed to be in breach of his obligations under this Section 5.5, to the
extent that he is performing his duties and obligations to Buyer pursuant to an
Employment Agreement (as defined below).
(g) Injunctive Relief. The Companies and the Shareholders hereby
-----------------
acknowledge and agree that it would be difficult to fully compensate Buyer for
damages resulting from the breach or threatened breach of the foregoing
provisions and, accordingly, that Buyer, without being required to post any
bond, shall be entitled to temporary and injunctive relief, including temporary
restraining orders, preliminary injunctions and permanent injunctions, to
enforce such provisions. This provision
21
<PAGE>
with respect to injunctive relief shall not, however, diminish the right of
Buyer to claim and recover damages.
5.6 Repayment of Certain Assumed Loans. Immediately following the Closing,
----------------------------------
Buyer shall assume the note payable listed on Schedule 1.3(b) hereto.
---------------
6. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE.
---------------------------------------------------
Buyer's obligation to consummate this Agreement is expressly subject to the
satisfaction, on or prior to the Closing Date, of all of the following
conditions (compliance with which or the occurrence of which may be waived in
whole or in part by Buyer in writing):
6.1 Representation and Warranties. All representations and warranties of
-----------------------------
the Companies and the Shareholders contained in this Agreement, or any
certificate, schedule, exhibit, statement, report or other document delivered or
furnished by either Shareholder or the Companies pursuant this Agreement, shall
be true, correct and complete as of the Closing Date as if made at and as of
such date.
6.2 Covenants. The Companies and the Shareholders shall have performed
---------
and satisfied all covenants and conditions required by this Agreement to be
performed or satisfied by them on or prior to the Closing Date.
6.3 Certificates.
------------
(a) On the Closing Date, each of the Companies shall have
furnished to Buyer a certificate dated the Closing Date signed by an officer of
the Companies to effect that (i) all of its representations and warranties
contained in this Agreement, or any certificate, schedule, exhibit, statement,
report or other document delivered or furnished by it pursuant to this
Agreement, remain true, correct and complete as of the Closing Date as if made
at and as of such date; and (ii) it has performed and satisfied all covenants
and conditions required by this Agreement to be performed or satisfied by it on
or prior to the Closing Date.
(b) On the Closing Date, each Shareholder shall have furnished
Buyer with a certificate dated the Closing Date signed by him to the effect that
(i) all the representations and warranties of the Companies and the Shareholders
contained in this Agreement, or any certificate, schedule, exhibit, statement,
report or other document delivered or furnished by that Shareholder or the
Companies pursuant to this Agreement, remain true, correct and complete as of
the Closing Date as if made at and as of such date; and (ii) the Companies and
the Shareholder have performed and satisfied all covenants and conditions
required by this Agreement to be performed or satisfied by it or him on or prior
to the Closing Date.
6.4 Material Errors. Buyer shall not have discovered any material error,
---------------
misstatement or omission in any of the representations or warranties made by
either of the Companies and the Shareholders in this Agreement, or any
certificate, schedule, exhibit, statement, report or other documents delivered
or furnished by either Shareholder or the Companies pursuant to this Agreement;
or (ii) fail-
22
<PAGE>
ure on the part of either of the Companies or either Shareholder to perform or
satisfy any covenants or conditions required to be performed or satisfied by it
or him under this Agreement.
6.5 Absence of Litigation. No action or proceeding shall have been
---------------------
instituted or threatened prior to or at the Closing Date before any court or
other governmental body, or instituted or threatened by any public authority,
the result of which could prevent or make illegal the consummation of the
transactions contemplated hereunder or under the other agreements to be entered
into in connection with this Agreement or which could have a material adverse
effect on either of the Companies or its properties, Business or prospects.
6.6 Absence of Damage to Property. The tangible and real properties of
-----------------------------
the Companies shall not have suffered any substantial damage or destruction,
whether by fire or otherwise, and whether or not covered by insurance, which
could have a material adverse effect on either of the Companies or its
properties, Business or prospects.
6.7 Consents. The Companies and the Shareholders shall have obtained the
--------
consent or approval of each person whose consent to or approval of the
transactions contemplated by this Agreement or the other agreements to be
entered into in connection with this Agreement is required in order to
consummate this such other agreements or to continue the operation of the
Business as it is currently conducted. Such consents and approvals shall
include, without limitation, the consent of the Companies' current landlord and
the consents of the Shareholders' spouses, if any, in regard to their community
property rights, in forms satisfactory to Buyer and its counsel.
6.8 Governmental Approvals. The Companies shall have obtained all
----------------------
consents and approvals of all governmental agencies that are necessary to permit
the consummation of the transactions contemplated by this Agreement, the other
agreements to be entered into in connection with this Agreement and the
operation of the Business as it is currently conducted.
6.9 Execution of Employment Agreement. Altif shall have executed and
---------------------------------
delivered to Buyer, an employment agreement in the form attached as Exhibit C to
---------
this Agreement (an "Employment Agreement").
6.10 Intentionally Omitted.
---------------------
6.11 Intentionally Omitted.
---------------------
6.12 Opinion of Counsel. The Companies and the Shareholders shall have
------------------
furnished Buyer with the opinion of Stewart Gilman, Esq., dated the Closing
Date, in form and substance reasonably satisfactory to Buyer and its counsel,
covering the matters specified in Exhibit D to this Agreement.
---------
6.13 Due Diligence Review. On or prior to the Closing Date, Buyer and
--------------------
Buyer's representatives shall have completed their due diligence review of the
Companies, to their complete satisfaction.
23
<PAGE>
6.14 Board Approval. Buyer's Board of Directors, and the Board of
--------------
Directors of Buyer's indirect parent corporation, Smart & Final Inc., shall have
approved of the terms and conditions of this Agreement and the other agreements
to be entered into in connection with this Agreement.
6.15 Corporate Name Change. The Companies and the Shareholders shall have
---------------------
furnished to Buyer an amendment to the Companies' Articles of Incorporation, in
form acceptable for filing with the Florida Secretary of State, changing the
Companies' corporate names to names that are, in the reasonable opinion of Buyer
and Buyer's counsel, not substantially similar to "Orlando Foodservice, Inc." or
"Capricorn Foods of Central Florida, Inc.".
6.16 Approval of Documentation. The form and substance of all opinions,
-------------------------
certificates, instruments of transfer and other documents to be furnished by the
Companies and the Shareholders and their counsel under this Agreement shall be
satisfactory in all reasonable respects to Buyer and its counsel.
7. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANIES AND THE
----------------------------------------------------------------
SHAREHOLDERS TO CLOSE.
- ---------------------
The obligations of the Companies and the Shareholders to consummate this
Agreement is expressly subject to the satisfaction, on or prior to the Closing
Date, of all of the following conditions (compliance with which or the
occurrence of which may be waived in whole or in part in writing by all of the
Companies and the Shareholders):
7.1 Representations and Warranties. All representations and warranties of
------------------------------
Buyer contained in this Agreement shall be true, correct and complete as of the
Closing Date as if made at and as of such date.
7.2 Covenants. Buyer shall have performed and satisfied all covenants and
---------
conditions required by this Agreement to be performed or satisfied by it on or
prior to the Closing Date.
7.3 Buyer' Certificate. On the Closing Date, Buyer shall have furnished
------------------
to the Companies and the Shareholders a certificate dated the Closing Date
signed by an officer of Buyer, to the effect that (i) all of its representations
and warranties contained in this Agreement, or any certificate, schedule,
exhibit, statement, report or other document delivered or furnished by it
pursuant to this Agreement, remain true, correct and complete as of the Closing
Date as if made at and as of such date; and (ii) it has performed and satisfied
all covenants and conditions required by this Agreement to be performed or
satisfied by it on or prior to the Closing Date.
7.4 Material Errors, Etc. The Shareholders shall not have discovered any
--------------------
material (i) error, misstatement or omission in any of the representations or
warranties made by Buyer in this Agreement, or any certificate, schedule,
exhibit, statement, report or other document delivered or furnished by Buyer
pursuant to this Agreement; or (ii) failure on the part of Buyer to perform or
satisfy any covenants or conditions required to be performed or satisfied by it
hereunder.
24
<PAGE>
7.5 Absence of Litigation. No action or proceeding shall have been
---------------------
instituted prior to or at the Closing Date before any court or other
governmental body, or instituted or threatened by any public authority, the
result of which could prevent or make illegal the consummation of the
transactions contemplated hereunder or under the other agreements to be entered
into in connection with this Agreement.
