Asset Purchase Agreement
Relating to the Business of
Rich and Rhine, Inc.
INDEX
1. Purchase and Sale of Assets...........................................................1
(a) Transfer of Assets............................................................1
(b) Purchased Assets..............................................................1
(c) Retained Assets...............................................................3
2. Assumption of Liabilities; Purchase Price; Allocations...............................3
2.1 (a) Assumed Liabilities....................................................3
(b) Liabilities Not Assumed................................................3
2.2 Purchase Price................................................................4
2.3 Closing Purchase Price Payments...............................................4
2.4 Purchase Price Audit and Adjustment...........................................4
2.5 Allocations...................................................................5
2.6 Collection of Accounts Receivable.............................................5
3. The Closing...........................................................................6
4. Representations and Warranties of the Seller..........................................6
(a) Ownership and Delivery of Transferred Assets and Execution and Effect of
Agreement.....................................................................6
(b) Organization, Good Standing, Authority........................................6
(c) Subsidiaries; Capitalization..................................................7
(d) Financial Statements..........................................................7
(e) Liabilities...................................................................7
(f) No Adverse Change.............................................................7
(g) Taxes.........................................................................7
(h) Title to Properties; Absence of Encumbrances..................................8
(i) Real Property.................................................................8
(j) Patents, Trademarks, and Copyrights...........................................8
(k) Contracts, Leases, and Commitments............................................9
(l) Inventory.....................................................................9
(m) Accounts Receivable..........................................................10
(n) Permits; Compliance with Laws................................................10
(o) Employees....................................................................10
(p) Employee Benefit Plans.......................................................11
(q) Insurance....................................................................11
(r) Litigation...................................................................11
(s) Environmental Matters........................................................11
(t) Restrictions.................................................................13
(u) Transactions with Affiliates.................................................13
(v) Books and Records............................................................13
(w) Improper Payments............................................................13
(x) Disclosure...................................................................14
i
5. Representations and Warranties of Purchaser..........................................14
(a) Organization and Good Standing...............................................14
(b) Execution and Effect of Agreement............................................14
(c) Restrictions.................................................................14
(d) Authority for Agreement......................................................15
(e) Governmental Consents........................................................15
(f) Litigation...................................................................15
(g) Financial Statements.........................................................15
(h) Disclosure...................................................................15
6. Closing Deliveries...................................................................16
(a) Deliveries of the Seller.....................................................16
(b) Purchaser's Deliveries.......................................................16
7. Covenants............................................................................17
7.1 Seller's Restrictive Covenant................................................17
7.2 Seller's Employees...........................................................18
7.3 Proration of Expenses........................................................18
8. Brokers and Finders..................................................................18
9. Indemnification by the Seller and UGI................................................18
10. Indemnification By Purchaser.........................................................19
11. Further Provisions Regarding Indemnification.........................................19
(a) Survival.....................................................................19
(b) Limitations..................................................................20
(c) Defense......................................................................20
12. Kero Guaranty........................................................................20
13. Further Assurances...................................................................20
14. Notices..............................................................................21
15. Entire Agreement.....................................................................21
16. Waiver...............................................................................22
17. Successors...........................................................................22
18. Section Headings.....................................................................22
19. Fees and Expenses....................................................................22
20. Severability.........................................................................22
21. Governing Law........................................................................22
22. No Third Party Beneficiaries.........................................................22
23. Counterparts.........................................................................23
24. Definition of Knowledge..............................................................23
25. Attorney Fees........................................................................23
26. Retention of Records.................................................................23
iii
INDEX OF SCHEDULES AND EXHIBITS
SCHEDULES
1(b)(ii) Outstanding Checks
1(b)(iii) Real Property
1(b)(iv) Personal Property
1(c) Retained Assets
2.1(a) Assumed Liabilities
2.1(b) Retained Liabilities
2.4 Schedule of Accounting Principles
4 Disclosure Schedule
4(b) Qualification
4(d) Financial Statements of Seller
4(h) Purchased Assets
4(i) Real Property
4(k)-1 Contracts, Leases and Commitments
4(k)-2 10 Largest Customers and Suppliers of the Seller
4(l) Inventory
4(m) Accounts Receivable
4(n) Governmental Licenses and Authorizations
4(o) Employees and Employee Benefit Plans
4(q) Insurance
4(r) Litigation
4(s) Environmental
4(u) Transactions with Affiliates
5(g) Financial Statements of Kero
7.2 Affected Employees
7.3 Proration of Expenses
EXHIBITS
2.3(b)-1 Promissory Note
2.3(b)-2 Pledge Agreement
2.4 Statement of Purchased Assets and Accounts Payable
2.5 Allocations
6(a)(i) Xxxx of Sale
6(a)(ii) Opinion of Miller, Nash, Weiner, Hager & Xxxxxxx LLP
6(a)(iii) Lease Assignment
6(a)(iv) Assignment of Agreements
6(a)(ix) Supply Agreement
6(b)(iii) Assumption Agreement
6(b)(v) Opinion of Proskauer Rose LLP
iv
THIS ASSET PURCHASE AGREEMENT ("Agreement") is dated as of May 1,
1998 by and among Rich & Rhine Acquisition Corp., a Delaware corporation
("Purchaser"), Kero Investments, Inc., a Colorado corporation ("Kero"), Rich and
Rhine, Inc., an Oregon corporation ("Seller") and United Grocers, Inc., an
Oregon corporation ("UGI").
RECITALS
--------
A. Seller is in the business of the distribution of grocery, food and
other items principally to convenience stores (the "Business").
B. UGI is the owner of all of the outstanding shares of capital stock of
Seller.
C. Purchaser desires to purchase and Seller desires to sell all of the
assets currently used in connection with the Business upon the terms and subject
to the conditions set forth herein.
D. Purchaser desires to obtain an assignment of the interest of UGI
under a lease (the "Lease") with R&R Leasing LLC with respect to certain real
property and improvements located at 00000 X.X. Xxxxxxxx Xxx, Xxxxxxxx, Xxxxxx
00000.
E. In order to induce the parties to enter into this Agreement, the
parties desire to make the covenants, conditions, representations, and
warranties provided for herein.
NOW, THEREFORE, in reliance on the representations, warranties,
and agreements and subject to the terms and conditions set forth in this
Agreement, the parties agree as follows:
1. Purchase and Sale of Assets.
(a) Transfer of Assets. At the Closing (as defined below)
simultaneously with the assumption of the liabilities contemplated by Section 2,
(i) Seller shall assign, transfer, and deliver to Purchaser, and Purchaser shall
receive from Seller, all of the Purchased Assets (as defined below), but not the
Retained Assets (as defined below), which shall be retained by the Seller and
not be transferred or conveyed pursuant to this Agreement; and (ii) Purchaser
shall deliver to Seller the Closing Cash Payment (as defined below) and Kero,
the indirect parent of Purchaser, shall deliver the Note (as defined below).
