c&k market - motion to authorize debtors to perform under c&k express pharmacy asset purchase...

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Tonkon Torp LLP 888 SW Fifth Avenue, Suite 1600

Portland, Oregon 97204 503-221-1440

Page 1 of 4 - DEBTOR'S MOTION FOR ORDER AUTHORIZING DEBTOR TO PERFORM AND CAUSE C&K EXPRESS, LLC TO PERFORM ITS OBLIGATIONS UNDER PHARMACY ASSET PURCHASE AGREEMENT

Albert N. Kennedy, OSB No. 821429 (Lead Attorney) Direct Dial: (503) 802-2013 Facsimile: (503) 972-3713 E-Mail: [email protected]

Timothy J. Conway, OSB No. 851752 Direct Dial: (503) 802-2027 Facsimile: (503) 972-3727 E-Mail: [email protected]

Michael W. Fletcher, OSB No. 010448 Direct Dial: (503) 802-2169 Facsimile: (503) 972-3869 E-Mail: [email protected]

Ava L. Schoen, OSB No. 044072 Direct Dial: (503) 802-2143 Facsimile: (503) 972-3843 E-Mail: [email protected]

TONKON TORP LLP 1600 Pioneer Tower 888 S.W. Fifth Avenue Portland, OR 97204

Attorneys for Debtor

UNITED STATES BANKRUPTCY COURT

DISTRICT OF OREGON

In re

C & K Market, Inc.,

Debtor.

Case No. 13-64561-fra11

DEBTOR'S MOTION FOR ORDER AUTHORIZING DEBTOR TO PERFORM AND CAUSE C&K EXPRESS, LLC TO PERFORM ITS OBLIGATIONS UNDER PHARMACY ASSET PURCHASE AGREEMENT EXPEDITED HEARING REQUESTED

C & K Market, Inc., debtor and debtor-in-possession ("Debtor") moves this

Court for entry of an Order Authorizing Debtor to Perform and Cause C&K Express, LLC to

Perform its Obligations Under Pharmacy Asset Purchase Agreement. Copies of the

Pharmacy Asset Purchase Agreement and the First Amendment to Pharmacy Asset Purchase

Agreement are attached hereto as Exhibit 1 and Exhibit 2 (together, the "APA"). A copy of

Debtor's proposed Order is attached hereto as Exhibit 3.

Case 13-64561-fra11 Doc 134 Filed 12/06/13

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1. This Court has subject matter jurisdiction to consider this matter

pursuant to 28 U.S.C. 1334. This is a core proceeding pursuant to 28 U.S.C. 157(b)(2).

Venue is proper before this Court pursuant to 28 U.S.C. 1408 and 1409.

2. The statutory bases for the relief requested herein are Sections 105(a),

363(b) AND 365 of Title 11 of the United States Code ("Bankruptcy Code"), Rule 6004 of

the Federal Rules of Bankruptcy Procedure ("Bankruptcy Rules"), and Rules 2002-1 and

6004-1 of the Local Rules of the United States Bankruptcy Court for the District of Oregon

("Local Rules").

3. On November 19, 2013 (the "Petition Date"), Debtor filed its

voluntary petition for relief under Chapter 11 of the Bankruptcy Code.

4. Debtor remains in possession of its assets and continues to operate its

business as debtor-in-possession pursuant to Sections 1107 and 1108 of the Bankruptcy

Code.

5. Debtor holds 100% of the membership interests of C&K Express, LLC

("Express"), an Oregon limited liability company. Debtor is also the manager of Express.

Prior to the Petition Date, Express owned and operated 15 pharmacies. Express is a co-

borrower with Debtor on Debtor's loans with U.S. Bank, National Association ("Bank").

Bank has a security interest in virtually all of Express' assets. In July of 2013, Debtor

engaged The Food Partners, LLC ("Food Partners") to assist Debtor in the sale of the

pharmacies.

6. Prior to the Petition Date, Express entered into asset purchase

agreements for the sale of the pharmacy inventory, equipment and intangible assets at 13 of

the 15 pharmacies. Twelve of the sales have closed. The 13th sale is evidenced by the APA

executed by and among Express, Debtor and Safeway, Inc. ("Safeway") and relates to the

pharmacy located at 821 S. Main Street, Myrtle Creek, Oregon (the "Pharmacy").


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7. The APA provides for the sale by Express to Safeway of the Records

and the Prescription and Non-Prescription Inventory (as those terms are defined in the APA)

relating to or used in the operation of the Pharmacy. The APA also contains a Covenant Not

to Compete pursuant to which Debtor and Express both agree that they will not compete with

Safeway as more particularly set forth in Section 9 of the APA.

8. Subject to certain adjustments, the purchase price payable by Safeway

is (a) $1,600,000 for the Records and the Covenant Not to Compete, and (b) an amount equal

to Express' cost for the Prescription and Non-Prescription Inventory.

9. The closing of the transactions contemplated by the APA was

scheduled for December 6, 2013. Safeway has requested that Debtor obtain Court

authorization to close the transaction and perform its obligations under the APA.

10. Debtor believes the transaction contemplated by the APA is in the best

interests of Debtor and its creditors in that it will result in a reduction of approximately

$1,800,000 in the secured obligations owing by Debtor to Bank.

11. Debtor seeks authority to assume the APA to the extent it is an

executory contract.

