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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 29, 2003
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from _____________ to _______________
Commission file number: 002-94984
Roundy's, Inc.
(Exact name of registrant as specified in its charter)
Wisconsin 39-0854535
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
23000 Roundy Drive
Pewaukee, Wisconsin 53072
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (262)953-7999
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
Indicate by checkmark whether the Registrant is an accelerated filer
(as defined in Exchange Act Rule 12b-2)
Yes No X
As of May 9, 2003 there were 1,000 shares of the Registrant's common
stock outstanding, all of which were held by Roundy's Acquisition
Corporation ("RAC"). RAC is controlled by the Willis Stein Funds
(as defined in Note 2 to the financial statements contained in this report)
and certain associated investors, and approximately 100% of RAC's common
stock may be deemed to be beneficially owned by certain officers and
directors of the Registrant, all of whom are or may be deemed to be affiliates
of the Registrant. There is no established public trading market for such
stock.
ROUNDY'S, INC.
FORM 10-Q
For the period ended March 29, 2003
INDEX
Page No.
--------
PART I. - Financial Information
Item 1. Financial Statements (unaudited)
Consolidated Statements of Income 1
Consolidated Balance Sheets 2
Consolidated Statements of Cash Flows 3
Notes to Unaudited Consolidated Financial
Statements 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Discussion about 17
Market Risk
Item 4. Controls and Procedures 17
PART II. - Other Information
Item 1. Legal Proceedings 18
Item 2. Changes in Securities and Use of Proceeds 18
Item 3. Defaults Upon Senior Securities 18
Item 4 Submission of Matters to a Vote of Security
Holders 18
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 18
CERTIFICATIONS PURSUANT TO SECTION 302 OF SARBANES-OXLEY ACT 19
EXHIBIT INDEX
PART I. Item 1. FINANCIAL STATEMENTS
ROUNDY'S, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands)
(Unaudited)
Thirteen Weeks Ended
-------------------------
Successor Predecessor
----------- -----------
March 29, March 30,
2003 2002
Revenues: ----------- -----------
Net sales and service fees $ 887,096 $ 872,142
Other - net 737 387
----------- -----------
887,833 872,529
----------- -----------
Costs and Expenses:
Cost of sales 711,035 715,322
Operating and administrative 144,711 133,497
Interest
Interest 9,877 3,726
Amortization of deferred
financing costs 819 95
----------- -----------
866,442 852,640
----------- -----------
Income Before Income Taxes 21,391 19,889
Provision for Income Taxes 8,556 8,155
----------- -----------
Net Income $ 12,835 $ 11,734
=========== ===========
See notes to unaudited consolidated financial statements.
ROUNDY'S, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
Successor
--------------------------
March 29, December 28,
Assets 2003 2002
---------- -------------
(Unaudited)
Current Assets:
Cash and cash equivalents $ 96,660 $ 139,778
Notes and accounts receivable, less
allowance for losses of $5,463 and 73,281 87,344
$5,577, respectively
Merchandise inventories 220,596 236,465
Prepaid expenses 8,009 9,756
Deferred income tax benefits 15,871 15,871
----------- -----------
Total current assets 414,417 489,214
----------- -----------
Property and Equipment - Net 221,838 214,548
Other Assets:
Deferred income tax benefits 25,231 25,231
Notes receivable, less allowance for
losses of $1,475 in both periods 3,179 3,523
Other assets - net 89,211 91,344
Goodwill 600,528 556,894
----------- -----------
Total other assets 718,149 676,992
----------- -----------
Total assets $1,354,404 $1,380,754
=========== ===========
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable $ 195,184 $ 240,845
Accrued expenses 143,268 137,416
Current maturities of long-term debt 2,961 2,961
Income taxes 14,740 13,370
----------- ----------
Total current liabilities 356,153 394,592
----------- ----------
Long-Term Debt 559,094 559,824
Other Liabilities 91,364 91,380
----------- ----------
Total liabilities 1,006,611 1,045,796
----------- ----------
Shareholders' Equity:
Common stock (1,000 shares issued and
outstanding at $0.01 par value)
Additional paid-in capital 314,500 314,500
Retained earnings 33,293 20,458
----------- ----------
Total shareholders' equity 347,793 334,958
Total liabilities and shareholders' ----------- ----------
equity $1,354,404 $1,380,754
========== ==========
See notes to unaudited consolidated financial statements.
ROUNDY'S, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Thirteen Weeks Ended
---------------------------
Successor Predecessor
------------- ------------
March 29, March 30,
2003 2002
------------- ------------
Cash Flows From Operating Activities:
Net income $ 12,835 $ 11,734
Adjustments to reconcile net income to net
cash flows provided by operating activities:
Depreciation and amortization, including
deferred financing costs 10,667 10,198
Loss on sale of property and equipment 3 33
Changes in operating assets and liabilities,
net of the effect of business acquisitions:
Notes and accounts receivable 15,534 (7,370)
Merchandise inventories 23,033 18,600
Prepaid expenses 2,100 2,712
Other assets (639) (743)
Accounts payable (54,463) (23,456)
Accrued expenses 3,592 1,398
Income taxes 1,370 6,993
Other liabilities (16) 30
Net cash flows provided by operating ------------ ------------
activities 14,016 20,129
------------ ------------
Cash Flows From Investing Activities:
Capital expenditures (9,005) (3,702)
Proceeds from sale of property and equipment
and other assets 16 20
Payment for business acquisitions net of
cash acquired (47,759)
Decrease in notes receivable, net 344 360
------------ ------------
Net cash flows used in investing activities (56,404) (3,322)
------------ ------------
Cash Flows From Financing Activities:
Payments of debt (730) (13,553)
Common stock purchased (56)
------------ ------------
Net cash flows used in financing activities (730) (13,609)
------------ ------------
Net (Decrease) Increase in Cash and Cash
Equivalents (43,118) 3,198
Cash and Cash Equivalents, Beginning of Period 139,778 45,516
------------ ------------
Cash and Cash Equivalents, End of Period $ 96,660 $ 48,714
============ ============
Supplemental Cash Flow Information:
Cash paid during the period:
Interest $ 4,022 $ 3,728
Income taxes 7,231 1,162
See notes to unaudited consolidated financial statements.
ROUNDY'S, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements as of March
29, 2003, and for the three-month periods ended March 29, 2003 (successor)
and March 30, 2002 (predecessor) reflect all adjustments (consisting only
of normal recurring adjustments) that are, in the opinion of management,
necessary for a fair presentation of the financial position and operating
results for the interim periods. The unaudited consolidated financial
statements have been prepared in accordance with accounting principles
generally accepted in the United States for interim financial information,
in accordance with the instructions for Form 10-Q and Article 10 of
Regulation S-X and do not include all of the information and footnotes
required for complete, audited financial statements. The unaudited
consolidated financial statements should be read in conjunction with the
consolidated financial statements and related notes thereto, together with
Management's Discussion and Analysis of Financial Condition and Results of
Operations, contained in the Roundy's, Inc. Annual Report on Form 10-K for
the year ended December 28, 2002. The results of operations for the three-
month period ended March 29, 2003 may not necessarily be indicative of the
results that may be expected for the entire fiscal year ending January 3,
2004.
2. TRANSACTIONS
Transactions - On June 6, 2002, all of the issued and outstanding capital
stock of Roundy's, Inc. ("Roundy's" or the "Company") was purchased by
Roundy's Acquisition Corporation ("RAC") from its former owners. This
purchase is referred to throughout these financial statements as the
"Transactions."
RAC is a corporation formed at the direction of Willis Stein & Partners,
III, L.P. ("Willis Stein") for the purposes of acquiring Roundy's. 90% of
RAC's common and preferred stock is owned by investment funds controlled by
Willis Stein (the "Willis Stein Funds") and certain associated equity
investors.
Purchase Accounting - The acquisition of Roundy's was accounted for as a
purchase. As a result, all financial statements for periods subsequent to
June 6, 2002, the date the Transactions were consummated, will reflect the
new reporting entity after adjustment of the carrying value of assets and
liabilities to their fair values as of June 7, 2002.
Predecessor/Successor - For purposes of the financial statement
presentation set forth herein, the Predecessor Company refers to the
Company prior to the consummation of the Transactions and Successor Company
refers to the Company after the consummation of the Transactions.
3. ACQUISITIONS
In November 2002, the Company entered into a definitive agreement to
acquire the capital stock of Prescott's Supermarkets, Inc. ("Prescott's")
for approximately $47.8 million. Prescott's primarily owned and operated
seven licensed Pick `n Save stores located in the Wisconsin cities of Fond
du Lac (three stores), Oshkosh (two stores) and West Bend (two stores).
Goodwill of $43.3 million resulted from the acquisition which was accounted
for as a purchase. The transaction closed on January 21, 2003 and the
operating results of Prescott's are included in the consolidated statements
of income after this date. The consolidated financial statements reflect
the preliminary allocation of the purchase price to the assets acquired and
liabilities assumed based on their fair values.
The proforma effect of the Prescott's acquisition was not material.
In February 2003, the Company entered into a definitive agreement to
acquire seven Kohl's grocery stores in the Madison area from The Great
Atlantic & Pacific Tea Company, Inc. for approximately $19.0 million in
cash for the non-inventory assets plus net payments of approximately $1.1
million for acquired inventory. The Company will convert six stores to
Copps stores and consolidate the volume of the seventh store into an
existing company-owned Copps store. The transaction closed on April 30,
2003.
On May 2, 2003, the Company signed an agreement to purchase the assets of
31 Rainbow Foods stores from Fleming Companies, Inc. Thirty of these
stores are located in the Minneapolis-St. Paul metropolitan area and one
store is located near Schofield, Wisconsin. The aggregate consideration to
be paid for the transaction is $42.5 million for the non-inventory assets,
plus the value of store inventories (estimated at approximately $40
million) and the assumption of capitalized leases of approximately $36
million. The transaction, which is expected to be completed within the
next 60 days, is subject to approval of the U.S. Bankruptcy Court in
Wilmington, Delaware and other customary regulatory approvals and closing
conditions. The Company is also seeking an amendment to its senior credit
facility to permit the acquisition.
4. RECENTLY ISSUED ACCOUNTING STANDARDS
The Company adopted Emerging Issues Task Force (EITF) Issue No. 02-16 (EITF
02-16) "Accounting by a Customer (including a Reseller) for Certain
Consideration Received from a Vendor" effective December 29, 2002.
Pursuant to EITF 02-16, vendor consideration related to vendor funded
coupons and certain advertising and other programs have been reclassified
in the consolidated statements of income and prior periods have also been
consistently reclassified. Specifically, vendor funded coupon
reimbursements, previously considered part of net sales at the point of
sale, are now reflected as a reduction to cost of sales. Accordingly,
$10.0 million and $8.1 million of such reimbursements in 2003 and 2002,
respectively, have been classified as a reduction in cost of sales with a
corresponding decrease in net sales. Vendor reimbursements previously
classified as offsets to advertising and other expenses, have now also been
reflected as reductions in cost of sales pursuant to EITF 02-16.
Accordingly, $9.5 million and $7.4 million of such reimbursements in 2003
and 2002, respectively, have been classified as a reduction in cost of
sales with a corresponding increase in operating and administrative
expenses.
5. SEGMENT REPORTING
The Company and its subsidiaries sell and distribute food and nonfood
products that are typically found in supermarkets. The Company's stores
and those of its wholesale customers are located primarily in the Midwest.
The Company has two reportable segments - wholesale and retail. The
Company's retail segment sells directly to the consumer while the wholesale
distribution segment sells to both Company-owned and independent retail
food stores. Eliminations represent the activity between wholesale and
Company-owned retail stores. Inter-segment revenues are recorded at amounts
consistent with those charged to independent retail stores.
Identifiable assets are those used exclusively by that industry segment.
Corporate assets are principally cash and cash equivalents, notes
receivable, transportation equipment, corporate office facilities and
equipment.
Reportable segments, as defined by SFAS No. 131, "Disclosure about Segments
of an Enterprise and Related Information," are components of an enterprise
about which separate financial information is available that is evaluated
regularly by the chief operating decision-maker in deciding resource
allocation and assessing performance.
(In thousands) Thirteen Weeks Ended
--------------------------
March 29, March 30,
2003 2002
------------ ------------
NET SALES AND SERVICE FEES
Retail $ 449,658 $ 376,656
Wholesale 718,762 735,374
Eliminations (281,324) (239,888)
------------ ------------
Consolidated $ 887,096 $ 872,142
============ ============
INCOME BEFORE INCOME TAXES
Retail $ 9,129 $ 7,700
Wholesale 23,398 16,207
Eliminations (11,136) (4,018)
------------ ------------
Consolidated $ 21,391 $ 19,889
============ ============
DEPRECIATION AND AMORTIZATION
Retail $ 4,348 $ 5,155
Wholesale 1,560 2,569
Corporate 3,940 2,379
------------ ------------
Consolidated $ 9,848 $ 10,103
============ ============
CAPITAL EXPENDITURES
Retail $ 7,814 $ 1,626
Wholesale 267 524
Corporate 924 1,552
------------ ------------
Consolidated $ 9,005 $ 3,702
============ ============
IDENTIFIABLE ASSETS (AT PERIOD END)
Retail $ 565,194 $ 323,816
Wholesale 545,853 357,070
Corporate 243,357 96,715
------------ ------------
Consolidated $1,354,404 $ 777,601
============ ============
6. CONDENSED CONSOLIDATING INFORMATION
The following presents condensed consolidating financial statements of
Roundy's and its subsidiaries. All subsidiaries are 100% owned by
Roundy's. All of the domestic subsidiaries are guarantors of the Company's
$300 million 8 7/8% senior subordinated notes due 2012 (the "Notes").
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
Thirteen Weeks Ended March 29, 2003 (Successor)
(In thousands)
Combined
Roundy's Subsidiaries Eliminations Total
--------- ------------ ------------ ---------
Revenues:
Net sales and service fees $ 375,984 $ 721,214 $(210,102) $ 887,096
Other-net 316 421 737
--------- ---------- ----------- ---------
376,300 721,635 (210,102) 887,833
--------- ---------- ----------- ---------
Costs and Expenses:
Cost of sales 337,250 579,640 (205,855) 711,035
Operating and administrative 28,852 120,106 (4,247) 144,711
Interest 5,569 5,127 10,696
--------- ---------- ----------- ---------
371,671 704,873 (210,102) 866,442
--------- ---------- ----------- ---------
Income Before Income Taxes 4,629 16,762 21,391
Provision for Income Taxes 1,851 6,705 8,556
Equity in earnings of
subsidiaries 10,057 (10,057)
--------- ---------- ----------- ---------
Net Income $ 12,835 $ 10,057 $ (10,057) $ 12,835
========= ========== =========== =========
CONDENSED CONSOLIDATING STATEMENTS OF INCOME
Thirteen Weeks Ended March 30, 2002 (Predecessor)
(In thousands)
Combined
Roundy's Subsidiaries Eliminations Total
--------- ------------ ------------ ---------
Revenues:
Net sales and service fees $ 369,484 $ 665,965 $(163,307) $ 872,142
Other-net (31) 418 387
--------- ---------- ---------- ---------
369,453 666,383 (163,307) 872,529
--------- ---------- ---------- ---------
Costs and Expenses:
Cost of sales 335,473 540,032 (160,183) 715,322
Operating and administrative 27,786 108,835 (3,124) 133,497
Interest (517) 4,338 3,821
---------- ---------- ----------- ---------
362,742 653,205 (163,307) 852,640
---------- ---------- ----------- ---------
Income Before Income Taxes 6,711 13,178 19,889
Provision for Income Taxes 2,752 5,403 8,155
Equity in earnings of
subsidiaries 7,775 (7,775)
---------- ---------- ----------- ---------
Net Income $ 11,734 $ 7,775 $ (7,775) $ 11,734
========== ========== =========== =========
CONDENSED CONSOLIDATING BALANCE SHEETS
As of March 29, 2003 (Successor)
(In thousands)
Combined
Assets Roundy's Subsidiaries Eliminations Total
---------- ------------ ------------ ---------
Current Assets:
Cash and cash equivalents $ 72,025 $ 24,635 $ 96,660
Notes and accounts
receivable-net 26,975 57,350 $ (11,044) 73,281
Merchandise inventories 56,565 164,031 220,596
Prepaid expenses and other (4,225) 28,105 23,880
---------- ------------ ------------ ---------
Total current assets 151,340 274,121 (11,044) 414,417
---------- ------------ ------------ ---------
Property and Equipment-Net 10,940 210,898 221,838
Other Assets:
Investment in subsidiaries 205,134 (205,134)
Intercompany receivables 448,637 (448,637)
Deferred income tax benefits 25,231 25,231
Notes receivable 600 2,579 3,179
Goodwill and other assets 256,739 433,000 689,739
---------- ------------ ------------ ---------
Total other assets 936,341 435,579 (653,771) 718,149
---------- ------------ ------------ ---------
Total assets $1,098,621 $ 920,598 $ (664,815)$1,354,404
========== ============ ============ =========
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable $ 98,182 $ 104,700 $ (7,698) $ 195,184
Accrued expenses and other 89,508 71,846 (3,346) 158,008
Current maturities of
long-term debt 2,500 461 2,961
Intercompany payable 448,637 (448,637)
---------- ------------ ------------ ---------
Total current liablities 190,190 625,644 (459,681) 356,153
---------- ------------ ------------ ---------
Long-Term Debt 545,887 13,207 559,094
Other Liabilities 14,751 76,613 91,364
---------- ------------ ------------ ---------
Total liabilities 750,828 715,464 (459,681) 1,006,611
---------- ------------ ------------ ---------
Shareholders' Equity 347,793 205,134 (205,134) 347,793
---------- ------------ ------------ ---------
Total liabilities and
shareholders' equity $1,098,621 $ 920,598 $ (664,815) $1,354,404
========== ============ ============ =========
CONDENSED CONSOLIDATING BALANCE SHEETS
As of December 28, 2002 (Successor)
(In thousands)
Combined
Assets Roundy's Subsidiaries Eliminations Total
---------- ------------ ------------ ----------
Current Assets:
Cash and cash equivalents $ 117,307 $ 22,471 $ 139,778
Notes and accounts
receivable-net 35,543 56,317 $ (4,516) 87,344
Merchandise inventories 63,386 173,079 236,465
Prepaid expenses and other (4,649) 30,276 25,627
---------- ------------ ------------ -------
Total current assets 211,587 282,143 (4,516) 489,214
---------- ------------ ------------ --------
Property and Equipment-Net 10,873 203,675 214,548
Other Assets:
Investment in subsidiaries 190,732 (190,732)
Intercompany receivables 409,761 (409,761)
Deferred income tax benefits 25,231 25,231
Notes receivable 640 2,883 3,523
Goodwill and other assets 258,896 389,342 648,238
---------- ----------- ------------ --------
Total other assets 885,260 392,225 (600,493) 676,992
---------- ----------- ------------ --------
Total assets $1,107,720 $ 878,043 $ (605,009)$1,380,754
========== =========== ============ =========
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable $ 127,742 $ 116,147 $ (3,043) $ 240,845
Accrued expenses and other 81,314 70,944 (1,473) 150,786
Current maturities of
long-term debt 2,500 461 2,961
Intercompany payable 409,761 (409,761)
---------- ----------- ------------ --------
Total current liabilities 211,556 597,313 (414,277) 394,592
---------- ----------- ------------ --------
Long-Term Debt 546,502 13,322 559,824
Other Liabilities 14,704 76,676 91,380
---------- ----------- ------------ --------
Total liabilities 772,762 687,311 (414,277) 1,045,796
---------- ----------- ------------ ---------
Shareholders' Equity 334,958 190,732 (190,732) 334,958
---------- ----------- ------------ --------
Total liabilities and
shareholders' equity $1,107,720 $ 878,043 $ (605,009)$1,380,754
========== =========== ============ =========
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the period ended March 29, 2003 (Successor)
(In thousands)
Combined
Roundy's Subsidiaries Total
---------- ------------ ----------
Net Cash Flows From Operating Activities: $ (34,886) $ 48,902 $ 14,016
---------- ------------ ----------
Cash Flows From Investing Activities:
Capital expenditures-net of proceeds (938) (8,051) (8,989)
Acquisition of Roundy's
Payment for business acquisitions net of
cash acquired (47,759) (47,759)
Notes receivable 40 304 344
---------- ------------ ----------
Net cash flows used in investing activities (48,657) (7,747) (56,404)
---------- ------------ ----------
Cash Flows From Financing Activities:
Proceeds from long-term borrowings
Payments of debt (615) (115) (730)
Intercompany receivables-net 38,876 (38,876)
---------- ------------ ----------
Net cash flows (used in) provided by
financing activities 38,261 (38,991) (730)
---------- ------------ ----------
Net (Decrease) Increase in Cash and Cash
Equivalents (45,282) 2,164 (43,118)
Cash And Cash Equivalents, Beginning Of
Period 117,307 22,471 139,778
---------- ------------ ----------
Cash And Cash Equivalents, End Of Period $ 72,025 $ 24,635 $ 96,660
========== ============ ==========
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the period ended March 30, 2002 (Predecessor)
(In thousands)
Combined
Roundy's Subsidiaries Total
---------- ------------ ----------
Net Cash Flows From Operating Activities: $ (11,146) $ 31,275 $ 20,129
---------- ------------ ----------
Cash Flows From Investing Activities:
Capital expenditures-net of proceeds (1,609) (2,073) (3,682)
Notes receivable 270 90 360
---------- ------------ ----------
Net cash flows used in investing activities (1,339) (1,983) (3,322)
---------- ------------ ----------
Cash Flows From Financing Activities:
Payments of debt (13,450) (103) (13,553)
Debt issuance costs (56) (56)
Intercompany receivables-net 23,067 (23,067)
---------- ------------ ----------
Net cash flows (used in) provided by
financing activities 9,561 (23,170) (13,609)
---------- ------------ ----------
Net Increase (Decrease) in Cash and Cash
Equivalents (2,924) 6,122 3,198
----------- ------------ ----------
Cash And Cash Equivalents, Beginning Of
Period 23,137 22,379 45,516
----------- ------------ ----------
Cash And Cash Equivalents, End Of Period $ 20,213 $ 28,501 $ 48,714
=========== ============ ==========
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
On April 8, 2002, Roundy's and RAC entered into a share exchange agreement
pursuant to which, among other things and subject to the terms and
conditions contained therein, RAC consummated the Transactions by acquiring
all of the issued and outstanding capital stock of Roundy's on June 6,
2002.