(b) Purchased Assets. The "Purchased Assets" means the Business
conducted by Seller and all assets and property of Seller as of the Closing Date
(as defined below), real or personal, tangible or intangible, used or useful in
connection therewith, including, without limitation, all of the Seller's right,
title, and interest in, to, and under the following (but excluding "Retained
Assets"):
1
(i) all inventory (delivered, in transit and ordered),
including, without limitation, all of Seller's right, title, and interest in and
to all groceries, tobacco items, candy, juice, frozen/service delicatessen items
and related supplies, including, without limitation, all that property described
on Schedule 4(1), except for items disposed of in the ordinary course of
business between the date of such schedule and the Closing Date (the
"Inventory");
(ii) cash in the amount of $145,000 and an amount to
cover checks which have not cleared as of the Closing Date ("Outstanding Check
Allowance") as set forth on Schedule 1(b)(ii), and all accounts receivable of
Seller arising out of or in connection with the Business, including, without
limitation, all that property described on Schedule 4(m), except for items
disposed of in the ordinary course of business between the date of such schedule
and the Closing Date (the "Accounts Receivable");
(iii) all leasehold interests, improvements, and fixtures
thereon and interests therein, used or useful in connection with the Business,
including without limitation the lease legally described on Schedule 1(b)(iii)
("Real Property");
(iv) all equipment, machinery, computers, software,
furniture, trade fixtures, vehicles, and other personal property used or useful
in connection with the Business, whether owned, leased, or otherwise held by
Seller including, without limitation, that property described in Schedule
1(b)(iv) ("Personal Property") except for items disposed of in the ordinary
course of business between the date of such schedule and the Closing Date;
(v) all office and other supplies, tools, spare parts,
and maintenance, advertising, and promotional materials and other tangible
personal property used or useful in connection with the Business;
(vi) all inventions, processes, formulae, and all
discoveries, improvements, trade secrets, and confidential data, whether or not
patentable or copyrightable and other intangible personal property used or
useful in connection with the Business, if any;
(vii) all trademarks, service marks, trade names,
copyrights, patents, designs and similar rights (including any registrations
thereof and applications therefor and the name "Rich and Rhine, Inc." used or
useful in connection with the Business, if any (the "Intellectual Property");
(viii) to the extent transferable, all Seller's rights in
and under agreements, mortgages, instruments, leases for personal property,
customer contracts, insurance policies, and other agreements used or useful in
connection with the Business;
(ix) to the extent transferable, all Seller's licenses
and other governmental authorizations used or useful in connection with the
Business including, without limitation, those licenses and authorizations listed
on Schedule 4(n) ("Licenses and Authorizations");
2
(x) to the extent transferable, all manufacturer's and
seller's warranties made to the Seller in connection with the Business, and all
rights of a successor employer for employment tax and unemployment insurance
purposes (should Purchaser choose to avail itself thereof);
(xi) all records which relate to the operations and
finances of Seller, including, without limitation, books, records, ledgers,
files, documents, correspondence, computer discs, diagrams, construction data,
blueprints, instruction manuals, maintenance manuals, reports and similar
documents used or useful in connection with the Business;
(xii) all causes of action, complaints and rights
currently in litigation or which could result in litigation which would or could
benefit the Business; and
(xiii) all goodwill of Seller arising out of or
associated with the Business.
(c) Retained Assets. The "Retained Assets" means (i) Seller's
rights under this Agreement, (ii) Seller's minute book and stock certificates,
(iii) cash in excess of $145,000 and the Outstanding Check Allowance, and (iv)
the assets as listed on Schedule 1(c).
2. Assumption of Liabilities; Purchase Price; Allocations.
2.1 (a) Assumed Liabilities. At the Closing, Purchaser shall assume
from the Seller the "Assumed Liabilities" which shall only consist of (i)
verifiable trade debts of the Seller which are listed on Schedule 2.1(a), other
similar debts and liabilities incurred in the ordinary course of business
between the date of such schedule and the Closing Date, and other similar
accounts or sums payable in the ordinary course of business (the "Accounts
Payable"); (ii) obligations of Seller under the contracts listed on Schedule
2.1(a); and (iii) UGI's obligations under the Lease which arise from and after
the Closing Date. The Assumed Liabilities shall at all times specifically
exclude, and Purchaser shall specifically not assume or in any way be
responsible or liable for and the Purchased Assets shall not be subject to
income taxes or indebtedness representing borrowed money, and all other debts,
liabilities, commitments, and obligations not specifically assumed hereunder.
(b) Liabilities Not Assumed. Except only for those debts,
liabilities, commitments, and obligations of the Seller which are expressly
assumed by Purchaser at the Closing pursuant to Section 2.1(a) hereof, Purchaser
shall not assume, nor shall Purchaser be liable or obligated in any way for any
debts, liabilities, commitments, and/or obligations of the Seller of any kind or
nature whatsoever, whether absolute or contingent, liquidated or unliquidated,
and whether or not accrued, matured, known, or suspected including, without
limitation, those liabilities listed on Schedule 2.1(b) (the "Retained
Liabilities"). The Seller shall remain fully and solely liable with respect to
all of the Retained Liabilities and agrees to pay and discharge all Retained
Liabilities.
3
2.2 Purchase Price. In full consideration for the Purchased Assets and
all of the covenants, conditions, representations, and warranties of the Seller
and UGI, and in addition to assumption of the Assumed Liabilities by Purchaser
and the covenants, conditions, representations, and warranties of Purchaser,
Purchaser shall pay at the Closing an aggregate purchase price (the "Purchase
Price") equal to the following:
(a) The total book value of the Purchased Assets as of the
Closing Date (determined as set forth in Section 2.4 hereof);
(b) Less the total of the Accounts Payable; plus
(c) A premium in the amount of $638,595.
2.3 Closing Purchase Price Payments. At Closing, Purchaser shall make
Purchase Price payments (the "Closing Payments") as follows:
(a) An amount equal to Three Million Five Hundred Thousand
Dollars ($3,500,000) paid by Purchaser to UGI in cash by wire transfer to an
account designated by UGI (the "Closing Cash Payment"); plus
(b) A promissory note in the amount of $750,000, in the form
attached hereto as Exhibit 2.3(b)-1 to be issued by Kero to UGI (the "Note")
which will be secured by a pledge of the common stock of Purchaser pursuant to a
Pledge Agreement in the form attached hereto as Exhibit 2.3(b)-2 (the "Pledge
Agreement").
2.4 Purchase Price Audit and Adjustment. Attached hereto as Exhibit 2.4
is a statement setting forth the estimated Purchased Assets and Accounts Payable
("Statement of Purchased Assets and Accounts Payable"). An independent audit
(the cost of which shall be evenly divided between Seller and Purchaser) of the
Statement of Purchased Assets and Accounts Payable will be performed by Deloitte
& Touche LLP (the "Auditor"). The Auditor shall determine the amount by which
the book value of the Purchased Assets on the Closing Date exceeds the amount of
the Accounts Payable in accordance with generally accepted accounting principles
applied consistently except as otherwise provided in a Schedule of Accounting
Principles attached hereto as Schedule 2.4. All the parties hereto shall
cooperate with all reasonable requests of the Auditor, including, without
limitation, requests for specific documentation and access to the books and
records of the Seller, in making its determination of the Purchase Price. The
parties hereto shall use their best efforts to cause the Auditor to make and
deliver its draft and final Purchase Price Determination on or before the dates
specified below.
The parties hereto shall cause the Auditor to give the Seller and
Purchaser a draft report on or before the 60th day after the Closing Date and
representatives of the Seller, Purchaser and the Auditor shall promptly
thereafter meet to discuss the contents of the Auditor's draft report. On or
before the 90th day after the Closing Date based on the Auditor's draft report
and
4
discussions with representatives of Purchaser and the Seller, the Auditor shall
deliver to Purchaser and the Seller the Auditor's final written report (the
"Purchase Price Determination") which shall specify the Purchase Price, and set
forth the variances, if any, from the Statement of Purchased Assets and Accounts
Payable.
If Seller objects to the Purchase Price Determination made the Auditor,
Seller shall have the right within 30 days after the Auditor's Purchase Price
Determination is delivered within which to request that the Purchase Price be
determined by an arbitrator (the "Arbitrator") who shall be chosen by the head
of the Portland, Oregon office of KPMG Peat Marwick LLC.
If the Purchase Price exceeds the Closing Payments, the Purchase Price
and the Note shall be increased by such difference.