12. The APA was negotiated, proposed and entered into by the parties

without collusion, in good faith, and from arms' length bargaining positions.

13. Safeway has acted in good faith within the meaning of Section 363(m)

of the Bankruptcy Code.

14. The stay provided in Bankruptcy Rule 6004(h) should not apply to the

order approving this motion.

WHEREFORE, Debtor respectfully requests that the Court enter its Order:

1. Authorizing Debtor to cause Express to close the APA and perform all

of its obligations thereunder;


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2. Authorizing Debtor to perform its obligations under the APA,

including the Covenant Not to Compete;

3. Authorizing Debtor to assume the APA to the extent it is an executory

contract;

4. Declaring the stay arising under Bankruptcy Rule 6004 inapplicable;

5. Finding that Safeway acted in "good faith" within the meaning of

Section 363(m) of the Bankruptcy Code; determining that the APA and the transactions

contemplated thereby may be specifically enforced against and are binding upon, and not

subject to rejection or avoidance by, Debtor or any Chapter 7 or Chapter 11 trustee of

Debtor;

6. Retaining jurisdiction to resolve any controversy or claim arising out

of relating to the APA until this Case has been closed; and

7. Such other and further relief as may be just and proper.

DATED this 6th day of December, 2013.

TONKON TORP LLP By /s/ Albert N. Kennedy

Albert N. Kennedy, OSB No. 821429 Timothy J. Conway, OSB No. 851752 Michael W. Fletcher, OSB No. 010448 Ava L. Schoen, OSB No. 044072 Attorneys for Debtor


EXHIBIT 1

PHARMACY ASSET PURCHASE AGREEMENT


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SAFEWAY41. PHARMACY ASSET PURCHASE AGREEMENT

This Pharmacy Asset Purchase Agreement (uAgreement) Is entered into as of the Effective Date

by and between Safeway Inc. a Delaware corporation, ("Safeway) and the Company and the Member Indicated below (the Company is referred to herein as MSelle, 1).

RECITALS

A. Seller is engaged in the business of operating a retail pharmacy identified below;

B. Safeway desires to purchase certain of the assets of the Pharmacy, and Seller desires to sell such assets, as described herein.

C. As a condition to the sale of the assets by Seller to Safeway, the Member is willing to agree to certain Covenants set forth herein,

AGREEMENT

In consideration of the mutual agreements contained herein, the parties agree as follows:

1. BASIC TRANSACTION TERMS (capitalized terms not defined In this Section are defined in Section or in the body of this Agreement)

1.1 Effective Date: October 29, 2013

1.2 Purchase Closing Date: December 6, 2013

1.3 Customer Notification Date: Before December 5, 2013

1.4 Company: C&K Express, LLC, an Oregon limited liability company

1.5 Member. C & K Market, Inc., an Oregon corporation

1.6 Pharmacy Name: Pharmacy Express

1.7 Pharmacy Location: 821 S. Main Street, Myrtle Creek, Oregon 97457

1.8 Purchase Price: $1,600,000 for the Records and the Covenant Not to Compete plus amounts for Prescription and Non-Prescription Inventory to be determined as described In Section 4 below.

1.9 Current Average Weekly Prescription Volume at the Pharmacy; 1,706

1.10 Deliver Assets to: 821 S. Main Street, Myrtle Creak, Oregon 97457. ("Safeway Store d)

1.11 Number of Years ofHard Copy Records Delivered to Safeway; S

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1.12 Storage Location for Hard Copy Records If Different from Safeway Store: Iron Mountain location servicing Safeway Store.

3.13 Notices:

Safeway: Safeway Inc. 5918 Stonerldge Mali Road Pleasanton, CA 94588 Attm Use A. Olsen

Sellers Address and Contact information:

C&K Express, LI.0 63.5 Fifth Street Brookings, OR 97415 Attn: General Counsel

2. DEFINITIONS

2.1 "Assets" means all of the following:

(a) Original prescription hard copies for the period preceding the Closing Date indicated in Section 3.11 above and working copies of all other pharmacy records, customer records, lists and profiles, and other written or recorded information In any form relating to the operation of the Pharmacy for the 18 month period preceding the Closing Date (collectively, "Records");

(b) All Prescription Drugs owned by Seller, used In the operation of the Pharmacy and located at the Pharmacy as of the Closing, but exclusive of (I) all items having an expiration date lass than 90 days after Closing Date, (ii) any damaged or expired date-coded merchandise and (Iii) those Items described in Exhibit A attached hereto (the "Prescription Inventory"); and

(c) Non-prescription inventory owned by Seller, used in the operation of the Pharmacy and located on the Pharmacy premises as of the Closing that is selected by Safeway in its sole discretion, not Including (I) all items having an expiration date fewer than 90 days after the Closing Date, (II) any damaged or expired date-coded merchandise and (ill) those items described in Exhibit attached hereto (the "Non-Prescription Inventory").

The Assets shall not Include any accounts receivable or any of Sellers cash on hand.

2.2 "Inventory" means a physical Inventory of the Assets described in Section 21() and Sect1or L2Lcl to be taken as of Closing Date by Washington Inventory Service or another mutually agreed upon Independent inventory service. The cost of taking the inventory shall be shared equally by Safeway and Seller, and the independent Inventory service will provide both Safeway and Seller with a complete copy of the inventory on or shortly after the Closing.