7.6 Opinion of Counsel. Buyer shall have furnished the Shareholders with
------------------
the opinion of Donald G. Alvarado, dated the Closing Date, in form and substance
reasonably satisfactory to the Companies, the Shareholders and their counsel,
covering the matters specified in Exhibit E to this Agreement.
---------
7.7 Approval of Documentation. The form and substance of all opinions,
-------------------------
certificates and other documents to be delivered by Buyer and its counsel under
this Agreement shall be satisfactory in all reasonable respects to the
Companies, the Shareholders and their counsel.
8. TERMINATION AND ABANDONMENT.
---------------------------
8.1 Termination. This Agreement may be terminated on or before the
-----------
Closing Date without liability on the part of any party exercising such right of
termination:
(a) by the mutual consent of Buyer, the Companies and the Shareholders;
(b) by Buyer, with or without cause, on or prior to the Closing Date;
(c) by any party hereto that is not in default hereunder at anytime on or
prior to the Closing Date if, at the time of the notice of such
termination is given, the transactions contemplated by this Agreement
shall not have been effected; provided that for this purpose the
Companies and the Shareholders shall be deemed one party and such
termination by the Companies and the Shareholders may only be made by
all of them; or
(d) by any party hereto if there has been a material misrepresentation or
breach on the part of the other party of the warranties of such other
party as set forth in this Agreement or made pursuant hereto, or if
there has been any material failure on the part of the other party to
perform its obligations or comply with the covenants under this
Agreement; provided that for this purpose the Companies and the
Shareholders shall be deemed one party and such termination by the
Companies and the Shareholders may only be made by all of them.
8.2 Procedure and Effect of Termination. In the event of termination and
-----------------------------------
abandonment by Buyer, as one party, or by the Companies and the Shareholders, as
the other party, or by both parties pursuant to Section 8.1 above, written
notice thereof shall be given to the other party and this Agreement shall
terminate and be abandoned, without further action by any of the parties hereto.
If this Agreement is terminated as provided in Sections 8.1(a) or 8.1(b) above
or because a condition to a party's obligation to consummate the transactions
contemplated by this Agreement has not been satisfied by the Closing Date, and
the other party is not in default, no party hereto shall have any liability or
25
<PAGE>
further obligations to any other party to this Agreement; provided, however,
that the existing Confidentiality Agreement between the parties shall survive
any termination hereunder.
9. SURVIVAL AND INDEMNIFICATION.
----------------------------
9.1 Survival of Representations, Warranties and Covenants. All
------------------------------------------- ---------
representations, warranties and agreements made by Buyer, the Companies and the
Shareholders in this Agreement (including statements contained in any schedule,
certificate, exhibit, statement, report or other document delivered by or on
behalf of any party hereto or in connection with the transactions contemplated
hereby) shall survive the execution, delivery and performance of this Agreement
and any investigations, inspections, examinations, or audits made by or on
behalf of the parties. All such representations and warranties shall remain in
full force and effect until the expiration of the applicable statute of
limitations, unless specific claims shall have been made in writing, or an
action at law or in equity shall have been commenced or filed, in good faith, on
or prior to such anniversary dates. Nothing in this Section 9.1 shall affect
the obligations and indemnities of the parties with respect to the covenants and
agreements contained in this Agreement that are permitted or required to be
performed, in whole or in part, after the Closing Date.
9.2 Indemnification.
---------------
(a) The Companies and the Shareholders, jointly and severally, agree
to indemnify Buyer and hold it harmless against and in respect of any and all
claims, losses, expenses, obligations and liabilities, including court costs and
reasonable attorneys' fees associated therewith, which arise or result from or
are incident or related to (i) the inaccuracy of any representation or breach of
any warranty of the Companies or either Shareholder, or (ii) any default or
failure of the Companies' or either Shareholder's commitments or obligations
under this Agreement, or (iii) by reason of any act or omission of the Companies
or either Shareholder which constitutes a breach or default under this
Agreement, or (iv) the noncompliance with any applicable bulk transfer or
similar laws, or (v) the Excluded Liabilities. The Companies and each
Shareholder shall reimburse Buyer on demand for any payment made or loss
suffered by Buyer at any time after the execution of this Agreement, based upon
the judgment of any court of competent jurisdiction or pursuant to a bona fide
compromise or settlement of claims, demands or actions, in respect of any
damages to which the foregoing indemnity relates. Notwithstanding the
foregoing, Buyer shall have the right, but shall not be required, to offset or
reduce the amount of any and all payments made as part of the Purchase Price by
the amount of any such payment or loss. Any such offset or reduction shall not
be deemed a waiver of any right or remedy which Buyer may have either under this
Agreement or otherwise. Consummation of the transaction contemplated under this
Agreement shall not be deemed or construed to be a waiver of any right or remedy
of Buyer, nor shall this Section or any other provision of this Agreement be
deemed or construed to be a waiver of any ground of defense by Buyer.
(b) Buyer agrees to indemnify the Companies and the Shareholders and
hold them harmless against and in respect of any and all damages, claims,
losses, expenses, costs, obligations and liabilities, including court costs and
reasonable attorneys' fees, which arise or result from or are incident or
related to (i) the inaccuracy of any representation or breach of any warranty of
Buyer, or (ii) any
26
<PAGE>
default of the commitments or obligations of Buyer under this Agreement, or
(iii) by reason of any act or omission of Buyer which constitutes a breach or
default under this Agreement, or (iv) the Assumed Liabilities. Buyer shall
reimburse the Companies and the Shareholders on demand for any payment made or
loss suffered by them at any time after the execution of the Agreement, based on
the judgment of any court of competent jurisdiction or pursuant to a bona fide
compromise or settlement of claims, demands or actions, in respect of any
damages to which the foregoing indemnity relates. Consummations of the
transaction contemplated under this Agreement shall not be deemed or construed
to be a waiver of any right or remedy of the Companies or the Shareholders, nor
shall this Section or any other provision of this Agreement be deemed or
construed to be a waiver of any ground of defense by them.
(c) The party indemnified hereunder (the "Indemnitee") shall promptly
notify the indemnifying party (the "Indemnitor") of the existence of any claim,
demand, or other matter involving liabilities to third parties to which the
Indemnitor's indemnification obligations would apply and shall give the
Indemnitor 30 days (or such shorter period as required by the contingencies of
such claim, demand or other matter involving liabilities to third parties) in
which to elect to defend the same at its own expense and with counsel its own
selection (who shall be approved by the Indemnitee, which approval shall not be
unreasonably withheld); provided that the Indemnitee shall at all times also
have the right to fully participate in the defense at its own expense. If the
Indemnitor shall, within such 30-day period, fail to defend, the Indemnitee
shall have the right, but not the obligation, to undertake the defense of, and
to compromise or settle (exercising reasonable business judgment) the claim or
other matter on behalf, for the account, and at the risk and expense of the
Indemnitor. Notwithstanding the foregoing, if the matter might have an effect on
the ongoing Business or the Purchased Assets or Buyer's relationship with
customers or suppliers, Buyer shall have first right to defend the same on the
basis set forth in the preceding sentence. Except as provided above, the
Indemnitee shall not compromise or settle the claim or other matter without the
written consent of the Indemnitor, such consent not to be unreasonably withheld.
If the claim is one that cannot by its nature be defended solely by the
Indemnitor, the Indemnitee shall make available all information and assistance
that the Indemnitor may reasonably request; provided that any associated
expenses shall be paid by the Indemnitor.
10. MISCELLANEOUS.
-------------
10.1 Notices. Any notice or other communication required or permitted
-------
hereunder shall be in writing, and shall be deemed to have been given if
personally delivered or delivered by facsimile transmission or 72 hours after
being placed in the United States mail, registered or certified-return receipt
requested, postage prepaid, addressed as follows:
If to the Companies:
Orlando Foodservice, Inc.
Capricorn Foods of Central Florida, Inc.
2540 Shader Road
Orlando, FL 32804
Facsimile (407) 290-1083
27
<PAGE>
If to Altif:
Michael Altif
844 Benchwood Court
Winter Springs, FL 32708
If to Coe:
Frederick R. Coe
261 Robin Road
Altamont Springs, FL 32701
If to Buyer:
American Foodservice Distributors
4700 South Boyle Avenue
Los Angeles, CA 90058
Attn: Martin A. Lynch
Facsimile: (213) 589-2074
With a copy to:
Smart & Final Inc.
4700 South Boyle Avenue
Los Angeles, CA 90058
Attn: Donald G. Alvarado, Esq.
Facsimile: (213) 589-0415
Each of the parties shall be entitled to specify a different address by
giving notice as aforesaid.
