Karns Prime & Fancy Food, Ltd. - Page 14

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          requirements; (4) a mediation/arbitration agreement that required           
          petitioner and SUPERVALU to resolve any controversy, claim, or              
          dispute by mediation or arbitration; and (5) a reimbursement                
          agreement that required petitioner to pay annually to SUPERVALU             
          10 percent of the petitioner’s lease value.  In addition, as was            
          customary for SUPERVALU when it guaranteed one of its customer’s            
          lease obligations, SUPERVALU required petitioner to enter into an           
          option agreement with SUPERVALU that gave SUPERVALU the right to            
          take over petitioner’s lease in the event that petitioner de-               
          faulted under it.13                                                         
               On January 26, 2000, petitioner’s officers, who were also              
          stockholders of petitioner, executed an agreement in which they             
          guaranteed various obligations that petitioner had to SUPERVALU             
          and/or its subsidiaries.  Such obligations included petitioner’s            
          obligations under the April 16, 1999 supply agreement and the               
          corresponding April 15, 1999 note.                                          
               Petitioner satisfied the annual purchase requirement set               
          forth in the April 16, 1999 supply agreement for each of the                
          periods ended April 16, 2000, and April 16, 2001, and otherwise             
          complied with, did not materially breach, and was not in uncured            

               13It has been SUPERVALU’s practice to take over customer               
          leases that it guaranteed where its customers were in default               
          under them.                                                                 

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Last modified: May 25, 2011