[Execution Copy]
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AGREEMENT AND PLAN OF MERGER
Among
FOOD 4 LESS HOLDINGS, INC.,
FFL ACQUISITION CORP.
and
XXXX XXXXX, INC.
Dated as of November 6, 1997
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TABLE OF CONTENTS
Page
ARTICLE I THE MERGER...................................................... 1
SECTION 1.1 The Merger........................................ 1
SECTION 1.2 Effective Time.................................... 1
SECTION 1.3 Effects of the Merger............................. 2
SECTION 1.4 Certificate of Incorporation; By-
Laws.............................................. 2
SECTION 1.5 Directors and Officers............................ 2
SECTION 1.6 Conversion of Securities.......................... 2
SECTION 1.7 Treatment of Employee Options and
Other Employee Equity Rights...................... 4
SECTION 1.8 Fractional Interests.............................. 6
SECTION 1.9 Surrender of Shares of Company
Stock; Stock Transfer Books....................... 6
SECTION 1.10 Closing and Closing Date.......................... 9
SECTION 1.11 Escrow............................................ 9
SECTION 1.12 Appraisal Rights.................................. 9
SECTION 1.13 Stockholders' Representatives.....................10
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................10
SECTION 2.1 Organization and Qualification...................10
SECTION 2.2 Authorization; Validity and Effect
of Agreement.....................................11
SECTION 2.3 Capitalization...................................11
SECTION 2.4 Subsidiaries.....................................12
SECTION 2.5 Other Interests..................................12
SECTION 2.6 No Conflict; Required Filings and
Consents.........................................12
SECTION 2.7 Compliance.......................................13
SECTION 2.8 SEC Documents....................................14
SECTION 2.9 Litigation.......................................15
SECTION 2.10 Absence of Certain Changes.......................15
SECTION 2.11 Taxes............................................15
SECTION 2.12 Employee Benefit Plans...........................16
SECTION 2.13 No Other Agreements to Sell the
Company or its Assets............................18
SECTION 2.14 Assets...........................................18
SECTION 2.15 Contracts and Commitments........................19
SECTION 2.16 Absence of Breaches or Defaults..................20
SECTION 2.17 Labor Matters....................................21
SECTION 2.18 Insurance........................................22
SECTION 2.19 Affiliate Transactions...........................22
SECTION 2.20 Environmental Matters............................22
SECTION 2.21 Form S-4; Proxy Solicitation.....................24
SECTION 2.22 Opinion of Financial Advisor.....................24
SECTION 2.23 Brokers..........................................24
SECTION 2.24 DGCL Section 203; State Takeover
Statutes.........................................24
SECTION 2.25 Vote Required....................................25
SECTION 2.26 Tax Matters......................................25
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Page
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB................25
SECTION 3.1 Organization and Qualification...................25
SECTION 3.2 Authorization; Validity and Effect
of Agreement.....................................26
SECTION 3.3 Capitalization...................................26
SECTION 3.4 Subsidiaries.....................................27
SECTION 3.5 Other Interests..................................27
SECTION 3.6 No Conflict; Required Filings and
Consents.........................................27
SECTION 3.7 Compliance.......................................28
SECTION 3.8 SEC Documents....................................28
SECTION 3.9 Litigation.......................................30
SECTION 3.10 Absence of Certain Changes.......................30
SECTION 3.11 Taxes............................................30
SECTION 3.12 Employee Benefit Plans...........................31
SECTION 3.13 Assets...........................................32
SECTION 3.14 Contracts and Commitments........................34
SECTION 3.15 Absence of Breaches or Defaults..................35
SECTION 3.16 Labor Matters....................................36
SECTION 3.17 Insurance........................................36
SECTION 3.18 Environmental Matters............................36
SECTION 3.19 Form S-4; Proxy Statement........................38
SECTION 3.20 Brokers..........................................38
SECTION 3.21 Vote Required....................................38
SECTION 3.22 Opinions of Financial Advisors...................39
SECTION 3.23 Tax Matters......................................39
ARTICLE IV CONDUCT OF BUSINESS PENDING THE MERGER..........................39
SECTION 4.1 Conduct of Business of the Company
Pending the Merger...............................39
