Exhibit 10.2
SUPPLY AGREEMENT
THIS SUPPLY AGREEMENT (the "Agreement") is made as of the 3rd day June,
1991 by and among:
SHOPPERS FOOD WAREHOUSE CORP.,
a Delaware corporation,
SHOPPER FOOD WAREHOUSE VA CORP., a Virginia
corporation and SHOPPERS FOOD WAREHOUSE MD CORP., a
Maryland corporation
(hereinafter, collectively referred to as "SFW")
and
SUPER RITE FOODS, INC.,
a Delaware corporation
(hereinafter referred to as "Super Rite")
1. Term of Agreement and Applicability.
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1.1 Except as otherwise set forth herein, this Agreement shall become
effective upon the date on which the transactions contemplated by that Asset
Purchase Agreement of even date herewith, by and among SFW, on the one hand,
Super Rite Foods Holdings Corporation, Super Rite, Food-A-Rama, Incorporated,
Midway Markets of Delaware, Inc., and Food-A-Rama-G.U., Inc., on the other (the
"Purchase Agreement"), are consummated: Unless earlier terminated or extended
in accordance with the provisions hereof, this Agreement shall terminate at
midnight, Washington, D.C. time on the 90th day (the "Termination Date")
following the fourth anniversary of the date (the "Initiation Date") on which
SFW shall have first notified Super Rite in writing, that Super Rite has become
the "substantially exclusive supplier" of those Products described in paragraph
2.3 hereof to at least 10 of the grocery stores currently operated by SFW, plus
those Supermarkets purchased pursuant to the Purchase Agreement.
Notwithstanding this paragraph 1.1., those provisions set forth in paragraphs 19
through 22 hereof shall be effective as of the date hereof and shall survive any
termination hereof. All references to the "term of this Agreement" shall
include the original term and all extensions thereof.
1.2 The parties shall assume their Product purchase obligations
pursuant to this agreement:
(a) With respect to the Supermarkets (as defined in the Purchase
Agreement) that SFW purchases pursuant to the Purchase Agreement,
beginning as of the day after the Closing Date (as defined in the
Purchase Agreement); and
(b) With respect to all other stores owned by SFW, SFW may begin
to purchase certain Products, selected by SFW, in its sole discretion,
from Super Rite beginning as of the day after the Closing Date, and
shall cooperate with Super Rite to effect an orderly transition of the
supply requirements of SFW's other grocery stores from SFW's current
primary supplier to Super Rite, provided that SFW's obligations under
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paragraph 2.3 hereof to use Super Rite as its substantially exclusive
supplier for all grocery stores that SFW operates shall not commence
until the date six months after the Closing Date.
2. Provision of Groceries and Other Products and Price Formulas.
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2.1 Super Rite hereby agrees to sell to SFW and SFW hereby agrees to
purchase from Super Rite, certain products for resale ("Product") as may from
time to time be ordered by SFW, all in accordance with and subject to the terms
and provisions of this Agreement. The applicable price and fee formulas for the
categories of products and merchandise indicated shall apply as follows:
Category Price to SFW
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Dry Grocery - Cost Plus 2.5% (except as set
forth in paragraph 2.3.4 below)
Frozen - Cost Plus 4.0%
Dairy Products - Cost Plus 3.0%
(other than ice
cream)
Packaged Meats - Cost Plus 3.5%
Bake-Off Items - Cost Plus 4.0%
Ice Cream - Cost Plus 6.5%
Cigarettes - State minimum wholesale price,
or, if none, Cost
Health and Beauty - Rite-Aid's Cost
Aids (including Plus 3.0%
non-food items)
("HBA")
2.1.1 The fees and prices set forth above are maximum fees
and prices and shall apply during the term of this
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Agreement and during any extensions thereof pursuant to paragraph 17 hereof.
2.1.2 All references to "Cost" in this Agreement refer to
the actual price paid or payable by Super Rite (or Rite Aid) to its source of
supply for such Products (together with any freight cost actually incurred by
Super Rite for shipment to its Harrisburg, Pennsylvania warehouse), net of all
credits and other deductions (including those described in paragraph 6.3.1
hereof, but without giving effect to customary discounts or concessions provided
in consideration of prompt payment as described in paragraph 6.3.2 hereof).
2.1.3 Super Rite shall sell all Products that SFW requires
for all grocery stores operated, directly or indirectly, by SFW, including the
full line of HBA (including housewares and non-food items) that is currently
available to Rite Aid retail stores from Rite Aid's warehouse. Super Rite
represents and warrants to SFW that it has entered into an agreement with Rite
Aid Corporation pursuant to which it will be able to provide HBA (including non-
food items) to SFW during the term of this Agreement at the price set forth in
paragraph 2.1 hereof, provided that any SFW order for any HBA item is for not
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less than six units of such item.
2.2 Notwithstanding the foregoing fee schedule, Super Rite
acknowledges that two of SFW's existing stores are in need of special
consideration due to extraordinary competitive pressures in the local
marketplace. In order to assist SFW in its efforts to meet such competition,
Super Rite agrees that the following reduced fee schedule for dry grocery,
frozen and dairy products shall be applicable to those two stores:
Dry Grocery - Cost Plus 2.1%
Frozen - Cost Plus 3.5%
Dairy Products - Cost Plus 2.5%
(other than ice
cream)
Said reduced schedule shall remain in effect until such time as Super Rite and
SFW shall reasonably agree that such extraordinary competitive conditions no
longer exist. Super Rite agrees to give favorable consideration to future
requests from SFW for comparable concessions to the extent that SFW encounters
similar extraordinary competitive conditions elsewhere in its system.
2.3 It is the intention of the parties hereto that, except as set
forth in this Agreement, SFW shall rely upon and utilize Super Rite as its
substantially exclusive supplier for non-perishable dry-grocery, frozen, and
dairy products (other than ice cream), and for HBA for all supermarkets owned or
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operated by SFW within Super Rite's marketing area (which area shall not include
those areas south of Richmond, Virginia).
2.3.1 For purposes of this Agreement, the term "substantially
exclusive supplier" means that SFW will rely upon Super Rite for the
Products described in paragraph 2.3 in the same manner and to the same
extent that it has traditionally relied upon its current primary supplier,
consistent with SFW's past practices. Nothing herein shall require SFW to
purchase produce, meat, or any other Products from Super Rite, except to
the extent that it has been SFW's past practice to purchase such Products
from its current primary supplier.
2.3.2 Notwithstanding the foregoing or Title II of the
Commercial Law section of the Annotated Code of Maryland, and the case law
interpreting these provisions, SFW shall not be obligated under any
circumstances to purchase any Product from Super Rite in any quantity
solely by virtue of a pattern of purchases by SFW of such Product from
Super Rite or other course of dealing between the parties hereto. In
addition, SFW shall not be under any obligation to purchase the same amount
of Product, or a similar amount of Product, during any period as a
consequence of SFW's purchases of such Products from Super Rite during any
previous period.
2.3.3 Notwithstanding any other provision of this Agreement,
Super Rite acknowledges that certain current practices of SFW include the
purchase of Products from other suppliers through direct buys, direct
purchases of diverted products, purchase of show merchandise, direct
purchases from manufacturers and similar activities, that SFW operates its
own limited grocery warehouse, and that SFW shall be permitted to continue
such practices during the term of this Agreement.
2.3.4 SFW has regularly purchased Products through certain
brokers located in the Washington, D.C. metropolitan area and elsewhere
(the "Current Brokers"). To encourage SFW to use certain other brokers
with whom Super Rite has established relationships or who are so otherwise
selected by Super Rite (the "Other Brokers"), Super Rite agrees to reduce
SFW's price for all dry grocery Products purchased from Super Rite from the
maximum price otherwise applicable under paragraph 2.1 hereof to a price
equal to Super Rite's Cost Plus 2.25% (subject to such other adjustments as
may be applicable hereunder) for so long as SFW permits Super Rite to use
the Other Brokers (and not Current Brokers) in connection with the Product
purchased and supplied by Super Rite. SFW agrees that Super Rite may use
the Other Brokers for purchase of such Products until its has otherwise
notified Super Rite pursuant hereto. SFW
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may discontinue its ordering of Products from Other Brokers upon notice to
Super Rite. After the effective date of such discontinuance, SFW's price
for dry grocery Products shall be determined in accordance with paragraph
2.1 or 2.2 of this Agreement, as appropriate, until such time as SFW
notifies Super Rite that it will permit Super Rite to use the Other
Brokers. Nothing herein shall limit SFW's ability to elect to use the
Current Brokers (and not the Other Brokers) or the Other Brokers (and not
the Current Brokers), as the case may be, from time to time or the number
of times that SFW may change from one to another.
2.4 In addition to any other price adjustment to which SFW may be
entitled, Super Rite's fee used in calculating the price to SFW for all Products
ordered by a full pallet-loads (or any multiples thereof) shall be reduced by
.43 percentage points from the fee otherwise applicable pursuant to paragraphs
2.1 through 2.3 hereof (e.g., if the fee otherwise applicable were 2.25%, the
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pallet-load fee would be 1.82%). The reduction provided by this paragraph shall
be reflected on the applicable Super Rite invoice for the pallet-load
merchandise. Super Rite Shall provide SFW with a monthly written report of such
pallet allowances on a store-by-store basis.
2.5 Except as expressly provided by this Agreement, the price payable
by SFW for Products hereunder shall not be subject to any increase or upward
adjustment, including (without limitation) pallet charges, label charges and
fuel or overhead surcharges.