Results of Operations
The following table sets forth each category of statement of income data as
a percentage of net sales and service fees. As part of the Transactions,
the Company entered into various financing arrangements and as a result,
the Company now has a different capital structure. In addition, as a
result of the Transactions, the Company's assets and liabilities were
adjusted to reflect their estimated fair market values, and the purchase
price in excess of fair market value was recorded as goodwill.
Accordingly, the results of operations for periods subsequent to the
consummation of the Transactions and related financing transactions will
not necessarily be comparable to prior periods.
Period Ended
-----------------------------------
March 29, 2003 March 30, 2002
---------------- ----------------
Statement of Income Data Successor Predecessor
---------------- ----------------
(Dollars in thousands):
Revenues:
Net sales and service fees $887,096 100.0% $872,142 100.0%
Other-net 737 0.1 387 -
-------- ----- ------- ------
Total 887,833 100.1 872,529 100.0
Cost and Expenses:
Cost of sales 711,035 80.2 715,322 82.1
Operating and
administrative 144,711 16.3 133,497 15.3
Interest 10,696 1.2 3,821 0.4
------- ----- -------- -----
866,442 97.7 852,640 97.8
------- ----- ------- ----
Income before income taxes 21,391 2.4 19,889 2.2
Provision for income tax 8,556 1.0 8,155 0.9
-------- ----- -------- ----
Net income $ 12,835 1.4% $ 11,734 1.3%
======== ===== ========= ====
Net Sales and Service Fees
Net sales and service fees represent product sales less returns and
allowances and sales promotions. The Company derives its net sales and
service fees from the operation of retail grocery stores and the wholesale
distribution of food and non-food products. In addition, the Company
provides specialized support services for retail grocers, which include
promotional merchandising and advertising programs, accounting and
inventory control, store development and financing and assistance with
other aspects of store management.
The table below indicates the portion of the Company's net sales and
service fees attributable to retail sales and wholesale distribution for
the periods indicated. Eliminations represent the intercompany activity
between the Company's wholesale operations and its retail operations (in
thousands):
Period Ended
------------------------------
March 29, 2003 March 30, 2002
-------------- --------------
Successor Predecessor
-------------- --------------
Net Sales and Service Fees
Retail $ 449,658 $ 376,656
Wholesale 718,762 735,374
Eliminations (281,324) (239,888)
----------- -----------
Total $ 887,096 $ 872,142
=========== ===========
Costs and Expenses
Costs and expenses consist of cost of sales, operating and administrative
expenses, SARs and other termination costs and interest expense.
* Cost of sales includes product costs and freight.
* Operating and administrative expenses consist primarily of personnel
costs, sales and marketing expenses, depreciation and amortization
expenses, expenses associated with the Company's facilities, internal
management expenses, business development expenses and expenses for
finance, legal, human resources and other administrative departments.
* Interest expense includes interest on the Company's outstanding
indebtedness and amortization of deferred financing costs. In the
predecessor company, interest expense also includes interest rate swap
termination costs and the write off of deferred financing costs.
Three Months Ended March 29, 2003 (Successor) Compared With Three Months
Ended March 30, 2002 (Predecessor)
Net Sales and Service Fees
Net sales and service fees totaled $887.1 million in the first quarter
2003, a $15.0 million, or 1.7%, increase from $872.1 million in the first
quarter 2002. Retail sales were $449.7 million for the first quarter 2003,
a $73.0 million, or 19.4%, increase from $376.7 million in the first
quarter 2002. This increase in retail sales was due in large part to the
acquisition of eleven licensed Pick 'n Save retail grocery stores from
independent operators in two separate transactions. The first four-store
acquisition closed on October 23, 2002 (the "Gold's Acquisition") which
accounted for a retail sales increase of approximately $31.1 million. The
second seven-store acquisition closed on January 21, 2003 (the "Prescott's
Acquisition") which accounted for a retail sales increase of approximately
$34.5 million. Wholesale sales were $718.8 million for the first quarter
2003, a $16.6 million, or 2.3%, decrease from $735.4 million in the first
quarter 2002. This decrease was primarily due to lower sales to customers
in the Company's non-Wisconsin divisions.
First quarter 2003 same store sales at the Company's retail stores improved
0.6% (including Pick 'n Save licensed stores operated while under previous
ownership). The same store sales results were negatively impacted by
Easter sales recorded in the second quarter 2003 versus the first quarter
2002.
Gross Profit
Gross profit was $176.1 million for the first quarter 2003, a $19.3
million, or 12.3%, increase from the $156.8 million in the first quarter
2002. The gross margin for the same periods of 2003 and 2002 was 19.9% and
18.0%, respectively. The increase in the Company's gross profit and gross
margin for the quarter was primarily due to the increase in the sales mix
attributable to the higher profits derived by Company-owned retail stores.
Retail sales for first quarter 2003 represented 50.7% of net sales and
service fees compared to 43.2% for the same period in 2002. The retail
gross margin was 24.8% and 24.9% for the first quarter of 2003 and 2002,
respectively. First quarter wholesale gross margin was 9.6% as compared
with 9.1% in the first quarter 2002. The increase in wholesale gross
margins was due to increased higher-margin private label sales and stronger
vendor promotional allowances in the Company's Wisconsin divisions.
Operating Expenses
Operating and administrative expenses were $144.7 million for the first
quarter 2003, an $11.2 million, or 8.4%, increase from $133.5 million in
the first quarter 2002. Operating and administrative expenses, as a
percentage of net sales and service fees, increased to 16.3% for the first
quarter of 2003 compared with 15.3% in the first quarter of 2002. The
percentage increase was attributable to the Company's acquisition of retail
stores and the increased concentration in Company-owned stores in the first
quarter of 2003, which have a significantly higher ratio of operating costs
to sales than wholesale operations. Retail operating and administrative
expenses decreased to 21.1% of retail sales for the first quarter 2003
compared with 21.5% for first quarter 2002 primarily due to decreased
depreciation. Wholesale operating and administrative expenses decreased to
6.3% of wholesale sales for the first quarter 2003 as compared with 6.7%
for the same period in 2002. This decrease was due to operational and
productivity improvements in the Company's wholesale operations.
Interest Expense
Interest expense was $10.7 million for first quarter 2003, a $6.9 million
increase from $3.8 million in first quarter 2002. The increase was
primarily due to increased borrowings associated with the purchase of the
Company's issued and outstanding stock by RAC in June 2002. RAC was a
corporation formed at the direction of Willis Stein & Partners, III, L.P.
for the purposes of acquiring the Company.
Income Taxes
Provision for income taxes was $8.6 million for first quarter 2003, an
increase of $0.4 million from $8.2 million in first quarter 2002. The
effective income tax rates for the first quarters of 2003 and 2002 were
40.0% and 41.0%, respectively.
Net Income
Net income was $12.8 million for first quarter 2003, a $1.1 million
increase from $11.7 million in the prior quarter. The net income margin
was 1.4% and 1.3%, respectively, for first quarter 2003 and first quarter
2002.
Adjusted EBITDA
Adjusted EBITDA (as defined below) was $41.9 million for first quarter
2003, an $8.1 million, or 24.0%, increase from $33.8 million for first
quarter 2002. Retail Adjusted EBITDA for the first quarter of 2003 was
$21.3 million, a $3.3 million, or 18.3%, increase from $18.0 million for
2002. The increase in Adjusted EBITDA at the retail segment was primarily
due to the Gold's and Prescott's acquisitions, offset partially by pre-
opening expenses for three former Rainbow Foods stores acquired in
December, 2002. Wholesale Adjusted EBITDA for the first quarter of 2003
was $25.5 million, a $5.6 million, or 28.4%, increase from $19.9 million
for 2002. This increase was primarily due to operational and labor
productivity improvements.
SEGMENT DATA Three Months Ended
(Subject to Reclassifications) --------------------------------
(in thousands) March 29, 2003 March 30, 2002
-------------- --------------
Successor Predecessor
-------------- --------------
(unaudited) (unaudited)
REVENUES:
Retail operations $ 449,658 $ 376,656
Wholesale operations 718,762 735,374
Eliminations (281,324) (239,888)
----------- ----------
Total $ 887,096 $ 872,142
=========== ==========
ADJUSTED EBITDA (1):
Retail operations $ 21,294 $ 18,000
Wholesale operations 25,523 19,880
Corporate and other (4,882) (4,067)
----------- ----------
Total $ 41,935 $ 33,813
=========== ==========
EBITDA RECONCILIATION:
Net income $ 12,835 $ 11,734
Interest expense 10,696 3,821
Income taxes 8,556 8,155
Depreciation and amortization
expense 9,848 10,103
----------- ----------
Total $ 41,935 $ 33,813
=========== ==========
(1) Adjusted EBITDA represents net income plus interest, income taxes,
depreciation and amortization. Adjusted EBITDA is presented because the
Company believes EBITDA is frequently used by securities analysts,
investors and other interested parties in the evaluation of companies in
its industry. However, other companies in the Company's industry may
calculate Adjusted EBITDA differently than the Company. Adjusted EBITDA
may be relevant or useful to investors as the Company understands that
securities analysts and others use measures like Adjusted EBITDA to value
securities like the Company's Notes, and therefore investors may wish to
consider Adjusted EBITDA because it is likely that the Notes are being
valued in part based on that measure. The Company uses Adjusted EBITDA
primarily as a measure of performance and it is used to calculate
compliance with the terms of a number of covenants contained in the
indenture governing the Notes and the Company's bank credit agreement.
Adjusted EBITDA is not a measurement of financial performance under
generally accepted accounting principles and should not be considered as an
alternative to cash flow from operating activities or as a measure of
liquidity or an alternative to net income as indicators of the Company's
operating performance or any other measures of performance derived in
accordance with generally accepted accounting principles.
Liquidity and Capital Resources
The Company's cash and cash equivalents totaled $96.7 million at March 29,
2003, compared with $139.8 million at December 28, 2002. Cash flows
provided by operating activities were $14.0 million for the three months
ended March 29, 2003. Net cash used in investing activities totaled $56.4
million primarily due to the acquisition of the capital stock of Prescott's
Supermarkets, Inc. ("Prescott's") for $47.8 million. Prescott's owned and
operated seven licensed Pick `n Save stores located in the Wisconsin cities
of Fond du Lac (three stores), Oshkosh (two stores) and West Bend (two
stores). Net cash used in financing activities for the three months ended
March 29, 2003 totaled $0.7 million.
Capital spending totaled $9.0 million for the three months ended March 29,
2003. Capital expenditures consisted primarily of remodeling of new and
existing stores and maintenance of retail stores and the wholesale
distribution network. Total capital expenditures for fiscal 2003,
excluding any acquisitions, are estimated to be approximately $60.0
million.
From time to time, the Company provides long-term debt financing to certain
independent retailers it serves to aid them in store expansion or
improvements. Such loans are primarily secured by the retailer's
inventory, equipment, personal assets, and other forms of guarantees.
During first quarter 2003, the Company made loans to independent retailers
of $0.1 million.
Working capital amounted to $58.3 million at March 29, 2003, compared with
$94.6 million at December 28, 2002. The decrease was primarily related to
capital expenditures and acquisitions offset by profits.
As a result of the Transactions, the Company has significant debt service
obligations, including interest, in future years. On June 6, 2002, in
connection with the Transactions, the Company entered into a credit
agreement with various lenders, allowing it to borrow $250.0 million under
a term loan, and up $125.0 million under a revolving line of credit. There
are no outstanding borrowings under the revolving line of credit. The term
loan will be repayable in 28 consecutive quarterly installments, the first
24 of which will each be in the amount of $625,000 and the last four of
which will each be in the amount of $58.8 million. In addition, the
Company issued $300.0 million in aggregate principal amount of 8 7/8%
Senior Subordinated Notes due 2012 (the "Notes") of which $225.0 million
was issued as of the date of the Transactions and $75.0 million was issued
in December 2002.
The Company's senior credit facility contains various restrictive covenants
which: (i) prohibits it from prepaying other indebtedness, (ii) requires it
to maintain specified financial ratios, such as (a) a minimum fixed charge
coverage ratio, (b) a maximum ratio of senior debt to EBITDA, and (c) a
maximum ratio of total debt to EBITDA; and (iii) requires it to satisfy
financial condition tests including limitations on capital expenditures.
In addition, the senior credit facility prohibits the Company from
declaring or paying any dividends and prohibits it from making any payments
with respect to the Notes if the Company fails to perform its obligations
under or fails to meet the conditions of, the senior credit facility or if
payment creates a default under the senior credit facility.
The indenture governing the Notes, among other things, (i) restricts the
Company's ability and the ability of its subsidiaries to incur additional
indebtedness, issue shares of preferred stock, incur liens, pay dividends
or make certain other restricted payments and enter into certain
transactions with affiliates; (ii) prohibits certain restrictions on the
ability of certain of its subsidiaries to pay dividends or make certain
payments to it; and (iii) places restrictions on the Company's ability and
the ability of its subsidiaries to merge or consolidate with any other
person or sell, assign, transfer, lease, convey or otherwise dispose of all
or substantially all of its assets.
The Company's principal source of liquidity is cash flow generated from
operations and borrowings under its revolving credit facility. The
Company's principal use of cash is to meet debt service requirements,
finance its capital expenditures, make acquisitions and provide for working
capital. The Company expects that current excess cash, cash available from
operations, combined with funds available under its $125.0 million
revolving line of credit, will be sufficient to fund its operations, debt
service and capital expenditures for at least the next 12 months.
The Company's ability to make payments on and to refinance its debt, and to
fund planned capital expenditures will depend on its ability to generate
sufficient cash in the future. This, to some extent, is subject to general
economic, financial, competitive and other factors that are beyond the
Company's control. The Company believes that, based upon current levels of
operations, it will be able to meet its debt service obligations when due.
Significant assumptions underlie this belief, including, among other
things, that the Company will continue to be successful in implementing its
business strategy and that there will be no material adverse developments
in its business, liquidity or capital requirements. If the Company's
future cash flow from operations and other capital resources are
insufficient to pay its obligations as they mature or to fund its liquidity
needs, it may be forced to reduce or delay its business activities and
capital expenditures, sell assets, obtain additional debt or equity capital
or restructure or refinance all or a portion of its debt, on or before
maturity. There can be no assurance that the Company would be able to
accomplish any of these alternatives on a timely basis or on satisfactory
terms, if at all. In addition, the terms of the Company's existing and
future indebtedness may limit its ability to pursue any of these
alternatives.