2.3 "Lien" means any lien, claim, option, charge, security interest, mortgage, deed of trust, license, lease or other encumbrance and Includes, without limitation, any unpaid claim or charge of any creditor or supplier.

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2.4 "Prescription Drugs means all drugs required by law to be dispensed under the supervision of a

registered or licensed pharmacist.

3. PURCHASE AND SALE

3.1 Seller will sell the Assets to Safeway, and Safeway will purchase the Assets from Seller, on the Closing Date.

3.2 Safeway shall not assume any liabilities of Seller.

3.3 Notwithstanding the foregoing, transfer of any of the Assets containing confidential medical

Information of a patient shall be subject to any objections by such patient to the transfer that are received by Seller prior to the Closing Date.

4. PURCHASE PRICE

4.1 (a) Purchase Price.. The Purchase Price, as It may be adjusted pursuant to Section 4.11b below, shell equal the total of:

(I) An amount Indicated in Section 1.8 above for Records and for the Covenant Not to Compete;

(ii) An amount equal to Sellers cost for Prescription Inventory and Non-Prescription Inventory, at Sellers actual cost; and

(b) Possible Purchase. Price Adlustn,ei. Seller represents and warrants to Safeway that Seller currently fills the Average Weekly Prescription Volume Indicated In Section 1.9 above. If a mutual audit of Pharmacys prescription records for the six weeks immediately prior to the Notification Date determines that (1) the actual confirmed volume Is less than 95% of the Average Weekly Prescription Volume; or (2) Seller has Customer prescription Contracts that do not allow Safeway participation or otherwise are exclusive in nature; or (3) any of the Records has been falsified or otherwise altered by Seller; then Safeway may in Its sole discretion, prior to the Notification Date either:

(I) Prorate downward the Purchase Price to reflect the actual confirmed Average Prescription Volume at the rate of $938 per prescription below 95% of the Average Prescription Volume. There will be no adjustment to the Purchase Price If the actual confirmed Average Prescription Volume Is greater than indicated in Section 1.2 above; or

(II) If the actual confirmed Average Prescription Volume is less than 1,190 prescriptions, terminate this Agreement upon written notice to Seller.

4.2 The Purchase Price shall be paid by wire transfer pursuant to the wire transfer Instructions attached hereto as ih[bjt4 as follows:

(a) That portion of the Purchase Price attributable to the Records and the Covenant Not to Compete, subject to adjustment as described in Section 4(}. shall be wired to Seller on the Closing Date; and

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(b) That portion of the Purchase Price attributable to Prescription Inventory and Non-Prescription Inventory shall be wired within 5 business days after completion of the inventory.

4.3 Safeway shall be responsible for sales tax and similar charges and assessments on the sale of the Assets to Safeway and for payment of any and all taxes relating to Safeways business. Seller shall be responsible for taxes relating to Sellers business that have accrued prior to the Closing Date, Including payroll taxes and employee withholding and accrued benefits, business and occupations taxes, sales and use taxes, Income taxes and personal property taxes.

4.4 Nothing contained In this Agreement shall confer upon Sellers employees any right to become employed by Safeway. In the event that Safeway elects to hire any employees of Seller, this Agreement does not confer upon them any right to continue in the employ of Safeway or restrict the rights of Safeway to discharge any employees, with or without cause, effective at any time.

4.5 Safeway may, at Safeways expense, provide to Seller the closing and liquidation services of William McDermott, Pharmacy Consultant (or, in the event that William McDermott Is not reasonably available, such substitute consultant as to which Safeway and Seller shall reasonably agree). Such services will Include (I) closing the Pharmacy; (II) removing and disposing of all unattached fixtures and equipment within the Pharmacy premises; and (Ill) ensuring that the Pharmacy premises are "broom clean." All proceeds of the foregoing closing and liquidation services shall be paid to Seller.

S. NOTIFICATION

On the Notification Date, Safeway, at Safeweys expense, will notify Sellers prescription customers of

the proposed transfer of the Assets to Safeway and the anticipated Closing Date.

6. CLOSING; TERMINATION AND EFFECT

6.1 The sale will be consummated upon the occurrence of the following (the "Closing)

(a) Safeway shall deliver to Seller the portion of the Purchase Price set forth In section

(b) Seller shall deliver to Safeway a duly executed and acknowledged Bill of Sale In the form attached hereto as Exhibit C (the "Bill of Sale"); and

(c) Each party shall deliver or cause to be delivered to the other party such additional documents as may be required by law or as may be reasonably necessary In the discretion of Safeway to complete the sale of the Assets to Safeway and otherwise to consummate the transactions contemplated hereunder. After the Closing, each party shall, from time to time, upon request of the other party, perform such further acts as may be reasonably required to consummate the transactions contemplated by this Agreement.

6.2 Possession of the Assets shall be delivered by Seller to Safeway on the Closing Date to the Safeway Store Indicated in Section 1.1 or such other location as Safeway may designate.

6.3 in the event that, prior to the Closing, any material portion of the Assets are destroyed or substantially damaged, either party may termInate this Agreement upon written notice to the other.

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6.4 In the event that this Agreement is terminated for any reason, or the transaction does not close for any reason, Safeway promptly will return to Seller all Records, and Safeway will not use In Its own pharmacy business any such Records.