3. Ordering Obligations of SFW.
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3.1 SFW shall place orders with Super Rite for such Products as it
may require as contemplated by this Agreement, at such times as are consistent
with the conduct of its business, and Super Rite shall deliver the Product
ordered to the locations specified by SFW with such orders with respect to SFW's
supermarkets located within Super Rite's marketing area, which area shall not
include those areas south of Richmond, Virginia. SFW shall, to the extent
practical, endeavor to place orders for dry grocery Products in full-trailer
quantities.
3.2 After SFW places any order for special order merchandise with
Super Rite and prior to Super Rite's receipt of such merchandise, SFW shall
provide Super Rite with delivery instructions therefor. Such delivery
instruction shall provide for the delivery of all such merchandise to SFW within
not more than thirty (30) days (or, in the case of HBA, 16 weeks) after receipt
thereof by Super Rite. Special order merchandise shall consist of (without
limitation) in-and-out merchandise not regularly stocked by SFW. The parties
recognize that a 100% adherence to the provisions of this paragraph 3.2 would be
difficult and it is the intent of the parties to work
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cooperatively with each other in the event of less than 100% compliance at any
given time.
3.3 Upon receipt of any order from SFW for Product required for
planned sales or promotions, Super Rite shall use its reasonable best efforts to
obtain the Product so ordered to ensure that such Product is delivered to SFW at
the time requested by SFW so as to enable SFW to proceed with the planned sale
or promotion.
4. Cooperation on Delivery.
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4.1 Super Rite shall deliver all orders promptly and in accordance
with the schedule attached as Exhibit A hereto, as such schedule may be modified
as reasonably requested by SFW.
4.2 Super Rite shall cause its delivery driver to assist SFW's
personnel in unloading all Product deliveries. The delivery driver shall not be
required to assist in breaking down pallets or stocking Product in the stores.
The delivery driver shall verify each delivery against the delivery documents on
a pallet-by-pallet basis and shall execute a copy of the delivery documents upon
the conclusion of the delivery indicating any shortages or overages of pallets
delivered from the number of pallets of Product as indicated on the delivery
invoice. SFW shall have until the later to occur of (i) 11:00 A.M. of the
morning following delivery, or (ii) 24 hours after the time at which the
delivery has been completed to notify Super Rite by facsimile transmission (or
such other methods as the parties may adopt) of any shortages or overages, mis-
selects and damaged Product as determined by its unloading and inspection of the
Product contained in the pallets so delivered.
5. Receiving Obligations of SFW.
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5.1 SFW shall endeavor to provide sufficient personnel to assist the
Super Rite delivery driver in unloading all driver deliveries so that such
delivery and unloading may be completed in a reasonably expeditious fashion,
recognizing that it is SFW's practice to unload perishable merchandise on a
first-priority basis, and all other merchandise in the order in which it arrives
at SFW's loading docks. SFW shall instruct its personnel to verify each
delivery against the pallet count set forth in the delivery documents and to
acknowledge delivery of all pallets by executing a copy of the delivery
documents.
6. Purchase Process for Groceries, Frozen and Dairy Products.
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6.1 [Deleted]
6.2 [Deleted]
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6.3 For the purposes of this agreement "Product Cost" or "Super
Rite's Cost", as described in paragraphs 2.1 and 2.2, shall be subject to the
following additional adjustments:
6.3.1 (a) Super Rite's Cost used in calculating the fees and
prices chargeable to SFW for Products shall be reduced by all
manufacturer's discounts, allowances, rebates and bill-backs
(including, without limitation, full-trailer discounts (super-load
discounts) and back-haul allowances (net of the actual cost of back-
haul)) allowed to Super Rite prior to calculating the fee chargeable
to SFW. Super Rite hereby agrees to select chase allowances in
connection with its products purchases in lieu of coupon or other
manufacturer, or supplier allowances where such option is available,
unless otherwise instructed by SFW. Super Rite's decision to backhaul
shall not result in a larger freight charge to SFW than would have
applied if the supplier/manufacturer had selected the carrier and the
quantities were those that Super Rite would have ordered if it had not
used its own backhaul equipment.
(b) Super Rite shall purchase at allowance prices on
behalf of SFW all Products designated in writing from time to time, by
SFW, in a manner consistent with SFW's past practices with its current
primary supplier. SFW may, from time to time, modify such designation
of Products by giving written notice to Super Rite. The Products so
designated from time to time for purchase by Super Rite, are referred
to as "Allowance Items." SFW shall order, and Super Rite shall
purchase and maintain in stock sufficient quantities of the Allowance
Items to enable SFW to purchase its requirements of the Allowance
Items from the beginning of an allowance period until the commencement
of the next allowance period (i.e., bridging deals). Subject to
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paragraph 2.3.3., during any allowance period and the bridging period
thereafter, SFW shall purchase its requirements for Allowance Items
from Super Rite. For purposes of calculating the price to SFW for
such Allowance Items, Super Rite's Cost therefor shall be deemed to be
the allowance price available at the commencement of the applicable
allowance period (subject to all other adjustments thereto
contemplated by this Agreement), without regard to the actual price
payable by Super Rite for the Allowance Items so purchased if such
price exceeds the allowance price available. If Super Rite is unable
to purchase any Allowance Items from allowance period to allowance
period due to changes in promotional frequency, Super Rite shall so
notify SFW promptly, so that SFW and Super Rite may agree upon a
mutually acceptable accommodation.
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(c) Notwithstanding clause 6.3.1(b), SFW shall have the
right to purchase Allowance Items directly from the manufacturer or
supplier thereof, provided that SFW shall advise Super Rite promptly
of all direct orders of Allowance Items.
(d) SFW shall have the right to select certain merchandise
for sale through its advertisements. Super Rite shall purchase all
Products so designated in a quantity specified by SFW for a period
beyond the ad period. With respect to such designated items, Super
Rite shall purchase a sufficient quantity to supply such Products in
the quantity so specified by SFW and shall continue to sell the
specified quantity of such Products to SFW for the ad period price for
the period requested by SFW, which period shall not be more than four
(4) weeks (or sixteen (16) weeks in the case of HBA) beyond the ad
period, during which four-week (or sixteen-week) period SFW agrees
that it shall purchase the entire quantity of such Products so
specified by SFW.
6.3.2 Super Rite shall be entitled to deduct from its invoice
costs amounts received from its suppliers (or discounts from the
invoices received from its suppliers) in the nature of "cash
discounts" in consideration of prompt payment by Super Rite thereon
without any obligation to deduct the same from Super Rite's Product
Cost (as defined in paragraph 2.1.2 hereof) for purposes of
calculating the price of Product payable by SFW pursuant to paragraph
2.1, 2.2, 2.3 or 2.4 hereof. In any instance in which the "cash
discount" allowance by any supplier to Super Rite is less than two
percent (2%), then Super Rite's Cost shall be calculated as though
such supplier had provided Super Rite with a 2% cash discount.
6.3.3 Super Rite may not increase the price charged to SFW for
any Product resulting from an increase in Super Rite's Cost for such
Product unless Super Rite shall have first given SFW not less than two
(2) weeks written notice of any such Cost increase for Product;
provided, however, that the foregoing shall not apply to any increase
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in Super Rite's Cost for such Product if Super Rite has not received
at least two weeks' notice of any price increase for such Product from
its supplier (or the manufacturer), in which case Super Rite shall
give the same notice to SFW as it received from its supplier (or the
manufacturer) before it may increase SFW's price for such Product.
7. Terms of Billing.
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7.1 Super Rite shall provide an invoice to each SFW store at the time
of delivery. Receipt of the delivery shall be acknowledged in writing by SFW
personnel as contemplated by paragraph 4.2 and shall be signed by the Super Rite
delivery driver.
7.2 Super Rite shall submit a statement to SFW at SFW's principal
executive office each week for the Product delivered to each of SFW's stores
during the preceding "Sales Week." For purposes of this Agreement, a "Sales
Week" shall be that period beginning at 12:01 A.M. each Sunday and ending at
midnight on each succeeding Saturday. Each statement so submitted shall be
computed in accordance with the applicable provisions of paragraphs 2 and 6
hereof. Not later than each Wednesday following each Sales Week, Super Rite
shall provide SFW microfiche summaries of all invoices for Product delivered to
SFW during such Sales Week, organized on a store-by-store basis.
7.3 SFW shall receive credits against amounts due to Super Rite,
including, but not limited to, credits for product billed but not received, mis-
selects, delivery shortages and Product damaged in transit. SFW shall also
receive credits against amounts due to Super Rite for amounts owned to SFW by
any Broker or any manufacturer for allowance monies, provided SFW notifies Super
Rite of such amounts and agrees to cooperate with Super Rite in its efforts to
collect such amounts from such Broker or manufacturer.
8. Terms of Payment.
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8.1 No later than 11:00 A.M. on the 10th day following the last day
of each Sales Week (or, if later, the seventh business day after the date on
which Super Rite shall have delivered the statement for any Sales Week), SFW
shall make available at Super Rite Foods, Inc. Harrisburg Area office a check
representing payment for the weekly statement relating to such Sales Week.
9. Other Services To Be Provided By Super Rite.
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9.1 Super Rite, at its own cost and expense, shall provide the
following to SFW during the term of this Agreement:
9.1.1 Super Rite shall assign an account manager, satisfactory
to SFW, to call upon the SFW headquarters on a regular basis to coordinate
service needs, product procurement needs, delivery schedules and similar
operational issues for SFW.