Critical Accounting Policies and Estimates
The preparation of the Company's financial statements in conformity with
accounting principals generally accepted in the United States require the
Company to make estimates, assumptions and judgments that affect amounts of
assets and liabilities reported in the consolidated financial statements,
the disclosure of contingent assets and liabilities as of the date of the
financial statements and reported amounts of revenues and expenses during
the year. The Company believes its estimates and assumptions are
reasonable; however, future results could differ from those estimates under
different assumptions or conditions.
Critical accounting policies are policies that reflect material judgment
and uncertainty and may result in materially different results using
different assumptions or conditions. The Company identified the following
critical accounting policies and estimates; discounts and vendor
allowances, allowance for losses on receivables, closed facility lease
commitments, reserves for self-insurance and pension costs. For a detailed
discussion of accounting policies, refer to the notes to the consolidated
financial statements and managements discussion and analysis contained in
the Company's Annual Report on Form 10-K for the year ended December 28,
2002.
The following policy reflects certain updates relating to the Company's
adoption of
EITF 02-16.
Discounts and Vendor Allowances
Purchases of product at discounted pricing are recorded in inventory at the
discounted price until sold. Volume and other program allowances are
accrued as a receivable when it is reasonably assured they will be earned
and reduce the cost of the related inventory for product on hand or cost of
sales for product already sold. Vendor monies received for slotting are
initially deferred and recognized as a reduction to cost of sales after
completion of an estimated slotting cycle of approximately nine months.
Vendor allowances received to fund specific, identifiable, incremental
advertising and certain other expenses are recorded as a reduction of the
Company's related advertising or other expense. Any excess reimbursement
above the Company's cost reduces cost of sales.
Forward-Looking Statements
This Form 10-Q filing contains forward-looking statements within the
meaning of Section 27A of the Securities Exchange Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended. All
statements other than statements of historical facts included herein or
therein are forward-looking statements. In particular, without limitation,
terms such as "anticipate," "believe," "estimate," "expect," "goal,"
"indicate," "may be," "objective," "plan," "predict," "should," "will" or
similar words are intended to identify forward-looking statements. Forward-
looking statements are subject to certain risks, uncertainties and
assumptions which could cause actual results to differ materially from
those predicted. Important factors that could cause actual results to
differ materially from such expectations ("Risk Factors") are disclosed in
the Company's Annual Report on Form 10-K for the year ended December 28,
2002 filed on March 27, 2003 (SEC File No. 002-94984) under the caption
"Item 1. Business - Risk Factors." Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable,
it can give no assurance that such expectations will prove to have been correct.
All subsequent written or oral forward-looking statements attributable to the
Company or persons acting on behalf of the Company are expressly qualified in
their entirety by the Risk Factors. Additional information concerning factors
that could cause actual results to differ materially from those in the
forward-looking statements is contained from time to time in the Company's SEC
filings,including, but not limited to information under the caption "Risk
Factors" contained in the prospectus filed on February 6, 2003 forming a part
of the Company's Registration Statement on Form S-4 under the Securities Act
of 1933 (Registration No. 333-102779).
Item 3. Quantitative and Qualitative Disclosures about Market Risk
There have been no material changes in the Company's market risk since
December 28, 2002. See the discussion under Part II Item 7A in the
Company's Annual Report on Form 10-K for the year ended December 28, 2002.
Item 4. Controls and Procedures
(a) Evaluation of disclosure controls and procedures.
The Company maintains disclosure controls and procedures that are
designed to ensure that information required to be disclosed in
the Company's reports under the Securities Exchange Act of 1934,
as amended (the "Exchange Act") is recorded, processed,
summarized and reported within the time periods specified in the
SEC's rules and forms, and that such information is accumulated
and communicated to management, including the Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow
timely decisions regarding required disclosure. Management
necessarily applies its judgment in assessing costs and benefits
of such controls and procedures, which can provide only
reasonable assurance regarding management's control objectives.
Within 90 days prior to the filing date of this report (the
"Evaluation Date"), the Company carried out an evaluation, under
the supervision and with the participation of the Company's
management, including the Company's chief executive officer and
its chief financial officer, of the effectiveness of the design
and operation of the Company's disclosure controls and procedures
pursuant to Rule 15d-14 of the Securities and Exchange Act of
1934 (the "Exchange Act"). Based upon that evaluation, the chief
executive officer and chief financial officer concluded that as
of the Evaluation Date, the Company's disclosure controls and
procedures (as defined in Rule 15d-14 under the Exchange Act) are
effective to ensure that information required to be disclosed by
the Company in reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported
within the time periods specified in Securities and Exchange
Commission rules and forms.
(b) Changes in internal controls.
There were no significant changes in the Company's internal
controls or in other factors that could significantly affect
these controls subsequent to the date of their most recent
evaluation nor were there any significant deficiencies or
material weaknesses in the Company's internal controls.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is a party to routine litigation incidental to its
business. Management believes that none of this litigation is
likely to have a material adverse effect on the Company's
consolidated financial position and results of operations. There
have been no material changes to the information contained in Item
3. Legal Proceedings in the Company's Annual Report filed on Form
10-K for the year ended December 28, 2002.
Item 2. Changes in Securities and Use of Proceeds
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
The Exhibit Index contained in this report immediately following
the signature pages to this report is incorporated herein by this
reference.
(b) Reports on Form 8-K
None
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.
ROUNDY'S,INC.
--------------------------------------
(Registrant)
Date: May 9, 2003 /s/ROBERT A.MARIANO
------------ --------------------------------------
Robert A. Mariano, Chairman of the Board,
Chief Executive Officer and President
(Principal Executive Officer)
ROUNDY'S,INC.
--------------------------------------
(Registrant)
Date: May 9, 2003 /s/DARREN W. KARST
------------ --------------------------------------
Darren W. Karst, Executive Vice President
and Chief Financial Officer
(Principal Financial Officer)
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF
SARBANES-OXLEY ACT
I, Robert A. Mariano, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Roundy's, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under
which such statements were made, not misleading with respect to the period
covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses
in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: May 9, 2003
-------------
/s/ROBERT A. MARIANO
------------------------------------------
Robert A. Mariano, Chairman of the Board,
Chief Executive Officer and President
CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF
SARBANES-OXLEY ACT
I, Darren W. Karst, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Roundy's, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: May 9, 2003
------------
/s/DARREN W. KARST
-----------------------------------------
Darren W. Karst, Executive Vice President
and Chief Financial Officer
Roundy's, Inc.
Quarterly Report on Form 10-Q under the Securities Exchange Act of 1934
for the quarter ended March 29, 2003
EXHIBIT INDEX
The following exhibits to the Quarterly Report are filed herewith or, where
noted, are incorporated by reference herein:
Exhibit
No. Description
- ------ ---------------------------------------------------------
2.1 Stock Purchase Agreement by and among Roundy's, Inc. and
the Shareholders of Prescott's Supermarkets, Inc. dated
as of December 10, 2002 (1)
2.2 Asset Purchase Agreement dated October 18, 2002, by and
among B&H Gold Corporation, Gold's, Inc., Gold's Market,
Inc., Gold's of Mequon, LLC, Mega Marts, Inc. and
Roundy's, Inc. (2)
2.3 Share Exchange Agreement dated April 8, 2002 by and
between Roundy's Acquisition Corp. and Roundy's, Inc.(3)
2.4 Share Exchange Agreement dated May 18, 2001, by and
between Roundy's, Inc. and The Copps Corporation(4)
2.5 Asset Purchase Agreement dated February 21, 2003 among
Roundy's, Inc., The Copps Corporation, Kohl's Food
Stores, Inc. and The Great Atlantic & Pacific Tea
Company, Inc. (FILED HEREWITH) (5)
3.1 Roundy's, Inc. Amended and Restated Articles of
Incorporation(6)
3.2 Amended and Restated By-Laws of Roundy's, Inc.(7)
4.1 Indenture of Trust dated June 6, 2002 between Roundy's,
Inc. and BNY Midwest Trust Company, as Trustee(8)
4.2 Form of $225,000,000 Roundy's, Inc. 8 7/8% Senior
Subordinated Notes due 2012(9)
4.3 Form of $75,000,000 Roundy's, Inc. 8 7/8% Senior
Subordinated Notes due 2012(9)
4.4 Form of Guaranty issued by Cardinal Foods, Inc., Holt
Public Storage, Inc., Insurance Planners, Inc., I.T.A.,
Inc., Jondex Corp., Kee Trans, Inc., Mega Marts, Inc.,
Midland Grocery of Michigan, Inc., Pick 'n Save
Warehouse Foods, Inc., Ropak, Inc., Rindt Enterprises,
Inc., Scot Lad Foods, Inc., Scot Lad-Lima, Inc., Shop-
Rite, Inc., Spring Lake Merchandise, Inc., The Copps
Corporation, The Midland Grocery Company, Ultra Mart
Foods, Inc., and Village Market, LLC as Guarantors of
the Registrant's $225,000,000 Roundy's, Inc. 8 7/8%
Senior Subordinated Notes due 2012 and $75,000,000
Roundy's, Inc. 8 7/8% Senior Subordinated Notes due
2012(10)
10.1 A/B Exchange Registration Rights Agreement dated as of
June 6, 2002 by and among Roundy's, Inc. as Issuer, the
subsidiary guarantors of Roundy's, Inc. listed on
Schedule A thereto, and Bear, Stearns & Co. Inc., CIBC
World Markets Corp. as Initial Purchasers(11)
10.2 A/B Exchange Registration Rights Agreement dated as of
December 17, 2002 by and among Roundy's, Inc. as Issuer,
the subsidiary guarantors of Roundy's, Inc. listed on
Schedule A thereto, and Bear, Stearns & Co. Inc., CIBC
World Markets Corp. as Initial Purchasers(12)
10.3 $375,000,000 Credit Agreement among Roundy's Acquisition
Corp., Roundy's, Inc., as Borrower, The Several Lenders
from Time to Time Parties Hereto, Bear Stearns Corporate
Lending Inc., as Administrative Agent, Canadian Imperial
Bank of Commerce, as Syndication Agent Bank One,
Wisconsin, Cooperatieve Centrale Raiffeisen-
Boerenleenbank B.A., "Rabobank Nederland", New York
Branch, LaSalle Bank National Association, Associated
Bank, N.A., Harris Trust and Savings Bank, M&I Marshall
& Ilsley Bank, U.S. Bank, National Association, as
Documentation Agents Dated as of June 6, 2002(13)(14)
10.4 First Amendment to the Credit Agreement, dated as of
December 10, 2002, among Roundy's Acquisition Corp.,
Roundy's Inc., as Borrower, the several banks, financial
institutions and other entities from time to time
parties thereto, Bear Stearns & Co. Inc., as sole lead
arranger and sole bookrunner, Bear Stearns Corporate
Lending Inc., as administrative agent, Canadian Imperial
Bank of Commerce, as syndication agent, and the
institutions listed in the Credit Agreement as
documentation agents (15)
10.5 Guarantee and Collateral Agreement made by Roundy's
Acquisition Corp., Roundy's, Inc. and certain of its
Subsidiaries in favor of Bear Stearns Corporate Lending
Inc., as Administrative Agent Dated as of June 6,
2002(16)
10.6 Consulting Agreement dated July 1, 2002 between the
Registrant and Gerald F. Lestina(17)
10.7 Roundy's, Inc. Supplemental Employee Retirement Plan for
certain executive officers including Mr. Lestina(18)
10.8 Board of Directors Resolution dated March 19, 2002
adopting Amendment to Supplemental Employee Retirement
Plan(19)
10.9 Excerpts from Board of Directors Consent Resolution
adopting Amendment to Supplemental Employee Retirement
Plan effective June 7, 2002(20)
10.10 Form of Deferred Compensation Agreement between the
Registrant and certain executive officers including
Messrs. Schmitt and Kitz(21)
10.11 Amendment dated March 31, 1998 to Form of Deferred
Compensation Agreement between the Registrant and
certain executive officers including Messrs. Schmitt and
Kitz(22)
10.12 Second Amendment dated June 3, 1998 to Form of Deferred
Compensation Agreement for certain executive officers
including Messrs. Kitz and Schmitt(23)
10.13 Directors and Officers Liability and Corporation
Reimbursement Policy issued by American Casualty Company
of Reading, Pennsylvania (CNA Insurance Companies) as of
June 13, 1986(24)
10.14 Declarations page for renewal through November 1, 2003
of Directors and Officers Liability and Corporation
Reimbursement Policy(34)
10.15 Employment Agreement dated June 6, 2002 between
Registrant and Robert F. Mariano(25)
10.16 Employment Agreement dated June 6, 2002 between
Registrant and Darren W. Karst(26)
10.17 Employment Contract between the Registrant and Gary L.
Fryda dated March 31, 2000(27)
10.18 Excerpts from Roundy's, Inc. Board of Directors
resolution adopted March 19, 2002 relating to group term
carve-out, executive extension on COBRA continuation
rights and professional outplacement services for
Company Officers, including Messrs. Lestina, Fryda,
Schmitt and Kitz(28)
10.19 Confidentiality and Noncompete Agreement dated June 6,
2002 between the Registrant and Gerald F. Lestina(29)
10.20 Roundy's, Inc. Deferred Compensation Plan Amended and
Restated August 13, 2002(30)
10.21 Employment Agreement dated December 27, 2002 between
Registrant and Donald S. Rosanova (31)
10.22 Investor Rights Agreement dated June 6, 2002 by and
among Roundy's Acquisition Corp., Willis Stein &
Partners III, L.P., Willis Stein & Partners III-C, L.P.,
Willis Stein & Partners Dutch III-A, L.P., and Willis
Stein & Partners Dutch III-B, L.P., the investors listed
on the Schedule of Coinvestors, and certain executive
employees of Roundy's, Inc. (32)
10.23 First Amendment dated October 28, 2002 to Investor
Rights Agreement dated June 6, 2002, including form of
Transfer Notice and Joinder Agreement (33)
99.1 Certification of Principal Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (FILED
HEREWITH)
99.2 Certification of Principal Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (FILED
HEREWITH)
- ------
(1) Incorporated by reference to Exhibit 2.1 to Registrant's Registration
Statement on Form S-4 filed on January 28, 2003 (Commission File No. 333-
102779)
(2) Incorporated by reference to Exhibit 2.2 to Registrant's Registration
Statement on Form S-4 filed on January 28, 2003 (Commission File No. 333-
102779)
(3) Incorporated by reference to Exhibit 2.1 to Registrant's Registration
Statement on Form S-4 filed on August 2, 2002 (Commission File No. 333-
97623)
(4) Incorporated by reference to Exhibit 2.4 to Registrant's Current
Report on Form 8-K filed with the Commission on June 1, 2001 (Commission
File No. 002-94984)
(5) Pursuant to Regulation S-K, Item 601 (b)(2), included as part of
Exhibit 2.8 is a list of omitted schedules and exhibits together with an
agreement to furnish copies of any omitted schedule or exhibit to the
Commission upon request.
(6) Incorporated by reference to Exhibit 3.1 to Registrant's Registration
Statement on Form S-4 filed with the Commission on August 2, 2002 (File No.
333-97623)
(7) Incorporated by reference to Exhibit 3.2 to Registrant's Registration
Statement on Form S-4 filed with the Commission on August 2, 2002 (File No.
333-97623)
(8) Incorporated by reference to Exhibit 4.1 to Registrant's Registration
Statement on Form S-4 filed with the Commission on August 2, 2002 (File No.
333-97623)
(9) Incorporated by reference to Exhibits A-1 and A-2 to the Indenture of
Trust, Exhibit 4.1 to Registrant's Registration Statement on Form S-4 filed
with the Commission on August 2, 2002 (File No. 333-97623)
(10) Incorporated by reference to Exhibit E to the Indenture of Trust,
Exhibit 4.1 to Registrant's Registration Statement on Form S-4 filed with
the Commission on August 2, 2002 (File No. 333-97623)
(11) Incorporated by reference to Exhibit 10.1 to Registrant's
Registration Statement on Form S-4 filed with the Commission on August 2,
2002 (File No. 333-97623)
(12) Incorporated by reference to Exhibit 10.1 to Registrant's
Registration Statement on Form S-4 filed with the Commission on January 28,
2003 (Commission File No. 333-102779)
(13) Incorporated by reference to Exhibit 10.2 to Registrant's
Registration Statement on Form S-4 filed with the Commission on August 2,
2002 (File No. 333-97623)
(14) The Exhibits listed on page v of the Credit Agreement, Exhibit 10.2,
consist of the form of Guarantee and Collateral Agreement and the exhibits
thereto which are included as part of Exhibit 10.5.