7. REPRESENTATIONS, WARRANTIES AND COVENANTS

7.1 Seller represents and warrants that

(a) Seller has good and marketable title to all of the Assets and shall convey said Assets to Safeway on the Closing Date free and clear of all Uerts. Alternatively, Seller shall provide documentation satisfactory to Safeway demonstrating that the Liens of all creditors will be satisfied out of the purchase proceeds and released;

(b) Seller Is duly organized and validly existing under the laws of the State indicated in Section 1 above;

(c) the execution, delivery and performance of this Agreement are within Its powers and have been duly authorized by all necessary action and do not contravene Its charter or by-laws or any contractual restriction binding on or affecting Seller;

(d) this Agreement constitutes the valid obligation of Seller applicable to Seller and enforceable against Seller In accordance with its terms;

(a) no authorization, approval or other action by and no notice to or filing with, any governmental authority or regulatory body or any third party Is required for the due execution, delivery and performance of this Agreement, other than releases of UCC-1 financings statements to be filed at or after Closing with the Oregon Secretary of State:

(f) there Is no action, suit or proceeding pending against, or to Sellers knowledge, threatened against or affecting Seller which could reasonably be expected to Impair Sellers ability to perform Its obligations hereunder;

(g) as of the Closing Date there are no creditors of Seller who can lawfully object to the transfer of the Assets to Safeway or who may lawfully assert any right, title or Uen against the Assets other than U.S. Bank, National Association;

(h) all Prescription Inventory to be sold to Safeway pursuant to this Agreement was purchased by Seller either directly from the manufacturer of such products or from an authorized distributor of record as defined by the Federal Food, Drug and Cosmetic Act and such purchases by Seller compiled with all applicable provisions of the Federal Food, Drug, and Cosmetic Act;

(I) Seller Is In compliance in all material respects with all requirements of federal, state and local laws and safety standards, codes and regulations applicable to the Pharmacy and Sellers business conducted at the Pharmacy;

(J) Seller maintains valid, current federal and state approvals and permits for the storage, sale and distribution of pharmaceuticals In the Pharmacy;



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(k) Seller has not retained the services of any broker nor incurred any expense or liability fbr any brokers commissions or fees with respect to the transactions contemplated by this Agreement, except for such brokers commissions and fees that will be paid by Seller in full at Closing; and

(I) Seller currently participates In no exclusive prescription contracts or plans.

7.2 Seller covenants that:

(a) up to and Including the Closing Date, Seller shall continue to conduct its business In connection with the Pharmacy in the ordinary course and shall use commercially reasonable efforts to preserve the goodwill of its customers, suppliers and other business relationships;

(b) Seller shall, upon not less than 24 hours prior notice and at any time during normal business hours, provide Safeway and Its representatives access to the Records and allow Safeway to examine the Assets. Safeways Inspection shall be conducted in such a manner as not to interfere unreasonably with Sellers business and not to disclose the transaction contemplated hereby to Sellers customers prior to the Notification Date;

(c) Seller shall assign and transfer to Safeway, effective as of the Closing Date, the Pharmacy telephone number(s) at no additional cost to Safeway;

(d) Seller shall be responsible for all Liens and other liabilities, costs and expenses, arising out of or In connection with the operation - of the Pharmacy and Its business prior to the Closing Date, Including retroactive claim denials and claim charge backs from third party claim submissions and audits;

(e) other than prescription hard copies, Seller shall not transfer to Safeway, and shall retain for the periods required by all applicable federal and state statutes, rules and regulations, all original books and records; provided, however, that following the Closing and during such required retention period and upon reasonable notice thereof by Safeway, Seller shall afford Safeway or Safeways authorized representatives reasonable access to such retained books and records;

(f) after the Closing Date, Seller shall comply with all record retention requirements governing the prescription flies transferred hereunder in accordance with applicable federal, state and local law;

(g) Seller shall be responsible for responding to all requests for Pharmacy records and third party audits, government Investigations, state agency Investigations with respect to business conducted by the Pharmacy prior to the Closing Date; and

(h) for a period of six months following the Closing Date, Seller shall grant Safeway access to use Sellers computer system at no cost to Safeway for look-up" purposes only with respect solely to Information relating to the Pharmacy.

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7.3 Joint representations:

The parties acknowledge that each Is a covered entity and that any patient health information Is being transferred in the course of the sale of a business and Is therefore Thalth care operations" as defined in 45 CFA Section 164501.

8. CONDITIONS TO CLOSING

The Closing Is subject to the satisfaction or waiver by Safeway of the following conditions: 81 All representations and warranties of Seller in this Agreement shall be true In all material respects.

8.2 Seller shall have performed all of Its covenants to be performed pursuant to this Agreement prior to the Closing In all material respects.

8.3 No law, regulation, judgment or order prohibits the transactions contemplated by this Agreement.

8.4 Seller has provided Safeway with copies, together with an assignment In farm and substance reasonably acceptable to Safeway, of all legally transferable licenses and permits held by Seller that are needed to lawfully transfer the Assets to Safeway.

8.5 Seller has coperated with Safeway, at Safeways expense, to convert computerized customer records to Safeways computer format. Seller has provided Safeway with a list of third-party Insurance plans used In the Pharmacy operation at least 5 days prior to the Closing. The thIrd-party insurance plan list must contain the computer Code, plan name, BIN and processor ID numbers to the extent necessary for each insurance plan in the Pharmacy computer database.