9.1.2 Super Rite shall provide to SFW not less than twelve (12)
free, four-color rotogravure circulars per year at the times designated by
SFW for distribution by SFW, so long as vendors continue to provide "roto-
allowances." Additional rotogravure circulars shall be provided as the
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parties hereto may agree. Super Rite and SFW shall cooperate in
determining the content and production of such circulars, provided that SFW
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shall make the final determination thereon (including final item selection
and approval). SFW shall provide all retail prices for inclusion in such
circulars directly to the printer designated by Super Rite, which printer
shall be reasonably satisfactory to SFW. Super Rite shall take such action
as may be necessary to cause the printer thereof to protect the retail
price information from disclosure to Super Rite or any other person prior
to the date that such circular is distributed. Super Rite also shall
arrange for the printer of such circular to provide a proof thereof to SFW
to permit SFW to receive such proof and communicate its changes or
corrections to the printer in sufficient time to incorporate them in the
circular as printed. From time to time, Super Rite shall also provide SFW
with promotional items such as cookbooks, tabloids, etc. as may be mutually
agreed to by Super Rite and SFW. Super Rite shall deliver all circular and
other materials described in this paragraph 9.1.2 to such newspapers,
mailing houses and other and distributors, and in such quantities, as SFW
may reasonably designate.
9.1.3 Super Rite shall provide to SFW on-line capability to
access Super Rite's main-frame computer for the purpose of reviewing
Product cost and availability of SFW's reserves and Super Rite's stock. SFW
shall be responsible for all costs for day-to-day activity of any terminals
located at SFW's office, including but not limited to maintenance, but
excluding line charges, which shall be borne by Super Rite. At least once
each Sales Week, Super Rite shall provide to SFW by mag tape or tape-to-
tape transmission (at SFW's option) Product cost figures for use on SFW's
computer. The Product cost information so provided shall include, without
limitation, Super Rite's product code numbers, item UPC numbers (not case
numbers), pack and size data, cost allowances and information concerning
"on deal" products. Super Rite shall prepare such reports using a format
reflecting SFW's 52-week velocity and the balance on hand of Products in
SFW's reserve. The on-line hook-up shall also be arranged so as to permit
SFW to place Product orders directly on-line.
9.1.4 On a weekly basis, Super Rite shall provide to SFW a
product velocity report for the preceding Sales Week's purchases by SFW on
a store-by-store basis. Each velocity report shall include, without
limitation, data for the previous Sales Week, quarter-to-date data, and
data for each of the four quarters preceding the current quarter.
9.1.5 From time to time, as may be requested by SFW, Super Rite
shall use its reasonable best efforts to provide to SFW trailers for the
temporary storage of
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equipment and/or trucks for the delivery of equipment to store locations.
9.1.6 Super Rite shall provide "drop" trailers for delivery as
SFW may request.
9.1.7 It is Super Rite's policy when at all possible to permit
special add-on items to orders for next day delivery and Super Rite shall
provide that same service to SFW.
9.1.8 Super Rite shall stock and make available for purchase by
SFW all items of Product that may be requested by SFW. Super Rite shall not
delete from inventory or discontinue any Product that SFW offers for sale
in any of its stores without SFW's prior consent.
10. SFW Store Expansion and New Store Inventory.
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10.1 To the extent practical, SFW shall provide to Super Rite not
less than 180 days' notice of the commencement of operations of any new SFW
store to which this Agreement would apply.
10.2 Super Rite shall maintain and/or adjust its capability to
supply SFW as SFW may request, for such and at such additional locations as SFW
may operate.
10.3 Super Rite shall deliver all orders for Product to existing
stores within 24 hours of receipt of an order therefor, and within twelve (12)
hours following the receipt of such orders for any new SFW stores not previously
supplied by Super Rite (and for any substantially remodeled stores) prior to and
during the first week of operation of each new or remodeled store. "Overflow"
orders shall be delivered on the same day as "full-trailer" orders, or on the
next day, provided such next-day delivery is made no later than eight hours
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after delivery of the "full-trailer" order. The schedule for all multiple order
deliveries shall be approved, in advance, by SFW. The operation of this
paragraph 10.3 shall require some reasonable advance coordination between the
parties as to the period during the day during which orders will be placed.
10.4 With respect to new or substantially remodeled stores opened
(or reopened) by SFW during term of this Agreement, Super Rite agrees to provide
the initial pre-opening inventory for such store(s) of Products normally
purchased by SFW through Super Rite upon the following terms and conditions:
(i) the purchase price for such inventory shall be payable, in full, on the
first anniversary of the date SFW commences retail operations at such new or
remodeled store; (ii) during the first 90 days of the new or remodeled store's
operations, no interest shall accrue on the unpaid balance of the stock in
inventory; and (iii) after the 90th day of such new or remodeled store's
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operation, the unpaid balance of the inventory purchase price shall accrue
simple interest, at the rate of 6.75% per annum from such 90th day until the
outstanding balance is paid in full, such interest to be payable monthly in
arrears commencing on the 120th day after the date on which SFW commences (or
recommences) operations at such new or remodeled store.
11. Super Rite's Competitive Obligation.
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11.1 Super Rite agrees that during the term of this Agreement it
will be and will remain competitive with similar wholesalers as to Product cost,
services and service level (including percentage accuracy in delivering Products
ordered and timeliness of delivery). The measure of competitive performance
shall not necessarily be deemed to relate to an individual product or item or an
individual category (provided that, e.g., uncompetitive pricing of an individual
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category of Product may be sufficient to make Super Rite uncompetitive), but
generally to the overall performance of Super Rite, including its performance
with regard to Product cost, services and service level as compared with other
such wholesalers. In addition to Super Rite's obligation to remain competitive
pursuant to this paragraph 11.1, Super Rite shall provide SFW with a service
level during the term of this Agreement that equals or exceeds the service level
provided by SFW's current primary supplier during the 12 months preceding the
date primary supplier during the 12 months preceding the date hereof. For the
term of this agreement, fees shall remain unchanged from those set forth in
accordance with paragraph 2 hereof, except as provided by paragraph 11.2 hereof.
11.2 Super Rite further agrees that it shall not enter into any
supply agreements or other arrangements (or series of agreements or
arrangements) with any customer upon terms that, taken as a whole, are more
favorable to such customer than those provided to SFW pursuant to this Agreement
without providing the same terms to SFW.
12. [Deleted]
13. Additional Understandings.
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13.1 Any Product that is available to Super Rite only in limited
quantities that are insufficient to satisfy the demands of all of Super Rite's
customers, shall be allocated among SFW and Super Rite's other customers during
such period of limited supply, based upon the ratio of each customer's volume
use of such Product to the total volume use of such Product by all Super Rite
customers for the three-month period prior to the commencement of such shortage,
as reflected on Super Rite's records, provided that if any such allocation is
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required to be made prior to 90 days following the date on which SFW has begun
to rely upon Super Rite as the substantially exclusive supplier for all of SFW's
stores, the allocation to SFW shall be based
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upon SFW's records of its purchases of such Product from its previous supplier
to the extent necessary to provide a 90-day purchasing history for SFW.
13.2 Either party shall notify the other of any event,
occurrence, circumstances or activity which may cause an interruption in the
normal procedures or time requirements as set forth in this Agreement. Whether
or not any such notice is given by Super Rite, nothing in this Agreement shall
prevent SFW from purchasing Product from any source in the event Super Rite
shall be unable or unwilling to deliver such Product to any SFW store in
accordance with this Agreement, without prejudice to SFW's rights hereunder.
13.3 Termination. In addition to any rights that SFW may
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otherwise have at law or otherwise, upon the occurrence of any "Termination
Event" (as defined below), SFW shall have the right to terminate this Agreement
by giving Super Rite written notice of its election to terminate this Agreement
(the "Termination Notice"), provided, that SFW shall have first given Super Rite
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written notice of the occurrence of a Termination Event not less than fifteen
(15) days prior to the giving of the Termination Notice. Any such termination
shall be in addition to, and not in lieu of, any other remedies that SFW may
have, in law or at equity, against Super Rite arising out of, or in connection
with, any action or occurrence that causes or constitutes a Termination Event,
or otherwise. The provisions of paragraphs 19 through 22 shall survive any
termination of this Agreement. This Agreement shall terminate upon the giving
of the Termination Notice.
13.3.1 The term "Termination Event" means the occurrence of any
one or more of the following:
(a) There shall be a breach by Super Rite or any
affiliate thereof of any material obligation under the Purchase
Agreement or any agreement or undertaking delivered in connection
therewith or contemplated thereby and, if such breach is capable of
being cured, such breach shall not have been cured (or Super Rite
shall have commenced diligent efforts to cure) within twenty (20) days
of SFW's giving notice of such breach in each case in a manner
reasonably satisfactory to SFW;
(b) Super Rite shall have failed to perform any material
obligation under this Agreement or shall otherwise have breached or
violated any material provision hereof;
(c) Super Rite shall have failed to be competitive with
regard to Product cost, service and service level as required by
paragraph 11.1 hereof or
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shall fail to extend to SFW the terms provided to any other customer
as required by paragraph 11.2 hereof;
(d) Super Rite shall have discontinued operations, become
insolvent, initiated (or become the subject of) any proceeding in
bankruptcy or otherwise become unable to continue to act as SFW's
substantially exclusive supplier of Product (or HBA, as the case may
be);
(e) Rite Aid shall have become insolvent, unless Super Rite
makes other arrangements, reasonably acceptable to SFW, to provide HBA
at prices no greater than, and providing services and a service level
comparable to, those provided by Rite Aid.
