Cost-U-Less reaches agreement with shareholder groups for board nominee, rule change

By Lisa Kerner

Charlotte, N.C., March 6 - Cost-U-Less, Inc. said it entered into separate letter agreements with two shareholder groups, Delafield Hambrecht, Inc. and its affiliates and Chadwick Capital Management LLC and its affiliates, to nominate and support John D. Delafield for election to the Cost-U-Less board of directors at its 2007 annual meeting.

The company further agreed to submit a proposal to shareholders at the 2007 annual meeting to amend the Cost-U-Less articles of incorporation removing the requirement that a business combination be approved by holders of at least two-thirds of the outstanding common stock under certain circumstances.

Delafield Hambrecht and Chadwick Capital Management agreed to support the slate of directors nominated by the Cost-U-Less board, according to a company news release.

The investors also agreed not to nominate any candidates for election to the board or propose any other business at an annual meeting through the end of 2007.

Cost-U-Less said entering into the agreements will avoid unnecessary expenses, distraction of management's time and disruption to the company's business as a result of a proxy contest.

Delafield Hambrecht, the company's largest shareholder with a 9.48% stake, filed a schedule 13D/A with the Securities and Exchange Commission on Jan. 24 requesting that the company immediately appoint an investment bank to market the company through an auction process.

In addition Delafield Hambrecht, a potential buyer for the company, was prepared to propose nominees for election who support its view.

Cost-U-Less is based in Bellevue, Wash., and operates retail warehouse club-style stores in the Pacific, the Caribbean, United State Territories, Hawaii and California.

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