8.6 seller will have provided to Safeway insurance policy extracts, certificates of insurance and policy form numbers for the insurance policies described in Section 10.1.

9. COVENANT NOT TO COMPETE

9.1 For a period of five years after the Closing, no Seller or Member shall: (I) directly or Indirectly operate or own a controlling Interest In any business or retail pharmacy selling Prescription Drugs within a five-mile radius of the Safeway Store; (II) use or permit any third party to use any portion of the In-Store or Pharmacy premises to display, sail or otherwise make available Prescription Drugs or related pharmacy services, for so long as it controls the Pharmacy location, with an outside limit of 5 years.

9.2 For a period of two years after the Closing, Seller and Member shall not, dIrectly or Indirectly, use, share, distribute, duplicate or exploit any prescription customer lists, prescription customer profiles, prescription records or any other written or recorded Information In any form relating to the operation of the Pharmacy and Its business, Including the records of prescription refill data, whether or not sold and transferred to Safeway pursuant to this Agreement; provided, the foregoing shall not apply with respect to the employees of Seller or Member in connection with Sellers and Members respective employee health plans, as required by law or In connection with pending litigation, third party claims or resolving outstanding accounts receivable.



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9,3 The covenants set forth in 9.1 and 9.2 above together shalt constitute the Covenant Not to Compete.

9.4 If the Covenant Not to Compete is held invalid or unenforceable by a court by reason of its geographic or business scope or duration, then only such invalid or unenforceable provisions of the same shall be deemed ineffective and the remaining provisions shall remain effective to the maximum extent permitted by applicable law.

9.5 Seller and Member acknowledge and agree that a violation of the Covenant Not to Compete shall cause Safeway Irreparable injury for which it has no adequate remedy at law, and that Safeway may therefore, in addition to its exercise of all other remedies available at law or by the terms of this Agreement, seek Injunctive relief. 10. INSURANCE/INDEMNIFICATION

10.1 Without limiting Sellers Indemnification of Safeway as provided heroin and as a material condition of this Agreement, the Seller shall have had in full force and effect as of the Closing Date and for 5 continuous years prior thereto, insurance with limits, coverages, terms, and conditions at least as broad as shown below:

(a) Workers compensation and employers liability Insurance with limits to conform with the greater of the amount required by California law or one million dollars ($1,000,000), with a limit of one million dollars ($1,000,000) per person subject to an aggregate limit of one million dollars ($1,000,000) per annum;

(b) Commercial general liability insurance written on an occurrence basis with limits not less than $2,000,000 combined single limit per occurrence for bodily Injury, death, and property damage, Including personal injury, contractual liability, independent contractors, broad4brm property damage, and products and completed operations coverage; and

(c) Professional liability Insurance written on an occurrence basis with limits not less than $2,000,000 per occurrence.

(d) The annual general aggregate limits shall be twice the required per occurrence limits.

10.2 Seller shall indemnify, defend and hold Safeway harmless from and against any and all liabilities, costs and expenses arising out of, related to any breach of any of Sellers representations, warranties or covenants hereunder. Liability will be limited to the Purchase Price received. This section is Safeways exclusive remedy for monetary damages for breach of this Agreement.

11. MISCELLANEOUS

11.1 Any notice given hereunder shall be in writing and shall be given by personal delivery, by certified or registered U.S. mail, postage or delivery charge prepaid, return receipt requested, or by reputable overnight delivery service, addressed as indicated in Section 1 above or such other address of which the parties may notify the other from time to time.

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11.2 This Agreement constitutes the entire agreement of the parties and supersedes all other prior discussions, agreements, or understandings with respect to the subject matter hereof. No amendment to this Agreement shell be effective unless it Is embodied in a writing executed by both parties.

11.3 This Agreement may not be assigned by either party, and no attempted assignment shall be effective, without the prior written consent of the other party. This Agreement shall Inure to the benefit of and be binding on the parties hereto and their successors and permitted assigns.

11.4 Other than as to Injunctive relief, any controversy, claim or breach or alleged breech arising out of this Agreement shall be resolved by the Arbitration Service of Portland ("ASP") for binding arbitration. The location of the arbitration shall be Portland, Oregon, and arbitration will be held on a date and at a time that is reasonably acceptable to each party. The arbitration will be before one arbitrator chosen from a list of arbitrators provided by ASP and mutually agreed to in writing by the parties. If the parties cannot reach an agreement on an arbitrator within fifteen (15) days of receipt of the list provided by ASP, then on the 15th day, the parties will convene a conference with the ASP case administrator (or such other ASP staff member as ASP makes available). The claimant and the respondent, beginning with the claimant, will alternate striking one arbitrator from the list until one arbitrator Is left, which arbitrator will be appointed. If such arbitrator Is unable or unwilling to serve, then the next to lest candidate will be chosen. Costs of arbitration will be shared equally by the parties. The prevailing party shall be entitled to reimbursement of reasonable attorneys fees.

11.5 This Agreement shall be governed by and construed in accordance with the substantive laws of the State of Oregon without application of conflict of laws principles.

114 All provisions hereof that the parties reasonably expect to survive the Closing shall so survive.

11.7 This Agreement may be executed In several counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Delivery of an executed signature page to this Agreement by facsimile or other electronic transmission (including documents In Adobe POP format) will be effective as delivery of a manually executed counterpart to this Agreement.