(f) Super Rite (or any entity in which Super Rite or any
affiliate of Super Rite has an economic interest, other than as an
unaffiliated, arms-length wholesale supplier) (a "Super Rite Entity")
shall have, obtain or acquire any economic interest in any grocery
store located within 10 miles of any grocery store owned or operated
by SFW or in which SFW has any economic interest (or that would
otherwise be subject to the terms of this Agreement), including any
Supermarket as to which SFW has entered into a lease, purchaser
agreement or other arrangement to operate such Supermarket (an "SFW
Supermarket"), other than the BASICS Supermarket located at the
intersection of Central Avenue and Enterprise Road, Prince Georges
County, Maryland (for so long as Super Rite shall own such
supermarket, but Super Rite may not operate such supermarket as a
supermarket beyond the expiration of the current term of the lease for
such supermarket, without renewals, extensions or optional periods,)
or an "Existing Store". A grocery store shall be an Existing Store if
(i) such store was in full operation and any Super Rite Entity had an
economic interest in such store (or, prior to the date on which SFW
shall have opened or entered into a lease or purchase agreement
concerning such store, a Super Rite Entity shall have given SFW prior
written notice of its intent to enter into a lease or purchase
agreement for such store, signed such lease or purchase agreement
within 30 days of such notice and diligently proceeded to commence
operation of such store as soon as commercially possible (hereafter
the "Proposed Store Procedure")): (x) as of September 1, 1991 or (y)
as of the date on which SFW first opened, or acquired, the applicable
SFW store or entered into a lease or other agreement to do so; (ii)
such store is located in the Baltimore Metropolitan Area (defined
below), notwithstanding the proximity of such store to an SFW store;
(iii) such store is located in the "Intersection
14
Zone" (consisting of the area within the cross-hatched section of the
map attached hereto as Exhibit B (the "Map"), provided that Super Rite
--------
shall have first offered such store to SFW upon the same lease terms
as are available to Super Rite in accordance with the procedure
described in Section 10.21 of the Purchase Agreement, and SFW shall
have refused Super Rite's offers with respect to such store in
accordance with those provisions; (iv) such store is not located
within the Baltimore Metropolitan Area, the Intersection Zone, the
D.C. Metropolitan Area (as defined in the Purchase Agreement), or the
Eastern Shore of Maryland, is located more than five miles from any
SFW Supermarket, and Super Rite shall have followed the Proposed Store
Procedure with respect to a Proposed Store; or (v) such store is
located within the Washington, D.C. Metropolitan Area, was acquired by
Super Rite as part of a single acquisition of a number of stores, of
which a substantial majority of the stores so acquired are not in the
Washington, D.C. Metropolitan Area, provided, that Super Rite shall
--------
have first offered to sell such store to SFW in the manner described
in Section 10.21 of the Purchase Agreement, affording SFW the
opportunity to acquire any or all of such stores that are located
within the Washington, D.C. Metropolitan Area at a price equal to the
pro rata portion, applicable to the number of stores so acquired by
--- ----
SFW, of the purchase price otherwise payable by Super Rite for the
entire acquisition; or
(g) There shall be a "Change of Control" over Super Rite.
For purposes of this clause, a "Change of Control" shall have occurred
if neither Alex Grass nor Martin Grass shall be the chairman of the
board or the chief executive officer of Super Rite and of Super Rite
Foods Holdings Corporation (or their respective successors in
interest), unless such person shall cease to be the chairman of the
board or the chief executive officer thereof as a result of his death.
For purposes of this paragraph 13, the "Baltimore Metropolitan Area"
shall consist of the City of Baltimore, the Maryland counties of Baltimore,
Harford, and Carroll, and the portions of the Maryland counties of Anne Arundel
and Howard consisting of the area north of that line indicated on the Map.
14. Private Label. Super Rite will provide SFW with a full-line of
-------------
private-label Product of a quality acceptable to SFW, under a label acceptable
to SFW, which label shall not be a "BASICS" or "Super Rite" label or any other
name that is peculiar to Super Rite or its subsidiaries. The private label line
shall include a full range of food, household and non-food grocery items
(including large club sizes and multi-paks), other than
15
HBA. A full-line of private label HBA (including housewares and non-foods)
shall be provided by Super Rite under the "Rite Aid" private label to the same
extent as such HBA is made available to Rite Aid retail stores, by Rite Aid
Corporation. Notwithstanding the foregoing, SFW shall only be required to
purchase those private-label Products from Super Rite that SFW, in its sole
discretion, find acceptable. To the extent SFW determines any private-label
Products to be unacceptable to SFW, upon SFW's request, Super Rite shall obtain
an acceptable private-label Product to replace the unacceptable Private-label
Product, in each case without forfeiting the right to purchase dry grocery
Products at Super Rite's Cost Plus 2.25% pursuant to paragraph 2.3.3 of this
Agreement, if then applicable. SFW shall also have the right to require Super
Rite to provide the private-label Products that are acceptable to SFW with a
label or packaging of SFW's selection, including an SFW private label and
packaging of SFW's design and specification.
15. Cardboard Recycling. In order to facilitate arrangements that SFW has
-------------------
with certain persons for the recycling of cardboard and other packaging
materials (the "Materials"), Super Rite agrees to coordinate and arrange the
pick up of baled Materials at each of SFW's store locations. Super Rite, at its
sole expense, will transport the Materials to its warehouse and hold the
Materials for pick up by the recycler or recyclers chose by SFW. In
consideration, SFW will pay Super Rite a fee of One Dollar and Fifty Cents
($1.50) for each bailed item. Invoices for services rendered under this Section
shall be issued by Super Rite on a weekly basis and fees for the sales week
preceding the date of invoice will be paid by SFW with the weekly statement in
accordance with paragraph 7 hereof.
16. Coupons. Super Rite shall use its reasonable best efforts to assist
-------
SFW in attempting to resolve any problems with manufacturers, vendors, or coupon
clearing houses regarding coupon redemptions or coupons returned to SFW for
which redemption was denied by the manufacturer or vendor or their coupon
clearing house.
17. Optional Extensions.
-------------------
17.1 The term of this Agreement may be extended by SFW, at its
sole and exclusive option, upon the same terms and conditions as set forth
herein, by giving written notice of extension (the "Extension Notice") to Super
Rite not less than 90 days prior to any Termination Date in the manner provided
in paragraph 20 hereof. For purposes of this paragraph 17, the term
"Termination Date" shall refer to the original Termination Date and to all
extensions thereof in accordance with this paragraph 17.
17.2 At any time that SFW is permitted to extend the term of this
Agreement, SFW may extend the term of this Agreement, at SFW's election, for
either an additional one-year
16
period (a "One-Year Extension") or for an additional three-year period (a
"Three-Year Extension"); provided that SFW shall not be permitted to elect a
--------
One-Year Extension or a Three-Year Extension without Super Rite's express
consent if such One-Year or Three-Year Extension would cause the Termination
Date, as extended, to be a date later than 10 years and three months after the
Initiation Date under this Agreement. Any such non-conforming election of a
Three-year Extension shall be treated for all purposes as the election of a One-
Year Extension. SFW shall specify in the Extension Notice whether it elects a
One-Year Extension or a Three-Year Extension.
17.3 Upon the giving of the Extension Notice by SFW, the
Termination Date shall be extended by the period of time specified in the
Extension Notice and Super Rite shall thereupon be obligated to pay to SFW an
amount, in cash (the "Extension Fee"), equal to (i) $4.0 million, if SFW shall
elect a Three-Year Extension or (ii) $1.4 million, if SFW shall elect a One-Year
Extension, in consideration of SFW's election to extend the term of this
Agreement.
17.3.1 Super Rite shall pay SFW the Extension Fee, by
cashiers or certified check, or by wire transfer, at SFW's election, to an
account designated by SFW in the Extension Notice, not later than the fifth
business day prior to the date on which the term covered by the Extension
Notices commences.
17.3.2 Super Rite's obligation to pay the Extension Fee
shall be absolute and unconditional upon the giving of the Extension Notice
by SFW.
18. Cost Data and Competitive Obligation Audits.
-------------------------------------------
18.1 Super Rite shall keep complete books and records of all cost
data relating to the Products sold to SFW and other customers of Super Rite,
including, without limitation, invoices, and bills of lading and any other
books, documents, papers or other records of Super Rite involving transactions
or containing information relevant to this Agreement (the "Cost Data"). Super
Rite agrees to supply SFW with a list of its normal Product selling prices as
well as the net prices, discounts, or commissions that Super Rite extends
generally to its customers and to notify SFW promptly if any changes are
subsequently made.
18.2.1 SFW shall have the right, directly or through its
representatives, from time to time, during normal business hours and upon
reasonable notice to Super Rite, to audit the Cost Data and such other
information as SFW, in its reasonable discretion, shall request to ensure
compliance by Super Rite with its obligations under paragraph 11.1 hereof,
including all internally generated reports or compilations pertaining thereto.
SFW will endeavor to perform such audits in
17
a manner that minimizes disruption to the business of Super Rite and will
coordinate such audits with the appropriate members of Super Rite management.
All audits of Cost Data shall generally be performed in accordance with that
protocol attached hereto as Exhibit C.