(15) Incorporated by reference to Exhibit 10.3 to Registrant's
Registration Statement on Form S-4 filed with the Commission on January 28,
2003 (File No. 333-102779)
(16) Incorporated by reference to Exhibit 10.3 to Registrant's
Registration Statement on Form S-4 filed with the Commission on August 2,
2002 (File No. 333-97623)
(17) Incorporated by reference to Exhibit 10.6 to Registrant's
Registration Statement on Form S-4 filed with the Commission on August 2,
2002 (File No. 333-97623)
(18) Incorporated by reference to Exhibit 10.9 to Registrant's Form 10-Q
for the quarterly period ended July 3, 1999, filed with the Commission on
August 9, 1999 (Commission File No. 002-94984)
(19) Incorporated by reference to Exhibit 10.8 to Registrant's
Registration Statement on Form S-4 filed with the Commission on August 2,
2002 (File No. 333-97623)
(20) Incorporated by reference to Exhibit 10.9 to Registrant's
Registration Statement on Form S-4 filed with the Commission on August 2,
2002 (File No. 333-97623)
(21) Incorporated by reference to Exhibit 10.1 of Registrant's
Registration Statement on Form S-2 (File No. 33-57505) dated April 24, 1997
(22) Incorporated by reference to Exhibit 10.1(a) to Registrant's
Registration Statement on Form S-2 filed with the Commission on April 28,
1998 (Commission File No. 33-57505)
(23) Incorporated by reference to Exhibit 10.9 to Registrant's Form 10-Q
for the quarterly period ended October 3, 1998, filed with the Commission
on November 10, 1998 (Commission File No. 002-94984)
(24) Incorporated by reference to Exhibit 10.3 to Registrant's Annual
Report on Form 10-K for the fiscal year ended January 3, 1987, filed with
the Commission on April 3, 1987 (Commission File Nos. 002-66296 and 002-
94984)
(25) Incorporated by reference to Exhibit 10.18 to Registrant's
Registration Statement on Form S-4 filed with the Commission on August 2,
2002 (File No. 333-97623)
(26) Incorporated by reference to Exhibit 10.19 to Registrant's
Registration Statement on Form S-4 filed with the Commission on August 2,
2002 (File No. 333-97623)
(27) Incorporated by reference to Exhibit 10.11 to Registrant's Form 8-K
dated April 14, 2000, filed with the Commission on April 14, 2000
(Commission File No. 002-94984)
(28) Incorporated by reference to Exhibit 10.23 to Registrant's
Registration Statement on Form S-4 filed with the Commission on August 2,
2002 (File No. 333-97623)
(29) Incorporated by reference to Exhibit 10.25 to Registrant's
Registration Statement on Form S-4 filed with the Commission on August 2,
2002 (File No. 333-97623)
(30) Incorporated by reference to Exhibit 10.27 to Amendment No. 1 to
Registrant's Registration Statement on Form S-4 filed with the Commission
on October 18, 2002 (File No. 333-97623)
(31) Incorporated by reference to Exhibit 10.30 to Registrant's Annual
Report on Form 10-K for the fiscal year ended December 28, 2002 filed with the
Commission on March 27, 2003 (Commission File No. 002-94984)
(32) Incorporated by reference to Exhibit 10.31 to Registrant's Annual
Report on Form 10-K for the fiscal year ended December 28, 2002 filed with the
Commission on March 27, 2003 (Commission File No. 002-94984)
(33) Incorporated by reference to Exhibit 10.32 to Registrant's Annual
Report on Form 10-K for the fiscal year ended December 28, 2002 filed with
the Commission on March 27, 2003 (Commission File No. 002-94984)
(34) Incorporated by reference to Exhibit 10.16 to Registrant's Annual
Report on Form 10-K for the fiscal year ended December 28, 2002 filed with
the Commission on March 27, 2003 (Commission File No. 002-94984)
Exhibit 99.1
CERTIFICATION OF PERIODIC FINANCIAL REPORT
PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Robert A. Mariano, Chief Executive Officer of Roundy's, Inc. (the
"Company"), certify pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, 18 U.S.C. Section 1350, that, to my knowledge:
(1) The Quarterly Report on Form 10-Q of the Company for the
quarterly period ended March 29, 2003 (the "Report") fully
complies with the requirements section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of
operations of the Company.
Dated: May 9, 2003
------------
/s/ROBERT A. MARIANO
--------------------------
Chief Executive Officer
Principal Executive Officer
A signed original of this written statement required by Section 906 of the
Sarbanes-Oxley Act of 2002 has been provided to Roundy's, Inc. and will be
retained by Roundy's, Inc. and furnished to the Securities and Exchange
Commission or its staff upon request.
Exhibit 99.2
CERTIFICATION OF PERIODIC FINANCIAL REPORT
PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Darren W. Karst, Chief Financial Officer of Roundy's, Inc. (the
"Company"), certify pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, 18 U.S.C. Section 1350, that, to my knowledge:
(1) The Quarterly Report on Form 10-Q of the Company for the
quarterly period ended March 29, 2003 (the "Report") fully
complies with the requirements section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of
operations of the Company.
Dated: May 9, 2003
-----------
/s/DARREN W. KARST
---------------------------
Executive Vice President
and Chief Financial Officer
Principal Financial Officer
A signed original of this written statement required by Section 906 of the
Sarbanes-Oxley Act of 2002 has been provided to Roundy's, Inc. and will be
retained by Roundy's, Inc. and furnished to the Securities and Exchange
Commission or its staff upon request.
EXHIBIT 2.5
ASSET PURCHASE AGREEMENT
By and Among
The Great Atlantic & Pacific Tea Company, Inc.,
Kohl's Food Stores, Inc.,
Roundy's, Inc.
and
The Copps Corporation
TABLE OF CONTENTS
Page
1. Sale and Delivery of the Assets 1
1.1. Delivery of the Assets 1
1.2. Further Assurances 4
1.3. Purchase Price 4
1.4. Assumption of Liabilities; Etc. 5
1.5. Allocation of Purchase Price 6
1.6. The Closing 6
1.7. Apportionment and Adjustments 7
1.8. Delayed Closing 8
1.9. Transfer of Pharmacy Assets 9
2. Representations of the Seller and A&P 9
2.1. Organization 9
2.2. Authorization 10
2.3. Ownership of the Assets 10
2.4. Fixed Assets 11
2.5. Stores and Leases 11
2.6. Contracts and Commitments 12
2.7. Permits and Compliance with Laws 13
2.8. Claims, Litigation and Disputes 14
2.9. Financial Information 15
3. Representations of the Buyer and the Parent 15
3.1. Organization 15
3.2. Authorization 15
3.3. Regulatory Approvals 16
3.4. Financing 16
3.5. Limitation of Warranty 16
4. Information; Public Announcements 17
4.1. Confidentiality 17
4.2. Public Announcements 17
5. Covenants of the Seller and A&P 18
5.1. Conduct of Business 18
5.2. Absence of Material Changes 18
5.3. Satisfaction of Conditions 19
5.4. Employees 19
5.5. Access 19
5.6. No Post-Closing Inventory 19
5.7. Additional Financial Records 19
5.8. Pharmacy Customer Lists 19
5.9. Fixed Assets List 20
5.10. Agreements and Estoppels 20
6. Covenants of the Buyer and the Parent 20
6.1. Satisfaction of Conditions 20
6.2. Preservation of Books and Records; Post-
Closing Access 20
6.3. Insurance 21
6.4. Permits 21
6.5. Accounts Receivable 21
7. Conditions to Obligations of the Buyer 21
7.1. Compliance with Obligations 21
7.2. Corporate Proceedings 22
7.3. Consents of Lenders, Lessors and Other
Third Parties 22
7.4. Adverse Proceedings 22
7.5. Seller's Representations and Warranties 22
7.6. Closing Deliveries 22
8. Conditions to Obligations of the Seller 23
8.1. Compliance with Obligations 23
8.2. Corporate Proceedings 23
8.3. Consents of Third Parties. 23
8.4. Adverse Proceedings 23
8.5. Buyer's Representations and Warranties 23
8.6. Closing Deliveries 23
9. Indemnification 24
9.1. By the Buyer, the Parent, the Seller and
A&P 24
9.2A By the Seller and A&P 24
9.2B By the Buyer and the Parent 25
9.3. Procedures for Indemnification 25
9.4. Payment of Indemnification Obligation 27
9.5. Survival; Claims for Indemnification 27
9.6. Damages and Related Matters 27
10. Casualty 28
10.1. Damage 28
10.2. Condemnation 29
11. Post-Closing Agreements 29
11.1. Non-Competition Agreement 29
11.2. Sharing of Data 30
11.3. Cooperation in Litigation 30
11.4. Gift Certificates 31
12. Termination of Agreement 31
12.1. Termination by Lapse of Time 31
12.2. Termination by Agreement of the Parties 31
12.3. Termination by Reason of Breach 31
13. Certain Tax Matters. 32
14. Brokers 32
15. Notices 32
16. Consent to Jurisdiction 33
17. Successors and Assigns 33
18. Entire Agreement; Amendments; Attachments; Waivers 33
19. Expenses 34
20. No Third Party Beneficiaries 34
21. Governing Law 34
22. Section Headings 34
23. Severability 35
24. Counterparts 35
25. Terms Defined in This Agreement. 35
Exhibits
A - Form of Assignment and Assumption Agreement
B - Form of Guarantee
Schedules
1.1(b)(xvi) - Excluded Assets
1.5 - Allocation of Purchase Price
1.6(c) - Delayed Pharmacy Closing
1.7(b) - Inventory Procedures and Valuation
2.2 - Seller Consents, Waivers and Approvals
2.3 - Encumbrances
2.5 - Stores and Leases
2.6 - Contracts
2.7(a) - Permits
2.8 - Claims, Litigation, Disputes
3.2 - Buyer Consents, Waivers and Approvals
3.3 - Regulatory Approvals
5.2 - Material Changes
7.3 - Consents of Lenders, Lessors and Other Third
Parties
14 - Brokers
ASSET PURCHASE AGREEMENT
AGREEMENT made as of February 21, 2003 among Roundy's, Inc. (the
"Parent"), a Wisconsin corporation with its principal office at
23000 Roundy Drive, Pewaukee, Wisconsin 53072, The Copps
Corporation (the "Buyer"), a Wisconsin corporation and a wholly
owned subsidiary of the Parent, Kohl's Food Stores, Inc. (the
"Seller"), a Wisconsin corporation and a wholly owned subsidiary
of A&P (as defined herein), and The Great Atlantic & Pacific Tea
Company, Inc. ("A&P"), a Maryland corporation with its principal
office at 2 Paragon Drive, Montvale, New Jersey 07645.
Preliminary Statement
The Parent and the Buyer desire to purchase, and A&P and the
Seller desire to sell, the Assets (as defined herein) of the
Seller that relate to the Stores (as defined herein) identified on
Schedule 2.5 for the consideration set forth below and the
assumption of certain of the Seller's liabilities set forth below,
subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises
hereinafter set forth and other good and valuable consideration,
the receipt of which is hereby acknowledged, the parties hereby
agree as follows:
1. Sale and Delivery of the Assets
1.1. Delivery of the Assets.
(a) Subject to and upon the terms and conditions of this
Agreement, at the closing of the transactions contemplated by this
Agreement (the "Closing"), the Seller shall sell, transfer,
convey, assign and deliver to the Buyer, and the Buyer shall
purchase and assume from the Seller, the following properties,
assets and other claims, rights, obligations and interests to the
extent such properties, assets, claims, rights, obligations and
interests are primarily used or held for use by the Stores (but
not including the Excluded Assets, as defined below):
(i) all Store inventories held for future sale in the Stores
at the conclusion of the Inventory Count (as defined below), but
excluding the Excluded Inventory (as defined below), as adjusted
pursuant to Section 1.7(b) (collectively, the "Inventory");
(ii) all office supplies, maintenance supplies, packaging
materials and similar items of the Seller held in and designated
for use solely in the Stores (collectively, the "Supplies");
(iii) all rights and obligations of the Seller under the
license agreements between the Seller and certain banks operating
at the Stores set forth on Schedule 2.6 attached hereto and Leases
set forth on Schedule 2.5 attached hereto (collectively, the
"Contract Rights");
(iv) all rights, if any, of the Seller under express or
implied warranties from the suppliers or other third party service
or product providers to the Stores to the extent relating or
applicable to the items described in Section 1.1(a)(v);
(v) all of the machinery, equipment, furniture, fixtures,
office equipment, non-proprietary software, owned real property
improvements, leasehold improvements, construction in progress and
all other store assets, real and personal, located at and related
to the Stores and owned by the Seller on the Closing Date
(collectively, the "Fixed Assets"), but excluding any such assets
described in Section 1.1(b)(ii);
(vi) all customer lists, prescription records and related
records of the pharmacies located in the Stores; and
(vii) Seller's complete files relating to the Leases.
(b) Notwithstanding the provisions of Section 1.1(a), the
properties, assets and business to be transferred to the Buyer
under this Agreement shall not include:
(i) the Seller's right to use the name "Kohl's" or any
derivation thereof or other right derived from the Trademark
License Agreement, made as of the 30th day of September, 1983,
between Brown & Williamson Tobacco Corporation and the Seller (the
"License Agreement"), the Seller's right to use any registered or
unregistered trademark or trade name of A&P or any subsidiary
thereof, or any other general intangibles owned by the Seller used
in the operation of the Stores (collectively, the "Intangible
Property");
(ii) any Fixed Asset, Inventory or other asset that contains
the name "Kohl's" or any derivation thereof or any registered or
unregistered trademark or trade name of A&P or any subsidiary
thereof unless, with respect to such assets other than Inventory,
such name or trademark can be removed without material damage to
the asset;
(iii) inventory consisting of (a) private or control
labeled products, (b) perishable items, including meat, seafood,
deli items, floral items, produce, bakery and dairy merchandise,
but excluding frozen merchandise not otherwise described in this
clause (iii), (c) unmatched SKU inventory as between the Seller
and the Parent, (d) all inventory not permitted to be transferred
pursuant to applicable law, including by virtue of the Buyer's
lack of license, permit, certificate or otherwise, (e) items
mutually determined to be unsaleable, including items that are
damaged, spoiled, outdated (any merchandise with less than forty-
five (45) days remaining shelf life or which has a manufacturer's
date by which it must be sold that is less than forty-five (45)
days after the Inventory Date being deemed "outdated" for this
purpose), obsolete or otherwise unsaleable at normal retail price
in the ordinary course of business and (f) out-of-season seasonal
merchandise (the "Excluded Inventory");
(iv) amounts owed to the Seller or A&P including, without
limitation, rebates, refunds or any claims or causes of action by
the Seller or A&P against third parties relating to the Assets or
the operation of the business of the Stores, accounts receivable
(including, but not limited, to delinquent rent payments, tenant
reimbursements, refunds of insurance premiums or security deposits
with utilities accruing to, or held for, the benefit of the Seller
or A&P, and, except as may be provided to the contrary in this
Agreement, insurance proceeds, condemnation awards or other
compensation payable upon any sale, destruction, damage, taking or
other disposition of any of the Assets, or any of the Leases or
other Contract Rights) (the "Accounts Receivable"), in any such
case arising prior to the Closing;
(v) any capital stock of the Seller, its subsidiaries or
their respective corporate minute books;
(vi) any cash, investments or bank accounts of the Seller,
including, without limitation, any cash at any Store on the
Closing Date;
(vii) any of the Seller's insurance policies and any and
all claims or rights thereunder;
(viii) any assets used principally by the Seller to
provide corporate services to the Stores in the ordinary course of
business;
(ix) except as provided in Section 1.1(a)(vi) and (vii) all
employee records, all customer lists, all customer records, and
all books, records and accounts, manuals, studies, reports or
summaries to the extent they relate solely to and arise out of the
operation of the Stores;
(x) any assets of the Seller, A&P or any subsidiary of A&P
which are not solely used or held for use in the Stores and any
assets or Inventory ordered and paid for in the ordinary course of
business of the Stores, delivery which is not received on or prior
to the Closing Date or not physically located at the Stores as of
the Closing Date;
(xi) any and all automobiles, trucks, vans and other
vehicles;
(xii) all rights to refunds of all federal, state and
local capital gains, gross receipts, franchise, profits, property,
transfer, sales, use, mercantile, value added, payroll, capital
stock, withholding or other taxes, including estimated taxes
relating thereto and any interest and penalties imposed thereon
(collectively, the "Taxes") relating to the Assets or the Stores,
to the extent that such Taxes relate to a tax period or portion
thereof ending on or prior to the Closing Date (based on an
interim closing of the books as of the end of the Closing Date,
except for property or other ad valorem Taxes, which shall be
prorated on a daily basis);
(xiii) pharmacy related computer equipment and software,
thermal printers, copiers, in-store processing units, and GAPCOM
systems owned by third parties who are not affiliated with the
Seller or A&P;
(xiv) all non-proprietary software that is licensed
exclusively to A&P;
(xv) any rights Seller may have against third parties under
contracts to which Seller is a party, except for the Contract
Rights;
(xvi) the assets of the Seller listed on Schedule
1.1(b)(xvi); and
(xvii) any other assets of the Seller not specifically
referred to in Section 1.1(a) (together with the assets described
in clauses 1.1(b)(i) through 1.1(b)(xvi), the "Excluded Assets").
(c) The Inventory, Supplies, Contract Rights, Fixed Assets, and
other properties, assets and business of the Seller described in
Section 1.1, other than the Excluded Assets, shall be referred to
collectively as the "Assets."
1.2. Further Assurances. At any time and from time to time after the Closing,
at the reasonable request of any party and without further consideration,
each party promptly shall execute and deliver such instruments of
sale, transfer, conveyance, assignment,assumption and confirmation,
and take such commercially reasonable other action, as may
be reasonably requested to confirm the transfer of the Assets to the Buyer.
1.3. Purchase Price.
(a) The purchase price for all of the Assets to be sold by the
Seller and the Assumed Liabilities to be assumed by the Buyer
shall be $19,000,000 (the "Base Purchase Price"), plus or minus
the amount of the Rent and Tax Adjustment to which the Seller or
the Buyer is entitled under Section 1.7(a), plus the amount of the
Inventory Valuation pursuant to Section 1.7(b). The Base Purchase
Price, plus or minus the amount of the Rent and Tax Adjustment to
which the Seller or the Buyer is entitled under Section 1.7(a),
plus the amount of Inventory Valuation pursuant to Section 1.7(b)
are collectively referred to herein as the "Cash Consideration."
(b) At the Closing, the Buyer shall pay or direct to be paid to
the Seller via wire transfer of immediately available funds, the
amount of the Base Purchase Price, plus the Rent and Tax
Adjustment, plus the amount of the Inventory Valuation to such
account as shall be designated in writing by the Seller no later
than one (1) day prior to the Closing.
1.4. Assumption of Liabilities; Etc.
(a) At the Closing, the Buyer shall assume and execute and
deliver to the Seller an Instrument of Assumption of Liabilities
guaranteed by the Parent (the "Instrument of Assumption"), in a
form satisfactory to the Seller, pursuant to which it shall assume
and agree to timely perform, pay and discharge the following
liabilities, obligations and commitments of the Seller, to the
extent such liabilities, obligations and commitments relate to the
Assets, and not to the Excluded Assets (the "Assumed
Liabilities"):
(i) all liabilities, obligations and commitments, fixed or
contingent, of the Seller accruing or arising after the Closing
under the Assumed Contracts, which obligations become due and
payable or are otherwise required to be performed after the
Closing Date; provided, however, that the Assumed Liabilities
shall not include any liabilities and obligations of the Seller
under the Assumed Contracts that are attributable to any time
period prior to the Closing Date or an event that occurred prior
to the Closing, or that are attributable to or arise as a result
of any breach, violation, or non-performance of any Assumed
Contract by the Seller or A&P on or prior to the Closing Date,
including, without limitation, any breach or violation arising as
a result of the transactions contemplated by this Agreement;
(ii) obligations of Seller arising in the ordinary course of
business and consistent with customary industry practices,
relating to customer returns and allowances and similar customer
accommodations, and obligations relating to gift certificates
issued by Seller prior to the Closing Date as provided in Section
11.4 below; and
(iii) all liabilities arising out of the ownership, use
or possession of the Assets or the conduct or operations of the
Assets on or after the Closing Date.