11.8 Notwithstanding any other provision of this Agreement, either party may terminate this Agreement if Closing has not occurred by December 5, 2013 for any reason unrelated to the breach of any provision of this Agreement by the terminating party.

(Signature page follows)

P a g e

Asset Purchase Agreement - Myrtle Creek


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IN WITNESS WHEREOF, the parties have executed this Agreement, effective as of the Effective Date.

SAFE WAY: SELLER:

Safeway inc. C&K Express, ILC

BY; ;Qk ar

Nam Jewel Hunt

Vorv L Sandeno

Title: Group Vice President Print Title: President

Corporate Pharmacy Tax ID:. 75-3001392

MEMBER: C & K Market, Inc., solely for purposes of Section

Na Greaorv L. Sandeno Prin Thie: President

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PURCHASE EXCLUSIONS

Prescription Drugs and non-prescription Inventory not stocked by the Safeway Store Over-the-counter drugs, except that this exclusion shall not apply to those over-the-counter

drugs stored behind the pharmacy counter or In a locked case that are sold in the normal course of business and are stocked by the Safeway Store

Diabetic supplies, except that this exclusion shall not apply to Insulin products Products that contain ephedrine, pseudoephedrine or phenyipropanolamine ("PSE Products"),

except that this exclusion shall not apply to those PSE Products stocked by the Safeway Store Drugs not purchased by Seller either directly from the manufacturer of such products or from

an authorized distributor of record Repackaged drugs or Inventory Private label items Drugs, materials, supplies and equipment used in compounding, unless part of the normal

business of the Safeway Store Recalls Durable medical equipment Equipment not specified in Attachment i to this Exhibit Drugs subject to an R.E.M.S. Implementation system (example: Thalidomide, Accutane, Actiq,

Fentora, etc. Vaccines

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ATrACHMEN[ PURCHASED EQUIPMENT

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EXHIWTB

WIRE TRANSFER INSTRUCTIONS

Name of Bank: U.S. Bank

Routing Transit (aba) Number. 123000848

Account Number: 153910599104

Account Name: C & K Market, Inc. - Operating Account

131 p age Asset Purchase Agreement - Myrtle Creek


2013-10-30 16:30 Safeway FaciLities 9254673111 >> P 14/14

BILL OF SALE

FOR VALUABLE CONSIDERATION, the receipt of which Is hereby acknowledged, C&K Express, L.LC, an Oregon limited liability company (the Seller"), pursuant to that certain Pharmacy Asset Purchase Agreement (the "Agreement") dated October 29, 2013 by and among the Member, Seller and Safeway Inc. ("Safeway"), hereby sells, assigns, grants, bargains, transfers and delivers to Safeway, the Assets (as such term Is defined In the Agreement).

Seller hereby assigns and transfers to Safeway any and all warranties relating to the Assets that may be lawfully assigned

or transferred.

IN WITNESS WHEREOF, Seller has caused this Bill of Sale to be executed as of .201

C&K Express, LLC By: C & K Market, Inc., Its Manager

By; -

Name:

Print Tttle;_

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EXHIBIT 2

FIRST AMENDMENT TO PHARMACY ASSET PURCHASE AGREEMENT


This First Amendment to Pharmacy Asset Purchase Agreement ("4mendmenl is entered into as of December 5, 2013, by and between SAFE WAY INC., a De1aware corporation ("Safeway"), C&K EXPRESS, LLC, an Oregon limited liability conjpany ("Company"), and C&K MARKET, INC., an Oregon corporation, Debtor and Dbtor-in-Possession in that certain Chapter 11 case entitled In re: C&K Market. Inc. , Unitd States Bankruptcy Court for the District of Oregon, Case No. 13-64561-frail ("Member"; and with Safeway and Company, together, the "Parties").

R1ICITALS

A. Safeway, Company and Member have previously executed that cektain Pharmacy Asset Purchase Agreement, entered into as of October 29, 2013 ("APA"), pursuant to which, inter alia, Company agreed to sell to Safeway certain assets described in the APA and Member agreed to abide by that "Covenant Not To Compete" set forth in Section 9 of the )TA.

B. On November 19, 2013, Member filed a Voluntary Petition under I l U.S.C. chapter 11 in the United States Bankruptcy Court for the District of Oregon ("Ba4kruptcy Court") thereby commencing its chapter ii bankruptcy case, designated as Case No. 13-64561-frail ("Members Bankruptcy Case"). Member is a Debtor and Debtor-in-Possssion and has remained in possession and control of its business and assets. No bankruptcytru$ee has been appointed in Members Bankruptcy Case.

C. Safeway, Company and Member have agreed that certain changes e made to the terms of the APA, which are set forth below.

NOW, THEREFORE, the Parties agree as follows:

1. The Recitals hereto are true in all material respects. All undefined capitalized terms used herein shall have the meanings ascribed to them in the AP unless otherwise specifically defined herein.

2. Section 1.1 of the APA shall be deleted in its entirety and replaced with the following:

below). 3.

the following:

4, the following:

1.1 Effective Date: Upon the entry of the Final Order (:laceddefined

Section 1.2 of the APA shall be deleted in its entirety and with

1.2 Closing Date or Purchase Closing Date: January 101, 2014.

Section 1.3 of the APA shall be deleted in its entirety and with

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1.3 Notification Date or Customer Notification January 10, 2014.