18.2.2 SFW shall have the right, through its duly appointed
agent, including but not limited to, independent auditors, at SFW's expense, to
impact, examine and make abstracts and copies of the Cost Data, and to interview
the employees, agents and accountants responsible for the preparation and
maintenance of such Cost Data insofar as may be necessary to verify the accuracy
of the Cost Data and of the statements provided for herein and to ensure the
satisfaction of Super Rite's competitive obligation in paragraph 11.1 hereof.
Such inspection and examination shall be made during normal business hours upon
reasonable notice and not more often than twice per calendar year. In addition
to such other remedies as may be available to SFW hereunder, if as a result of
any such examination an over-charge of more than 1.5% is discovered in the
amount of any payments made by SFW, then (i) the costs of such examination shall
be borne by Super Rite, and (ii) SFW shall thereafter have the right to conduct
such examinations once per calendar quarter.
18.3 Not later than 90 days following the end of each of Super
Rite's fiscal years during the term of this Agreement, Super Rite shall deliver
a certificate from Coopers & Lybrand (or such other accounting firm of national
standing as may then be acting as Super Rite's independent auditor) (the
"Independent Auditor"), certifying Super Rite's compliance with its obligations
pursuant to Paragraph 11.2 hereof during such fiscal year, in form and substance
reasonably satisfactory to SFW. SFW shall have the right, acting through Arthur
Andersen & Co., or such other accounting firm as SFW may designate, to review
the basis for the aforementioned certificate with the Independent Auditor and
otherwise confirm the accuracy of the Independent Auditor's certificate
delivered pursuant hereto.
18.4 SFW will not use the information in an improper manner and
will take such safeguards as are reasonably satisfactory to Super Rite to ensure
the confidentiality of any proprietary information or pricing data relating to
customers of Super Rite, including the use of independent auditors who shall
undertake to keep all such information confidential.
19. Confidentiality. All information obtained by either party hereto
---------------
concerning the performance of the parties, pricing or operational practices,
business properties, business plans or finances or any other information
concerning the business of the other parties hereto, including the existence and
terms of this Agreement ("Confidential Information") shall be used only for the
purposes of this Agreement and the transactions contemplated hereunder and shall
be treated as confidential and shall not be
18
disclosed or transferred, directly or indirectly, to any other person, or used
for any other person, without the prior written consent of the party from whom
such Confidential Information was obtained, except (i) to professional advisors
or financial partners of such parties, and prospective lenders to such parties
in connection with this Agreement or the Purchase Agreement, (ii) insofar as
such data or information is published or is a matter of public knowledge or
(iii) as is required to be disclosed by applicable law or legal process;
provided that if any party believes that it shall be obligated by law or legal
- --------
process to disclose Confidential Information pertaining to any other party
(including disclosure under federal or state securities laws), it shall give
such other party notice of its intent to disclose such information not less than
four (4) business days prior to making any such disclosure so that such other
party may seek an appropriate protective order or waive compliance with the
provisions of this Agreement, unless the party making such disclosure shall have
been advised by counsel that such notice or delay could expose such party to a
substantial risk of criminal liability or substantial monetary damages. In the
event that the transaction provided for herein is not consummated for any reason
whatsoever, each party shall return to the other parties from whom information
has been obtained all copies of information supplied by such party or its
representatives.
20. Notice. Any and all notices required or desired to be given pursuant
------
to this Agreement shall be in writing and may be given by personal delivery, by
certified mail (return receipt requested), air courier or facsimile
transmission. If given by facsimile transmission, notice shall be to the
attention of each individual at the facsimile number designated below. If
delivered personally or sent by mail or air courier, notice shall be given to
each person designated below in separate envelopes each individually addressed
as follows:
To SFW: Shoppers Food Warehouse Corp.
3129 Pennsy Drive
Landover, MD 20785-1508
FAX: (301) 322-5670
ATTN: Mr. Kenneth M. Herman
Mr. Robert N. Herman
Mr. Jack Binder
To Super Rite: Super Rite Foods, Inc.
P.O. Box 2261
Harrisburg, PA 17105
FAX: (717) 257-4594
ATTN: Mr. Pete Vanderveen
Mr. David Gundling
With a copy to: Mr. Martin Grass
P.O. Box 3165
Harrisburg, PA 17105
19
or to such other address and persons as either party hereto may designate to the
other party in writing. Notice shall be deemed to have been given on the date
reflected in the proof or evidence of delivery, or if none, on the date actually
received.
21. Arbitration.
-----------
21.1 Any dispute between the parties hereto relating in any way
to this Agreement or the rights and obligations of the parties hereunder shall
be settled by arbitration in the English language to be held in Washington, D.C.
in accordance with the Commercial Arbitration Rules of the American Arbitration
Association (the "Arbitration Rules"). The arbitration shall be held before a
panel of three arbitrators, of which one shall be chosen by SFW, one by Super
Rite and the third by the first two arbitrators. In the event of a failure by
one party to appoint its arbitrator within thirty (30) days after the request
for arbitration, or the failure of the first two arbitrators to agree on the
choice of the third arbitrator within thirty (30) days after the appointment of
the first two arbitrators, the third arbitrator shall be appointed by the
American Arbitration Association in accordance with the Arbitration Rules upon
the request of any party hereto.
21.2 The arbitrators shall render their award within thirty (30)
days after the date of closing the oral hearings or, if oral hearings have been
waived, within thirty (30) days after the date the final statements and proofs
are transmitted to the arbitrators. The parties hereby agree to be bound by the
decision of the arbitrators, which shall be final and unappealable. The party
or parties against whom the arbitration decision is made shall bear all fees and
expenses of the arbitrators and of the prevailing party in such arbitration
(including fees and expenses of counsel). Judgment upon any award of the
arbitrators (including an award of equitable relief) may be entered in any court
having jurisdiction or an application may be made to such court for the judicial
acceptance of the award and an order of enforcement.
21.3 If any party fails to abide by such an award, the other
parties hereto may seek the order of a court which shall enter judgment on the
arbitration award, and the party or parties so failing to abide shall be
responsible for the payment of the expenses of the court proceeding and all
resulting enforcement expenses, including actual attorneys' fees. Should any
party hereto fail to appear or be represented at the arbitration proceedings
after due notice in accordance with the Arbitration Rules, then the arbitrators
may nevertheless render a decision in the absence of that party. Such a
decision shall have the same force and effect as if the absent party had been
present, whether or not it shall be adverse to the interests of the absent
party, and the decision may be entered for enforcement, if necessary, in any
court of competent jurisdiction, the absent party also bearing the costs of
20
arbitration, the court proceeding and enforcement, in the event the decision is
adverse to the absent party.
22. Miscellaneous Provisions
------------------------
22.1 Entire Agreement. This Agreement, together with the
----------------
Purchase Agreement and the other agreements contemplated thereby, constitutes
the entire understanding of the parties hereto with respect to the subject
matter hereof, and shall not be amended, except by a writing signed by the
parties hereto.
22.2 Governing Law. This Agreement shall be interpreted and
-------------
construed in accordance with the laws of the State of Maryland including
applicable provisions of the Uniform Commercial Code as adopted by the State of
Maryland. The invalidity of unenforceability of any term or provision of this
Agreement shall not void or impair the remaining provisions hereof.
22.3 Counterparts. This Agreement may be executed in any number
------------
of counterparts, each of which shall be deemed an original hereto and all of
which together shall constitute but one instrument.
22.4 Headings. The headings of the paragraphs hereof are
--------
inserted for convenience only and shall not constitute a part hereof.
22.5 Successors and Assigns. This Agreement and all of the
----------------------
provisions hereof shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns, provided, however,
that neither this Agreement nor any of the rights or obligations of Super Rite
may be assigned without the prior written consent of SFW. SFW reserves the
right to assign any of its rights and obligations under this Agreement to any of
its affiliates or to its successor, by operation of law or otherwise, whether or
not affiliated with SFW, in connection with the transfer of SFW's business or a
substantial portion thereof. Any permitted assignee under this Agreement must
execute this Agreement and agree to be bound hereby.
22.6 Nature of Relationship. Nothing herein shall be construed
----------------------
to place the parties in a relationship of partners, joint venturers, or
franchisor-franchisee, and neither party shall have the power to obligate or
bind the other in any manner whatsoever with respect to third parties.
22.7 Severability. If any part of this Agreement is or becomes
------------
or is held by any court of competent jurisdiction to be illegal, null or void,
or against public policy, then the remaining parts of this Agreement shall not
be affected thereby and shall remain valid and enforceable.
21
22.8 Waiver. Either party may waive any breach or compliance by
------
the other party with any covenant or provision of this Agreement by delivering
to the other party written notice stating the terms and extent of such waiver.
Any waiver under this Agreement by any party shall not be construed to extend or
apply beyond its stated terms and shall not be deemed to be a waiver of any
preceding or subsequent breach under this Agreement.
22.9 Construction. For purposes of construing or interpreting this
------------
Agreement or any provision hereof, no party hereto shall be deemed to have
drafted or prepared this Agreement.
IN WITNESS WHEREOF, SFW and Super Rite have caused this Agreement to be
duly executed on date and year first above written.
SHOPPERS FOOD WAREHOUSE CORPORATION
By: /s/ Kenneth Herman
-------------------------------------
Kenneth Herman, President
SHOPPERS FOOD WAREHOUSE VA CORP.
By: /s/ Robert N. Herman
-------------------------------------
Robert N. Herman,
Executive Vice-President
SHOPPERS FOOD WAREHOUSE MD CORP.
By: /s/ Robert N. Herman
-------------------------------------
Robert N. Herman,
Executive Vice-President
SUPER RITE FOODS, INC.