SECTION 4.2 Conduct of Business of Parent
Pending the Merger...............................42
ARTICLE V ADDITIONAL AGREEMENTS...........................................44
SECTION 5.1 Preparation of Form S-4 and the
Proxy Statement; Stockholder
Meetings.........................................44
SECTION 5.2 Accountants' Letters.............................45
SECTION 5.3 Access to Information;
Confidentiality..................................45
SECTION 5.4 No Solicitation of Transactions..................46
SECTION 5.5 Employee Benefits Matters........................47
SECTION 5.6 Directors' and Officers'
Indemnification; Insurance.......................47
SECTION 5.7 Notification of Certain Matters..................48
SECTION 5.8 Further Action...................................48
SECTION 5.9 Public Announcements.............................51
SECTION 5.10 Stock Exchange Listing...........................52
SECTION 5.11 Affiliates.......................................52
SECTION 5.12 Directorships....................................52
SECTION 5.13 Treatment of Yucaipa Consulting
Agreement........................................52
SECTION 5.14 Parent Representations and
Warranties.......................................52
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Page
SECTION 5.15 Registration Rights Agreement....................53
SECTION 5.16 Subsequent Sale..................................54
SECTION 5.17 Continuity of Business Enterprise................54
ARTICLE VI CONDITIONS OF MERGER............................................54
SECTION 6.1 Conditions to Obligation of Each
Party to Effect the Merger.......................54
SECTION 6.2 Conditions to Obligations of the
Company to Effect the Merger.....................55
SECTION 6.3 Conditions to Obligations of Parent
and Sub to Effect the Merger.....................56
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER...............................57
SECTION 7.1 Termination......................................57
SECTION 7.2 Effect of Termination............................58
SECTION 7.3 Fees and Expenses................................59
SECTION 7.4 Amendment........................................59
SECTION 7.5 Waiver...........................................59
ARTICLE VIII RELEASE OF ESCROWED SHARES......................................59
SECTION 8.1 Delivery of the Escrowed Shares..................59
SECTION 8.2 Voting of and Dividends on the
Escrowed Shares..................................59
ARTICLE IX GENERAL PROVISIONS..............................................60
SECTION 9.1 Non-Survival of Representations,
Warranties and Agreements........................60
SECTION 9.2 Notices..........................................60
SECTION 9.3 Certain Definitions..............................61
SECTION 9.4 Severability.....................................67
SECTION 9.5 Entire Agreement; Assignment.....................67
SECTION 9.6 Parties in Interest..............................68
SECTION 9.7 Governing Law....................................68
SECTION 9.8 Headings.........................................68
SECTION 9.9 Counterparts.....................................68
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of November 6, 1997 (the
"Agreement"), among Xxxx Xxxxx, Inc., a Delaware corporation ("Parent"), FFL
Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of
Parent ("Sub"), and Food 4 Less Holdings, Inc., a Delaware corporation (the
"Company").
WHEREAS, the Boards of Directors of Parent, Sub and the Company have
each approved the merger of Sub with and into the Company and the Company
becoming a wholly owned direct subsidiary of Parent (the "Merger") in accordance
with the General Corporation Law of the State of Delaware ("DGCL") upon the
terms and subject to the conditions set forth herein;
WHEREAS, concurrently with the execution and delivery of this
Agreement and as a condition and inducement to Parent's willingness to enter
into this Agreement, Parent and certain Company stockholders (the
"Stockholders") have entered into stockholders agreements, each dated as of the
date hereof and attached as Annex A hereto (the "Stockholders Agreements"); and
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Parent, Sub and the Company hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the conditions
of this Agreement and in accordance with the DGCL, at the Effective Time (as
defined in Section 1.2), Sub shall be merged with and into the Company. As a
result of the Merger, the separate corporate existence of Sub shall cease and
the Company shall continue as the surviving corporation of the Merger (the
"Surviving Corporation"). At Parent's election, the Merger may alternatively be
structured so that any direct wholly owned subsidiary of Parent may be
substituted for Sub as a constituent corporation in the Merger. In the event of
such an election, the parties agree to execute an appropriate amendment to this
Agreement in order to reflect such election.