5. The following provision shall be added to Section 4 of the A entitled "PURCHASE PRICE":

4.6 Notwithstanding any provisions to the contrary clontained in the APA and this Amendment, the Purchase Price shall be calculated based upon the original Notification Date set fo4th in the APA of December 5, 2013. I

6. The following provisions shall be added to Section 6.1 of APA:

6.1(d) Member shall obtain a "Final Order," as such term i defined herein, from the Bankruptcy Court having jurisdiction ovei Members Bankruptcy Case which (i) approves the APA and this Am ndment and authorizes Member, pursuant to 11 U.S.0 365, to assum the APA and this Amendment, and (ii) authorizes Member to execute an Iperform the APA and this Amendment. As used herein the term "Final Order" shall mean an Order of the Bankruptcy Court (a) as to which nc appeal, notice of appeal, motion to amend or make additional findings of fact, motion to alter or amend judgment, motion for rehearing or reconsid ration or motion for new trial has been timely filed or, if any of the: oregoing has been timely filed, it has been disposed of in a manner that ipholds and affirms the subject order in all material respects without th possibility for further appeal or rehearing thereon; and (b) as to which th time for instituting or filing an appeal, motion for rehearing or reec isideration or motion for new trial shall have expired.

7. Section 7.1 of the APA which reads "Seller represents and

that:" shall be deleted in its entirety and replaced with the following:

7.1 Seller represents and warrants that, other than Menibers Bankruptcy Case and obtaining the Final Order describedia Section 6.1(d).

8. Section 11.8 of the APA shall be deleted in its entirety andi replaced with the following:

11.8 Notwithstanding any other provision ofthis Agreerent, either party may terminate this Agreement if Closing has not occzrred by the close of business January 10, 2014 for any reason unrelatel to the breach of any provision of this Agreement by the terminating part.

9. Except as modified herein, the terms of the APA shall rem in full force and effect. This Amendment is not a novation nor is it to be construed as a re1ease or modification of any of the terms, conditions, warranties or rights set forth in the 4.PA, except as expressly and specifically set forth herein.

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10. This Amendment and the APA set forth the entire agreemnt and understanding between the Parties, supercede all other agreements and understan1ings of the Parties, whether written or oral, and may not be changed, altered, modified or amended in any respect except by written instrument duly signed by each of the Parties.

11. This Amendment may be executed in one or more counterarts, each of which shall be deemed an original but all of which together shall constitute one ii the same instrument. This Amendment may be executed by a telecopied or electronic sign and transmission by telecopy or electronic mail of an executed counterpart of this An4endment shall be deemed to constitute due and sufficient delivery of such counterpart. I II I

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IN WITNESS WHEREOF, each of the Parties hereto has duly this Amendment effective as of the date and year above written.

SAFE WAY INC., a Delaware corporation

By: Print Name:_______________________ Title:

C&K EXPRESS, LLC, an Oregon limited liabilit company

By: Print Name:_________________ Title:

C&K MARKET, INC., an Oregon corporation, Dbtor and Debtor-in-Possession I By: Print Name:_______________________ Title:

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EXHIBIT 3

PROPOSED FORM OF ORDER




Page 1 of 3 - ORDER GRANTING DEBTOR'S MOTION FOR ORDER AUTHORIZING DEBTOR TO PERFORM AND CAUSE C&K EXPRESS, LLC TO PERFORM ITS OBLIGATIONS UNDER PHARMACY ASSET PURCHASE AGREEMENT

UNITED STATES BANKRUPTCY COURT

DISTRICT OF OREGON

In re

C & K Market, Inc.,

Debtor.

Case No. 13-64561-fra11

ORDER GRANTING DEBTOR'S MOTION FOR ORDER AUTHORIZING DEBTOR TO PERFORM AND CAUSE C&K EXPRESS, LLC TO PERFORM ITS OBLIGATIONS UNDER PHARMACY ASSET PURCHASE AGREEMENT

This matter having come before the Court on Debtor's Motion for Order

Authorizing Debtor to Perform and Cause C&K Express, LLC to Perform its Obligations Under

Pharmacy Asset Purchase Agreement (the "Motion") [Dkt. #_____], the Court having reviewed

the Motion and having considered the statements of counsel and the evidence adduced with

respect to the Motion; and the Court having found that (1) the Court has jurisdiction over this

matter pursuant to 28 U.S.C. 157 and 334; (2) venue is proper in this district pursuant to 28

U.S.C. 1408 and 1409; (3) this is a core proceeding pursuant to 28 U.S.C. 157(b); and

(4) notice of the Motion and the Hearing was sufficient under the circumstances; and after due

deliberation the Court having determined that the relief requested in the Motion is in the best

interests of Debtor, its estate and the creditors; and good and sufficient cause having been shown,





IT IS HEREBY ORDERED that:

1. Debtor's Motion is granted.

2. Debtor is hereby authorized to cause C&K Express, LLC to perform all of

its obligations under the Pharmacy Asset Purchase Agreement.

3. Debtor is hereby authorized to perform its obligations under the Pharmacy

Asset Purchase Agreement, including the Covenant Not to Compete.

4. To the extent the Pharmacy Asset Purchase Agreement is an executory

contract, Debtor it authorized to assume it.