By: /s/ Pete Vanderveen
-------------------------------------
Pete Vanderveen, President
22
CONFORMED COPY
September 12, 1991
Shoppers Food Warehouse Corp.
Shoppers Food Warehouse VA Corp.
Shoppers Food Warehouse MD Corp.
4600 Forbes Boulevard
Lanham, MD 20706
Re: Modifications to Purchase Agreement and Supply Agreement
--------------------------------------------------------
Gentlemen:
The purpose of this letter is to set forth our mutual understandings
and agreements with respect to that certain Asset Purchase Agreement, dated as
of June 3, 1991 as amended on July 18, 1991, by and among Super Rite Corporation
(formerly known as Super Rite Foods Holdings Corporation), Super Rite Foods,
Inc. ("Super Rite"), Foodarama, Incorporated, Midway Markets of Delaware, Inc.,
and FOOD-A-RAMA-G.U., Inc. (collectively the "Sellers"), and Shoppers Food
Warehouse Corp. (the "Buyer") (as amended from time to time, the "Purchase
Agreement"), and that certain Supply Agreement dated as of June 3, 1991 by and
among the Buyer, Shoppers Food Warehouse MD Corp. and Shoppers Food Warehouse VA
Corp., on the one hand (collectively "Shoppers"), and Super Rite, on the other
hand (the "Supply Agreement") (the Purchase Agreement and Supply Agreement are
collectively referred to herein as the "Agreements"). All terms used in this
Agreement without further definition shall have the meanings set forth in the
Purchase Agreement and/or Supply Agreement.
In order to facilitate the completion of the transactions contemplated
by the Purchase Agreement and the Supply Agreement and to settle certain
disputes arising in connection therewith, the relative rights of the parties to
the Agreements will be modified as follows:
1. As consideration for the agreements herein and in settlement of
certain disputes relating to the Agreements, the Closing Purchase Price will be
reduced by $4,000,000. This purchase price reduction will be paid pursuant to
a promissory note made by the Sellers in the form of the Closing Note (the
"Reduction Note"). The Reduction Note shall bear no interest. If the Reduction
Note is not paid pursuant to its terms, the Buyer shall have the right, in
addition to all other rights of the Buyer, to offset any amounts due thereunder
against the Closing
Shoppers Food Warehouse Corp.
Shoppers Food Warehouse VA Corp.
Shoppers Food Warehouse MD Corp.
September 12, 1991
Page 2
Note and the Inventory Note. In the event there are no amounts due under such
notes, the Buyer will have a right of recourse against the parent of Super Rite
for any amounts due under the Reduction Note. The Closing Note and the
Reduction Note shall be due and payable four years after the Closing Date, as
such date may be modified by the parties.
2. The Sellers will not transfer the Marlow Heights store located at
3913 St. Barnabas Road in Marlow Heights, Maryland (the "Marlow Heights Store")
and such store will be deleted from the list of Supermarkets being transferred
to the Buyer. At the Closing, the Sellers shall sell and assign, and the Buyer
shall purchase and assume, all of the Sellers' right, title and interest in and
to the other six Supermarkets set forth on Schedule 2.1(a) of the Purchase
Agreement. In accordance with Section 11.5(d) of the Purchase Agreement, the
Price Abatement in the amount of $2,143,000 relating to the nontransfer of the
Marlow Heights Store shall be applied to reduce the Cash Purchase Price.
3. The Sellers will be required to deliver the following Supermarkets
(the "Required Supermarkets") in accordance with the requirements set forth in
the Purchase Agreement:
1. BASICS No. 76 - Sterling
47100 Community Plaza, No. 140
Sterling, Virginia 22170
2. BASICS No. 80 Dale City Davis Ford and Smoke
Town Roads Routes 640 and 642
Dale City, Virginia 22193
3. BASICS No. 83 - Gunston
7760 Gunston Plaza
Lorton, Virginia 22079
4. Failure of the Sellers to deliver the Required Supermarkets to
the Buyer at or before the Closing Date (or such other date as the parties shall
mutually agree) shall constitute a default by the Sellers under the Purchase
Agreement and shall permit the Buyer to terminate the Supply Agreement as
provided in Paragraph 11 hereof. Notwithstanding Paragraph 2 hereof, if (i) the
Sellers shall have satisfied all of the conditions to the Buyer's obligations
hereunder set forth in Section 11.1 of the Purchase Agreement that are required
to permit the Sellers to transfer to the Buyer as of the Closing Date each of
the Required Supermarkets in the condition and in the manner contemplated
hereby; (ii) all other conditions to the Buyer's obligation to consummate the
transactions contemplated hereby shall have been satisfied prior to the Closing
Date; and (iii) the Sellers shall
Shoppers Food Warehouse Corp.
Shoppers Food Warehouse VA Corp.
Shoppers Food Warehouse MD Corp.
September 12, 1991
Page 3
not have breached or violated or failed to perform any of their other material
obligations under the Purchase Agreement, then the Buyer shall not have the
right to terminate the Purchase Agreement pursuant to Article XIII of the
Purchase Agreement or be excused from its obligation to complete the purchase
and sale of the Supermarkets as to which all conditions to its obligations shall
have been satisfied, but shall have the right to receive an adjustment of the
Closing Purchase Price as described in the Purchase Agreement.
5. The Sellers will be responsible for expenses incurred in
remodeling the Sterling store in an amount of $800,000.
6. Sellers shall use every reasonable effort to deliver the Glendale
Store, the Glenmont Store and the Springfield Store. If the Sellers fail to
satisfy the conditions set forth in the Purchase Agreement with respect to these
Supermarkets by the Closing Date, as such date is modified by the parties
hereto, then the Sellers shall have an additional period of 120 days following
the Closing Date in order to satisfy such conditions, as to such Supermarkets
only, in accordance with the terms of Section 11.5.3 of the Purchase Agreement.
7. With respect to any Supermarkets transferred to the Buyer, the
Sellers shall have obtained all necessary consents, waivers, estoppel letters,
non-disturbance agreements and approvals, including landlord estoppels and
lender approvals. The Buyer agrees to waive any exceptions contained in these
documents provided that (a) the Sellers indemnify the Buyer against any claims
-------- ----
arising therefrom in accordance with the provisions of Section 14.1 of the
Purchase Agreement, (b) such exceptions relate to items that would not, in any
event, affect the Buyer's right to quiet enjoyment, to conduct the business of
the Supermarkets or to obtain all necessary permits and licenses relating to the
Supermarkets, and (c) the Sellers warrant to the Buyer that any such exception
can be cured by the Sellers, at the Sellers' sole cost and expense.
8. The Sellers reaffirm their obligations under the Supply Agreement
and agree to correct the deficiencies set forth in the letter from Buyer's
counsel to Franklin Brown dated as of September 5, 1991 (a copy of which is
attached hereto for reference).
9. The Buyer agrees to assume the leases of the Supermarkets pursuant
to the terms of the leases presently existing. The Sellers represent and
warrant that such lease provisions will remain unchanged or that the Sellers
will be liable for any increased costs thereunder. With respect to the rental
obligations under the lease of the Glendale Store,
Shoppers Food Warehouse Corp.
Shoppers Food Warehouse VA Corp.
Shoppers Food Warehouse MD Corp.
September 12, 1991
Page 4
Shoppers Food Warehouse Corp. will guarantee the obligations of Shoppers Food
Warehouse MD Corp. With respect to the Dale City Store, Shoppers Food Warehouse
VA Corp. will provide a certificate of Arthur Andersen & Co. to the effect that
its Tangible Net Worth as of the Closing Date is not less than $1,000,000.
10. At the Closing, good title to the Purchased Assets shall be
transferred at the Sellers' sole cost end expense, to the Buyer free and clear
of any and all tenancies and liens except the Permitted Encumbrances and any
liens or tenancies for which the Sellers have indemnified the Buyer in
accordance with the provisions of Section 14.1 of the Purchase Agreement.
Notwithstanding the foregoing, the Sellers shall remove all such liens and
tenencies, at the Sellers' sole cost and expense.
11. The parties acknowledge that, for mutual convenience, they have
started performance under the Supply Agreement as of August 24, 1991 and that
such agreement shall be deemed effective as of such date, provided that in the
-------- ----
event that the Sellers shall fail to meet their obligations under the Purchase
Agreement (as modified hereunder) by the Closing Date, then Shoppers shall have
a right to terminate the Purchase Agreement and Supply Agreement in accordance
with the respective terms thereof.
12. Section 11.1.9 of the Purchase Agreement regarding the suitability
of the Wheaton Store is hereby deleted in its entirety and shall be of no
further force and effect, provided however, that notwithstanding the foregoing,
-------- -------
the parties hereby agree and acknowledge that if such store is transferred at
Closing, the Sellers shall be responsible for delivering a use and occupancy-
permit for such store without any obligation on the part of the Buyer to be
bound by or incur costs for (a) those items excepted or waived by the applicable
county authorities as a result of the remodeling permit previously filed with
the county by the Sellers for such store or (b) any items required to be
performed as a result of that permit.
13. All out-of-pocket costs and other expenses incurred by the Buyer
in connection with or arising out of the Buyer's Labor Agreement shall be borne
by the Buyer.
14. The Buyer waives any material adverse change in the business of
the Supermarkets and for failure to operate the Supermarkets in the normal
course of business through August 24, 1991 as reflected in decreases in sales
volume at the Supermarkets based upon historic sales volumes for applicable
periods as set forth in the weekly financial statements from June 10, 1991
through August 24, 1991 supplied by the Sellers to the Buyer, provided that this
-------- ----
provision shall not be deemed to waive
Shoppers Food Warehouse Corp.