(b) In addition, as to each of the Contract Rights, subject to
obtaining the required consents, waivers and approvals set forth
on Schedule 2.2 with respect to each such Contract Right, the
Seller, the Buyer and the Parent shall execute and deliver to each
other an Assignment and Assumption (each an "Assignment") in the
form of Exhibit A attached hereto, as modified to include such
terms, provisions and conditions which are required pursuant to
the applicable Contract Right, and the Buyer and the Parent shall
cause an executed copy of each Assignment to be sent to the
respective landlord or other applicable party under the subject
Contract Right as soon as practicable after the Closing.
(c) On the Closing Date, the Parent shall acknowledge and
agree to unconditionally guarantee all of the liabilities,
obligations, commitments, fixed or contingent assumed by the Buyer
pursuant to this Agreement (the "Guarantee") in the form of
Exhibit B attached hereto. At anytime thereafter requested by a
third party, the Parent shall acknowledge such obligation.
(d) Except for the Assumed Liabilities expressly assumed by Buyer
and/or Parent under this Agreement, neither Buyer nor Parent shall
in any manner assume or be liable or responsible for any of the
liabilities, debts, or obligations of Seller or A&P, of any nature
whatsoever, including, but without limiting the generality of the
foregoing, the following:
(i) Past, current and future liabilities and obligations of
Seller or A&P for federal, state or local taxes of any nature
(except for taxes to be pro-rated or apportioned between the Buyer
and the Seller as provided in Sections 1.7(a) and 13(a) hereof);
or
(ii) Liabilities or obligations of Seller or A&P of any
nature to their employees or former employees, including, without
limitation, liabilities or obligations for wages, withholding and
employment taxes, vacation, sick pay, bonuses, severance pay,
retirement and fringe benefits, and any obligations or liabilities
under the "WARN" Act or equivalent state statutory or regulatory
requirements.
1.5. Allocation of Purchase Price. The aggregate amount of the Base
Purchase Price shall be allocated among the Assets and the
Assumed Liabilities as set forth on Schedule 1.5 attached hereto.
1.6. The Closing. (a) The Closing shall take place on or before
April 30, 2003, at the offices of Whyte Hirschboeck Dudek S.C., 111
East Wisconsin Avenue, Suite 2100, Milwaukee, WI, at such time and date
as may be mutually agreed upon by the parties hereto. The transfer of
the Assets by the Seller to the Buyer and the assumption of the Assumed
Liabilities by the Buyer shall be deemed to occur at 12:00 a.m.,
Madison, Wisconsin time, on the date of the Closing (the "Closing
Date").
(b) To the extent that the Seller is unable to transfer to Buyer
the liquor which is Inventory at any Store (the "Liquor
Inventory"), the Seller and Buyer shall cause the Closing to be
consummated with respect to such Store notwithstanding the
inability to transfer such Liquor Inventory; provided, however,
the price to be paid at such Closing shall be reduced by the
portion of the Inventory Valuation (as defined in Schedule 1.7(b))
attributable to such Liquor Inventory (the "Liquor Valuation") and
the Liquor Inventory shall not be transferred to the Buyer. In
accordance with applicable law, Buyer shall store the Liquor
Inventory on Seller's behalf for a nominal fee to be mutually
agreed upon from the Closing until such date on which the Seller
is permitted, in accordance with applicable law, to transfer the
Liquor Inventory to Buyer (the "Delayed Liquor Closing"). Buyer
and Seller shall use their reasonable best efforts to cause the
Delayed Liquor Closing to occur as soon as practicable after
Closing. At the Delayed Liquor Closing, Seller shall transfer the
Liquor Inventory to Buyer and Buyer shall pay Seller the amount of
the Liquor Valuation via wire transfer of immediately available
funds. In the event the arrangement to be established pursuant to
this Section 1.6(b) is not consistent with applicable law, the
parties shall negotiate an arrangement which results in the
parties receiving the benefits of the arrangements contemplated by
this Section 1.6(b).
(c) To the extent the Seller is unable to transfer to Buyer or,
if applicable, a Pharmacy Assignee the pharmaceutical business
(the "Pharmacy Business") at any Store because of the failure to
such person to have obtained the requisite federal, state and
local licenses, permits and approvals notwithstanding such
person's diligent pursuit thereof, Seller and Buyer shall cause
the Closing to be consummated with respect to such Store
notwithstanding the inability to transfer the pharmaceutical
business; provided, however, the price to be paid at such Closing
shall not include the value of the Inventory related to the
applicable Pharmacy Business as calculated pursuant to the
Inventory Valuation during the Inventory Count and such pharmacy
Inventory and the Pharmacy Business at such Store shall not be
transferred to Buyer. Until the date on which Seller is
permitted, in accordance with applicable law, to transfer the
Pharmacy Business at such Store to Buyer (the "Delayed Pharmacy
Closing"),but in no event longer than 120 days from the Closing
Date, Seller will continue to operate the Pharmacy Business at
such Store on the terms and conditions set forth on Schedule
1.6(c) attached hereto. Buyer and Seller shall use their
reasonable best efforts to cause the Delayed Pharmacy Closing to
occur as soon as practicable after the Closing. Immediately prior
to a Delayed Pharmacy Closing Buyer and Seller shall conduct an
inventory (a "Pharmacy Inventory") and an inventory valuation (a
"Pharmacy Inventory Valuation") with respect to the applicable
Pharmacy Business on a basis consistent with the Inventory Count
and the Inventory Valuation. At each Delayed Pharmacy Closing,
Seller shall transfer the applicable Pharmacy Business to Buyer
and Buyer shall pay Seller the amount of the applicable Pharmacy
Inventory Valuation.
1.7. Apportionment and Adjustments. (a) (i) The Seller shall be
entitled to a proportionate adjustment in respect of all prepaid
expenses, and the Buyer shall be entitled to a proportionate
adjustment in respect of all expenses paid or payable in arrears
for periods prior to the Closing, including, in each case, without
limitation, all fees, taxes and rents (including any customary
charges to the extent provided for in any given Lease such as, but
without limitation, percentage rent, utilities, operating expenses
and common area maintenance charges, however denominated) and real
and personal property taxes (the "Rent and Tax Adjustment"), based
on how billed, as of the Closing Date, which amount shall be added
to or subtracted from, as the case may be, the cash portion of the
purchase price deliverable at the Closing. With respect to time
periods between December 31, 2002 and the Closing Date, unless the
actual amounts are known, such prorations will be determined on
the basis of the most recent estimates received by the Seller from
the relevant counterparty or governmental entity, if any, and if
not, on the basis of actual amounts incurred or assessed for the
year 2002, and will not be adjusted after the Closing Date to
reflect actual amounts incurred or assessed for periods after
December 31, 2002. The calculation of the Rent and Tax
Adjustment, shall be agreed upon by the Buyer and Seller prior to
Closing and delivered at Closing.
(ii) At all times after the Closing Date, the Buyer shall perform
all obligations contained in the Leases with respect to the
payment of rent or other charges, regardless of whether such rent
or other charges are ultimately allocable to the Seller pursuant
to this Section 1.7(a).
(b) (i) A physical count of the Inventory (the "Inventory Count")
shall be made by the Buyer, the Seller and an independent
inventory service mutually agreed to by the parties (the
"Inventory Service"). The Inventory Service shall make the
Inventory Count on the day prior to the Closing Date, or such
other time period before Closing mutually agreed to by the parties
(the "Inventory Date"), in accordance with mutually agreed upon
instructions consistent with the inventory procedures set forth in
Schedule 1.7(b) attached hereto. Both parties shall be entitled
to have representatives present during the Inventory Count. These
representatives will attempt, in good faith, to resolve any
disputes with respect to quantity or pricing which may arise
during the Inventory Count. Excluded Inventory shall be
identified prior to the Inventory Count and will be removed by the
Seller at the Seller's cost prior to the Inventory Date to the
extent practicable. The fees, costs and expenses related to the
Inventory Count shall be shared equally by the Buyer and the
Seller. Departments not inventoried by the Inventory Service
shall be inventoried by appropriate personnel at mutually agreed
upon times and in the presence of representatives of the Buyer and
the Seller.
(ii) The Inventory Service shall provide each of the Buyer
and the Seller inventory extension documentation at the conclusion
of the Inventory Count, which documentation shall set forth the
value of the Inventory according to the methodology of valuation
set forth on Schedule 1.7(b) attached hereto (the "Inventory
Valuation"). The Inventory Valuation shall be paid by the Buyer
to the Seller in cash via wire of immediately available funds to
an account designated by the Seller at Closing.
1.8. Delayed Closing. Notwithstanding anything to the contrary
contained herein, in the event that as of the Closing Date set
forth in Section 1.6(a) with respect to any one or more Stores
(each such Store a "Delayed Store") there shall have been a
failure of the conditions set forth in Section 7.3 or Section 7.6
with respect to such Store or Stores, which failure has not been
waived by the Buyer; then the Closing shall occur as provided in
Section 1.6(a) (the "Initial Closing") for all Stores other than
Delayed Stores and the payment made by Buyer at the Initial
Closing shall be reduced by the portion of the Base Purchase
Price, as set forth on Schedule 1.5, allocable to such Delayed
Store(s). If the failure of the condition set forth in Section
7.3 or Section 7.6 with respect to a Delayed Store is cured within
sixty (60) days after the Initial Closing, then a closing for such
Delayed Store (the "Subsequent Closing") shall occur as soon as
practical after such cure has been accomplished. At the
Subsequent Closing, Buyer shall pay to Seller by wire transfer of
immediately available funds (i) the portion of the Base Purchase
Price allocable to such Delayed Store as set forth on Schedule 1.5
(plus or minus the Rent and Tax Adjustment for such Store pursuant
to Section 1.7(a)) and (ii) the Inventory Valuation for such
Delayed Store as determined pursuant to Section 1.7(b). If the
failure of the condition set forth in Section 7.3 or Section 7.6
for any Delayed Store is not cured with such sixty-day period,
then Buyer may, at its option, elect to terminate this Agreement
with respect to such Store (without liability of any party to any
other party hereunder) or proceed with the Subsequent Closing with
respect to such Store, in the latter case without prejudice to any
rights Buyer may have against the Seller and A&P hereunder on
account of the circumstances giving rise to the failure of the
condition set forth in Section 7.3 or Section 7.6.
1.9. Transfer of Pharmacy Assets. Prior to Closing, Buyer shall
have the right to designate an assignee (the "Pharmacy Assignee")
to which Seller, at the Closing, shall transfer directly all Fixed
Assets and Inventory relating to the pharmaceutical businesses in
the Stores ("Pharmacy Assets"); provided, however, that, at
Closing, Buyer shall cause the Pharmacy Assignee to provide to
Seller and A&P (i) evidence and/or representations and warranties
to Seller's reasonable satisfaction that the Pharmacy Assignee is
an entity in good standing with the applicable federal, State of
Wisconsin and local governmental authorities and possesses all
licenses, permits and authorizations required to acquire and own
the Pharmacy Assets and operate the pharmacies within the Stores;
and (ii) reasonable and customary indemnification, on a joint and
several basis with the Buyer, against all Losses arising out of or
relating to the failure of such representation and warranties to
be true and correct after the Closing. In the event of a Delayed
Pharmacy Closing, the provisions of this Section 1.9 shall be
applied mutatis mutandis with respect to such Delayed Pharmacy
Closing.
2. Representations of the Seller and A&P
The Seller and A&P, jointly and severally, represent and warrant
to the Buyer as follows:
2.1. Organization. The Seller is a corporation duly organized,
validly existing and in current status under the laws of the
State of Wisconsin, and has all requisite power and authority (corporate
and other) to own its properties, to carry on its business
as now being conducted, to execute and deliver
is Agreement and the agreements contemplated herein, and to consummate the
transactions contemplated hereby. The Seller is duly
qualified to do business and in good standing in all jurisdictions in which
its ownership of property or the character of its business
requires such qualification and where failure
to be so qualified would have a Material
Adverse Effect (as defined herein). A&P is a
corporation duly organized, validly existing
and in good standing under the laws of the
State of Maryland, and has all requisite power
and authority (corporate and other) to own its
properties, to carry on its business as now
being conducted, to execute and deliver this
Agreement and the agreements contemplated
herein, and to consummate the transactions
contemplated hereby.
2.2. Authorization. The execution and
delivery of this Agreement by the Seller and
A&P, and the agreements provided for herein,
and the consummation by the Seller and A&P of
all transactions contemplated hereby, have
been duly authorized by all requisite
corporate action of the Seller and A&P. This
Agreement and all such other agreements and
obligations entered into and undertaken in
connection with the transactions contemplated
hereby to which the Seller and A&P are a party
constitute the valid and legally binding
obligations of the Seller and A&P, enforceable
against the Seller and A&P in accordance with
their respective terms, except as
enforceability thereof may be limited by
bankruptcy, insolvency, reorganization or
other laws affecting the enforcement of
creditors' rights generally or the
availability of equitable remedies. Subject
to obtaining the consents, waivers and
approvals described in Schedule 2.2, the
execution, delivery and performance by the
Seller of this Agreement and the agreements
provided for herein, and the consummation by
the Seller of the transactions contemplated
hereby and thereby in the manner provided for
in this Agreement, will not, with or without
the giving of notice or the passage of time or
both, (a) violate the provisions of any law,
rule or regulation applicable to the Seller;
(b) violate the provisions of the Articles of
Incorporation or By-laws of the Seller; (c)
violate any judgment, decree, order or award
of any court, governmental body or arbitrator
binding on the Seller; or (d) conflict with or
result in the breach or termination of any
term or provision of, or constitute a default
under, or cause any acceleration under, or
cause the creation of any lien, charge or
encumbrance upon the Assets pursuant to, any
indenture, mortgage, deed of trust or material
agreement to which the Seller is a party or by
which the Seller or the Assets are bound, in
each case in a manner that could reasonably be
expected to have a material adverse effect on
the Assets or the business as presently
conducted at the Stores (a "Material Adverse
Effect"). Schedule 2.2 attached hereto sets
forth a true and correct list of all material
consents, waivers and approvals of third
parties that are required in connection with
the consummation by the Seller of the
transactions contemplated by this Agreement.
2.3. Ownership of the Assets.
(a) Except as set forth on Schedule 2.3
attached hereto, the Seller, at the Closing,
will, subject to obtaining the consents,
waivers and approvals described in Schedule
2.2, have the right to (and will, upon
delivery of the bill of sale, Instrument of
Assumption and instruments of transfer of
ownership contemplated hereby) sell and
transfer to the Buyer good, clear, record and
marketable title to the Assets (other than the
Leases) free and clear of all claims,
liabilities, liens, pledges, charges,
encumbrances and equities of any kind
(collectively, the "Encumbrances"), other than
Permitted Encumbrances.
(b) The Seller, at the Closing, subject
to obtaining the consents, waivers and
approvals described in Schedule 2.2, the
execution and delivery of the Lease
Assignments, and the assumption of the Assumed
Liabilities, will transfer to the Buyer all of
the Seller's leasehold interest in each of the
premises identified in the Leases, subject
only to the respective terms of the Leases,
the Fee Encumbrances and the Permitted
Encumbrances.
(c) Except as set forth in Sections
2.3(a), 2.3(b), 2.5 and 2.7, neither the
Seller nor A&P makes any representation or
warranty as to the condition or fitness for a
particular purpose of any of the Assets or the
real property that is the subject of the
Leases or any improvements or fixtures located
thereon.
"Fee Encumbrances" shall mean, with respect to the premises
identified in any Lease, Encumbrances on the title of the landlord
to such premises.
"Permitted Encumbrances" shall mean (i) any lien for current taxes
not delinquent, taxes not yet due and payable or taxes being
contested in good faith and by appropriate proceedings, (ii) any
lien securing an Assumed Liability and arising in the ordinary
course of business, (iii) covenants, conditions and restrictions
of record arising in the ordinary course of conduct of business at
the Stores, which covenants, conditions and restrictions are not
violated in any material respect by existing uses or improvements
and do not materially interfere with the use of the property and
do not materially affect the merchantability of the Seller's title
or contain any provision for reversion or forfeiture of the
Seller's title, and (iv) as it relates to the Leases, limitations
on use of a subject premises to the extent that such limitation
does not materially adversely affect or limit the conduct of
retail sales as presently conducted in the Stores.
2.4. Fixed Assets. The Fixed Assets
comprise all material tangible personal
property, other than the Excluded Assets and
Inventory, necessary to conduct the business
of Seller at the Stores as the same has
heretofore been conducted.
2.5. Stores and Leases. (a) Schedule
2.5 lists the name and location of each store
location being transferred to the Buyer (each
a "Store" and collectively, the "Stores").
The Seller's interest in each Store is a
leasehold interest. Schedule 2.5 attached
hereto sets forth a true, correct and complete
list as of the date hereof of the leases of
real property pursuant to which any Store
occupies its premises (each a "Lease" and
collectively, the "Leases"). Seller has
delivered to Buyer a true and correct copy of
each Lease, including all amendments thereto.
Except as set forth on Schedule 2.2, the
continuation, validity and effectiveness of
each Lease will not be affected by the
transfer thereof to the Buyer under this
Agreement nor will the transfer thereof give
any person a right of termination or right to
make a material modification with respect to
such Lease, and all such Leases are assignable
to the Buyer without consent the of the
landlord except as set forth on Schedule 2.5.
(b) (i) The Leases are in full force effect and binding and
enforceable against the Seller and each of the other parties
thereto in accordance with their respective terms; (ii) the Seller
has not received any written notice from the landlord under any
Lease asserting that it is in breach or default of such Lease;
(iii) to the knowledge of the Seller and A&P, no event has
occurred or circumstance exists which, with the delivery of
notice, passage of time or both, would constitute such a breach or
default by Seller, or which would permit the termination,
modification or acceleration of rent under any Lease; (iv) there
are no material disputes with respect to any Lease; and (v) except
as set forth on Schedule 2.5, the Seller has not assigned,
subleased, mortgaged, deeded in trust or otherwise transferred or
encumbered any Lease or any interest therein, except for any
Permitted Encumbrances.
(c) Neither the Seller nor A&P, has received notice of any
condemnation or eminent domain proceedings with respect to any of
the Stores.