If the Purchase Price is less than the Closing Payments, the Purchase
Price and the Note shall be decreased by such difference.
The cost of the arbitration shall be paid as determined by the
Arbitrator.
2.5 Allocations. All parties acknowledge and agree that the total of the
Assumed Liabilities plus the Purchase Price, shall be allocated among the
Purchased Assets in accordance with Exhibit 2.5. All parties agree to use the
allocations contained in this Section 2.5 and Exhibit 2.5 for all purposes,
including preparing and filing any applicable tax returns and forms.
2.6 Collection of Accounts Receivable. During the 120-day period
following the Closing Date (the "Collection Period") Purchaser shall collect the
Accounts Receivable in the ordinary course of business. All payment received
shall be applied to the invoice designated by the account debtor. If no invoice
is designated, payments from account debtors (including account debtors who are
then currently buying from Purchaser) shall be applied to the oldest Account
Receivable of such account debtor until all Accounts Receivable of such debtor
have been paid in full. During the Collection Period, (i) Purchase shall deliver
to Seller monthly reports of collections with respect to Accounts Receivable and
(ii) representatives of Seller shall have the right from time to time during
normal business hours to review the status of collections of Accounts
Receivable. At any time during the Collection Period, Seller shall have the
right to purchase for cash equal to its unpaid balance any Account Receivable.
At the end of the Collection Period, Purchaser shall have the right to assign
back to Seller any Accounts Receivable which have not been paid in full and to
offset the uncollected balance thereof against the Note.
3. The Closing. The Closing of the transactions contemplated by this
Agreement (the "Closing") shall be held on May 1, 1998 (the "Closing Date") at
the offices of Proskauer Rose LLP, 0000 Xxxxxxx Xxxx Xxxx, Xxxxx 0000, Xxx
Xxxxxxx, Xxxxxxxxxx.
4. Representations and Warranties of the Seller. Except as set forth in
a Disclosure Schedule attached hereto as Schedule 4, the Seller and UGI, jointly
and severally, represent,
5
warrant, and agree as follows and warrant to Purchaser, Kero and Nations Credit
Commercial Corporation, through its NationsCredit Commercial Funding Division
("NationsCredit") that as of the date hereof and as of the Closing Date:
(a) Ownership and Delivery of Transferred Assets and Execution
and Effect of Agreement. The Seller and UGI each have the full right, power, and
authority to enter into and to perform this Agreement and all other agreements,
certificates, and documents executed or delivered, or to be executed or
delivered, by either of them in connection with this Agreement (collectively,
with this Agreement, "Seller's Documents"). This Agreement has been duly
authorized, executed, and delivered by the Seller and UGI, and Seller's
Documents are (or when executed and delivered will be) legal, valid, and binding
obligations of the Seller and UGI, as the case may be, enforceable in accordance
with their respective terms, subject to the effect of bankruptcy, insolvency,
and other laws generally affecting the rights of creditors and to general
principles of equity. The authorization, execution, delivery, and performance of
Seller's Documents and the consummation of the transactions contemplated by
Seller's Documents do not and will not (1) violate any of the provisions of
either the Seller's or UGI's Articles of Incorporation and By-Laws, or (2)
violate, conflict with, result in a breach of or constitute a default under,
require any notice or consent under, give rise to a right of termination of, or
accelerate the performance required by, any terms or provisions of any material
agreement, instrument or writing of any nature to which either Seller or UGI is
a party or is bound, or to which any of either Seller's or UGI's assets or
business is subject or (3) violate, or result in a breach of, conflict with, or
require any notice, filing or consent under, statute, rule, regulation or other
provision of law, or any other, judgment or other direction of a court or other
tribunal, or any other governmental requirement, permit, registration, license
or authorization applicable to the Seller or UGI or any of their assets or
Business (collectively, "Legal Requirements"), or (4) result in the creation of
any material lien, claim, encumbrance, or restriction on any of the assets or
properties of either Seller or UGI.
(b) Organization, Good Standing, Authority. Each of Seller and
UGI is duly organized, validly existing, and in good standing under the laws of
the State of Oregon and has full power and authority to own and lease its
respective assets and properties and to conduct its respective business as it is
now being conducted. Seller is duly qualified or licensed to do business and is
in good standing under the laws of those jurisdictions listed on Schedule 4(b),
constituting each jurisdiction in which the conduct of the Business or the
ownership or leasing of its assets require such qualification unless the failure
to be so licensed or qualified would not have a material adverse effect on
Seller or its Business, financial condition or prospects ("Material Adverse
Effect").
(c) Subsidiaries; Capitalization. Seller has no subsidiaries and
has no equity interest in any corporation, partnership, joint venture, or other
entity. All of the outstanding shares of stock of Seller are owned by UGI.
(d) Financial Statements. Schedule 4(d) contains true copies of
financial statements for the Seller as at the three most recent year ends
(collectively, the "Financial
6
Statements"); the balance sheet of the Seller as at April 3, 1998 (the "Balance
Sheet") and the related statements of income and supplementary schedules, if
any, of the Seller for the period then ended. Except as provided on Schedule
4(d), each of the foregoing Financial Statements are complete and correct, are
in accordance with the Seller's books and records, have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis, and presents fairly the financial position, results of operations and
changes in financial position of the Seller as at the dates and for the fiscal
periods indicated.
(e) Liabilities. Seller has no liabilities (whether accrued,
unmatured, contingent, or otherwise, and whether due or to become due (i) which
are not reflected in the Balance Sheet, (ii) which have not been incurred since
the date of the Balance Sheet in the ordinary course of business as heretofore
conducted by Seller, or (iii) which are not described in the schedules attached
to this Agreement.
(f) No Adverse Change. Since the date of the Balance Sheet the
Seller has operated the Business diligently and only in the ordinary course of
business as theretofore conducted, and there has been no: (i) material adverse
change in the business, properties, assets, liabilities, commitments, earnings,
financial condition, or prospects of the Seller; or (ii) property damage or
destruction resulting in a loss or cost to the Seller of more than $10,000 in
the aggregate, whether or not covered by insurance.
(g) Taxes. Seller has properly filed all federal, foreign, state,
local, and other tax returns and reports which are required to be filed, all of
the foregoing are true, correct, and complete in all material respects, and all
taxes, interest, and penalties due and payable as shown on such returns or
claimed to be due by any taxing authority have been timely paid. All unpaid
federal, foreign, state, local, and other taxes, fees, assessments, duties, and
other similar governmental charges payable by the Seller or which will, with the
passage of time, become payable by the Seller (including interest and penalties)
whether or not disputed, are adequately reserved against in accordance with the
Seller's past practices. There are no outstanding waivers or extensions of time
with respect to the assessment or audit of any tax or tax return of the Seller,
or claims now pending or matters under discussion with any taxing authority in
respect of any tax of the Seller. The Seller has made available to Purchaser
true copies of the federal, foreign, state, and local tax returns of the Seller
for the years ended on December 31 for the years 1997, 1996, and 1995. Purchaser
will not incur nor be obligated for, nor will the Purchased Assets be subject
to, any sales, use, or other tax or excise in connection with the acquisition of
the Purchased Assets.