Shoppers Food Warehouse VA Corp.
Shoppers Food Warehouse MD Corp.
September 12, 1991
Page 5
any further adverse changes or other changes in the normal course of business.
15. Exhibit 8.20 to the Purchase Agreement will be amended to add the
equipment and personal property described in the Supplement to Exhibit 8.20
attached hereto.
16. Unless the Agreements are terminated in accordance with the terms
thereof, or the parties hereto agree to a different time, date or place, the
Closing of the Agreements shall take place at the offices of Gibson, Dunn &
Crutcher at 10:00 a.m., Washington, D.C. time, on October 12, 1991 (the "Closing
Date").
17. For the avoidance of doubt, the term "Retained Supermarkets" as
used in the Purchase Agreement (including, without limitation, its use in
Section 10.21 of the Purchase Agreement) also shall be deemed to include,
without limitation, the Marlow Heights store.
18. This Agreement shall be governed by, and construed and enforced in
accordance with, the internal laws of the State of Delaware without regard to
choice or conflicts of laws. This Agreement shall be governed by and subject to
all provisions of the Agreements not otherwise inconsistent with the provisions
hereof, which are deemed incorporated herein by this reference. In the event
there are any inconsistencies between this Agreement and the terms of the
Purchase Agreement or Supply Agreement, the terms of this Agreement shall govern
the parties' obligations.
19. This Agreement shall have no effect on the Agreements, which shall
continue to be in full force and effect, except as expressly modified by the
provisions hereof. No party to this Agreement shall be deemed thereby to have
waived any rights that it may have under the Agreements or any failure on the
part of any other party thereto to comply with its obligations thereunder,
except as expressly set forth in this Agreement.
20. Super Rite Corporation (formerly Super Rite Foods Holding
Corporation) is the parent corporation of Super Rite. In order to induce the
Buyer to enter into these modifications and to complete performance of its
obligations under the Purchase Agreement and the Supply Agreement, Super Rite
Corporation hereby joins in and agrees to be bound by, jointly and severally
with Super Rite (including any successor to or assignee of Super Rite), directly
as a principal contracting party and not merely as a surety or guarantor, all of
the obligations of Super Rite under the Supply Agreement. Super Rite
Corporation further covenants and agrees that it will cause any successor or
assign, and any transferee of all or substantially all of its business or
Shoppers Food Warehouse Corp.
Shoppers Food Warehouse VA Corp.
Shoppers Food Warehouse MD Corp.
September 12, 1991
Page 6
assets, as a condition to any assignment or transfer, to specifically agree in
writing to be bound, as a principal contracting party, to the obligations of
Sellers under the Purchase Agreement and of Super Rite under the Supply
Agreement.
IN WITNESS WHEREOF, all the parties hereto have executed this Agreement
by the undersigned duly authorized officer of each party as of the day and year
first above written.
SUPER RITE CORPORATION
(formerly SUPER RITE FOODS
HOLDINGS CORPORATION)
By: /s/ Martin Grass
-----------------
Name: Martin Grass
Title: Vice Chairman
SUPER RITE FOODS, INC.
By: /s/ Martin Grass
-----------------
Name: Martin Grass
Title: Vice Chairman
FOODARAMA, INCORPORATED
By: /s/ Martin Grass
-----------------
Name: Martin Grass
Title: Vice Chairman
FOOD-A-RAMA-G.U., INC.
By: /s/ Martin Grass
-----------------
Name: Martin Grass
Title: Vice Chairman
MIDWAY MARTS OF DELAWARE
By: /s/ Martin Grass
-----------------
Name: Martin Grass
Title: Vice Chairman
Shoppers Food Warehouse Corp.
Shoppers Food Warehouse VA Corp.
Shoppers Food Warehouse MD Corp.
September 12, 1991
Page 7
Accepted and Agreed:
SHOPPERS FOOD WAREHOUSE CORP.
By: /s/ Robert N. Herman
--------------------
Name: Robert N. Herman
Title: Executive Vice President
SHOPPERS FOOD WAREHOUSE VA CORP.
By: /s/ Robert N. Herman
--------------------
Name: Robert N. Herman
Title: Executive Vice President
SHOPPERS FOOD WAREHOUSE MD CORP.
By: /s/ Robert N. Herman
--------------------
Name: Robert N. Herman
Title: Executive Vice President
Exhibit 8.20 - Supplement
A. Additional Equipment and Fixed Assets to be Present in Supermarkets at
Closing for No Additional Charge to Buyer:
Office equipment
All Telxon units
Encoders
Sealers
MPO unit and tapes
All diskettes and manuals
Telephones, telephone equipment, intercom and communications
systems
Computers, printers and other peripheral equipment and any
software necessary to operate same
Business licenses, authorizations and permits that are conveyed
B. Contracts for Additional Equipment and Fixed Assets to be Assumed by
Buyer:
Money order machine
WU computer
Muzac POP system
November 4, 1991
Shoppers Food Warehouse Corp.
Shoppers Food Warehouse MD Corp.
Shoppers Food Warehouse VA Corp.
4600 Forbes Boulevard
Landham, Maryland 20706
Re: Amendment No. 3 to Asset Purchase Agreement and Supply Agreement
Gentlemen:
This Amendment No. 3 (the "Amendment") sets forth the parties' mutual
understandings and agreements with respect to (i) the consummation off the
transactions contemplated by that certain Asset purchase Agreement, dated as off
June 3, 1991, as amended on July 18, 1991 and September 12, 1991, by and among
Super Rite Corporation (formerly Super Rite Foods Holdings Corporation), Super
Rite Foods, Inc. ("Super Rite") Foodarama, Incorporated, Midway Markets of
Delaware, Inc. and Food-A-Rama-G.U., Inc. (collectively, the "Sellers"), and
Shoppers Food Warehouse Corp. (the "Buyer") (as amended from time to time, the
"Purchase Agreement"); and (ii) certain understandings concerning that certain
Supply Agreement, dated as of June 3, 1991, by and among the Buyer, Shoppers
Food Warehouse MD Corp. and Shoppers Food Warehouse VA Corp. on the one hand
(collectively, "Shoppers") and Super Rite, on the other hand, as amended on
September 12, 1991 (the "Supply Agreement") (the Purchase Agreement and Supply
Agreement are collectively referred to herein as the "Agreements"). All terms
used but not defined in this Amendment shall have the meanings given them in the
Purchase Agreement or supply Agreement, as the case may be.
In order to facilitate the completion of the transactions contemplated
by the Agreements and to settle certain disputes
Shoppers Food Warehouse Corp.
November 4, 1991
Page 2
arising in connection therewith, the parties hereby agree as follows:
1. (a) Contemporaneously with the execution of this Amendment, the Buyer
is purchasing and the Sellers are selling under the Purchase Agreement only the
following stores (the "Transferred Stores"):
a. Sterling (Basics No. 76)
47100 Community Plaza #140
Sterling, Virginia 22170
b. Dale City (Basics No. 80)
Davis Ford & Smoketown Roads
Rts. 640 & 642
Dale City, Virginia 22193
(b) Not later than January 10, 1992 (or, if earlier, the fifth
Business Day after the Buyer shall have received written notice from the Sellers
that the all conditions to the Buyer's obligations under the Purchase Agreement,
including this Amendment, shall have been satisfied) (the "Glendale Closing
Date"), the Sellers shall sell, transfer and convey to the Buyer, and the Buyer
shall purchase from the Sellers, that Supermarket located at 10515 Greenbelt
Road, Glendale, Maryland known as Glendale (Basics No. 72) together with all
Store Assets related thereto (collectively the "Glendale Store"), upon the terms
set forth in the Purchase Agreement. Upon transfer of the Glendale Store, the
Inventory Purchase Price of the Saleable Inventory related to the Glendale Store
shall be calculated in the manner described in Article III of the Purchase
Agreement and the Inventory Note issuable pursuant to Section 3.2.3 of the
Purchase Agreement shall include the Inventory Purchase Price for the Saleable
Inventory related to the Glendale Store. The Sellers and Buyer agree to execute
any additional documents and amendments to the Purchase Agreement that may be
necessary to effectuate the transfer of the Glendale Store.
(c) If the conditions to the Buyer's obligation to purchase the
Glendale Store shall not have been satisfied by the Glendale Closing Date, the
Sellers shall pay to the Buyer, not later than the fifth Business Day following
the Glendale Closing Date (the "Payment Date"), $2,750,000 (the "Glendale
Consideration") as liquidated damages for the Sellers' failure to transfer and
deliver the Glendale Store as follows: (i) the principal amount of the Inventory
Note shall be reduced by the lesser of the Glendale Consideration or the
principal amount of the Inventory Note and (ii) the Sellers shall deliver to the
Buyer a check in an amount, if any, equal to the amount by which the Glendale
Consideration exceeds the principal amount of the Inventory Note. If the
Glendale Consideration shall not have
Shoppers Food Warehouse Corp.
November 4, 1991
Page 3
been paid, in full, by the Payment Date, the Buyer may, at its option, deduct
any unpaid portion of the Glendale Consideration from any amounts otherwise
payable from time to time by the Buyer under the Supply Agreement.