10.2 Entire Agreement. This Agreement, and the Exhibits and Schedules
----------------
hereto, which are incorporated into this Agreement by reference and are made a
part hereof, constitute the entire agreement between the parties hereto
pertaining to the subject matter hereof and supersede all prior agreements,
understandings, negotiations, and discussions, whether oral or written.
10.3 Amendment and Modification. No supplement, modification, waiver or
--------------------------
termination of this Agreement shall be binding unless executed in writing by the
party to be bound. No waiver of any of the provisions of this Agreement shall
be deemed or shall constitute a waiver of any other provisions (whether or not
similar), nor shall such waiver constitute a continuing waiver unless otherwise
expressly provided.
10.4 Headings. Section and subsection headings are not to be considered
--------
part of this Agreement and are included solely for convenience and reference and
shall not be held to define, construe or limit the meaning of any provision of
this Agreement.
28
<PAGE>
10.5 Successors and Assigns. All of the terms, provisions and obligations
----------------------
of this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective heirs, representatives, successors and
assigns. Notwithstanding the foregoing, neither this Agreement nor any rights
or obligations hereunder shall be assigned, pledged, hypothecated or otherwise
transferred by a party without the prior written consent of all other parties,
except (i) by operation of law, or (ii) by Buyer to any entity that Buyer
controls (provided that such assignment shall not relieve Buyer of its
obligations hereunder, if such assignee does not perform such obligations).
10.6 Governing Law; Venue. The validity, construction and interpretation
--------------------
of this Agreement shall be governed by the internal laws of the State of Florida
applicable to contracts made and to be performed wholly within that state.
10.7 Third Parties. Nothing in this Agreement, expressed or implied, is
-------------
intended to confer upon any person other than the parties hereto any rights or
remedies under or by reason of this Agreement.
10.8 Expenses. Each party shall bear the expenses (including, without
--------
limitation, attorneys' fees) incurred by him or it in connection with the
negotiation, execution and delivery of this Agreement and the agreements
contemplated by this Agreement.
10.9 Attorneys' Fees. In the event any party takes legal action to enforce
---------------
any of the terms of this Agreement, the unsuccessful party to such action shall
pay the successful party's reasonable expenses, including attorneys' fees for
pretrial investigation, at trial, and on appeal, incurred in such action.
10.10 Counterparts. This Agreement may be executed simultaneously and in
------------
two or more counterparts, each one of which shall be deemed an original, but all
of which shall constitute one and the same instrument. Facsimile signatures of
this Agreement shall have the same binding effect as original signatures.
10.11 Joint and Several Obligations. All of the obligations of the
-----------------------------
Companies and the Shareholders hereunder shall constitute the joint and several
obligations of each of the Companies and each Shareholder.
10.12 Severable Provisions. If any of the provisions of this Agreement
--------------------
may be determined to be illegal or otherwise unenforceable, in whole or in part,
the remaining provisions, and any partially unenforceable provisions to be the
extent enforceable, shall nevertheless be binding and enforceable. For the
purpose of determining the scope of the covenants set forth in Section
5.5(e)(ii) above, each of the subsections thereof shall be considered a separate
covenant such that if the geographic scope of any such subsections shall be
determined by a court of competent jurisdiction to be excessive and invalid,
such subsections shall be severed and the remaining subsections shall be deemed
enforceable and remain in full force and effect.
29
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date and year first set forth above.
BUYER:
-----
AMERICAN FOODSERVICE DISTRIBUTORS, a
California corporation
By /s/ Martin A. Lynch
--------------------
Its Executive Vice President & CFO
------------------------------
By /s/ Donald G. Alvarado
----------------------
Its Vice President and Secretary
----------------------------
THE COMPANIES:
-------------
ORLANDO FOODSERVICE, INC., a
Florida corporation
By /s/ Michael G. Altif
--------------------
Its President
---------
CAPRICORN FOODS OF CENTRAL FLORIDA,
INC., a Florida corporation
By /s/ Michael G. Altif
--------------------
Its President
---------
THE SHAREHOLDERS:
----------------
/s/ Michael G. Altif
--------------------
MICHAEL G. ALTIF
/s/ Frederick Coe
-----------------
FREDERICK COE
30
<PAGE>
ASSET PURCHASE AGREEMENT
between
CONTINENTAL GRAIN COMPANY
AND
AMERICAN FOOD SERVICE DISTRIBUTORS
Dated September 26, 1997
THIS AGREEMENT, dated as of September 26, 1997, is between CONTINENTAL
GRAIN COMPANY (the "SELLER"), a Delaware corporation and AMERICAN FOOD SERVICE
DISTRIBUTORS, (the "BUYER") a(n) California corporation.
RECITALS
WHEREAS, Seller is engaged in the operation of a commercial meat processing
and distribution business in Opa Locka, Florida and Riviera Beach, Florida
commonly referred to as Southern Foods (the "PURCHASED BUSINESS").
WHEREAS, Seller proposes to sell to Buyer, and Buyer proposes to purchase
from Seller, certain assets of Seller on the terms and subject to the conditions
contained in this Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and the
agreements contained herein, Seller and Buyer agree as follows:
1. Agreement to Sell and Purchase.
------------------------------
On the terms and subject to the conditions of this Agreement, Seller agrees
to sell and transfer to Buyer, and Buyer agrees to purchase from Seller, on and
as of the close of business on the day immediately preceding the Closing Date
(as defined in Section 9 hereof), the following property and assets of Seller
(the "PURCHASED ASSETS"):
1.1 The real property of Seller located in or near the Southern Foods
facility at 13100 Northwest 38th Avenue, Opa Locka, Florida, 33054, legally
described in SCHEDULE 1.1 hereto (the "REAL PROPERTY"), together with all
buildings, structures, installations, fixtures and other improvements situated
thereon (hereinafter collectively referred to as the "PURCHASED FACILITY");
1.2 All equipment, machinery, spare machinery and parts, motor vehicles
and other rolling stock, tools, accessories, office equipment, furniture and
furnishings and other miscellaneous tangible personal property owned by Seller
and used at the Purchased Facility and at the Southern
<PAGE>
Foods facility located at 1400 West 13th Street, Riviera Beach, Florida, 33419,
including without limitation any such assets that have been fully depreciated
and accordingly are not reflected in Seller's books and records (hereinafter
collectively referred to as the "EQUIPMENT");
1.3 All merchantable inventory, supplies and the like (hereinafter
collectively referred to as the "INVENTORY");
1.4 All open purchase orders entered into in the ordinary course of
business pursuant to which Seller has committed to purchase goods in connection
with the Purchased Business (hereinafter collectively referred to as the "OPEN
PURCHASE ORDERS");
1.5 All customer orders entered into in the ordinary course of business
pursuant to which Seller has committed to sell goods or inventory (hereinafter
collectively referred to as the "OPEN CUSTOMER ORDERS") upon terms and
conditions set forth in SCHEDULE 1.5;
1.6 All rights of Seller under all other contracts, leases, commitments,
license and permits (to the extent transferrable), and agreements entered into
in the course of the Purchased Business and identified in SCHEDULE 1.6
(hereinafter collectively referred to as the "CONTRACTS AND LEASES") hereto;
1.7 All current accounts, notes and other amounts receivable arising from
the operation of the Purchased Business and existing as of the close of business
on the day immediately preceding Closing Date (hereinafter collectively referred
to as the "RECEIVABLES" and each individually as a "RECEIVABLE");
1.8 All accounts, notes and other amounts payable and all accrued
liabilities arising from the operation of the Purchased Business and existing as
of the close of business on September 27, 1997, (hereinafter collectively
referred to as the "PAYABLES" and each individually as a "PAYABLE".)
1.9 All rights of Seller to the use of the name "Southern Foods".
Except as hereinafter specifically provided, the Purchased Assets will be
transferred by Seller to Buyer in accordance with this Agreement free and clear
of all liens, charges or encumbrances, and with respect to the Real Property,
subject to: (i) obligations for taxes for the current year not yet due and
payable, (ii) liens, charges, and encumbrances reflected in the real estate
title insurance commitments delivered by Seller to Buyer pursuant to Section 8.1
hereof, and (iii) easements, conditions, covenants, reservations and
restrictions of record (hereinafter collectively referred to as the "PERMITTED
EXCEPTIONS").