(h) Title to Properties; Absence of Encumbrances. The Seller has
lawful, valid and marketable title to or, in the case of leases and licenses,
valid and subsisting leasehold interests or licenses in, all of its properties
and assets of whatever kind (whether real or personal, tangible or intangible),
including, without limitation, the Purchased Assets and all properties and
assets shown on the Balance Sheet (except for assets sold in the ordinary course
of business since the date thereof) and to properties and assets that are shown
on any schedule to this Agreement as being owned or leased and in each case free
and clear of any and all liens, mortgages, pledges,
7
security interests, restrictions, prior assignments, claims, agreements and
encumbrances of any kind whatsoever and except for liens for current taxes and
assessments not yet due and payable ("Permitted Liens"). On the date hereof the
Seller has the full right, power, and authority to sell, assign, transfer, and
deliver the Purchased Assets and on the date hereof, the execution, delivery and
performance of Seller's Documents by the Seller and UGI will convey to Purchaser
lawful, valid, and marketable title to the Purchased Assets, free and clear of
any and all liens, pledges, security interests, options, encumbrances, charges,
agreements, prior assignments or claims of any kind whatsoever by any person or
entity other than Permitted Liens and such conveyances will not breach or cause
a violation of any agreement, obligation or undertaking of either Seller or UGI.
All assets, properties, and rights relating to the Seller's Business are held
by, and all agreements, obligations and transactions relating to the Seller's
Business have been entered into, incurred, and conducted by, the Seller rather
than any of its affiliates.
All of the Purchased Assets (other than Inventory, Accounts
Receivable and assets listed on another disclosure schedule attached hereto)
with a replacement cost of more than $5,000.00 are listed on Schedule 4(h).
(i) Real Property. Seller does not own any real property.
Schedule 4(i) contains a complete and correct list of all real property
(including buildings and structures) leased by the Seller and UGI with respect
to Seller's Business, and all interests therein (including a brief description
of the property, the record title holder, the location and the material
improvements thereon). Except for matters which will not have a Material Adverse
Effect, all such real property, buildings, and structures, and the equipment
therein, and the operations and maintenance thereof, comply with any applicable
agreements and restrictive covenants and conform to all applicable Legal
Requirements (as defined in Section 4(a) hereof) including those relating to the
environment, health and safety, land use and zoning, and all work required to be
done by the Seller or UGI as tenant has been duly performed. No condemnation or
other proceeding is pending or, to the knowledge of Seller or UGI, threatened,
which would have a Material Adverse Effect on the use of any such property by
the Seller or, following the Closing, Purchaser. The buildings and other
structures, equipment and other material assets leased by Seller are, taken as a
whole, in good operating condition and repair, subject to ordinary wear and
tear.
(j) Patents, Trademarks, and Copyrights. There are no trademarks,
service marks, trade names, brands, copyrights, and patents which are presently
being used or are planned to or could be used (based on the Seller's current
plans and projections) in the Seller's Business, nor are there any applications
for registration and registrations thereof pending.
(k) Contracts, Leases, and Commitments. The Seller has furnished
to Purchaser true copies of the contracts, leases, and commitments listed in
Schedule 4(k)-1, including summaries of the terms of any unwritten contracts,
leases, or commitments. Except as set forth in Schedule 4(k)-1: (1) the Seller
(and to the knowledge of Seller, the other parties thereto) have complied in all
material respects with such contracts, leases, and commitments, all of which are
valid and enforceable and will not be adversely affected by this acquisition or
the
8
transfer in connection therewith to Purchaser; (2) such contracts, leases, and
commitments are in full force and effect and there exists no event or condition
which with or without notice or lapse of time would be a default thereunder by
the Seller, give rise to a right to accelerate or terminate any provision
thereof by a third party, or give rise to any lien, claim, encumbrance, or
restriction on any of the assets or properties of the Seller; (3) all of such
contracts, leases, and commitments have been entered into on an arm's-length
basis, and the Seller believes that none is materially burdensome to the
Seller's Business; and (4) none of the Seller's purchase commitments is, to the
Seller's knowledge, in excess of the normal requirements of its Business or at
an excessive price in light of the current business. The Seller is not a party,
nor are any of its assets or the Business subject, to any contract, lease, or
commitment not listed in Schedule 4(k)-1 (including, without limitation,
purchase or sales commitments, financing or security agreements or guaranties,
repurchase agreements, agency agreements, manufacturers representative
agreements, commission agreements, employment, or collective bargaining
agreements, pension, bonus, or profit-sharing agreements, group insurance,
medical or other fringe benefit plans, and leases of real or personal property),
other than obligations or contracts listed on another schedule to this
Agreement, contracts terminable without penalty on not more than 30 days' notice
or commitments that do not involve, individually or in the aggregate, the
receipt or expenditure of more than $50,000 in any one year. If any of the
contracts listed in Schedule 4(k)-1 should provide for expiration or be subject
to termination before the Closing, the Seller shall proceed in accordance with
the Seller's past practice, after consultation with Purchaser. Schedule 4(k)-2
contains a list of the ten largest customers and suppliers of each of the Seller
(measured by dollar volume of purchases and sales, as applicable) and the
estimated dollar amount and percentage of the business which each such customer
or supplier represented during Seller's Fiscal Year ended October 3, 1997. The
Seller is not engaged in any material dispute with any material customers or
suppliers. To the knowledge of Seller, no customer or supplier of the Seller's
Business is considering termination, nonrenewal, or any adverse modification of
its arrangements with the Seller that will have a Material Adverse Effect, and,
to Seller's knowledge, the transactions contemplated by this Agreement will not
have a Material Adverse Effect on the Seller's relationship with any of its
suppliers or customers of its Business. Seller believes that the Seller has
adequate sources of supply for groceries and other supplies, assuming current
levels of business.
(l) Inventory. Schedule 4(l) contains a list of the Inventory of
the Seller as at April 24, 1998, setting forth a brief description of each item
by category and quantity, and by unit and aggregate values. Except for certain
obsolete, damaged or slow moving inventory which is specifically identified and
valued on Schedule 4(l), the Inventory is in good and marketable condition, does
not include any items which are obsolete, damaged or slow moving, and is
saleable in the normal course of business, in each case in light of the Business
as currently conducted. Each item of the Inventory is carried on the Balance
Sheet at the lower of cost or market, with cost determined on a first-in,
first-out basis. Notwithstanding the foregoing, the Seller shall incur no
liability under this Section 4(l) after the Purchase Price is determined
pursuant to Section 2.4 hereof by the Auditor or by the Arbitrator, as the case
may be.
9
(m) Accounts Receivable. Schedule 4(m) is an aged list of the
Accounts Receivable of the Seller as at April 24, 1998.
(n) Permits; Compliance with Laws. Schedule 4(n) lists all of the
permits, licenses and authorizations held by the Seller that are material to the
Business ("Permits"). Except as set forth in Schedule 4(n), the Permits are
valid and unimpaired, will be unaffected by a transfer of all of the Purchased
Assets to Purchaser, and constitute all of the licenses, permits, and
authorizations required for the ownership or occupancy of the Seller's
properties and assets and the operation of its Business. The Seller's Business
has been operated in material compliance therewith and all laws and regulations
(federal, state, local, and foreign) applicable to it, and all required material
reports and filings with governmental authorities have been properly made.
Within the past five years, the Seller has not entered into any agreement with,
had any material dispute with, or, to the knowledge of Seller, been investigated
by, any governmental authority, community group, or other third party that could
materially restrict the operation of its Business. Seller and UGI agree to use
their best efforts not involving any payment to transfer to Purchaser Seller's
right to do business in the states of Oregon and Washington with respect to the
sale of tobacco and cigarettes.