5. Safeway, Inc. acted in good faith within the meaning of Section 363(m) of

the Bankruptcy Code and the Pharmacy Asset Purchase Agreement, and the transactions

contemplated thereby, may be specifically enforced against and are binding upon, and not

subject to rejection or avoidance by, Debtor or any Chapter 7 or Chapter 11 trustee of Debtor.

6. This Order shall be effective immediately upon entry.

7. This Court shall retain jurisdiction to resolve any controversy or claim

arising out or related to the Pharmacy Asset Purchase Agreement until this Case has been closed.

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I certify that I have complied with the requirements of LBR 9021-1(a)(2)(A).

Presented by:

TONKON TORP LLP

By Albert N. Kennedy, OSB No. 821429 Timothy J. Conway, OSB No. 851752 Michael W. Fletcher, OSB No. 010448 Ava L. Schoen, OSB No. 044072 888 S.W. Fifth Avenue, Suite 1600 Portland, OR 97204-2099 Telephone: 503-221-1440 Facsimile: 503-274-8779 E-mail: [email protected] [email protected] [email protected] [email protected] Attorneys for Debtor

cc: List of Interested Parties


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Page 1 of 1 - CERTIFICATE OF SERVICE

CERTIFICATE OF SERVICE

I hereby certify that the foregoing ORDER GRANTING DEBTOR'S MOTION FOR ORDER AUTHORIZING DEBTOR TO PERFORM AND CAUSE C&K EXPRESS, LLC TO PERFORM ITS OBLIGATIONS UNDER PHARMACY ASSET PURCHASE AGREEMENT was served on the parties indicated as "ECF" on the attached List of Interested Parties by electronic means through the Court's Case Management/Electronic Case File system on the date set forth below.

In addition, the parties indicated as "Non-ECF" on the attached List of Interested Parties were served by mailing a copy thereof in a sealed, first-class postage prepaid envelope, addressed to each party's last-known address and depositing in the U.S. mail at Portland, Oregon on the date set forth below.

DATED this 6th day of December, 2013.

TONKON TORP LLP By /s/ Albert N. Kennedy

Albert N. Kennedy, OSB No. 821429 Timothy J. Conway, OSB No. 851752 Michael W. Fletcher, OSB No. 010448 Ava L. Schoen, OSB No. 044072 Attorneys for Debtor

034518/00017/5112334v1


LIST OF INTERESTED PARTIES

In re C & K Market, Inc. U.S. Bankruptcy Court Case No. 13-64561-fra11

ECF PARTICIPANTS

RICHARD T ANDERSON [email protected], [email protected] CASEY B BOYLE [email protected] DONALD J CHURNSIDE [email protected], [email protected] TIMOTHY J CONWAY [email protected], [email protected] BRADLEY S COPELAND [email protected], [email protected] JOHN E DAVIS [email protected] MELINDA DAVISON [email protected] COLIN F. DOUGHERTY [email protected] MICHAEL W FLETCHER [email protected], [email protected];[email protected] DAVID A FORAKER [email protected], [email protected] BENJAMIN FREUDENBERG [email protected] DOUGLAS L GALLAGHER [email protected], [email protected] RUSSELL D GARRETT [email protected], [email protected];[email protected];[email protected]

THOMAS A HUNTSBERGER [email protected] GREGG D JOHNSON [email protected], [email protected] ROBERT B KAPLAN [email protected] ALBERT N KENNEDY [email protected], [email protected];[email protected] CHRISTINE A KOSYDAR [email protected], [email protected];[email protected];[email protected]

JEFFREY C MISLEY [email protected], [email protected] WILSON C MUHLHEIM [email protected];[email protected] EVAN H. NORDBY [email protected] CHRISTOPHER L PARNELL [email protected], [email protected];[email protected] TERESA H PEARSON [email protected], [email protected];[email protected] DAVID L POLLACK [email protected] TARA J SCHLEICHER [email protected], [email protected];[email protected] AVA L SCHOEN [email protected], [email protected] LOREN S SCOTT [email protected] ALAN G SELIGSON [email protected], [email protected] TROY SEXTON [email protected], [email protected],[email protected],[email protected] PATRICK L STEVENS [email protected], [email protected],[email protected] MICHAEL R. STEWART [email protected] US Trustee, Eugene [email protected] JOSEPH M VANLEUVEN [email protected], [email protected];[email protected] PAMELA K. WEBSTER [email protected], [email protected] NON-ECF PARTICIPANTS

SECURED CREDITORS

Banc of America Leasing & Capital LLC 2059 Northlake Parkway 4 South Tucker, GA 30084

Dell Financial Services LLC Mail Stop-PS2DF-23 One Dell Way Round Rock, TX 78682

James D. Gillespie 28274 S. Fork Rd. Dayville, OR 97825

Greatway Center Property LLC 8816 E. Evans Creeks Rogue River, OR 97537

Green & Frahm 941 Delsie Dr. Grants Pass, OR 97527

Komlofske Corp. 1535 E. 3rd St. Prineville, OR 97754

Ken and Lynda Martin 80380 Torreon Way La Quinta, CA 92253

Protective Life 2801 Highway 280 South Birmingham, AL 35202

OTHER

Jenette A. Barrow-Bosshart Otterbourg P.C. 230 Park Avenue New York, NY 10169-0075

034518/00017/5087851v1


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