SECTION 1.2 Effective Time. The parties hereto shall cause the Merger
to be consummated by filing a certificate of merger or a certificate of
ownership and merger (the "Certificate
2
of Merger") on the Closing Date with the Secretary of State of the State of
Delaware, in such form as required by and executed in accordance with the
relevant provisions of the DGCL (the date and time of the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware (or
such later time as is specified in the Certificate of Merger) being the
"Effective Time").
SECTION 1.3 Effects of the Merger. The Merger shall have the effects
set forth in the applicable provisions of the DGCL. Without limiting the
generality of the foregoing and subject thereto, at the Effective Time all the
property, rights, privileges, immunities, powers and franchises of the Company
and Sub shall vest in the Surviving Corporation, and all debts, liabilities and
duties of the Company and Sub shall become the debts, liabilities and duties of
the Surviving Corporation.
SECTION 1.4 Certificate of Incorporation; By-Laws. (a) At the
Effective Time and without any further action on the part of the Company and
Sub, the text of the Certificate of Incorporation of the Company as in effect
immediately prior to the Effective Time shall be amended, restated and
integrated to read in its entirety as set forth in Exhibit A hereto, and as so
amended, restated and integrated shall be the Certificate of Incorporation of
the Surviving Corporation until thereafter and further amended as provided
therein and under the DGCL.
(b) At the Effective Time and without any further action on the part
of the Company and Sub, the By-Laws of Sub shall be the By-Laws of the Surviving
Corporation and thereafter may be amended or repealed in accordance with their
terms or the Certificate of Incorporation of the Surviving Corporation and as
provided by law.
SECTION 1.5 Directors and Officers. The directors of Sub immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-Laws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the initial officers of
the Surviving Corporation, in each case until their respective successors are
duly elected or appointed (as the case may be) and qualified.
SECTION 1.6 Conversion of Securities. At the Effective Time, by virtue
of the Merger and without any action on the part of Parent, Sub, the Company or
the holders of any of the following securities:
(a) Subject to Section 1.8:
(A) each share of Common Stock, par value $.01 per share, of the
Company ("Company Voting Common Stock") and each share of Non-Voting Common
Stock, par value
3
$.01 per share, of the Company ("Company Non-Voting Common Stock"; and,
together with the Company Voting Common Stock, the "Company Common Stock")
issued and outstanding immediately prior to the Effective Time (other than
shares of Company Common Stock to be cancelled in accordance with Section
1.6(b) hereof or shares of Company Common Stock ("Dissenting Shares") that
are held by stockholders ("Dissenting Stockholders") properly exercising
appraisal rights pursuant to Section 1.12) shall be converted into and
represent the right to receive (a) a number (rounded to the nearest
ten-thousandth of a share) of fully paid and nonassessable shares of Common
Stock, par value $.01 per share, of Parent (the "Parent Common Stock")
equal to the quotient of (i) the Applicable Percentage of the Per Share
Value divided by (ii) the Average Parent Price, (the "Common Stock
Consideration"), payable upon the surrender of the certificate formerly
representing such share of Company Common Stock and (b) if the Applicable
Percentage is less than 100% at the Effective Time, a percentage interest
(the "Escrow Percentage Interest") in any Escrowed Shares (as defined in
Section 1.11) equal to one (1) divided by the Fully-Diluted Basis, payments
and/or distributions from which shall be made as provided in and subject to
the terms and conditions of the Escrow Agreement in the form of Exhibit B
hereto (the "Escrow Agreement") (the Common Stock Consideration and any
Escrow Percentage Interest described in (ii) above hereinafter referred to
as the "Common Merger Consideration"); and
(B) each share of Series A Preferred Stock, par value $.01 per
share, of the Company ("Series A Preferred Stock") and each share of Series
B Preferred Stock, par value $.01 per share, of the Company ("Series B
Preferred Stock"; together with the Series A Preferred Stock, the "Company
Preferred Stock; together with the Company Common Stock, the "Company
Stock") issued and outstanding immediately prior to the Effective Time
shall be converted into and represent the right to receive (i) a number of
fully paid and nonassessable shares of Parent Common Stock equal to the
Common Stock Consideration times the number of shares of Company Common
Stock into which such share of Company Preferred Stock is then convertible
(the "Preferred Stock Consideration"), payable upon the surrender of the
certificate formerly representing such share of Company Preferred Stock and
(ii) if the Applicable Percentage is less than 100% at the Effective Time,
an Escrow Percentage Interest equal to the number of shares of Company
Common Stock into which such share of Company Preferred Stock is then
convertible divided by the Fully-Diluted Basis (the Preferred Stock
Consideration and any Escrow Percentage Interest described in (ii) above
hereinafter referred to as the "Preferred Merger Consideration" and,
together with the Common Merger Consideration, as the "Merger
Consideration").