(d) In addition to the other conditions to the Buyer's obligations under
the Purchase Agreement, the Buyer's obligation to purchase the Glendale Store
shall be subject to the satisfaction, on or before the Glendale Closing Date, of
the following conditions:
(i) The Buyer shall have received an estoppel certificate and a
consent to the assignment of the lease for the Glendale
Store, executed by the landlord of the Glendale Store,
substantially in the forms attached hereto as Exhibits A and
B (which certificate and consent, when delivered, shall be
deemed to have satisfied the condition set forth in Section
11.1.2 of the Purchase Agreement requiring the delivery of
consents and estoppels with respect to the Glendale Store);
(ii) The buyer shall have received a non-disturbance agreement
from the mortgagee of the Glendale Store, substantially in
the form attached hereto as Exhibit C (which agreement, when
delivered, shall be deemed to have satisfied the condition
set forth in Section 11.1.2 of the Purchase Agreement
requiring the delivery of a lender's non-disturbance
agreement with respect to the Glendale Store); and
(iii) The Buyer shall have received a certified copy of an order
of the court or courts having jurisdiction over the pending
bankruptcy proceedings of the two general partners of the
landlord of the Glendale Store, approving and consenting to
the approval and consent of the landlord to the transfer of
the Glendale Store to the Buyer, including the execution and
delivery of those documents referred to in clause (i) above.
(e) For purposes of determining whether the condition set forth in
Section 11.1.1 of the Purchase Agreement has been satisfied, the Sellers'
representations and warranties shall not be deemed to be inaccurate solely by
reason of the occurrence of a material adverse change in the condition,
operations or
Shoppers Food Warehouse Corp.
November 4, 1991
Page 4
prospects of the Glendale Store between October 12, 1991 and the Glendale
Closing Date.
2. The Sellers shall not be required to sell and transfer and the Buyer
shall not be required to purchase any of the following stores: (i) Springfield
(Basics No. 78), located at 8402 Old Keene Mill Road, Springfield, Virginia
22152, (ii) Glenmont (Basics No. 81), located at 12389 Georgia Avenue, Wheaton,
Maryland 20906 and (iii) Gunston (Basics No. 83), located at 7760 Gunston Plaza,
Lorton, Virginia 22079. (The Springfield store, the Glenmont store, the Gunston
store and the Marlow Heights Store shall hereinafter collectively be referred to
as the "Refused Stores.") The Refused Stores shall be deemed to be Retained
Supermarkets for all purposes under the Purchase Agreement, provided that, the
-------- ----
Refused Stores shall not be subject to the provisions of Section 10.21 of the
Purchase Agreement (as mended to date).
3. Until the Glendale Closing Date, the Sellers shall continue to operate
the Glendale Store in the usual, regular and ordinary manner, in accordance with
Section 10.1 of the Purchase Agreement, in a manner consistent with past
practices and in a manner consistent with the Sellers' operation of the Retained
Supermarkets. The Sellers' compliance with the obligations arising under this
paragraph 3 shall be a condition to the Buyers' obligation to purchase the
Glendale Store. The closing for the purchase and sale of the Glendale Store
shall take place at the offices of Gibson, Dunn & Crutcher, Washington, D.C. on
the Glendale Closing Date.
4. As consideration for the agreements herein and in settlement of
certain disputes relating to the Agreements, the Closing Purchase Price is
hereby reduced by $2,357,000. For the avoidance of doubt, after giving effect
to all of the amendments and modifications to the Agreements to date, the
Closing Purchase Price shall be reduced to Zero Dollars ($0.00).
Notwithstanding any provision to the contrary in the Purchase Agreement, (i) the
Buyer shall have no obligation to deliver the Closing Note to the Sellers or to
pay any amount in cash to the Sellers (other than any amounts payable in
accordance with Article V of the Purchase Agreement) and (ii) the Sellers shall
have no obligation to deliver the Reduction Note to the Buyer.
5. As additional consideration for the settlement of certain disputes
between the parties, the principal amount of the Inventory Note to be delivered
by the Buyer to the Sellers shall be $250,000 less than the amount determined in
accordance with Article III of the Purchase Agreement. Section 3.2.3 of the
Purchase Agreement is hereby amended to reflect that the Buyer shall have the
right to purchase from the Sellers additional inventory having an aggregate
price equal to the difference
Shoppers Food Warehouse Corp.
November 4, 1991
Page 5
between Three Million and 00/100 Dollars ($3,000,000.00) and the Inventory
Purchase Price.
6. The Sellers hereby specifically reaffirm the indemnification given by
them in Section 14.1 of the Purchase Agreement (the "Indemnification") and, for
the avoidance of doubt, agree and acknowledge that such Indemnification shall
extend to all of those situations set forth in Section 14.1 of the Purchase
Agreement and shall include, without limitation:
a. With respect to the presence of Hazardous Substances at the
Supermarkets, the presence of (i) asbestos or any spun-glass
insulation products determined to be dangerous or hazardous
substances in the Transferred Stores and (ii) petroleum products
and by-products, including gas and oil and other fuel spills and
leaks, located at the exterior of the Transferred Stores near the
loading docks;
b. With respect to the delivery of consents, estoppel certificates,
nondisturbance agreements and other documents evidencing the
consent of the landlords and lenders of the Transferred Stores to
the transfer to the Buyer, any situation arising because of the
Sellers' failure to deliver such consents in the forms originally
requested by the Buyer that affect the Buyer's quiet enjoyment of
the Transferred Stores or ability to conduct business in the
ordinary course in the Transferred Stores or ability to obtain
all licenses, permits and other necessary governmental approvals
to operate as supermarkets in the Transferred Stores or that
cause the Buyer to incur any cost, liability or damages as a
consequence thereof, including consequential damages and actual
fees and expenses of outside legal counsel;
c. Any costs, losses, damages or expenses incurred by the Buyers
relating to, or caused by, any acts or omissions of prior
tenants;
d. All liens and judgments existing against the Transferred Stores,
whether recorded against the landlords or the Sellers, including,
without limitation, the existence of a mortgage to First National
Bank of Maryland from the landlord of the Dale City store in the
approximate amount of $992,538, dated March 26, 1987 and recorded
in Deed Book 1480 at page 561 in the land Records of Prince
William County.
Shoppers Food Warehouse Corp.
November 4, 1991
Page 6
7. Exhibit 8.20 to the Purchase Agreement shall be amended to add the
NCR/NCC cash registers and EDP equipment to the list of Additional Equipment and
Fixed Assets to be Present in the Supermarkets at Closing for No Additional
Charge to Buyer.
8. The parties hereby agree that, upon the completion of the transfer of
the Transferred Stores, all conditions to the effectiveness of the Supply
Agreement shall be deemed to have been satisfied and neither party shall
thereafter have any right to terminate the Supply Agreement for failure to
comply with the terms of the Purchase Agreement. For avoidance of doubt, the
Initiation Date, as that term is used in the Supply Agreement, shall be August
24, 1991.
9. The parties hereby expressly waive and release each other from any
claims each may have against the other that may arise as a result of failure to
consummate the transactions contemplated by the Purchase Agreement prior to the
date hereof.
10. This Amendment shall be governed by, and construed and enforced in
accordance with, the internal laws of the State of Delaware without regard to
choice or conflicts of laws provisions. This Amendment shall be governed by and
subject to all provisions of the Agreements not otherwise inconsistent with the
provisions hereof, which are deemed incorporated herein by this reference. In
the event there are any inconsistencies between this Amendment and the terms of
the Purchase Agreement or supply Agreement, the terms of this Amendment shall
govern.
11. This Amendment shall have no effect on the Agreements, which shall
continue to be in full force and effect, except as expressly modified by the
provisions hereof. No party to this Amendment shall be deemed hereby to have
waived any rights that it may have under the Agreements or any failure on the
part of any other party thereto to comply with its obligations thereunder,
except as expressly set forth in this Amendment.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment by the
undersigned duly authorized officers of each party as of the day and year first
above written.
SUPER RITE CORPORATION (formerly Super Rite Food
Holdings Corporation) a Delaware corporation
By: /s/ Martin L. Grass
------------------------
Name: Martin L. Grass
Title: Vice-Chairman
Shoppers Food Warehouse Corp.
November 4, 1991
Page 7
SUPER RITE FOODS, INC., a Delaware corporation
By: /s/ Martin L. Grass
------------------------
Name: Martin L. Grass
Title: Vice-Chairman
FOODARAMA, INCORPORATED, a Delaware corporation
By: /s/ Martin L. Grass
------------------------
Name: Martin L. Grass
Title: Vice-Chairman
FOOD-A-RAMA-G.U., INC. a Maryland corporation
By: /s/ Martin L. Grass
------------------------
Name: Martin L. Grass
Title: Vice-Chairman
MIDWAY MARKETS OF DELAWARE, INC., a Delaware
corporation
By: /s/ Martin L. Grass
------------------------
Name: Martin L. Grass
Title: Vice-Chairman
Accepted and Agreed:
SHOPPERS FOOD WAREHOUSE CORP.,
a Delaware corporation
By: /s/ Kenneth Herman
-----------------------
Name: Kenneth Herman
Title: President
Shoppers Food Warehouse Corp.
November 4, 1991
Page 8
SHOPPERS FOOD WAREHOUSE MD CORP.,
a Maryland corporation
By: /s/ Kenneth Herman
-----------------------
Name: Kenneth Herman
Title: President
SHOPPERS FOOD WAREHOUSE VA CORP.,
a Virginia corporation
By: /s/ Kenneth Herman
-----------------------
Name: Kenneth Herman
Title: President