2. Excluded Assets.
---------------
The Purchased Assets exclude, among other assets of Seller, the following:
2.1 Cash and bank accounts (other than Customer Prepayments);
<PAGE>
2.2 Tax refunds and insurance premium refunds arising from policy
cancellations;
2.3 General ledgers, tax returns, minute books and similar records of
Seller;
2.4 All trademarks, trade names, patents, service marks, copyright and
other intangibles, except the name "Southern Foods"; and,
2.5 The real property of Seller located in or near the Southern Foods
facility at 1400 West 13th Street, Riviera Beach, Florida, 33419, together with
all buildings, structures, installations, fixtures and other improvements
situated thereon excepting those non-fixed assets referred to in 1.2, above
(hereinafter collectively referred to as the "EXCLUDED FACILITY");
(2.1 through 2.5 hereinafter collectively referred to as the "EXCLUDED ASSETS").
3. Purchase Price.
--------------
3.1 Generally.
---------
The total purchase price to be paid to Seller for the Purchased Assets
(hereinafter referred to as the "PURCHASE PRICE") shall be the sum total of the
following:
3.1.1 The amount of Two Million Four Hundred Twenty-Seven Thousand
Dollars ($ 2,427,000.00) for the Purchased Facility and the
Equipment (the "PROPERTY AND EQUIPMENT PRICE"); PLUS,
3.1.2 An amount equal to the net book value of the Inventory as of
September 27, 1997, determined in accordance with SCHEDULE 3.1.2
hereto (the "INVENTORY PRICE"); PLUS,
3.1.3 An amount equal to the net book value of the Receivables as of
September 27, 1997, together with accrued interest thereon, if
any, to be determined in accordance with SCHEDULE 3.1.3 hereto
(the "RECEIVABLES PRICE");
3.1.4 LESS an amount equal to the net book value of the
Payables as of September 27, 1997, and accrued liabilities, to be
determined in accordance with SCHEDULE 3.1.4 hereto (the
"PAYABLES PRICE");
3.1.5 LESS the sum of One Million One Hundred Thousand Dollars
($1,100,000.00).
3.1.6 Less the sum of Twelve Thousand Dollars ($12,000.00),
which represents estimated funds necessary for the informational
system to become operational.
3.2 Payment.
-------
At the Closing, Buyer shall pay Seller an amount equal to the Purchase
Price, plus or minus prorations, adjustments and closing costs as set forth
herein by wire transfer of immediately available funds.
<PAGE>
3.3 Allocation.
----------
The parties agree that $800,000 of the total Purchase Price shall be
allocated to the land and building.
4. Assumption of Liabilities.
-------------------------
Subject to the conditions of this Agreement, Buyer shall assume the
following liabilities and obligations of Seller as set forth on Seller's balance
sheet as of the Closing Date as set forth on SCHEDULE 4, which shall be agreed
to and finalized at anytime prior to closing:
4.1 Liabilities and obligations arising before and after the Closing Date
under Open Purchase Orders;
4.2 Liabilities and obligations arising before and after the Closing Date
under Open Customer Orders;
4.3 Liabilities and obligations arising from and after the Closing Date
under the Contracts and Leases.
4.4 Liabilities and obligations arising before and after the Closing Date
under the Payables.
5. Labor and Employment Matters.
----------------------------
5.1 Generally.
---------
Without limiting the generality of Section 4 hereof, Buyer shall not assume
any employment obligation, wage or salary payment obligation, accrued or earned
vacation obligation, or employee benefit obligation of Seller or any workers
compensation claim arising from injuries sustained by or incidents involving
employees of Seller occurring prior to the Closing Date.
5.2 Employment Offers.
-----------------
Buyer hereby represents and warrants that it will, prior to the Closing
Date, offer employment to all persons currently employed by Seller at the Opa
Locka location and to five individuals currently employed at the Riviera Beach
location, such employment upon such terms and conditions as Buyer in its sole
discretion may choose to offer to be effective immediately as of the
<PAGE>
Closing Date. Buyer further acknowledges that Seller is relying on such
representation and warranty for purposes of assessing its obligation to give
notice of the transactions contemplated hereby to its employees or to take any
other action that may be required under applicable federal, state and local
laws. To facilitate the making of such employment offers, Seller shall afford
Buyer a reasonable opportunity to interview its employees for prospective
employment by Buyer. Buyer may in its discretion offer employment to any
person, on terms and conditions established by Buyer. Notwithstanding anything
to the contrary contained in this Agreement, no employee of Seller, whether or
not hired by Buyer from and after the Closing Date, shall be construed as a
third party beneficiary under this Agreement. Nothing contained herein shall
constitute a guarantee of employment or continued employment to seller's
employees.
5.3 Employment Transition Provisions.
--------------------------------
Effective as of the close of business on the day immediately preceding the
Closing Date and upon occurrence of the Closing, Seller shall terminate the
employment of each person employed by Seller at the Purchased Facilities unless
transferred to another location by agreement between such employee and Seller.
As soon as practicable after the Closing, Seller shall pay each such person all
accrued wages, salary, accrued and earned vacation and other employee
compensation payments for all periods prior to the Closing Date. In addition,
Seller shall pay or provide for all other employee benefits maintained by Seller
for all periods prior to the Closing Date, all in accordance with applicable
law.
6. Riviera Beach Closing.
----------------------
The Seller shall use its best efforts to coordinate the closing of the
Excluded Facility with the Buyer to coincide with the Closing Date. The sale of
the Equipment and Inventory to Buyer from the Excluded Facility pursuant to
Sections 1.2 and 1.3 hereof shall be F.O.B. the Riviera Beach Facility as of the
Closing Date. Buyer may elect, but shall not be obligated, to determine which
Equipment and Inventory from the Riviera Beach Facility it shall retain,
provided that Buyer shall (a) be responsible for all costs and expenses of
removing such Equipment and Inventory from its current location at such Excluded
Facilities and transporting such to Buyer's desired destination, and (b) repair
any damage caused by such removal. Buyer shall be entitled to remove such
Equipment and Inventory within thirty (30) days of the Closing Date provided
that Buyer has given Seller at least two (2) business days prior written notice
of its intent to remove such Equipment and Inventory.
<PAGE>
7. Closing Prorations.
------------------
On the Closing Date, utility charges, rents under assumed leases, payments
under assumed agreements, real property taxes payable on the Real Property,
heavy vehicle use taxes and other similar obligations to third parties shall be
prorated between Seller and Buyer on the basis of the actual number of calendar
days elapsed before and from and after the Closing Date. Without limiting the
generality of the foregoing, Seller shall pay that portion of the real estate
taxes for calendar year 1997 attributable to the actual number of calendar days
elapsed before the Closing Date, and Buyer shall pay the balance of such taxes
from and including the Closing Date and all real estate taxes payable in
subsequent years.
<PAGE>
8. Title Examination.
-----------------
8.1 Delivery of Commitments, Etc.
-----------------------------
As soon as reasonably practicable after the execution of this Agreement,
Seller shall, cause to be prepared and delivered to Buyer commitments for
American Land Title Association ("ALTA") Owner's Policy Form B-1970, (the "TITLE
COMMITMENTS") or equivalent title insurance policies covering the Real Property,
such commitments to be issued by a title insurance company (the "TITLE COMPANY")
selected by Seller and reasonably satisfactory to Buyer and to be in a form
reasonably acceptable to Buyer. Seller and Buyer shall each pay one-half (1/2)
of the examination and premium for the policies (of title insurance issued
pursuant to the title insurance commitments, the amount of the coverage to be
based upon that portion of the Purchase Price allocable to the Purchased
Facilities). Buyer shall be solely responsible for the cost of extended
coverage and any endorsements to the title policy required by Buyer.
8.2 Title Objections.
----------------
In the event that the Title Commitment contains exceptions other than the
Permitted Exceptions (the "UNPERMITTED EXCEPTIONS"), within ten (10) days after
receipt of the Title Commitment, Buyer shall give Seller written notice of any
Unpermitted Exceptions to which Buyer objects. Seller shall be given a period
of fifteen (15) days (the "CURE PERIOD") following such notice to cause the
Unpermitted Exceptions to be waived or removed from the Title Commitment, or to
obtain a commitment from the Title Company or any other title insurance company
licensed to do business in the State of Florida (the "SUBSTITUTE TITLE COMPANY")
to insure the Buyer against loss or damage resulting from the Unpermitted
Exceptions. In the event that, within the Cure Period, the Seller is unable or
unwilling to cause the Unpermitted Exceptions to be removed from the Title
Commitment, or to obtain a commitment from the Title Company or the Substitute
Title Company to insure the Buyer against loss or damage resulting from the
Unpermitted Exceptions, Buyer may, in its sole discretion, elect to terminate
this Agreement within ten (10) days following the expiration of the Cure Period
and Buyer shall receive the return of the Earnest Money Deposit. In the event
that the Buyer does not so notify the Seller of its election to terminate this
Agreement, the Buyer shall purchase the Purchased Assets subject to such
Unpermitted Exceptions without diminution or reduction of, or setoff against,
the Purchase Price.