(o) Employees. Schedule 4(o) contains a list of the names, office
locations, and compensation of all full- and part-time employees of the Seller's
Business as of the date of such schedule; a list of all pension, retirement,
profit-sharing, deferred compensation, option, bonus, medical, insurance and
other benefit or incentive plans covering such employees; a list of the bonuses
paid to such employees for the years ended December 31, 1997 and December 31,
1996; a description of all employee "perks" or other benefit practices not set
forth in such plans or in agreements listed in Schedule 4(o); and a description
of the Seller's severance pay policy with respect to such employees. No strike
or labor dispute involving the Seller has occurred during the last three years
or, to the knowledge of Seller, is threatened. No key employee of the Business
has indicated that he or she is considering terminating his or her employment
and the Seller has no reason to believe any key employee is considering such
termination. The Seller has complied with applicable wage and hour, equal
employment, safety, and other legal requirements relating to its employees and
have complied in all respects with the union contracts to which the Business is
subject. Except as set forth in Schedule 4(o), neither the Seller nor any member
of any affiliated group of which the Seller was at any time a member, has ever
maintained or currently maintains any "employee benefit plan" subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Neither
the Seller nor any of its predecessors has ever contributed to or otherwise
participated in or has been required to contribute to or otherwise participate
in any "multiemployer plan", as defined in Section 4001(a)(3) of ERISA. The
Seller has not withdrawn from any such employee benefit plan or multiemployer
plan prior to the date of this Agreement.
(p) Employee Benefit Plans. Schedule 4(o) contains a true and
complete list of each employee pension benefit and welfare plan maintained by
the Seller, or to which the Seller contributes, for any of its employees.
10
(q) Insurance. A complete and correct list of all policies of
insurance of any kind or nature covering the Seller, including, without
limitation, policies of life, fire, theft, auto, casualty, product liability,
workmen's compensation, business interruption, employee fidelity, and other
casualty and liability insurance, indicating the type of coverage, name of
insured, the insurer, the premium, the expiration date of each policy and the
amount of coverage is contained in Schedule 4(q).
(r) Litigation. Schedule 4(r) contains a complete and correct
list of all actions, suits, proceedings, claims, or governmental investigations
pending or, to the knowledge of Seller, threatened against, the Seller or any of
its assets, or, in connection with the Seller's Business or, to Seller's
knowledge, any of the Seller's officers, directors, or employees in connection
with or with respect to their services on behalf of Seller. Except as set forth
on Schedule 4(r), neither the Seller, nor, to Seller's knowledge, any of the
Seller's officers, directors, or employees in connection with the Seller's
Businesses, is subject or party to any judgment, order, or other direction of or
stipulation with any court or other governmental authority or tribunal, or in
violation of any other legal requirements (as defined below), and Seller is not
aware of any reasonable basis for a claim that such a violation exists.
Immediately after Closing the assets of the Seller shall exceed the Seller's
liabilities and Seller will be able to pay its debts as they come due in the
ordinary course of the Seller's Business.
(s) Environmental Matters. (i) For the purpose of this Agreement,
the following terms shall have the meanings set forth hereafter:
"ENVIRONMENT" shall mean any surface or subsurface
physical medium or natural resource, including, air, land, soil, surface waters,
ground waters, stream and river sediments, biota and any indoor area, surface or
physical medium.
"ENVIRONMENTAL LAWS" shall mean any federal, state, local
or common law, rule, regulation, or ordinance relating to the protection of the
Environment.
"ENVIRONMENTAL LIABILITIES" shall mean any claims,
judgments, damages (including punitive damages), losses, penalties, fines,
liabilities, encumbrances, liens, violations, costs and expenses (including
attorneys' and consultants' fees) of investigation, remediation, monitoring by
any party, entity or authority, which (A) are incurred as a direct result of
Seller's violation of any Environmental Laws or (B) which arise under the
Environmental Laws as a direct result of Seller's activities on the Real
Property.
"HAZARDOUS SUBSTANCES" shall mean petroleum, petroleum
products, petroleum-derived substances, radioactive materials, hazardous wastes,
polychlorinated biphenyls, lead based paint, radon, urea formaldehyde, friable
asbestos and any other materials or substances regulated or defines as or
included in the definition of "hazardous substances," "hazardous constituents,"
"toxic substances," intended to classify or regulate substances by reason of
toxicity, carcinogenicity, ignitability, corrosivity or reactivity under any
Environmental Law.
11
(ii) To Seller's knowledge, except as set forth on
Schedule 4(s), all of the current and past operations of the Purchased Assets,
the Business and the Real Property, (while occupied by Seller), have at all
times been in material compliance with applicable Environmental Laws. None of
the Seller, nor to the knowledge of Seller, any other person or entity, has
engaged in, authorized, or allowed any operations or activities upon any of the
Real Property for the purpose of or in any way involving the handling,
manufacture, treatment, processing, storage, use, generation, release,
discharge, spilling, emission, dumping or disposal of any Hazardous Substances
at, on, under or from the Real Property or in material violation applicable
Environmental Laws.
(iii) To the knowledge of Seller there are no Hazardous
Substances in, on, over, or under the Real Property in concentrations which
would presently violate any applicable Environmental Laws or would be reasonably
likely to result in the imposition of liability for the investigation,
corrective action, remediation or monitoring of such Hazardous Substances.
(iv) To the knowledge of Seller none of the Real Property
is listed or proposed for listing on the National Priorities List pursuant to
the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), 42 U.S.C. ss. 9601 et seq., or any similar inventory of sites
requiring investigation or remediation maintained by any state or locality.
Seller has not received any notice, whether oral or written, from any
governmental entity or third party of any actual or threatened Environmental
Liabilities with respect to the Real Property, the Purchased Assets, or the
Business.
(v) To the knowledge of Seller there are no underground
storage tanks, Hazardous Substances (other than small quantities of Hazardous
Substances for use in the ordinary course of the Business) under the Real
Property.
(vi) To the knowledge of Seller there are no conditions
existing at the Real Property or with respect to the Purchased Assets or
Business, that require, or which with the giving of notice or the passage of
time or both will reasonably likely require remedial or corrective action,
removal, monitoring or closure pursuant to the Environmental Laws.
(vii) To the knowledge of Seller, Seller has all the
permits, licenses, authorizations and approvals necessary for the conduct of its
Business and for the operations on, in or at the Purchased Assets and the Real
Property which are required under applicable Environmental Laws ("Environmental
Permits"). Seller is in material compliance with the terms and conditions of all
such Environmental Permits, and, to the best knowledge of the Seller, no reason
exists why Purchaser would not be capable of continued operation of the Business
in full compliance with the Environmental Permits and the applicable
Environmental Laws.
(viii) The Seller has provided to Purchaser all
environmental reports, assessments, audits, studies, investigations, data
Environmental Permits and other written
12
environmental information in its custody, possession or control concerning the
Purchased Assets, the Business, and the Aggregate Real Property.
(t) Restrictions. The Seller is not a party to any non-compete or
similar agreement which in any way restricts the operation of the Business of
the Seller in an adverse manner.
(u) Transactions with Affiliates. Except as set forth in Schedule
4(u) , since January 1, 1995, the Seller has not had direct or indirect dealings
with key employee of the Seller outside of the employment relationship or with
any such employee's affiliates, associates, or relatives. Except as set forth in
Schedule 4(u) and except for employment arrangements with its employees, the
Seller has no obligation to or claim against any key employee of the Seller, or
any of its affiliates, associates, or relatives, and no such person or entity
has any obligation to or claim against the Seller. Schedule 4(u) reasonably
describes the nature and extent of any products, services, or benefits provided
to the Seller by any such person or entity other than ordinary employment
services and indicates whether there was a corresponding charge equal to the
fair market value of such products, services or benefits. Except as set forth in
Schedule 4(u), no key employee of the Seller, nor any of its affiliates,
associates, or relatives has any direct or indirect interest of any kind in any
business or entity which is competitive with the Seller.
(v) Books and Records. The books and records of the Seller are
complete and correct in all material respects and have been maintained in
accordance with good business practices.
To Seller's knowledge, there are no minute books of Seller in
existence and there are no written records in existence of any meetings or other
corporate actions by the shareholders or the board of directors of the Seller.