2.6. Contracts and Commitments.
(a) Schedule 2.6 attached hereto contains a true and correct list
of all written material contracts, agreements, Leases, licenses
and other instruments to which the Seller is a party, that are
necessary to the conduct of business of the Stores, as presently
conducted by the Seller, but excluding (i) insurance policies,
(ii) other agreements that will cease to exist after the Closing
Date, (iii) agreements with respect to general support, management
and supervision provided by the Seller's or A&P's headquarters or
corporate offices and (iv) the License Agreement (collectively,
the "Contracts"). For the purposes of this Section 2.6, Schedule
2.6 shall be deemed to include each of the Leases identified in
Schedule 2.5.
(b) Except as set forth on Schedule 2.6 attached hereto, as to
each Contract other than the Leases (which shall be governed by
the representations and warranties contained in Section 2.5):
(i) pursuant to each Contract which is to be assumed by the
Buyer (each an "Assumed Contract"), the Seller has fulfilled all
material obligations required to be performed by the Seller on its
part prior to the date hereof;
(ii) the Seller has not received any notice that it is in
breach of or default under any Assumed Contract in any material
respect, and there has occurred no material violation by the
Seller of any provision of any Assumed Contract which with the
passage of time (such as a grace period) or giving of notice or
both would constitute such a default by the Seller, result in a
loss of rights or result in the creation of any lien, charge or
encumbrance on the Seller's assets, thereunder or pursuant
thereto;
(iii) to the knowledge of the Seller and A&P, there is no
existing breach or default by any other party to any Assumed
Contract, and there has occurred no material violation of any
provision of any Assumed Contract which with the passage of time
(such as a grace period) or giving of notice or both would
constitute such a default by such other party, result in a loss of
rights by the Seller or result in the creation of any lien, charge
or encumbrance on the Seller's assets thereunder or pursuant
thereto; and
(c) Except as set forth on Schedule 2.2, the continuation,
validity and effectiveness of each Assumed Contract will not be
materially affected by the transfer thereof to the Buyer under
this Agreement nor will the transfer thereof give any person a
right of termination or right to make a material modification with
respect to such Assumed Contract.
(d) True and correct copies of all written Contracts have
previously been made available by the Seller to the Buyer.
2.7. Permits and Compliance with Laws.
(a) Schedule 2.7(a) is a correct and complete
list of all licenses, permits and certificates
from federal, state and local authorities
issued to the Seller with respect to the
Stores. All such licenses, permits and
certificates set forth on Schedule 2.7(a) are
in full force and effect, and the same
comprise all those necessary or required under
applicable laws and regulations for the
conduct of the business of Seller at the
Stores as the same has heretofore been
conducted (except for licenses, permits and
certificates the absence of which would not
have a Material Adverse Effect on the
operation of any Store). Except as set forth
on Schedule 2.7(a), the Stores and the
business conducted by Seller at the Stores has
been and is conducted in compliance with all
federal, state and local laws, regulations and
ordinances (including, without limitation,
laws, regulations and ordinances relating to
building, zoning, environmental matters,
occupational health and safety, labor and
employment, land use or similar matters)
relating to the use, occupancy and operation
of Stores by the Seller, the violation of
which could reasonably be expected to have a
Material Adverse Effect. Except as set forth
on Schedule 2.7(a), the business conducted at
the Stores does not violate, in any material
respect, any federal, state or local laws,
regulations or orders the enforcement of which
could reasonably be expected to have a
Material Adverse Effect.
(b) (i) To the knowledge of Seller and A&P, within the last 24
months no written notice, demand, request for information,
citation, summons or order has been issued to Seller or A&P
alleging of asserting material non-compliance of any of the Stores
with, or alleging or asserting any material liability with respect
to the ownership of any of the Stores under, any Environmental
Laws (as defined below).
(ii) To the knowledge of Seller and A&P. except as set forth
on Schedule 2.7(a), (1) no real property on which any of the
Stores is located has been designated or investigated by any
governmental authority under any Environmental Laws as a result of
being included on any federal, state or local list of lands
adversely impacted or potentially adversely impacted by the actual
or suspected, presence, spillage, leakage, discharge or other
emission of Hazardous Substances (as defined below), nor is there
any condition known to Seller or A&P which could reasonably be
expected to result in any such listing; and (2) Seller has not
received any written notice of an order, decree, investigation,
lien, or administrative or judicial proceeding, in each case,
under any Environmental Laws, concerning, or arising by reason of
the actual or suspected, presence, spillage, leakage, discharge or
other emission of Hazardous Substances in, on, or under any of the
Stores.
(iii) "Environmental Laws" shall mean any federal, state
or local laws, statutes, ordinances, rules and regulations of any
federal, state or local governmental authority relating to
occupational health and safety or relating to pollution or
protection of the environment, including, without limitation,
statutes, laws, ordinances, rules and regulations relating to the
emission, generation, discharge, spillage, leakage, storage, off-
site dumping, release or threatened release of Hazardous
Substances into ambient air, surface water, ground water or land,
or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Substances.
(iv) "Hazardous Substances" shall mean any product,
substance, chemical, contaminant, pollutant, waste or other
material whose presence, use, manufacture, disposal,
transportation, emission, discharge, spill or release, is either:
(a) regulated by any governmental authority under any
Environmental Laws or (b) defined or listed in, or otherwise
classified pursuant to, any statute, law, ordinance, rule or
regulation applicable to the Stores or the business of Seller as
"hazardous substances," "hazardous materials," "hazardous wastes,"
or "toxic substances". Hazardous Substances shall include, but
not be limited to, (a)(A) any "hazardous substance" as defined in
the Comprehensive Environmental Response, Compensation and
Liability Act, (B) any "regulated substance" as defined in the
Solid Waste Disposal Act or (C) any substance subject to
regulation pursuant to the Toxic Substances Control Act, as such
laws are now in effect or may be amended through the Closing Date
and any rule, regulation or legally binding order or decision
promulgated or issued under such laws, (b) petroleum and refined
petroleum products, (c) asbestos and asbestos-containing products
(as defined in 29 CFR 1910.1001(b), (d) radioactive materials, (e)
radon, (f) polychlorinated biphenyls, and (g) any other substance
that is regulated or classified as hazardous or toxic under any
Environmental Laws.
2.8. Claims, Litigation and Disputes.
Except as set forth on Schedule 2.8, and
except for actions, proceedings or
investigations affecting the retail food
merchandising industry in general, there is no
actual or, to the knowledge of the Seller and
A&P, threatened claim, litigation, action or
legal proceeding before any court,
administrative agency or commission or other
governmental authority or instrumentality,
domestic or foreign ("Governmental Entity")
against the Seller, adversely affecting (i)
the Seller's ability to perform its
obligations hereunder, (ii) the rights granted
under the Assumed Contracts, or (iii) the
ownership, use, maintenance or operation of
the Assets and the Stores by the Seller.
2.9. Financial Information. The
historical financial information regarding the
Seller's business at the Stores (including,
without limitation, sales revenue, operating
expenses and gross margin data for the fiscal
years ending in 2000, 2001 and 2002 and
interim periods thereafter through October
2002) that Seller and A&P have provided to
Buyer, was prepared from the books and records
of Seller kept in the normal course of
business, and is consistent in all respects
with that prepared and used by Seller for its
own internal management purposes in the
ordinary course of business.
3. Representations of the Buyer and the Parent
The Buyer and the Parent, jointly and severally, represent and
warrant to the Seller and to A&P as follows:
3.1. Organization. The Buyer is a
corporation duly organized, validly existing
and in good standing under the laws of the
State of Wisconsin, and has all requisite
power and authority (corporate and other) to
own its properties, to carry on its business
as now being conducted, to execute and deliver
this Agreement and the agreements contemplated
herein, and to consummate the transactions
contemplated hereby. The Buyer is duly
qualified to do business and in good standing
in all jurisdictions in which its ownership of
property or the character of its business
requires such qualification and where failure
to be so qualified would materially impair the
ability of the Buyer to consummate the
transactions contemplated hereby. Certified
copies of the Articles of Incorporation and By-
laws of the Buyer, each as amended to date,
have been previously made available to the
Seller, are complete and correct, and no
amendments have been made thereto or have been
authorized since the date thereof. The Parent
is a corporation duly organized, validly
existing and in good standing under the laws
of the State of Wisconsin, and has all
requisite power and authority (corporate and
other) to own its properties, to carry on its
business as now being conducted, to execute
and deliver this Agreement and the agreements
contemplated herein, and to consummate the
transactions contemplated hereby.
3.2. Authorization. The execution and
delivery of this Agreement by the Buyer and
the Parent, and the agreements provided for
herein, and the consummation by the Buyer and
the Parent of all transactions contemplated
hereby, have been duly authorized by all
requisite corporate action of the Buyer and
the Parent. This Agreement and all such other
agreements and written obligations entered
into and undertaken in connection with the
transactions contemplated hereby constitute
the valid and legally binding obligations of
the Buyer and the Parent, enforceable against
the Buyer and the Parent in accordance with
their respective terms, except as
enforceability thereof may be limited by
bankruptcy, insolvency, reorganization or
other laws affecting the enforcement of
creditors' rights generally or the
availability of equitable remedies. The
execution, delivery and performance of this
Agreement and the agreements provided for
herein, and the consummation by the Buyer of
the transactions contemplated hereby and
thereby in the manner provided for in this
Agreement, will not, with or without the
giving of notice or the passage of time or
both, (a) violate the provisions of any law,
rule or regulation applicable to the Buyer;
(b) violate the provisions of the Articles of
Incorporation or By-laws of the Buyer; (c)
violate any judgment, decree, order or award
of any court, governmental body or arbitrator
binding on the Buyer; or (d) subject to
obtaining the consents, waivers and approvals
described in Schedule 3.2, conflict with or
result in the breach or termination of any
term or provision of, or constitute a default
under, or cause any acceleration under, or
cause the creation of any lien, charge or
encumbrance upon the properties or assets of
the Buyer pursuant to, any indenture,
mortgage, deed of trust or other agreement or
instrument to which it or its properties is a
party or by which the Buyer is or may be
bound. Schedule 3.2 attached hereto sets
forth a true and correct list of all material
consents and approvals of third parties that
are required in connection with the
consummation by the Buyer of the transactions
contemplated by this Agreement.
3.3. Regulatory Approvals. Except as
provided on Schedule 3.3 attached hereto and
except for licenses, permits, approvals and
authorizations required to conduct business at
the Stores, and the third party consents
required to transfer certain of the Assets to
the Buyer, all consents, approvals,
authorizations and other requirements
prescribed by any law, rule or regulation
which must be obtained or satisfied by the
Buyer or the Parent and which are necessary
for the consummation of the transactions
contemplated by this Agreement have been, or
will be prior to the Closing Date, obtained
and satisfied.
3.4. Financing. The Buyer or the Parent
has sufficient funds necessary to pay the Cash
Consideration payable on the Closing Date (as
reasonably contemplated by Sections 1.3 and
1.7) and related fees and expenses associated
with the transactions contemplated by this
Agreement and, as of the Closing Date, the
Buyer or the Parent will have the financial
capacity to perform all of its other
obligations under this Agreement and the
Exhibits hereto. The Buyer and Parent have
obtained all consents, authorizations or
waivers from their lenders that are required
under any agreements in effect between the
Buyer or the Parent and such lenders to
consummate the transactions contemplated
hereby. Each of the Buyer and the Parent,
immediately after the Closing, will be
solvent, will be able to meet its obligations
and debts as they come due and will have
adequate capital for the conduct of its
business (including the operation of the
Stores) and immediately after the Closing the
Buyer's assets will exceed its liabilities and
the Parent's assets will exceed its
liabilities.
3.5. Limitation of Warranty. Except for
such representations and warranties as are
expressly set forth herein, each of the Buyer
and the Parent acknowledge that:
(a) all of the Assets will be conveyed "as-is", "where
is", with all faults and defects as of the Closing Date and
that there have been no representations, warranties,
guaranties, statements or information, express or implied,
whatsoever, made or furnished to the Buyer and the Parent, by
the Seller, A&P or any agent or representative thereof
relating to the conveyance and transfer of its respective
Assets, including, without limitation, any warranty of
merchantability, condition, operability or fitness for a
particular use or purpose;
(b) it has been given full opportunity to inspect the
Assets, including without limitation, the Stores and Seller's
files relating to the Leases and will rely solely upon its
own inspections for all purposes whatsoever, including,
without limitation, the determination of the character, size
(including quantity of acreage), condition (whether
environmental or otherwise), accessibility, state of repair,
zoning, suitability of each store and the equipment for the
purposes for which it is being acquired;
(c) to the extent desired by the Buyer, the Buyer has
obtained a title opinion, title report, or a title insurance
commitment (each being referred to herein as a "Commitment")
with respect to the Leases and/or the Stores. The Buyer
acknowledges that all title and survey matters relating to
the Leases and the Stores have been approved and accepted by
the Buyer prior to the execution of this Agreement; and
(d) the Buyer hereby acknowledges and agrees to accept,
pay, perform and comply with all title encumbrances affecting
the Stores and the Leases that are Permitted Encumbrances
hereunder, including, without limitation, (i) ad valorem
taxes and (ii) easements, restrictions and operating
agreements of record or delivered to the Buyer.
4. Information; Public Announcements
4.1. Confidentiality. All information
not previously disclosed to the public or
generally known to persons engaged in the
business of the Seller which shall have been
or will be furnished by the Seller and A&P to
the Buyer in connection with the transactions
contemplated hereby or as provided pursuant to
this Section 4 shall be considered
confidential information and treated in
accordance with the Confidentiality Agreement
(the "Confidentiality Agreement") dated as of
June 14, 2002 between the Parent and A&P;
provided, however, that notwithstanding the
foregoing the Buyer and the Parent shall be
entitled to disclose to their lenders and
investors a description of the transactions
contemplated hereby and the financial terms
thereof, provided that they agree to be bound
by the same confidentiality principles set
forth in the Confidentiality Agreement.
4.2. Public Announcements. The parties
agree that any and all public announcements or
other public communications concerning this
Agreement and the transactions contemplated
hereby shall be subject to the prior approval
of the Buyer and the Seller; provided that
either of them shall have the absolute right
to make any public announcement or other
public communication that is required pursuant
to applicable law or pursuant to any
contractual undertaking that requires
compliance with the information reporting
requirements of the federal or state
securities laws and regulations.
5. Covenants of the Seller and A&P
5.1. Conduct of Business. From the date
hereof and until the Closing Date, and except
as contemplated by this Agreement (including,
without limitation, the removal of Excluded
Inventory and the closure of the Stores to
facilitate the Inventory Count and other
activities as contemplated by Section 1.7(b)),
the Seller shall use its commercially
reasonable efforts to conduct the business at
the Stores substantially in the same manner as
heretofore conducted, including not increasing
retail pricing levels beyond those in effect
at the date hereof, except in the ordinary
course of business and consistent with past
practices; provided, however, that Buyer
acknowledges that from the earlier of (a)
public announcements or public communications,
(b) actual knowledge of the pending sale of
the Stores, (c) the delivery of the Labor
Notices or other notices, (d) the closing or
any of the Seller's stores not being
transferred to the Buyer, or (e) any other
notices, announcements or communications,
including, but not limited to, labor contract
negotiations and notices relating to the sale
or close of the Stores, the Stores may
experience a loss of personnel and the Buyer
agrees that such loss or any reasonably
related consequence of the foregoing shall not
be deemed a breach of this Section 5.1. The
Buyer further acknowledges and agrees that (i)
the failure of the Seller to order inventory
for delivery post-Closing, (ii) the removal or
closing sale of Excluded Inventory from the
Stores prior to the Closing Date, and (iii)
the removal of interior and exterior signs and
sign facings or other Intangible Property,
including Fixed Assets, inventory or any other
assets that contain any registered or
unregistered trademark or trade name of A&P or
any subsidiary thereof, in accordance with
Section 1.1(b)(ii), shall not be deemed a
breach of this Section 5.1. Notwithstanding
the foregoing, Seller may cease operations at
any Store which is a Delayed Store, at any
time after the Initial Closing.
5.2. Absence of Material Changes. Except
as set forth on Schedule 5.2 attached hereto
and except as contemplated by this Agreement,
from the date hereof and until the Closing
Date or the earlier termination of the
Agreement, the Seller shall:
(a) not mortgage, pledge, or subject to any lien,
charge or any other encumbrance any of the Assets except in
the ordinary course of business and for the Permitted
Encumbrances;
(b) not sell, assign, transfer or remove from the
Stores any of the Assets, except for inventory sold in the
ordinary course of business;
(c) continue to perform, on a timely basis, all of its
obligations under, and not modify, amend, alter or terminate
any of its executory contracts which are listed on Schedules
2.5 and 2.6; or
(d) continue to maintain the insurance covering the
Assets in effect as of the date of this Agreement.
5.3. Satisfaction of Conditions. The
Seller and A&P covenant and agree to use their
commercially reasonable efforts to obtain the
satisfaction of the conditions specified in
this Agreement and to achieve the consummation
of the transactions contemplated hereby and to
cooperate in good faith with the Buyer and the
Parent to resolve any challenges to such
transactions.
5.4. Employees. (a) The Seller shall
(i) terminate or relocate all of its employees
at the Stores effective as of the Closing Date
and (ii) be responsible for and satisfy all
amounts owed to employees at the Stores
through the Closing Date, including wages,
salaries, accrued vacation, severance
payments, all obligations or liabilities under
any employment, incentive, compensation or
bonus agreements, collective bargaining
agreements, or other benefits or payments to
which the employees at the Stores are
otherwise entitled to on account of
termination (including WARN Act and similar
statutory or regulatory requirements as
described below).
(b) The Seller and A& P shall have the responsibility for
compliance with the requirements under the Workers Adjustment and
Retraining Notification Act, 29 U.S.C. Sections 2101-2109 (the
"WARN Act") and any equivalent state statutory or regulatory
requirements and shall deliver all notices required to be given
under the WARN Act and any equivalent state statutory or
regulatory requirements as a result of the transactions
contemplated by this Agreement.
5.5. Access. In the event that the Buyer
and its agents and representatives shall
require access to the Stores prior to the
Closing, the Buyer and its agents and
representatives shall, in connection with such
access, preserve confidentiality, not
interfere with the Seller's pre-Closing
operations and accomplish such access through
coordinated site visits that include
representatives of the Seller. The Buyer
hereby agrees to indemnify and hold harmless
the Seller from and against any loss,
liability, damages, costs or expenses incurred
by the Seller as a result of the acts or
omissions of Buyer's representatives while at
the Stores.
5.6. No Post-Closing Inventory. The
Seller shall not order any Inventory intended
for delivery to any of the Stores after the
Closing Date.