8.3 Cooperation.
-----------
Seller shall cooperate, without additional cost to Seller, with Buyer both
before and after the Closing in connection with the efforts of Buyer, if any, to
cure any objections to title raised by Buyer which are not cured before the
Closing Date, if Buyer elects to close notwithstanding such objections.
9. Closing, Costs and Deliveries.
-----------------------------
<PAGE>
9.1 Closing.
-------
The closing of the transactions contemplated by this Agreement (the
"CLOSING") shall take place at the offices of Seller's local counsel on or about
October 1, 1997, or such other date (but no later than November 1, 1997) or
alternate location as Buyer and Seller may mutually agree (the "CLOSING DATE").
9.2 Buyer's Payments.
----------------
Buyer shall pay:
9.2.1 Recording fees for the documents to be given by Seller pursuant
to this Agreement;
9.2.2 Vehicle transfer fees for motor vehicles and rolling stock to be
transferred pursuant to this Agreement;
9.2.3 One-half of the expense of the title examinations and title
policy premium plus the cost of any additional insurance or
endorsements;
9.2.4 One-half of the fee for the Closing Escrow, if any; and
9.2.5 The fees and expenses of its own counsel.
9.3 Seller's Payments.
-----------------
Seller shall pay:
9.3.1 Any real estate transfer or stamp taxes imposed by the State of
Florida or Dade County upon the transactions contemplated by this
Agreement;
9.3.2 One-half of the expense of the title examinations and title
policy premiums under Section 8;
9.3.3 Recording fees for documents necessary to remove Unpermitted
Exceptions, if any;
9.3.4 One-half of the fee for the Closing Escrow, if any; and
9.3.5 The fees and expenses of a Phase I environmental audit and any
remediation connected therewith; and
9.3.6 The fees and expenses of its own counsel.
9.4 Buyer's Deliveries.
------------------
At the Closing, Buyer shall deliver to Seller:
9.4.1 A copy of the resolutions of the Board of Directors of Buyer
authorizing and approving the execution and delivery of the documents
to consummate the
<PAGE>
transactions contemplated hereby, certified by the Secretary or
Assistant Secretary of the Buyer as of the Closing Date;
9.4.2 The cash payment specified in Section 3.2 hereof; and
9.4.3 Such other instruments as may be required by the Title Company.
9.5 Seller's Deliveries.
-------------------
At the Closing, Seller shall deliver or cause to be delivered to Buyer:
9.5.1 A copy of the resolutions of the Board of Directors of Seller
authorizing and approving the execution and delivery of the documents to
consummate the transactions contemplated hereby, certified by the
Secretary or an Assistant Secretary of Seller as of the Closing Date;
9.5.2 One or more special warranty deeds conveying the Purchased
Facilities to Buyer, substantially in the form of SCHEDULE 9.5.2
hereto;
9.5.3 A Bill of Sale with respect to the Equipment and Inventory;
9.5.4 An Assignment Agreement or Agreements with respect to the items
set forth in Sections 1.4 through 1.9 together with the originals of all
documents identified therein;
9.5.5 Such other instruments as may be required by the Title Company;
and
9.5.6 Possession of the Purchased Assets.
10. Representations and Warranties of Seller.
----------------------------------------
Seller hereby represents and warrants to Buyer as follows:
10.1 Corporate.
---------
10.1.1 Good Standing. Seller is a corporation duly incorporated,
--------------
validly existing and in good standing under the laws of the State of
Delaware.
10.1.2 Corporate Power.
---------------
Seller has the corporate power to own its properties and conduct the
Purchased Business and to execute and deliver this Agreement and to
consummate the transactions contemplated hereby.
10.1.3 Authorization
-------------
The execution and delivery of this Agreement by Seller, and the
consummation of the transactions contemplated hereby, have been duly
authorized by all necessary corporate action of Seller and this
Agreement constitutes a valid and binding legal obligation, enforceable
against Seller in accordance with its terms.
<PAGE>
10.1.4 Qualification.
-------------
Seller is qualified to do business and is in good standing as a foreign
corporation under the laws of each state where the nature of the Purchased
Business or the Purchased Assets requires qualification and where failure
to qualify would have a material adverse effect on its business or
financial condition.
10.1.5 No Violations of Articles, By-laws or Agreements.
------------------------------------------------
There are no prohibitions in the Articles of Incorporation or By-laws of
Seller or in any indenture, contract or agreement to which Seller is a
party or by which Seller is bound, which prohibit the execution and
delivery by Seller of this Agreement or the consummation by Seller of the
transactions contemplated hereby.
10.1.6 Material Litigation.
--------------------
Seller warrants and represents that there is no material litigation or
government action, threatened or pending which would affect the conduct or
continued operation of the Purchased Business, or the Purchased Assets or
any of the representatives on the Seller's Balance Sheet.
10.2 Receivables.
-----------
All Receivables have arisen and will arise in the ordinary course of the
Purchased Business, and all Receivables constitute or will constitute valid and
binding obligations of the account debtors or other obligors enforceable in
accordance with their terms. The receivables balance on Seller's books are
stated in accordance with General Accepted Accounting Principles and have
adequate reserve or provision for potential bad debt.
10.3 Inventory.
---------
All Inventory reflected in the determination of the Purchase Price will be
of a saleable quality usable in the ordinary course of the Purchased Business
and are not "adulterated" or "misbranded" as those terms are defined in the
Food, Drug and Cosmetic Act.
10.4 Title to Property.
-----------------
10.4.1 Real Property.
-------------
Schedule 1.1 hereto correctly identifies the Real Property included in the
Purchased Assets. On the Closing Date Seller will have good title to the
Real Property, free and clear of all mortgages, liens, pledges, charges,
easements and encumbrances other than Permitted Exceptions.
10.4.2 Equipment.
---------
On the Closing Date, Seller will have good title to all Equipment included
in the Purchased Assets, free and clear of all mortgages, liens, pledges,
charges and encumbrances. Pursuant to Section 3.1.6, Seller is issuing
Buyer a $12,000.00 credit for potential additional charges to its
informational system.
<PAGE>
10.4.3 Environmental.
--------------
Seller warrants and represents that, with respect to the Opa Locka
facility, (a) there is no known or suspected environmental hazards
of any kind or character, (b) that it has or will perform a Phase I
environmental audit prior to closing, and (c) that it has provided
the results of those tests to Buyer prior to closing.
10.5 Employee Plans.
--------------
There is no collective bargaining agreement, similar agreement, or union
representative covering the Purchased Business.
10.6 Future Product Sales.
--------------------
Seller agrees to continue to sell Dutch Quality and Wayne Farms branded
product to the Purchased Facility pursuant to the terms and conditions offered
to other customers, with the same marketing programs (provided such programs are
not discontinued as to all customers) and pricing terms currently offered to
Southern Foods.
10.7 Survival of Representations and Warranties.
------------------------------------------
Each of the representations and warranties made and given by Seller in this
Agreement shall survive for a period of six (6) months following the Closing
Date except 10.4.3 and 10.6, which shall survive for 36 months,
11. Representations and Warranties of Buyer.
---------------------------------------
Buyer hereby represents and warrants to Seller as follows:
11.1 Corporate.
---------
11.1.1 Good Standing. Buyer is a corporation duly organized, validity
-------------
existing and in good standing under the laws of the State of California.
11.1.2 Corporate Power.
---------------
Buyer has the corporate power to own its properties and conduct the
Purchased Business and to execute and deliver this Agreement and to
consummate the transactions contemplated hereby.
11.1.3 Authorization
-------------
The execution and delivery of this Agreement by Buyer, and the consummation
of the transactions contemplated hereby, have been duly authorized by all
necessary corporate action of Buyer and this Agreement constitutes a valid
and binding legal obligation, enforceable against Buyer in accordance with
its terms.
11.1.4 Qualification.
-------------
Buyer is qualified to do business and is in good standing as a foreign
corporation under the laws of each state where the nature of the Purchased
Business or the Purchased Assets requires qualification and where failure
to qualify would have a material adverse effect on its business or
financial condition.
<PAGE>
11.1.5 No Violations of Articles, Operating Agreement or Agreements.
------------------------------------------------------------
There are no prohibitions in the Articles of Organization or Operating
Agreement of Buyer or in any indenture, contract or agreement to which
Buyer is a party or by which Buyer is bound, which prohibit the execution
and delivery by Seller of this Agreement or the consummation by Buyer of
the transactions contemplated hereby.