(w) Improper Payments. The Seller, and its officers and agents
have not made any illegal or improper payments to, or provided any illegal or
improper benefit or inducement for, any governmental official, supplier,
customer, or other person, in an attempt to influence any such person to take or
to refrain from taking any action relating to the Seller. The employees of the
Seller may from time to time have made customary holiday gifts of nominal value
to suppliers or customers.
(x) Disclosure. No representation, warranty, or other statement
by the Seller or UGI in this Agreement or in any other of Seller's Documents or
made in writing in connection with Seller's Documents, contains or will contain
an untrue statement of a material fact, or omits or will omit to state a
material fact necessary to make such statements not misleading. Neither Seller
nor UGI is aware of any matter specifically related to Seller's Business as
opposed to general economic circumstances or conditions generally affecting the
industry in which Seller participates that could reasonably be expected to have
a Material Adverse Effect on the Business as currently conducted that has not
been disclosed in writing to Purchaser. The representations
13
and warranties in Seller's Documents are the sole and exclusive representations
and warranties of the Seller and UGI, as the case may be, in connection with the
transactions contemplated hereby.
5. Representations and Warranties of Purchaser. Purchaser represents,
warrants, and agrees that:
(a) Organization and Good Standing. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware.
(b) Execution and Effect of Agreement. Purchaser has the full
right, power, and authority to enter into and perform this Agreement and all
other agreements, certificates and documents executed or delivered or to be
executed or delivered by it in connection with this Agreement (collectively,
with this Agreement, "Purchaser's Documents"). The execution, delivery, and
performance by Purchaser of Purchaser's Documents has been duly authorized by
all necessary actions of Purchaser. This Agreement has been duly executed and
delivered by Purchaser and Purchaser's Documents are (or when executed and
delivered by Purchaser will be) legal, valid, and binding obligations of
Purchaser enforceable in accordance with their respective terms.
(c) Restrictions. The authorization, execution, delivery, and
performance of Purchaser's Documents and the consummation of the transactions
contemplated by Purchaser's Documents do not and will not (1) violate any of the
provisions of the organizational documents of Purchaser, (2) violate, conflict
with, result in a breach of or constitute a default under, require any notice or
consent under, give rise to a right of termination of, or accelerate the
performance required by, any terms or provisions of any agreement, instrument or
writing of any nature to which Purchaser is a party or is bound or any of its
assets or businesses is subject, or (3) violate, conflict with or result in a
breach of, or require any notice, filing or consent under, any statute, rule,
regulation or other provision of law, or any order, judgment or other direction
of a court or other tribunal, or any other governmental requirement, permit,
registration, license, or authorization applicable to Purchaser.
(d) Authority for Agreement. The execution, delivery and
performance by Purchaser of this Agreement and all other of Purchaser's
Documents, have been duly authorized by all necessary actions on behalf of
Purchaser and Purchaser's Documents have been duly executed and delivered by
Purchaser. All of Purchaser's Documents constitute valid and binding obligations
of Purchaser enforceable in accordance with their respective terms subject to
the effect of bankruptcy, insolvency, and other laws generally affecting the
rights of creditors.
(e) Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any governmental authority is required on the part of Purchaser in
connection with the execution and delivery of Purchaser's Documents, or the
other transactions to be consummated at the Closing, as contemplated by this
Agreement, except such filings as shall have been made prior to or concurrently
with the Closing
14
and such filings required or permitted to be made after the Closing under
applicable Federal and state securities laws.
(f) Litigation. There is no action, suit, claim, proceeding or
investigation pending or threatened, against Purchaser, which questions the
validity of any of Purchaser's Documents or the right of Purchaser to enter into
them, or which would, if adversely determined, result, either individually or in
the aggregate, in any material adverse change in the assets, condition
(financial or otherwise), or businesses of Purchaser or its subsidiaries.
(g) Financial Statements. Schedule 5(g) contains copies of
unaudited statements of the net worth of Kero, which are not prepared in
accordance with generally accepted accounting principles, as at Kero's three
most recent fiscal year ends (the "Kero Net Worth Statement"). All of such
statements are complete and correct, and are in accordance with Kero's books and
records, and fairly present the net worth of Kero as of the dates and for the
fiscal periods indicated.
(h) Disclosure. No representation, warranty or other statement by
Purchaser in this Agreement or in any other of Purchaser's Documents or made in
writing in connection with Purchaser's Documents contains or will contain an
untrue statement of a material fact or omits or will omit to state a fact
necessary to make such statements not misleading. Purchaser is not aware of any
matter specifically related to the businesses of Purchaser or any subsidiary of
Purchaser as opposed to general economic circumstances or conditions generally
affecting the industries in which such parties participate that could be
reasonably be expected to have a Material Adverse Effect on the businesses of
Purchaser, or any subsidiary of Purchaser as currently conducted that has not
been disclosed in writing to Seller. The representations and warranties in
Purchaser's Documents are the sole and exclusive representations and warranties
of Purchaser in connection with the transaction contemplated hereby.
6. Closing Deliveries.
(a) Deliveries of the Seller. At the Closing, the Seller shall
deliver, or shall cause to be delivered, to Purchaser the following:
(i) The Xxxx of Sale in the form of Exhibit 6(a)(i) duly
executed by the Seller conveying to Purchaser the Purchased Assets free and
clear of all claims.
(ii) The executed opinion of Miller, Nash, Wiener, Hager
& Xxxxxxx LLP in the form attached hereto as Exhibit 6(a)(ii).
(iii) Assignment and Assumption ("Lease Assignment") of
the Lease duly executed by UGI in the form attached hereto as Exhibit 6(a)(iii).
(iv) Assignment of Agreements duly executed by UGI in the
form attached hereto as Exhibit 6(a)(iv).
15
(v) Consent to Lease Assignment duly executed by R&R
Leasing, L.L.C., the landlord under the Lease.
(vi) Evidence that Seller has changed its name to a name
dissimilar to its current name.
(vii) Certified resolutions of the board of directors and
shareholders of Seller authorizing the transactions contemplated by this
Agreement.
(viii) Evidence satisfactory to Purchaser that the rights
of Seller to do business in the States of Oregon and Washington with respect to
the sale of tobacco and cigarettes have been transferred to Purchaser (to the
extent transferable.)
(ix) An executed Supply Agreement in the form attached
hereto as Exhibit 6(a)(ix).
(x) Such other instruments and documents reasonably
deemed necessary or desirable by Purchaser and its counsel to transfer title to
the Purchased Assets to Purchaser.
(b) Purchaser's Deliveries. At the Closing, Purchaser shall
deliver or cause to be delivered to the Seller:
(i) The Closing Cash Payment by wire transfer.
(ii) The Note, duly executed by Kero.
(iii) An Assumption Agreement, respecting the Assumed
Liabilities in the form attached hereto as Exhibit 6(b)(iii), duly executed by
Purchaser.
(iv) The Lease Assignment duly executed by Purchaser.
(v) The executed opinion of Proskauer Rose LLP, counsel
to Purchaser, in the form attached hereto as Exhibit 6(b)(v).
(vi) Certified resolutions of the board of directors of
Purchaser authorizing the transactions contemplated by this Agreement.
(vii) The executed Pledge Agreement and the Certificate
for all the outstanding capital stock of Purchaser.
16
7. Covenants.
7.1 Seller's Restrictive Covenant.
(a) The parties acknowledge that Seller carries on its Business
throughout the States (the "Territory"), that following the Closing Purchaser
will distribute and market or intend to distribute and market products
throughout the Territory, that Purchaser's customers and sales representatives
are or will be located throughout the Territory, that a substantial portion of
the value of the Purchased Assets and the Business being purchased is the
goodwill the Seller has built up in the Territory and the ability of Purchaser
to expand its operations within the Territory, and that Purchaser would not be
purchasing the Purchased Assets but for such goodwill and ability to expand.