5.7. Additional Financial Records. At
the Closing (to the extent such information is
available at the Closing Date), and in any
event within ten (10) days following the
Closing Date, Seller will provide to Buyer
weekly sales data, by department, for each
Store, for all of the fiscal year 2002 and
that portion of fiscal 2003 through the
Closing Date.
5.8. Pharmacy Customer Lists. Within ten
(10) days following the date of this
Agreement, the Seller shall deliver to Buyer a
list of all customers of the pharmacy
businesses in the Stores.
5.9. Fixed Assets List. Within ten (10)
days following the date of this Agreement, the
Seller shall deliver to Buyer lists of the
Fixed Assets of each of the Stores, as
reflected by the Seller's most recent records
(except to the extent the same has heretofore
been provided). Buyer acknowledges that such
Fixed Assets lists may not be current, that
the actual Fixed Assets located at the Stores
and included among the Assets purchased
hereunder may differ from such lists, and that
Seller and A&P make no representations or
warranties regarding the accuracy of such
lists.
5.10. Estoppels and SNDA's. (i) Seller will use commercially
reasonable efforts to assist Buyer in obtaining estoppel
certificates in a form reasonably proposed by Buyer (the "Form
Estoppel Certificate") from the landlords under the Leases (the
"Landlords"); (ii) with respect to each Lease for which the
applicable Landlord declines (either directly or by inaction) to
deliver an estoppel certificate in the form of the Form Estoppel
Certificate and that requires the Landlord to deliver an estoppel
certificate upon request, Seller shall be required to obtain from
the applicable Landlord an estoppel certificate with respect to
each such Lease in the form contemplated by such Lease (the "Lease
Estoppel Certificate"); (iii) with respect to each Lease (a) for
which the Landlord declines (either directly or by inaction) to
deliver an estoppel certificate in the form of the Form Estoppel
Certificate, and (b) that does not require the Landlord to deliver
a Lease Estoppel Certificate, the Seller shall not be required to
obtain any estoppel certificate; provided that the applicable
Landlord does not make an assertion that, if true, would cause a
representation or warranty contained in Section 2.5 to be untrue
in any material respect (determined without regard to any
knowledge qualifications contained in Section 2.5); and (iv) as to
each lease encumbered by a lien securing the interests of a Lender
to a Landlord the Seller shall be required to obtain customary
subordination, non-disturbance and attornment agreements from the
current lenders to the Landlords, in favor of Buyer as the
assignee of the Leases ("SNDAs"), provided, the Buyer agrees that
it will accept existing SNDAs from current Landlord lenders in
favor of Seller in the forms reviewed by Buyer; provided that the
applicable lender does not assert the invalidity of any such SNDA
or that any such SNDA does not run with the land as provided
therein or does not for any other reason inure to the benefit of
Buyer.
6. Covenants of the Buyer and the Parent
6.1. Satisfaction of Conditions. The
Buyer and the Parent covenant and agree to use
their commercially reasonable efforts to
obtain the satisfaction of the conditions
specified in this Agreement and to achieve the
consummation of the transactions contemplated
hereby and to cooperate in good faith with the
Seller and A&P to resolve any challenges to
such transactions (including, without
limitation, labor and employee issues).
6.2. Preservation of Books and Records; Post-Closing Access. From
and after the Closing Date, the Buyer and the Parent agree that
the Buyer shall preserve and keep those books and records that are
among the Assets delivered to it hereunder, for such period of
time as may be required, but not longer than three (3) years, and
shall make such books and records available to the Seller and A&P
as may be reasonably required in connection with any reasonable
business purpose. In the event the Buyer wishes to destroy any
such books or records at any time after two years from the
Closing, the Buyer shall first give thirty (30) days prior notice
to the Seller and A&P and A&P, shall have the right at its option
and expense, upon prior written notice given to the Buyer within
said thirty (30) day period, to take possession of said records
within ninety (90) days after the date of the Buyer's notice
hereunder.
6.3. Insurance. From and after the Closing Date, the Buyer and
the Parent shall maintain in full force and effect insurance
policies and insurance contracts that in the Buyer's reasonable
judgment are reasonable and adequate to insure the Stores against
such risks as may be likely to give rise to any contingent
liability of the Seller under any of the Leases or otherwise to
any Landlord of the Stores.
6.4. Permits. The Buyer shall promptly following the execution of
this Agreement commence using its best efforts to obtain all such
licenses, permits and certificates from the applicable federal,
state or local authorities as shall be required to consummate the
transactions contemplated herein, including without limitation,
licenses, permits and certificates relating to liquor,
pharmaceutical, WIC, food stamps, cigarettes and tobacco, lottery
ticket sales, local occupancy, seller's permits from the Wisconsin
Department of Revenue, and retail food sales. Buyer's inability
or delay in obtaining such licenses, permits and certificates
shall not delay the Closing, except to the extent set forth in
Section 1.6 and Section 1.9.
6.5. Accounts Receivable. The Buyer
shall not be under any obligation to collect
Accounts Receivable, however, the Buyer shall
promptly forward to A&P within ten (10) days
after receipt any monies paid to the Buyer on
any Accounts Receivable. The Buyer shall
furnish information that the Seller may
reasonably request from time to time with
respect to such receipts of Accounts
Receivable.
7. Conditions to Obligations of the Buyer
The obligations of the Buyer under this Agreement are subject to
the fulfillment, at the Closing Date, of the following conditions
precedent, each of which may be waived in writing in the sole
discretion of the Buyer:
7.1. Compliance with Obligations. The
Seller shall have performed and complied in
all material respects with all material
obligations under this Agreement required to
be performed or complied with by it prior to
or at the Closing Date; provided however, that
the Seller's inability to transfer all or any
portion of the Assets because of the failure
of the Buyer to have obtained any permit,
license, certificate, authorization or other
governmental approvals required in connection
with such transfer, shall not be deemed a
breach of this Section 7.1.
7.2. Corporate Proceedings. All
corporate and other proceedings required to be
taken on the part of the Seller to convey,
assign, transfer and deliver the Assets shall
have been taken.
7.3. Consents of Lenders, Lessors and
Other Third Parties. The Seller shall have
obtained and delivered to the Buyer all
consents and approvals of lenders, lessors and
other third parties listed on Schedule 7.3
attached hereto, including without limitation,
the Landlord estoppel certificates and the
SNDAs required to be obtained pursuant to
Section 5.10. If the Landlord estoppel
certificates or the SNDAs required to be
obtained pursuant to Section 5.10 are not
obtained for a specific Store, the Closing for
such Store shall be delayed as provided in
Section 1.8.
7.4. Adverse Proceedings. No action or
proceeding by or before the Federal Trade
Commission, the Wisconsin State Attorney
General or other similar regulatory authority
shall have been instituted or threatened by
any governmental body or person whatsoever
which shall seek to postpone, cancel or
invalidate the transactions contemplated by
this Agreement, require the divestiture of the
Stores or which might materially adversely
affect the right of the Buyer to own or use
the Assets after the Closing.
7.5. Seller's Representations and
Warranties. Subject to Section 1.8 above,
each representation and warranty made by
Seller in Section 2 hereof shall be true and
correct in all material respects on and as of
the Closing Date with the same effect as
though each such representation and warranty
had been made or given on and as of the
Closing Date other than representations and
warranties made as of a specific date, which
shall be true and correct as of such specific
date.
7.6. Closing Deliveries. Subject to the
terms of this Agreement, the Buyer shall have
received at or prior to the Closing each of
the following documents:
(a) the Instrument of Assumption, the Assignments and a
bill of sale in a form reasonably satisfactory to the Buyer;
(b) such instruments of conveyance, assignment and
transfer, in form and substance consistent with this
Agreement, as shall be appropriate to convey, transfer and
assign to, and to vest in, the Buyer, good, clear, record and
marketable title to the Assets (subject to the Permitted
Encumbrances);
(c) certificates of good standing or their equivalent for
Seller and A&P from the appropriate officials of their states
of incorporation and from the Wisconsin Department of
Financial Institutions;
(d) certified copies of the resolutions of the boards
of directors of Seller and A&P (and of resolutions adopted by
A&P, as the sole shareholder of Seller, if required)
authorizing the transactions contemplated by this Agreement;
and
(e) such other documents as the Buyer shall reasonably
request.
8. Conditions to Obligations of the Seller
Subject to Section 1.6 hereof, the obligations of the Seller under
this Agreement are subject to the fulfillment, at the Closing
Date, of the following conditions precedent, each of which may be
waived in writing at the sole discretion of the Seller:
8.1. Compliance with Obligations. The
Buyer shall have performed and complied with
in all material respects all obligations under
this Agreement required to be performed or
complied with by it prior to or at the Closing
Date.
8.2. Corporate Proceedings. All
corporate and other proceedings required to be
taken on the part of the Buyer to purchase the
Assets and assume the Assumed Liabilities
shall have been taken.
8.3. Consents of Third Parties. The
Buyer shall have obtained all requisite
consents, waivers and approvals of all third
parties whose consent or approval is required
in order for the Buyer to consummate the
transactions contemplated by this Agreement,
including, without limitation, those set forth
on Schedule 3.2 attached hereto, and such
consents, waivers and approvals shall be in
full force and effect as of the Closing Date.
8.4. Adverse Proceedings. No action or
proceeding by or before the Federal Trade
Commission, the Wisconsin State Attorney
General or other similar regulatory authority
shall have been instituted or threatened by
any governmental body or person whatsoever
which shall seek to postpone, cancel or
invalidate the transactions contemplated by
this Agreement or which might affect the right
of the Seller to transfer the Assets.
8.5. Buyer's Representations and
Warranties. Subject to Section 1.8 above,
each representation and warranty made by Buyer
in Section 2 hereof shall be true and correct
in all material respects on and as of the
Closing Date with the same effect as though
each such representation and warranty had been
made or given on and as of the Closing Date
other than representations and warranties made
as of a specific date, which shall be true and
correct as of such specific date.
8.6. Closing Deliveries. The Seller shall have received at or
prior to the Closing such documents as the Seller shall reasonably
request including, but not limited to:
(a) the Instrument of Assumption, the Assignments, and
the Guarantee executed by Parent;
(b) certificates of good standing or their equivalent for
Buyer and Parent from the appropriate officials of their
states of incorporation and from the Wisconsin Department of
Financial Institutions;
(c) certified copies of the resolutions of the boards
of directors of Buyer and Parent (and of resolutions adopted
by Parent, as the sole shareholder of Buyer, if required)
authorizing the transactions contemplated by this Agreement;
and
(d) such other documents as the Seller shall reasonably
request.
9. Indemnification
9.1. By the Buyer, the Parent, the Seller
and A&P. The Buyer and the Parent, jointly
and severally, on the one hand, and the Seller
and A&P, jointly and severally, on the other
hand, each hereby indemnify and hold harmless
the other (and their respective affiliates,
successors and assigns and, if applicable,
their respective officers, directors,
employees, agents and heirs) against all
claims, damages, losses, liabilities, costs
and expenses (including, without limitation,
settlement costs and any legal, accounting or
other expenses for investigating or defending
any actions or threatened actions)
(collectively, "Losses") reasonably incurred
by the Indemnified Party in connection with
each and all of the following:
(a) any material breach by the Indemnifying Party of
any representation or warranty in this Agreement;
(b) any material breach of any covenant, agreement or
obligation of the Indemnifying Party contained in this
Agreement or any other agreement, instrument or document
contemplated by this Agreement; and
(c) any material misrepresentation contained in any
certificate furnished by the Indemnifying Party pursuant to
this Agreement or in connection with the transactions
contemplated by this Agreement.
9.2A By the Seller and A&P. The Seller
and A&P, on a joint and several basis, further
agree to indemnify and hold harmless the Buyer
and the Parent (and their affiliates,
successors and assigns and its officers,
directors, employees and agents) from any and
all Losses reasonably incurred by the
Indemnified Party, in connection with each and
all of the following:
(a) any claims against, or liabilities, obligations or
commitments of, the Seller or against the Assets arising
prior to or after the Closing Date and not expressly assumed
as an Assumed Liability hereunder;
(b) any claims against or liabilities, obligations or
commitments of, the Seller or A&P as a result of the actions
of the Seller contemplated by Section 5.4; and
(c) any taxes of the Seller (other than taxes subject
to the Rent and Tax Adjustment or apportioned among the
parties pursuant to Section 13 hereof).
9.2B By the Buyer and the Parent. The Buyer and the Parent, on a
joint and several basis, further agree to indemnify and hold
harmless the Seller and A&P (and their respective affiliates,
successors and assigns and, if applicable, their respective
officers, directors, employees, agents and heirs) from any and all
Losses reasonably incurred by the Indemnified Party, in connection
with each and all of the following:
(a) the Assumed Liabilities and any claims against, or
liabilities, obligations or commitments of, the Buyer or the
Parent or against the Assets arising on or after the Closing
Date;
(b) any taxes of the Buyer (other than taxes subject to
the Rent and Tax Adjustment or apportioned among the parties
pursuant to Section 13 hereof); and
(c) any Losses of Seller or A&P arising out of the
failure to terminate employees on the Closing Date because of
the arrangement contemplated by Section 1.6(c) hereof to the
extent that such Losses exceed amounts that Seller and A&P
would have been responsible for had the arrangement
contemplated by Section 1.6(c) not been invoked; provided
that in the event Section 1.6(c) is invoked, Seller and A&P
will cooperate with Buyer and Parent in taking appropriate
steps to comply with the WARN Act and equivalent state laws.
9.3. Procedures for Indemnification.
(a) A party seeking indemnification pursuant to Section 9.1, 9.2A
or 9.2B (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 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 prejudice
thereby). Thereafter, the Indemnified Party shall deliver to the
Indemnifying Party, within seven (7) 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 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 will not be liable to the Indemnified Party for
legal expenses subsequently incurred by the Indemnified Party in
connection with the defense thereof, so long as the Indemnifying
Party is actively defending such Third Party Claim. Regardless of
whether the Indemnifying Party elects to assume the defense of any
such Third Party Claim, so long as the Indemnifying Party shall
have paid all documented costs and expenses of the Indemnified
Parties that are indemnifiable hereunder (and that are not in
dispute in good faith) relating to the applicable Third Party
Claim, the Indemnified Party shall not admit any liability with
respect to, or settle, compromise or discharge, such Third Party
Claim without the Indemnifying Party's prior written consent, such
consent not to be unreasonably withheld.
(b) 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. The Indemnifying Party shall bear the
reasonable fees, costs and expenses of separate counsel of the
Indemnified Party if: (i) the use of counsel chosen by the
Indemnifying Party to represent the Indemnified Party would
present such counsel with a conflict of interest, such conflict of
interest is not remedied by waiver and the Indemnifying Party does
not or cannot choose another counsel without a conflict of
interest, (ii) the Indemnifying Party shall not have employed
counsel reasonably satisfactory to the Indemnified Party to
represent the Indemnified Party within a reasonable time after
notice of the institution of such claim, or (iii) the Indemnifying
party shall authorize the Indemnified Party to employ separate
counsel at the Indemnifying Party's expense.
(c) 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 thirty (30) days prior written notice
to the Indemnified Party, to consent to the entry of judgment with
respect to, or otherwise settle such Third Party Claim provided
the Indemnifying Party satisfies and discharges such judgment 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 or any of its
affiliates' businesses (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.
(d) 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.
9.4. Payment of Indemnification
Obligation. All indemnification by the Buyer,
the Parent, the Seller or A&P hereunder shall
be effected by payment of cash or delivery of
a cashier's or certified check in the amount
of the indemnification liability.
9.5. Survival; Claims for
Indemnification. All covenants, agreements
and obligations made by the parties herein or
in any instrument or document furnished in
connection herewith shall survive the Closing
and any investigation at any time made by or
on behalf of the parties indefinitely, unless
otherwise provided herein. All
representations and warranties of the parties
shall expire on the first anniversary of the
Closing Date, except for claims, if any,
asserted in writing prior to such date, which
shall survive until finally resolved and
satisfied in full and except for claims
relating to taxes, which shall survive until
the end of the applicable statute of
limitations. All claims and actions for
indemnity pursuant to this Section 9 for
breach of any representation or warranty shall
be asserted or maintained in writing by a
party hereto on or prior to the expiration of
the first anniversary of the Closing Date.
9.6. Damages and Related Matters.
(a) In calculating any amounts payable to a party seeking
indemnification under Section 9.1, 9.2A or 9.2B, the Indemnifying
Party shall receive credit for (x) any reduction in actual tax
liability as a result of the facts giving rise to the claim for
indemnification, and (y) any insurance recoveries.
(b) The Seller and A&P, on the one hand, and the Buyer and the
Parent, on the other hand, shall have no liability under Section
9.1(a) unless the aggregate amount of all Losses to the Seller and
A&P, on the one hand, and the Buyer and the Parent, on the other
hand (in each case including their respective affiliates,
successors and assigns and, if applicable, their respective
officers, directors, employees and agents), for all claims arising
under Section 9.1(a) exceeds Two Hundred Thousand Dollars
($200,000) and, in such event, the Seller and A&P, on the one
hand, and the Buyer and the Parent, on the other hand, shall be
required to pay only the amount by which such aggregate amount of
Losses exceeds Two Hundred Thousand Dollars ($200,000); provided
that in no event shall the Seller and A&P, on the one hand, or the
Buyer and the Parent, on the other hand, have an aggregate
liability for indemnification under Section 9.1(a) in excess of
Two Million Seven Hundred Thousand Dollars ($2,700,000). For the
purposes of this Section 9.6(b), the Seller and A&P shall be
treated as a single Indemnifying Party and the Buyer and the
Parent shall be treated as a single Indemnifying Party.
(c) The parties agree that the provisions of this Section 9 can
be specifically enforced in a court of competent jurisdiction.
Apart from such right to specific enforcement, the indemnification
provided for in this Section 9 shall, except as set forth below,
from and after the Closing, be the sole remedy for any of the
matters referred to herein. Notwithstanding the foregoing, the
purchase price adjustments contained in Section 1.7 shall be the
sole remedies for the covenants, representations and warranties
contained in Section 1.7. For further clarification, to the
extent that events, occurrences or facts shall arise or be
discovered which give a party the right to an adjustment pursuant
to Section 1.7, Section 1.7, and not this Section 9, shall control
and be the exclusive remedy for such party arising out of such
facts, events or circumstances.
(d) Any indemnification payments made by the parties pursuant to
this Section 9 shall be treated by the parties for tax purposes as
adjustments to the purchase price unless otherwise required by
applicable law.