11.2 Pending Litigation.
------------------
There are no actions, suits or proceedings pending or, to the knowledge of
Buyer, threatened against Buyer in any court or before any federal, state,
municipal or other governmental agency which, if decided adversely to Buyer,
would have a material adverse effect upon the ability of Buyer to consummate the
transactions contemplated by this Agreement.
11.3 As Is.
-----
Buyer acknowledges and agrees that it has had or will have had prior to the
Closing, adequate opportunity to investigate and inspect the conditions of the
Purchased Assets and, except for the representations, warranties, covenants and
indemnities made by Seller in this Agreement, Buyer is purchasing the Purchased
Assets in their "AS IS, WHERE IS CONDITION WITH ALL FAULTS, INCLUDING BUT NOT
LIMITED TO BOTH LATENT AND PATENT DEFECTS." EXCEPT AS EXPRESSLY SET FORTH IN
THIS AGREEMENT, NO WARRANTIES, EXPRESS OR IMPLIED, ARE MADE BY SELLER OR ANY OF
ITS AFFILIATES CONCERNING THE PURCHASED ASSETS, INCLUDING BUT NOT LIMITED TO,
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. Buyer
further acknowledges and agrees that it has had an opportunity to review and to
discuss with various agents and/or representatives of Seller the environmental
condition of the Purchased Assets. Buyer has investigated and has knowledge
of operative or
<PAGE>
proposed governmental laws and regulations including, without limitation,
environmental laws and regulations to which the Purchased Assets are or may be
subject and Buyer is purchasing the Purchased Assets upon the basis of its
review and determination of the applicability and effect of such laws and
regulations and the representations, warranties, covenants and indemnities made
by the Seller in this Agreement.
11.4 Survival of Representations and Warranties.
------------------------------------------
Each of the representations and warranties made and given by Buyer in this
Agreement shall survive for a period of six months following the Closing Date.
12. Conditions to Obligation of Buyer to Close.
------------------------------------------
The obligation of Buyer to effect the closing of the transactions
contemplated by this Agreement is subject to the satisfaction prior to or at the
Closing of the following conditions, any one or more of which may be waived by
Buyer:
12.1 Representations and Warranties.
------------------------------
The representations and warranties of Seller contained in this Agreement
shall be true and correct on the Closing Date, as if made on the Closing Date.
12.2 Observance and Performance.
--------------------------
Seller shall have observed and performed all covenants and agreements
required by this Agreement to be observed or performed by it on or prior to the
Closing Date.
12.3 Closing Documents.
-----------------
Buyer shall have received such special warranty deeds, in recordable form,
bills of sale, assignments, releases and other documents of transfer, including
without limitation assignments of certificates of title to all motor vehicles
constituting Purchased Assets in form suitable for transfer in the State of
Florida, required to transfer to Buyer the interests of Seller in the Purchased
Assets and to satisfy the other requirements of this Agreement consistent with
the terms of this Agreement.
12.4 Survey.
------
Buyer shall at its option and expense, obtain a survey of the Real Property
included in the Purchased Facilities.
12.5 Due Diligence.
-------------
Buyer shall have completed due diligence relative to the Purchased Assets
and the results of such due diligence shall not disclose risks of ownership of
the Purchased Assets materially greater than contemplated by Buyer at the date
hereof. Unless Buyer gives written notice to Seller on or before the closing
date to the contrary, Buyer shall accept the condition of the Purchased Assets
and this Section 12.5 shall be waived by Buyer. In the event Buyer gives written
notice of termination
<PAGE>
within the time specified and in accordance with the criteria of this Section
12.5, this Agreement shall be null and void.
13. Conditions to Obligation of Seller to Close.
-------------------------------------------
The obligation of Seller to effect the transactions contemplated by this
Agreement is subject to the satisfaction prior to or at the Closing of the
following conditions, any one or more of which may be waived by Seller:
13.1 Representations and Warranties.
------------------------------
The representations and warranties of Buyer contained in this Agreement
shall be true and correct on the Closing Date, as if made on the Closing Date.
13.2 Observance and Performance.
--------------------------
Buyer shall have observed and performed all covenants and agreements
required by this Agreement to be observed or performed by Buyer on or prior to
the Closing Date.
13.3 Board Approval.
--------------
Seller shall have obtained the due authorization and approval of its Board
of Directors for sale of the Purchased Assets and the transactions contemplated
by this Agreement.
14. Operation of Business Prior to Closing.
--------------------------------------
Seller agrees that, except with the prior written consent of Buyer, from
the date of this Agreement to the Closing or any Escrow Closing:
14.1 Maintenance of Business.
-----------------------
Seller will use reasonable efforts to (i) preserve intact the business
organization of the Purchased Business, (ii) keep available the services of key
employees on terms no less favorable to the Seller than those on which such
employees are presently employed, and (iii) preserve for Buyer the good will of
suppliers, customers and others having business relationships with the Purchased
Business. Seller will maintain its books and records during such period in a
manner consistent with past practice.
14.2 Employees.
---------
Seller will not hire any new employees for the Purchased Business other
than in the ordinary course of the business, or effect any increase in
compensation or employee benefits for its employees engaged in operating the
Purchased Business other than the right, but not the obligation, of Seller to
issue stay bonuses at its discretion.
14.3 No Disposition of Assets.
------------------------
Seller will not sell, transfer, dispose of or abandon any portion of the
Purchased Assets, except for the sale of assets in the ordinary course of
business and consistent with past practice and of assets not material in value
or to the operation of the Purchased Business.
14.4 No Additional Liens.
-------------------
Seller will not permit any of the Purchased Assets to become subject to any
mortgage, charge or encumbrance, other than Permitted Exceptions.
<PAGE>
14.5 No Modification of Agreements.
-----------------------------
Seller will not modify or amend any material contract, lease, commitment or
agreement to be assigned to or assumed by Buyer hereunder, or waive or assign to
any third party any of its rights under any such contract, lease, commitment or
agreement.
14.6 Certain Agreements.
------------------
Seller will not enter into any contract or agreement which relates to the
Purchased Business, which will not be fully performed on or before the Closing
Date other than contracts and agreements in the ordinary course of business
required to be assumed by Buyer pursuant to Section 4 hereof. In addition,
Seller will not enter into any contract or agreement which relates to the
Purchased Business and which contains terms or provisions inconsistent with past
business practices of Seller or the continued operation of the Purchased
Business as a going concern.
14.7 Maintenance of Insurance.
------------------------
Seller will continue to carry all existing policies of insurance relating
to the Purchased Assets, or will effect renewals or replacements thereof in
substantially the same form and amount, and providing substantially the same
coverage, as such existing policies.
14.8 Ordinary Course Operations.
--------------------------
Without limiting the generality of the foregoing, Seller will in all other
respects operate the Purchased Business in the ordinary course of business.
15. Bulk Sales Law.
--------------
Buyer hereby waives compliance by Seller with the requirements of any
applicable laws relating to bulk sales and transfers and Seller hereby agrees to
indemnify Buyer and hold Buyer harmless from any and all claims, liabilities or
costs arising with respect thereto, including reasonable attorneys' fees.
16. Taxes and Fees.
--------------
Buyer shall pay all recording fees, vehicle title transfer fees and any
sales taxes with respect to the sale of the Purchased Assets. Seller shall pay
all deed taxes and real estate transfer fees, if any.
17. Indemnification.
---------------
17.1 Indemnification by Seller.
-------------------------
Seller shall indemnify the Buyer and its respective members, directors,
officers, employees and agents from and against any loss, liability, claim,
damage or expense (including court and
<PAGE>
arbitration fees and costs, and reasonable fees and expenses of legal counsel,
investigators, expert witnesses, consultants, accountants and other
professionals) (a "LOSS") suffered or incurred by any such indemnified party in
connection with or arising from (i) any breach of any representation or warranty
of Seller contained in this Agreement, (ii) any breach of any covenant or
obligation of Seller contained in this Agreement, (iii) the use, ownership,
possession or operation of any of the Purchased Assets by Seller prior to the
Closing Date provided however that (A) Seller shall not have any liability under
-------- -------
clause (i) above until the aggregate of all Losses for which the Seller would
be liable but for this sentence, exceeds on a cumulative basis a dollar amount
equal to $50,000 (the "BASKET"), and in such case the liability of Seller under
this section shall only be for the amounts of any Loss under this Agreement
which exceed the Basket, (B) in no event shall Seller be liable for any Loss
(including without limitation any and all liabilities of Seller for costs,
expenses and attorneys' fees paid or incurred in connection with the curing of
any and all misrepresentations or breaches of warranties or covenants under this
Agreement) to the extent the aggregate of all indemnification payments by or on
behalf of Seller with respect to such Losses shall have exceeded the Purchase
Price.