Accordingly, for a period of five (5) years following the Closing Date (the
"Restriction Period"), Seller shall not: (i) directly or indirectly engage or be
interested in or carry on (whether as owner, partner, consultant, employee,
agent, or otherwise) any business, activity, or enterprise which in any part of
the Territory: (A) distributes, supplies, or markets (on a wholesale, retail or
other basis) any groceries, tobacco products, candy, juice or related items or
(B) provides goods or services which are similar to or compete with any aspect
of the Business or any businesses then being carried on by Purchaser, so long as
such business then carried on by Purchaser constitutes a natural or logical
expansion of the Business. In addition, the Seller, shall never use or divulge
any trade secrets, customer or supplier lists, pricing information, marketing
arrangements, strategies, business plans, internal performance statistics,
training manuals, or other information concerning Purchaser (as successor to the
Business) that is proprietary or confidential.
(b) Because the breach or attempted or threatened breach of this
restrictive covenant will result in immediate and irreparable injury to
Purchaser for which Purchaser will not have an adequate remedy at law, Purchaser
shall be entitled, in addition to all other remedies, to a decree of specific
performance of this covenant and to a temporary and permanent injunction
enjoining such breach, without posting bond or furnishing similar security. The
provisions of this Section 7.1 are in addition to and independent of any
agreements or covenants contained in any employment, consulting, or other
agreement between Purchaser or Purchaser's other subsidiaries and the Seller.
7.2 Seller's Employees. "Affected Employees" shall mean employees of
Seller who are employed by Seller immediately prior to the Closing other than
the individuals named on Schedule 7.2. As of the Closing, Seller shall discharge
all Affected Employees and pay to or for the benefit of such employees all
wages, commissions, salaries and benefits due such employees up to the Closing
provided, however, that amounts due to the Affected Employees representing
accrued vacation days will not be paid to such Affected Employees and shall be
included in the definition of Accounts Payable in Section 2.1(a) hereof.
Purchaser will grant to Affected Employees paid vacation time off equivalent to
the amount of such vacation pay accruals. Seller shall make a clean cut-off of
payroll and payroll tax reporting with respect to the Affected Employees and
shall pay over to the federal, state and city governments those amounts required
to be withheld for periods ending on or prior to the Closing. Purchaser agrees
to offer
17
employment to all Affected Employees immediately after the Closing on terms and
conditions substantially similar to those on which such employees were employed
by Seller immediately prior to the Closing, provided that such undertaking shall
not confer upon any Affected Employees any rights or remedies of any nature or
kind whatsoever, including, without limitation, any rights of employment.
7.3 Proration of Expenses. The parties agree that tobacco company rebate
credits, property taxes, rents, utility and other expenses for which there is
not a clean cut-off as of the Closing Date shall be prorated between the parties
as of the Closing Date in the manner set forth in Schedule 7.3 attached hereto.
Within 90 days of the Closing Date the parties shall jointly compute the amount
of all expenses subject to such proration and the party owing the net amount
thereof shall promptly remit the sum due to the other party.
8. Brokers and Finders. Seller and UGI on the one hand and Purchaser on
the other represent to each other that they have had no dealings with any broker
or finder or similar person in connection with the transactions contemplated by
this Agreement. Should any claim be made for a broker's, finder's or similar
fee, on account of any actions or dealings by a party or its agents, such party
shall indemnify and hold the other harmless from and against any and all
liability and expenses, including reasonable attorneys' fees, incurred by reason
of any claim made by such broker, finder, or similar person.
9. Indemnification by the Seller and UGI. Subject to Section 11, the
Seller and UGI, jointly and severally, shall indemnify, defend, and hold
harmless Purchaser, Kero, NationsCredit and their respective affiliates,
directors, officers, shareholders, agents, employees, successors and assigns,
promptly upon demand at any time and from time to time, against any and all
losses, liabilities, claims, actions, damages, and expenses, including, without
limitation, reasonable attorneys' fees at trial and on appeal and disbursements
(collectively, "Losses"), arising out of or in connection with any of the
following (a) any misrepresentation or breach of any warranty made by the Seller
in any of Seller's Documents; (b) the Retained Liabilities; (c) any breach or
nonfulfillment of any covenant or agreement made by the Seller or UGI in
Seller's Documents; (d) any and all liabilities or obligations whether arising
before, on or after the Closing Date relating to or arising out of any "employee
benefit plan" within the meaning of Section 3(3) of ERISA, and, except to the
extent of the Assumed Liabilities, any other bonus, profit sharing,
compensation, pension, severance, deferred compensation, fringe benefit,
insurance, welfare, medical, post-retirement health or welfare benefit, medical
reimbursement, health, life, stock option, stock purchase, tuition refund,
service award, company car, scholarship, relocation, disability, accident,
termination, individual employment, executive compensation, incentive, bonus,
commission, payroll practices, retention or any other type of plan, agreement,
policy, trust fund or arrangement, maintained, sponsored or contributed to by
Seller, or any entity that is, or at any time was, deemed a "single employer"
with Seller under Section 414(b), (c), (m) or (o) of the Code or Section 4001 of
ERISA; and (e) the claims of any broker, finder, or similar person engaged by
the Seller provided that notwithstanding the foregoing, the obligations of
Seller and UGI to indemnify Purchaser, Kero and NationsCredit and their
respective affiliates, directors, officers, shareholders, agents, employees,
successors and assigns shall be limited as follows:
18
(a) Seller and UGI shall be obligated to indemnify Purchaser and
its affiliates against Losses only to the extent Losses, in the aggregate,
exceed the sum of $50,000; and
(b) the indemnity obligations of Seller and UGI in the aggregate
shall be limited to a total amount equal to the Purchase Price as adjusted
pursuant to Section 2.4 hereof.
10. Indemnification By Purchaser. Subject to Section 11, Purchaser shall
indemnify, defend, and hold harmless the Seller, UGI and their affiliates,
directors, officers, shareholders, agents, employees, successors and assigns
promptly upon demand at any time and from time to time, against any and all
Losses arising out of or in connection with any of the following: (a) any
misrepresentation or breach of any warranty made by Purchaser in any of
Purchaser's Documents; (b) any breach or nonfulfillment of any covenant or
agreement made by Purchaser in Purchaser's Documents; (c) the claims of any
broker, finder, or similar person engaged by Purchaser; and (d) any claims
constituting Assumed Liabilities, but not to the extent such Assumed
Liabilities, or the transactions pursuant to which they arose, constitute a
breach of any of the representations and warranties of Seller pursuant to
Section 4 hereof.
11. Further Provisions Regarding Indemnification.
(a) Survival. All representations, warranties, indemnities,
covenants, and agreements made by the Seller and Purchaser in Seller's Documents
or Purchaser's Documents shall survive the Closing subject to the limitation set
forth in Section 14(b) below.
(b) Limitations. Neither the Seller nor UGI, on the one hand, nor
Purchaser, Kero or NationsCredit on the other hand (the Seller and UGI, on the
one hand, and Purchaser on the other, being referred to in this Section 14 as a
"party") shall be entitled to indemnification for Losses arising out of matters
referred to in Sections 12 or 13 above, as applicable, unless it shall have
given written notice to the other party, setting forth its claim for
indemnification in reasonable detail (including copies of court papers, if any),
within eighteen (18) months after the Closing Date provided, however, that such
notice may be given within five (5) years of the Closing Date with respect to a
breach of the representations and warranties contained in Section 4(a), 4(b),
4(c), and 4(h) and with respect to breaches of the representations and
warranties contained in Section 4(g), such notice may be given at any time prior
to the expiration of the last federal or state statute of limitations relating
to any tax liability described therein.