10. Casualty
The parties agree that from the date hereof and until the Closing:
10.1. Damage. (a) If destruction, loss or damage by fire or
other casualty to any Store occurs between the date hereof and the
Closing to the extent that the operation of a Store ceases (a
"Damage"), the Buyer shall have the right, subject to paragraph
(b) below, to either (i) terminate this Agreement as to such
Store, in which event the Base Purchase Price shall be reduced by
that portion of the Base Purchase Price attributable to such Store
as set forth on Schedule 1.5 attached hereto; or (ii) take
possession of such Store at the Closing of such Store and, except
to the extent the Seller has, or has caused to be, repaired such
Store prior to such Closing, the Seller shall assign to the Buyer
(or to the landlord if required by the applicable Lease) any right
it has to any unexpected insurance proceeds relating to such
Damage (with the Seller responsible for any deductible payable
under the insurance policy covering such Damage). The Buyer and
the Parent acknowledge and agree that no adjustment to the Base
Purchase Price shall occur if the Buyer takes possession of the
damaged Store pursuant to the preceding clause (ii).
(b) Notwithstanding the preceding paragraph (a), Buyer shall not
be entitled to elect to terminate this Agreement as to the damaged
Store as contemplated in clause (i) of paragraph (a) above if all
of the following conditions are satisfied at or prior to the
Closing for such Store: (i) the applicable Lease obligates the
applicable Landlord to rebuild or restore, or the tenant has the
right to rebuild or restore, the applicable Store and the
applicable Landlord has not asserted that it will not rebuild or
restore or permit the rebuilding or restoration of the applicable
Store or that it will terminate or seek to terminate the Lease,
(ii) a casualty insurance policy is in effect with respect to such
Store in accordance with the applicable Lease and the applicable
insurance carrier has not asserted that it is denying coverage
provided by the policy, and (iii) the applicable SNDA, if any,
permits the application of insurance proceeds to the rebuilding or
restoration of the applicable Store and the applicable lender has
not asserted that the proceeds are not to be permitted to be
applied for such purpose. In the event of Damage resulting in the
application of the preceding sentence, Seller shall bear full
responsibility for (i) the replacement cost of Fixed Assets
destroyed or repair cost of Fixed Assets damaged pursuant to such
Damage and (ii) in the ease of an applicable casualty insurance
policy for less than full replacement value, an amount equal to
full replacement value less the amount of coverage under such
policy.
10.2. Condemnation. (a) In the event
that ten percent (10%) or more of a Store
parking lot or ten percent (10%) or more of a
Store is taken in condemnation or by the
exercise of eminent domain prior to the
Closing for such Store, the Buyer shall have
the right to terminate this Agreement as to
such Store, in which event the Base Purchase
Price shall be reduced by that portion of the
Base Purchase Price attributable to the
applicable Store as set forth on Schedule 1.5
attached hereto.
(b) In the event that less than ten percent (10%) of a Store
parking lot or less than ten percent (10%) of a Store is taken in
condemnation or by the exercise of eminent domain prior to the
respective Closing for such Store, the Buyer shall take possession
of such Store or any portion thereof and close on such Store and
the Seller shall assign to the Buyer any right it has to any
condemnation award relating to such condemnation (it being
understood that no adjustment to the Base Purchase Price shall
occur as a result thereof). The Seller shall not settle any
condemnation proceeding relating to a Store without the Buyer's
prior consent (which consent shall not be unreasonably withheld).
11. Post-Closing Agreements
11.1. Non-Competition Agreement.
(a) For a period of three years after the Closing Date, neither
the Seller nor any person controlling, controlled by, or under
common control with the Seller (including A&P and any persons
controlled by A&P) (each, an "Affiliate") shall engage, nor lease
any real estate to any other party for use by such party in, any
business primarily involving the retail sale through retail stores
of groceries ("Competing Business") in Dane County, Wisconsin in
competition with Buyer; provided, however, that the leasing or
subleasing of the real property located at 2525 E. Washington
Avenue, Madison, Wisconsin by the Seller or its Affiliates to a
Competing Business, shall not be deemed a breach of this Section
11.1.
(b) The parties hereto agree that the duration and geographic
scope of the non-competition provision set forth in this Section
11.1 are reasonable. In the event that any court determines that
the duration or the geographic scope, or both, are unreasonable
and that such provision is to that extent unenforceable, the
parties hereto agree that the provision shall remain in full force
and effect for the greatest time period and in the greatest area
that would not render it unenforceable.
11.2. Sharing of Data.
(a) The Seller and A&P shall have the right for a period of three
years following the Closing Date to have reasonable access to such
books, records and accounts, including financial and tax
information, correspondence, production records and other similar
information as are transferred to the Buyer pursuant to the terms
of this Agreement for the purpose of concluding its business
relating to the Assets and for complying with its obligations
under applicable securities, tax, environmental or other laws and
regulations. The Buyer shall have the right for a period of three
years following the Closing Date to have reasonable access to
those books, records and accounts, including financial and tax
information, correspondence, employment records and other records
which are retained by the Seller pursuant to the terms of this
Agreement to the extent that any of the foregoing relates to the
Assets or is otherwise needed by the Buyer in order to comply with
its obligations under applicable securities, tax, environmental,
employment or other laws and regulations. If the Seller or the
Buyer wishes to dispose of or destroy any such books and records
after the foregoing time periods, such party shall first give
reasonable prior written notice to the other party, and such other
party shall have the right, at its option and expense, to take
possession of the books and records within a reasonable period of
time after receiving such written notice.
(b) The Seller and the Buyer agree that from and after the
Closing Date they shall cooperate fully with each other, at the
Buyer's cost, to facilitate the transfer of the Assets from the
Seller to the Buyer and the operation thereof by the Buyer.
11.3. Cooperation in Litigation.
Each party hereto will fully cooperate with
the other in the defense or prosecution of any
litigation or proceeding already instituted or
which may be instituted hereafter against or
by such party relating to or arising out of
the conduct of the business of the Seller
prior to or after the Closing Date (other than
litigation arising out the transactions
contemplated by this Agreement). The party
requesting such cooperation shall pay the out-
of-pocket expenses (including legal fees and
disbursements) of the party providing such
cooperation and of its officers, directors,
employees and agents reasonably incurred in
connection with providing such cooperation,
but shall not be responsible to reimburse the
party providing such cooperation for such
party's time spent in such cooperation or the
salaries or costs of fringe benefits or
similar expenses paid by the party providing
such cooperation to its officers, directors,
employees and agents while assisting in the
defense or prosecution of any such litigation
or proceeding.
11.4. Gift Certificates. Buyer shall
continue to honor for redemption any gift
certificates issued by Seller (from any of its
stores, including those other than the Stores)
for a period of six (6) months following the
Closing Date, at which time Buyer shall
deliver to Seller an accounting of all such
gift certificates redeemed, and Seller shall
reimburse Buyer for the amounts thereof within
ten (10) days following Seller's receipt of
such accounting. Buyer's accounting pursuant
to this Section 11.4 shall be deemed to be a
representation and warranty by Buyer to Seller
for indemnification purposes under Section
9.1(a).
12. Termination of Agreement
12.1. Termination by Lapse of Time.
Subject to Section 1.8. this Agreement shall
terminate at 5:00 p.m., Madison, Wisconsin
time, on June 30, 2003, if the Closing
contemplated hereby shall not have been
consummated.
12.2. Termination by Agreement of the
Parties. This Agreement may be terminated by
the mutual written agreement of the parties
hereto. In the event of such termination by
agreement, the Buyer and the Parent shall have
no further obligation or liability to the
Seller or A&P under this Agreement, and the
Seller and A&P shall have no further
obligation or liability to the Buyer or the
Parent under this Agreement.
12.3. Termination by Reason of
Breach. Subject to Section 1.8, this
Agreement may be terminated by the Seller, if
at any time prior to the Closing there shall
occur a material failure by the Buyer to
perform its obligations hereunder, and may be
terminated by the Buyer, if at any time prior
to the Closing there shall occur a material
failure by the Seller to perform its
obligations hereunder provided, however, that
such termination shall be preceded by 30 days
prior written notice given to the non-
terminating party and shall provide for a
reasonable opportunity to cure such failure;
provided, further, the circumstances giving
rise to the operation of Section 1.6 (b) and
(c) and Section 1.8 shall not constitute a
material failure unless there is a violation
of any other provision of this Agreement which
caused the operation of such Sections.
Notwithstanding anything to the contrary
contained herein, the Buyer agrees that a
failure on the Buyer's part to consummate the
purchase of the Stores as contemplated by this
Agreement will cause irreparable harm to
Seller and that monetary damages alone will
not be a sufficient remedy for any breach or
termination of this Agreement, and that in
addition to all other remedies the Seller
shall be entitled to specific performance and
injunctive or other equitable relief as a
remedy for any such breach or termination, and
the Buyer waives the securing or posting of
any bond in connection with such remedy. Such
relief shall be in addition to and not in lieu
of any other remedies that may be available,
including an action for the recovery of
damages.
13. Certain Tax Matters.
(a) All sales, use, real estate transfer and other similar taxes
(and any interest, penalties and other additions to such taxes and
or any related costs or expenses) under Wisconsin law, and all
governmental charges, if any, upon the sale or transfer of any of
the Assets hereunder shall be borne equally by the Seller and the
Buyer. The Seller, A&P, the Buyer and the Parent each covenant to
use commercially reasonable efforts to consummate the transactions
contemplated hereby in a manner that minimizes or avoids, if
possible, taxes of the type contemplated by this Section 13.
(b) At the Closing, the Seller and the Buyer shall deliver to
each other such properly completed resale exemption certificates
and other similar certificates or instruments as are reasonably
requested by the parties to claim available exemptions from the
payment of sales, transfer, use or other similar taxes under
applicable law.
14. Brokers. Except as disclosed on Schedule 14, the Seller, A&P, the
Buyer and the Parent each represent and warrant that they have not
engaged any broker or finder or incurred any liability for brokerage
fees, commissions or finder's fees in connection with the transactions
contemplated by this Agreement. The Seller, A&P, the Buyer and the
Parent each agree to indemnify and hold harmless the others against any
claims or liabilities asserted against any of them by any person acting
or claiming to act as a broker or finder on behalf of such person.
15. Notices
Any notices or other communications required or permitted
hereunder shall be sufficiently given if delivered personally or
sent by telex, federal express or other nationally recognized
overnight courier, registered or certified mail, postage prepaid,
addressed as follows or to such other address of which the parties
may have given notice:
To the Buyer or
the Parent: c/o Roundy's, Inc.
23000 Roundy Drive
Pewaukee, Wisconsin 53072
Attn: Edward G. Kitz, Vice President and
Secretary
With a copy to: Whyte Hirschboeck Dudek S.C.
111 East Wisconsin Avenue, Suite 2100
Milwaukee, Wisconsin 53202
Attn: John F. Emanuel
To the Seller or
A&P: c/o The Great Atlantic & Pacific
Tea Company, Inc.
2 Paragon Drive
Montvale, New Jersey 07645
Attn: Chief Financial Officer
Copy: General Counsel
With a copy to: Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Attn: Gary A. Brooks, Esq.
Unless otherwise specified herein, such notices or other
communications shall be deemed received on (a) the date delivered
(or on which delivery is refused), if delivered personally, (b)
the business day following delivery to an overnight courier, if
sent by overnight courier, or (c) the date of actual receipt, if
sent by any other method.
16. Consent to Jurisdiction
The Buyer, the Seller, A&P and the Parent each irrevocably submit
to the exclusive jurisdiction of (a) the state courts of the State
of Wisconsin, county of Dane, and (b) the United States District
Court for the Western District of Wisconsin, for the purposes of
any suit, action or other proceeding arising out of this Agreement
or any transactions contemplated hereby.
17. Successors and Assigns
This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns,
except that the Buyer, the Seller, A&P and the Parent may not
assign their respective rights or obligations hereunder without
the prior written consent of the Buyer, in the case of an
assignment by the Seller or A&P, or the Seller, in the case of an
assignment by the Buyer or the Parent. Any assignment in
contravention of this Section shall be void.
18. Entire Agreement; Amendments; Attachments; Waivers
(a) This Agreement, all Schedules and Exhibits hereto, all
agreements and instruments to be delivered by the parties pursuant
hereto and the Confidentiality Agreement represent the entire
understanding and agreement between the parties hereto with
respect to the subject matter hereof and supersede all prior oral
and written and all contemporaneous oral negotiations, commitments
and understandings between such parties. The Buyer, the Seller,
A&P and the Parent may amend or modify this Agreement, in such
manner as may be agreed upon, by a written instrument executed by
the Buyer, the Seller, A&P and the Parent.
(b) If the provisions of any Schedule or Exhibit to this
Agreement are inconsistent with the provisions of this Agreement,
the provision of the Agreement shall prevail. The Exhibits and
Schedules attached hereto or to be attached hereafter are hereby
incorporated as integral parts of this Agreement. Any matter
disclosed on any Schedule to this Agreement shall be deemed to
have been disclosed on all other Schedules to this Agreement to
the extent applicable thereto.
(c) Waiver of any term or condition of this Agreement by any
party shall be effective if in writing and shall not be construed
as a waiver of any subsequent breach or failure of the same term
or condition, or a waiver of any other term of this Agreement. No
failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power
or privilege.
19. Expenses
Except as otherwise expressly provided herein, the Buyer, the
Seller, A&P and the Parent shall each pay their own expenses in
connection with this Agreement and the transactions contemplated
hereby.
20. No Third Party Beneficiaries
This Agreement is for the sole benefit of the parties hereto and
their permitted assigns and nothing herein expressed or implied
shall give or be construed to give to any person or entity, other
than the parties hereto and such assigns, any legal or equitable
rights hereunder.
21. Governing Law
This Agreement shall be governed by and construed in accordance
with the internal laws of the State of Wisconsin applicable to
agreements made and to be performed entirely within the State of
Wisconsin, without regard to the conflicts of law principles
thereof.
22. Section Headings
The section headings are for the convenience of the parties and in
no way alter, modify, amend, limit or restrict the contractual
obligations of the parties.
23. Severability
The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any
other provision of this Agreement.
24. Counterparts
This Agreement may be executed in one or more counterparts, each
of which shall be deemed to be an original, but all of which shall
be one and the same document.
25. Terms Defined in This Agreement.
The following capitalized terms used herein are defined in the
indicated sections.
Accounts Receivable 1.1(b)(iv)
Affiliate 11.1(a)
A&P First Paragraph
Assets 1.1(c)
Assignment 1.4(b)
Assumed Contract 2.6(b)(i)
Assumed Liabilities 1.4(a)
Base Purchase Price 1.3(a)
Buyer First Paragraph
Cash Consideration 1.3(a)
Closing 1.1(a)
Closing Date 1.6
Commitment 3.5(c)
Competing Business 11.1(c)
Confidentiality Agreement 4.1
Contract Rights 1.1(a)(iii)
Contracts 2.6(a)
Damage 10.1(a)
Delayed Liquor Closing 1.6(b)
Delayed Pharmacy Closing 1.6(c)
Delayed Store 1.8
Encumbrances 2.3(a)
Environmental Laws 2.7(b)(iii)
Excluded Assets 1.1(b)(xvii)
Excluded Inventory 1.1(b)(iii)
Fee Encumbrances 2.3(c)
Fixed Assets 1.1(a)(v)
Form Estoppel Certificate 5.10
Governmental Entity 2.8
Guarantee 1.4(c)
Hazardous Substance 2.7(b)(iv)
Indemnified Party 9.3(a)
Indemnifying Party 9.3(a)
Initial Closing 1.8
Instrument of Assumption 1.4(a)
Intangible Property 1.1(b)(i)
Inventory 1.1(a)(i)
Inventory Count 1.7(b)(i)
Inventory Date 1.7(b)(i)
Inventory Service 1.7(b)(i)
Inventory Valuation 1.7(b)(ii)
Landlords 5.10
Lease Estoppel Certificate 5.10
Leases 2.5(a)
License Agreement 1.1(b)(i)
Liquor Inventory 1.6(b)
Liquor Valuation 1.6(b)
Losses 9.1
Material Adverse Effect 2.2
Parent First Paragraph
Permitted Encumbrances 2.3(c)
Pharmacy Assets 1.9
Pharmacy Assignee 1.9
Pharmacy Business 1.6(c)
Pharmacy Inventory 1.6(c)
Pharmacy Inventory Valuation 1.6(c)
Rent and Tax Adjustment 1.7(a)(i)
Seller First Paragraph
SNDAs 5.10
Store 2.5(a)
Subsequent Closing 1.8
Supplies 1.1(a)(ii)
Taxes 1.1(b)(xii)
Third Party Claim 9.3(a)
WARN Act 5.4(b)
(end of page)
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of and on the date first above written.
KOHL'S FOOD STORES, INC.
By:
Name:
Title:
THE GREAT ATLANTIC & PACIFIC TEA COMPANY,
INC.
By:
Name:
Title:
THE COPPS CORPORATION
By:
Name:
Title:
ROUNDY'S, INC.
By:
Name:
Title:
LIST OF OMITTED EXHIBITS AND SCHEDULES TO ASSET PURCHASE AGREEMENT DATED
FEBRUARY 21, 2003, BY AND AMONG ROUNDY'S, INC., THE COPPS CORPORATION,
KOHL'S FOOD STORES, INC. AND THE GREAT ATLANTIC & PACIFIC TEA COMPANY, INC.
Exhibits
A - Form of Assignment and Assumption Agreement
B - Form of Guarantee
Schedules
1.1(b)(xvi) - Excluded Assets
1.5 - Allocation of Purchase Price
1.6(c) - Delayed Pharmacy Closing
1.7(b) - Inventory Procedures and Valuation
2.2 - Seller Consents, Waivers and Approvals
2.3 - Encumbrances
2.5 - Stores and Leases
2.6 - Contracts
2.7(a) - Permits
2.8 - Claims, Litigation, Disputes
3.2 - Buyer Consents, Waivers and Approvals
3.3 - Regulatory Approvals
5.2 - Material Changes
7.3 - Consents of Lenders, Lessors and Other Third
Parties
14 - Brokers
THE ABOVE-DESCRIBED EXHIBITS AND SCHEDULES ARE OMITTED FROM THIS FILING
PURSUANT TO ITEM 601(B)(2) OF REGULATION S-K. THE REGISTRANT, ROUNDY'S,
INC. HEREBY AGREES TO FURNISH A COPY OF SUCH EXHIBITS AND SCHEDULES TO THE
COMMISSION UPON REQUEST.