17.2 Indemnification by Buyer.
------------------------
Buyer shall indemnify Seller and its respective shareholders, directors,
officers, employees and agents from and against any Loss suffered or incurred by
any such party in connection with or arising from (i) any breach of any
representation or warranty of Buyer contained in this Agreement, (ii) any breach
of any covenant or obligation of Buyer contained in this Agreement, (iii) any
liability assumed under Section 4, or (iv) the use, ownership, possession or
operation of any of the Purchased Assets by Buyer from and after the Closing
Date; provided however that (a) Buyer shall not have any liability under clause
-------- -------
(i) above until the aggregate of all Losses for which Buyer would be liable but
for this sentence, exceeds on a cumulative basis $50,000 (the "BASKET"), and in
such case the liability of Buyer shall only be for the amounts of Loss under
this Agreement which exceed the Basket, and (b) in no event shall Buyer be
liable for any Loss (including without limitation any and all liabilities of
Buyer for costs, expenses and attorney's fees paid or incurred in connection
with the curing of any and all misrepresentations or breaches of warranties or
covenants under this Agreement) to the extent the aggregate of all
indemnification payments by or on behalf of Buyer with respect to such Losses
shall have exceeded the Purchase Price.
17.3 Termination of Indemnification.
------------------------------
The obligations to indemnify and hold harmless an Indemnified Party (as
hereinafter defined) shall terminate when the applicable representation or
warranty terminates, provided, however, that such obligations to indemnify and
-------- -------
hold harmless shall not terminate with respect to any item as to which the
Indemnified Party shall have, before the expiration of the applicable period,
previously made a claim by delivering a written notice (stating in reasonable
detail the basis of such claim) to the Indemnifying Party.
17.4 Procedure Relating to Indemnification Under Section 17.1 or 17.2.
----------------------------------------------------------------
A party seeking indemnification pursuant to Sections 17.1 and 17.2 (an
"INDEMNIFIED PARTY") shall give prompt notice to the party from whom such
indemnification is sought (the "INDEMNIFYING PARTY") of the assertion of any
claim or assessment, or the commencement of any
<PAGE>
action, suit, audit or proceeding, by a third party in respect of which
indemnity may be sought hereunder (a "THIRD PARTY CLAIM") and will give the
Indemnifying Party such information with respect thereto as the Indemnifying
Party may reasonably request, but no failure to give such notice shall relieve
the Indemnifying Party of any liability hereunder (except to the extent the
Indemnifying Party has suffered actual prejudice thereby). Thereafter, the
Indemnified Party shall deliver to the Indemnifying Party, within five (5)
business days after the Indemnified Party's receipt thereof, copies of all
notices and documents (including court papers) received by the Indemnified Party
relating to the Third Party Claim. The Indemnifying Party shall have the right,
exercisable by written notice (the "NOTICE") to the Indemnified Party within
thirty (30) days of receipt of notice from the Indemnified Party of the
commencement of or assertion of any Third Party Claim, to assume the defense of
such Third Party Claim, using counsel selected by the Indemnifying Party and
reasonably acceptable to the Indemnified Party. Should the Indemnifying Party
so elect to assume the defense of a Third Party Claim, the Indemnifying Party
shall not be liable to the Indemnified Party for legal expenses subsequently
incurred by the Indemnified Party in connection with the defense thereof.
Regardless of whether the Indemnifying Party elects to assume the defense of any
such Third Party Claim, the Indemnified Party shall not admit any liability with
respect to, or settle, compromise, or discharge or effect the settlement or
compromise or discharge of such Third Party Claim without obtaining the
Indemnifying Party's consent. Neither the Indemnifying Party nor the
Indemnified Party shall, without the written consent of the other, effect the
settlement or compromise of, or consent to the entry of any judgement with
respect to, any pending or threatened action or claim in respect of which
indemnification or contribution could be sought hereunder (whether or not the
other party is an actual or potential party to such action or claim) unless such
settlement, compromise or judgement (a)(i) in the case of an action or claim
against both the Indemnifying and the Indemnified Party, includes an
unconditional release of all parties from all liability arising out of such
action or claim; (ii) in the case of an action or claim against the Indemnified
Party but not the Indemnifying Party, includes an unconditional release of the
Indemnifying Party from all liability arising of the action or the claim; or
(iii) in the case of an action or claim against the Indemnifying Party but not
the Indemnified Party, includes an unconditional release of the Indemnified
Party from all liability arising out of such action or claim; and (B) does not
---
include a statement as to or an admission of fault, culpability or failure to
act, by or on behalf of (i) the Indemnifying Party or the Indemnified Party (in
the case of an action or claim against both of them); (ii) the Indemnifying
Party (in the case of an action or claim against the Indemnified Party but not
the Indemnifying Party); or (iii) the Indemnified Party (in the case of an
action or claim against the Indemnifying Party but not the Indemnified Party).
(a) The Indemnifying Party or the Indemnified Party, as the case may be,
shall in any event have the right to participate, at its own expense,
in the defense of any Third Party Claim which the other is defending.
(b) The Indemnifying Party, if it shall have assumed the defense of any
Third Party Claim in accordance with the terms hereof, shall have the
right, upon five (5) days prior written notice to the Indemnified
Party, to consent to the entry of judgement with respect to, or
otherwise settle such Third Party Claim provided the Indemnifying
Party agrees that as between the Indemnifying Party and the
<PAGE>
Indemnified Party, the Indemnifying Party shall be solely obligated to
satisfy and discharge such judgement or settlement, unless (i) the
Third Party Claim involves equitable or other non-monetary damages or
(ii) in the reasonable judgment of the Indemnified Party such
settlement would have a continuing material adverse effect on the
Indemnified Party's business (including any material impairment of its
relationships with customers and suppliers), in which case such
settlement only may be made with the written consent of the
Indemnified Party, which consent shall not be unreasonably withheld.
(c) Whether or not the Indemnifying Party chooses to defend or
prosecute any claim involving a third party, all the parties hereto
shall cooperate in the defense or prosecution thereof and shall
furnish such records, information and testimony, and attend such
conferences, discovery proceedings, hearings, trials and appeals as
may be reasonably requested in connection therewith. Such cooperation
shall include access during normal business hours afforded to the
Indemnifying Party to, and reasonable retention by the Indemnified
Party of, records and information which are reasonably relevant to
such Third Party Claim, and making employees available on a mutually
convenient basis to provide additional information and explanation of
any material provided hereunder, and the Indemnifying Party shall
reimburse the Indemnified Party for all its reasonable out-of-pocket
expenses in connection therewith.
17.5 Exclusive Remedy
----------------
The indemnification provided in this Section 17 shall be the sole and
exclusive remedy after the Closing Date for monetary damages available to Buyer
and Seller for breach of any of the terms, conditions, representations,
warranties, covenants, agreements and other provisions of this Agreement. As
between Seller and the Buyer, the rights and obligations set forth in the
Agreement will be the exclusive rights and obligations with respect to this
Agreement, the events giving rise to this Agreement and the transactions
provided for therein or contemplated hereby.
18.4 Consequential and Punitive Damages.
----------------------------------
NOTWITHSTANDING ANYTHING ELSE TO THE CONTRARY CONTAINED HEREIN, NEITHER
PARTY SHALL BE LIABLE TO OR OTHERWISE RESPONSIBLE TO THE OTHER PARTY HERETO OR
ANY OF ITS AFFILIATES FOR PUNITIVE, CONSEQUENTIAL OR INCIDENTAL DAMAGES OR FOR
LOST PROFITS THAT ARISE OUT OF OR RELATE TO THIS AGREEMENT OF THE PERFORMANCE OR
BREACH HEREOF.
19. Public Announcement.
-------------------
Any and all public announcements of any kind or nature whatsoever
concerning the transactions contemplated hereby whether made before, on or after
the Closing Date shall require the prior approval of Seller and Buyer.
20. Pre-Closing Inspection Rights.
-----------------------------
<PAGE>
Seller will permit employees and agents of Buyer during normal business
hours and on reasonable notice to Seller to inspect the Purchased Assets. All
information obtained by Buyer pursuant to this Section shall be maintained as
confidential and shall not be disclosed to any third party without the consent
of Seller except in response to legal process or to the extent required to
comply with applicable law.