(c) Defense. If an indemnified party shall receive notice of a
claim asserting Losses for which it is indemnified under this Agreement, it
shall promptly notify the indemnifying party. The failure to notify the
indemnifying party shall not relieve the indemnifying party from its indemnity,
unless such delay adversely, materially and incurably affects the rights of the
indemnifying party. Upon receipt of a notice of claim from an indemnified party,
the indemnifying party may, at its cost and expense, participate in the defense
of such action and may assume the defense with counsel satisfactory, in the
exercise of reasonable judgement, to the indemnified party. If the indemnifying
party assumes the defense of a claim, the indemnified party may participate in
the defense of the claim at its own expense.
19
The indemnifying party may assume defenses of a claim while objecting to the
liability for the Loss. The indemnifying party may settle, compromise and pay
any claim of or to any third party. If the indemnified party shall reasonably
conclude that its interests in such action are materially different from those
of the indemnifying party or that it may have defenses that are different from
or in addition to those available to the indemnifying party, the indemnified
party, may use separate counsel (who must be reasonably acceptable to the
indemnifying party) to assert such defenses and otherwise participate in the
defense of such action, at the reasonable expense of the indemnifying party. If
the indemnifying party shall assume the defense with counsel satisfactory to the
indemnified party, the indemnifying party shall not be liable for any legal
expenses subsequently incurred by the indemnified party, unless the indemnified
party shall have employed separate counsel in accordance with the preceding
sentence. If the claim is one that cannot by its nature be defended solely by
the indemnifying party, the indemnified party shall make available all
information and assistance that the indemnifying party may reasonably request.
All parties shall cooperate with each other in good faith in the resolution of
any third party claims.
12. Kero Guaranty. Kero hereby unconditionally guaranties all
obligations of Purchaser under this Agreement.
13. Further Assurances. The parties shall cooperate and take such
actions, and execute such other documents, at the Closing or subsequently, as
either may reasonably request in order to carry out the provisions or purpose of
this Agreement.
14. Notices. All notices or other communications in connection with this
Agreement shall be in writing and shall be considered given when personally
delivered or when sent via reputable overnight commercial courier or directed,
as follows:
If to the Seller or UGI:
Xxxxx Xxxxx
United Grocers, Inc.
0000 X.X. Xxxx Xxxx
Xxxxxxxxx, Xxxxxx 00000
Personal & Confidential
With copies to:
Xxxxxx X. Xxxxxxxxx
Miller, Nash, Wiener, Hager & Xxxxxxx LLP
Suite 3500
000 X.X. Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxx 00000
20
If to Purchaser:
Xxxxxxx X. Xxxxx
Kero Investments, Inc.
000 Xxxx Xxxxx Xxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
With copies to:
Xxxxxxx Xxxx, Esq.
Proskauer Rose LLP
0000 Xxxxxxx Xxxx Xxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
15. Entire Agreement. This Agreement (which includes the schedules and
exhibits) sets forth the parties' final and entire agreement with respect to its
subject matter and supersedes any and all prior understandings and agreements.
This Agreement can be amended, supplemented, or changed, and any provision of
this Agreement can be waived, only by a written instrument making specific
reference to this Agreement signed by the party against whom enforcement of any
such amendment, supplement, change, or waiver is sought.
16. Waiver. Seller and UGI on the one hand or Purchaser on the other may
(a) extend the time for the performance of any of the obligations or other acts
of the other, (b) waive any inaccuracies in the representations and warranties
of the other contained herein or in any document delivered pursuant hereto and
(c) waive compliance with any of the agreements of the other or satisfaction of
any of the conditions to its obligations contained herein. Any extension or
waiver made pursuant to this Section 16 must be by an instrument in writing
signed on behalf of the party or parties granting the extension or waiver. A
waiver of any provision hereof or breach hereof shall not operate or be
construed as the waiver of any other provision or any subsequent breach.
17. Successors. This Agreement shall be binding upon and shall inure to
the benefit of the parties and their respective successors, and assigns;
provided, however, that neither this Agreement nor any right or obligation under
this Agreement may be assigned or transferred, except that Purchaser (i) may
assign its rights and obligations to a subsidiary that is wholly owned by it
directly or indirectly and (ii) with Seller's prior written consent, which
consent shall not unreasonably be withheld, may assign this Agreement and its
rights under this Agreement and Seller's Documents to any purchaser of the
Purchased Assets or to any financial institutions providing acquisition
financing to Purchaser, provided no assignment shall have the effect of
releasing Purchaser from its obligations under such documents. Seller hereby
consents to the assignment of its rights hereunder to NationsCredit.
21
18. Section Headings. The section headings in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
19. Fees and Expenses. Except as otherwise provided herein, whether or
not the transactions contemplated by this Agreement are consummated, the parties
shall pay their own respective expenses.
20. Severability. If any provision of this Agreement shall be held by
any court of competent jurisdiction to be illegal, invalid, or unenforceable,
such provision shall be construed and enforced as if it had been more narrowly
drawn so as not to be illegal, invalid, or unenforceable, and such illegality,
invalidity, or unenforceability shall have no effect upon and shall not impair
the enforceability of any other provision of this Agreement.
21. Governing Law. This Agreement shall be governed by and construed and
interpreted in accordance with the internal law of the State of Oregon (without
reference to its rules as to conflicts of law).
22. No Third Party Beneficiaries. Notwithstanding anything to the
contrary set forth herein, all of the agreements, covenants, representations and
warranties set forth herein and in any documents executed in connection herewith
are for the sole benefit of the parties hereto, including NationsCredit, and are
not intended to benefit any other person or entity.
23. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
24. Definition of Knowledge. Whenever and wherever in this Agreement
something is stated to be to the "knowledge" or "best knowledge" of a party, the
same shall be deemed to mean the actual knowledge of such party's officers and
senior management employees.
25. Attorney Fees. In the event any party hereto commences legal action
(including trial, arbitration, and bankruptcy proceedings) to enforce or to
interpret the terms of this Agreement, or to collect damages as the result of an
alleged breach hereof, the party prevailing shall be entitled to recover from
the non-prevailing party reasonable attorney fees and costs incurred in such
action prior to and at trial and on any appeal. For purposes of this Agreement,
"prevailing party" shall mean the party that succeeds either affirmatively or
defensively on claims having the greatest overall value or importance as
determined by an arbitrator or court of competent jurisdiction.
26. Retention of Records. After the Closing, Purchaser will retain the
accounting and business records of Seller acquired hereunder and will permit
Seller or its assigns the opportunity on reasonable notice during normal
business hours to inspect and make copies of such retained records. Purchaser
shall give Seller 60 days' written notice of Purchaser's intention to destroy
22
such records and during such period Seller or its assigns shall have the right
to take custody of the records at Seller's expense.
23
IN WITNESS WHEREOF, the parties have duly executed this Asset
Purchase Agreement as of the date first above written.
SELLER: PURCHASER:
RICH AND RHINE, INC., RICH & RHINE ACQUISITION CORP.,
an Oregon corporation a Delaware corporation
By: /s/ Xxxxxxx X. Xxxxxxx By: /s/ Xxxxxxx Xxxxxxx
Name: Xxxxxxx X. Xxxxxxx Xxxxxxx Xxxxxxx
Title: Vice-Pres Vice President
UGI: KERO:
UNITED GROCERS, INC., KERO INVESTMENTS, INC.,
an Oregon corporation a Colorado corporation
By: /s/ Xxxxxxx X. Xxxxxxx By: /s/ Xxxxxxx Xxxxxxx
Name: Xxxxxxx X. Xxxxxxx Xxxxxxx Xxxxxxx
Title: Pres & CEO Senior Vice President