21. Assignment.
----------
This Agreement may not be assigned by either party hereto without the prior
written consent of the other party. The terms and provisions of this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto,
their successors and permitted assigns, and no person, firm or corporation other
than the parties, their successors and permitted assigns, shall acquire or have
any rights under or by virtue of this Agreement.
22. Further Assurances.
------------------
From time to time after the Closing, at the request of Buyer and at no
additional cost to Seller, Seller will execute and deliver such other
instruments of transfer and take such other actions as Buyer may reasonably
require to transfer the Purchased Assets to, and vest title of the Purchased
Assets, in Buyer.
23. Expenses; Brokers and Finders.
-----------------------------
Each party agrees to bear its own costs and expenses in connection with the
transactions contemplated by this Agreement, including attorneys' fees and
accountants' fees. Each party represents and warrants to the other that it has
not retained any broker, finder or other intermediary in connection with the
transactions contemplated by this Agreement. Seller agrees to indemnify the
Buyer against any and all liability of Buyer resulting from claims for brokerage
commissions relating to the transaction contemplated by this Agreement and which
are made by any party other than the Broker who has not dealt with the Buyer and
alleges to have been employed by the Seller. Buyer agrees to indemnify the
Seller against any and all liability of the Seller resulting from claims for
brokerage commissions relating to the transaction contemplated by this Agreement
and which are made by any party other than the Broker who has not dealt with the
Seller and alleges to have been employed by the Buyer. The indemnification set
forth herein shall extend to all losses, costs,
<PAGE>
damages, attorneys' fees, court costs, and expenses which the indemnified party
may incur, and which relate to the matters indemnified hereby and shall survive
the Closing.
24. Entire Agreement.
----------------
This Agreement, including the schedules and exhibits attached to this
Agreement, constitutes the entire agreement and understanding between Seller and
Buyer with respect to the sale and purchase of the Purchased Assets and the
other transactions contemplated by this Agreement, and all prior
representations, understandings and agreements between the parties with respect
to the purchase and sale of the Purchased Assets and the other transactions
contemplated by this Agreement are superseded by the terms of this Agreement.
25. Choice of Law.
-------------
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of the State of Florida, including for the purpose of
choice of law, as though all acts and omissions related to this Agreement
occurred in the State of Florida.
26. Arbitration.
-----------
Any dispute or claim arising out of this Agreement, or breach thereof,
shall be decided by binding arbitration in the State of Florida, under the
current Commercial Arbitration Rules of the American Arbitration Association,
and, such remedy shall be exclusive. This Agreement to arbitrate shall be
specifically enforceable. Judgment upon the award rendered by the arbitrators
may be entered in any court having jurisdiction thereof. All costs and expenses
of the arbitration shall be borne and paid for by the non-prevailing party.
27. Severability.
------------
The provisions of this Agreement shall, where possible, be interpreted in a
manner necessary to sustain their legality and enforceability, and for that
purpose the provisions of this Agreement shall be read as if they cover only the
specific situation to which they are being applied. The unenforceability of any
provision of this Agreement in a specific situation shall not affect the
enforceability of that provision in other situations or of other provisions of
this Agreement.
28. Counterparts.
------------
This Agreement may be executed in counterparts, each of which shall be
considered an original.
29. Notices
-------
All notices given pursuant to this Agreement shall be delivered by hand or
sent by United States registered mail, postage prepaid, addressed as follows (or
to another address or person as a party may specify on notice to the other):
If to Seller: Continental Grain Company
340 Jesse Jewel Parkway, Suite 200
Gainesville, GA 30501
Attn: Robert Johnson
<PAGE>
with a copy to:
Continental Grain Company
340 Jesse Jewel Parkway, Suite 200
Gainesville, GA 30501
Attn: Legal Department
If to Buyer: Martin Lynch
c/o Smart & Final
4700 South Boyle Avenue
Los Angeles, CA 90058
with a copy to:
Legal Department
c/o Smart & Final
4700 South Boyle Avenue
Los Angeles, CA 90058
30. Escrow Closing.
--------------
At the election of the Seller or the Buyer, upon notice to the other party,
the transactions, contemplated by this Agreement shall be closed through an
escrow with Title Company (which may be referred to herein alternatively as
"ESCROWEE" or "TITLE COMPANY") in accordance with the general provisions of the
usual form of Deed and Money Escrow Agreement then in use by the Title Company
with such special provisions inserted into each escrow agreement as may be
required to conform with this Agreement ("CLOSING ESCROW"). Upon the creation
of the Closing Escrow, the Purchase Price, and delivery of the deed and other
documents required to be delivered at the Closing shall be made through the
Closing Escrow. Each party authorizes its respective attorneys to execute the
Closing Escrow and any amendments thereto on its respective behalf. In the
event of any inconsistencies between the terms and provisions of the Closing
Escrow and the terms and provisions of this Agreement, the terms and provisions
of this Agreement shall govern and control. The cost of the Closing Escrow
shall be divided equally between Seller and Buyer.
31. Risk of Loss.
------------
In the event that the Purchased Facilities are damaged by fire or other
casualty prior to the Closing, the Seller shall, within five (5) days
thereafter, notify the Buyer of such damage.
31.1 Damage Is Not Material.
----------------------
If such damage is not material, the Seller shall cause the Purchased
Facilities to be rebuilt or restored to the same condition as existed as of the
date of this Agreement, ordinary wear and tear excepted. In the event that such
damage cannot be repaired prior to the Closing, the Closing shall be extended
for a period not to exceed sixty (60) days, during which time the Seller shall
undertake, in good faith, to cause the Purchased Facilities to be so rebuilt or
restored. If the Seller fails to rebuild or restore such damage to the
Purchased Facilities within such sixty (60) day period, the Buyer shall have the
option:
31.1.1 Of taking the Purchased Facilities in their damaged
condition, together with an assignment of any unexpended
insurance proceeds or insurance claims which
<PAGE>
relate to such damage, if any, and be afforded a credit against
the Purchase Price for the amount equal to the cost to repair
such damage, less the amount of any insurance proceeds paid or
payable under any insurance policies applicable thereto; or
31.1.2 Of terminating this Agreement on written notice to
Seller.
31.2 Damage Is Material.
------------------
If the Purchased Facilities are materially damaged by fire or other
casualty prior to the Closing, the Buyer shall have the right, exercisable by
giving notice of such election to the Seller within thirty (30) days after the
receipt of notice of such damage from the Seller, to terminate this Agreement.
In the event that the Buyer does not elect to so terminate this Agreement, the
Buyer shall accept the conveyance of the Purchased Facilities in their damaged
condition together with an assignment of any unexpended insurance proceeds or
claims against any insurance carrier relating to such damage, if any.
31.3 "Material Damage."
---------------
For purposes of this Section, the term "material damage" shall mean damage
to the property, of which the cost to repair exceeds ten percent (10%) of the
Purchase Price.
31.4 "Cost to Repair."
--------------
As used in this Section, the term "cost to repair" shall mean the amount of
funds necessary to repair or restore the Purchased Facilities to the condition
which existed as of the date of this Agreement, ordinary wear and tear excepted.
The cost to repair shall include the extra cost of repairing or restoring the
Purchased Facilities to their original condition which is incurred as a result
of the use of building materials, equipment, appliances, fixtures or personal
property other than those commonly used today in connection with the
construction, furnishing, and outfitting of buildings and improvements such as
those making up the Purchased Facilities, and such extra cost as may be incurred
as a result of causing the repair or restoration of the Purchased Facilities to
be in compliance with all applicable laws and regulations.
31.4.1 In the event that the parties cannot agree upon the cost to
repair, the parties agree that, at a cost to be divided equally
between the Buyer and the Seller, an independent engineering firm
shall be retained, and shall be directed to provide an estimate of the
cost to repair, which estimate shall be binding upon the Buyer and the
Seller hereunder.
32. Default.
-------
In the event of default by the Seller in the performance of this Agreement,
Buyer shall have the right to seek specific performance or damages or any other
remedy provided by law. In the event of a default by Buyer in the performance
of this Agreement, Seller shall have the right to seek specific performance
hereof or damages or any other remedy provided by law.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered by their duly authorized officers on the date and year first above
written.
CONTINENTAL GRAIN COMPANY
By: /s/ Elton H. Maddox
-------------------
Title: Senior Vice President
---------------------
Date: September 25, 1997
------------------
AMERICAN FOOD SERVICE DISTRIBUTORS
By: /s/ Martin A. Lynch
-------------------
Title: Executive Vice President
------------------------
- ---------------------------------------Date: September 24, 1997
------------------
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<PAGE>
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