4
As of the Effective Time, all such shares of Company Stock shall no longer
be outstanding and shall automatically be cancelled and retired and shall
cease to exist, and each holder of a certificate representing any such
shares of Company Stock shall cease to have any rights with respect
thereto, except the right to receive the Merger Consideration and any cash
in lieu of fractional shares of Parent Common Stock to be issued or paid in
consideration therefor upon surrender of such certificate in accordance
with Section 1.9 and (iii) any dividends and distributions in accordance
with Section 1.9(e), in each case without interest.
(b) Each share of Company Common Stock that is (i) held in the
treasury of the Company or (ii) owned by Parent, Sub or any other direct or
indirect subsidiary of Parent or of the Company, in each case immediately
prior to the Effective Time, shall be cancelled and retired without any
conversion thereof and no payment or distribution shall be made with
respect thereto.
(c) Each share of common, preferred or other capital stock of Sub
issued and outstanding immediately prior to the Effective Time shall remain
outstanding and shall be unchanged after the Merger and shall thereafter
constitute all of the issued and outstanding capital stock of the Surviving
Corporation.
SECTION 1.7 Treatment of Employee Options and Other Employee Equity
Rights. (a) Immediately prior to the Effective Time, each outstanding option (a
"Company Option") to purchase shares of Company Common Stock under any stock
option or equity incentive plan of the Company (collectively, the "Company
Option Plans"), shall be cancelled in exchange for the following payments. With
respect to such portion of a Company Option which is exercisable immediately
prior to March 20, 1998 (a "Vested Option Portion"), the Company shall pay to
each holder of the Company Option a cash payment in an amount equal to the
excess, if any, of the Per Value Share minus the per share exercise price of
such Company Option, multiplied by the number of shares of Company Common Stock
subject to such Vested Option Portion, subject to applicable income tax
withholding and employer taxes. With respect to such portion of a Company Option
which is not exercisable immediately prior to the Effective Time (an "Unvested
Option Portion"), subject to Section 1.7(b) and the following sentence, if the
holder (a "Qualifying Employee") of the Company Option is employed by the
Company or any successor employer to the Company on the first anniversary of the
Effective Time (the "First Anniversary"), the Company shall pay to the
Qualifying Employee within 10 days after the First Anniversary, a cash payment
in an amount equal to the excess, if any, of the Per Share Value minus the per
share exercise price of such Company Option, multiplied by the number of shares
of Company Common Stock subject to such Unvested Option Portion, plus a pro rata
5
portion (based on the ratio of the amounts payable to Qualifying Employees under
this sentence) of any amounts which would have been payable to holders under
this sentence but who are not Qualifying Employees, subject to applicable income
tax withholding and employer taxes. If the Company or any successor employer to
the Company terminates the employment of a holder of a Company Option after the
Effective Time and prior to the First Anniversary without "cause" or such holder
terminates such employment for "good reason," as determined by the Company on a
case by case basis, such holder shall be a "Qualifying Employee" and such holder
shall be entitled to receive the payments prescribed by the preceding sentence
with respect to the Unvested Option Portion of such holder's Company Options.
(b) Any amount payable to a Qualifying Employee under Section 1.7(a) with
respect to the Qualifying Employee's Unvested Option Portion shall not exceed
the maximum amount which would not be subject to disallowance of deductibility
under Section 280G of the Code, as determined by the Company, unless the payment
of such excess amount is approved by the Company's shareholders pursuant to
Section 280G(b)(5) of the Code.
(c) Prior to the Effective Time, the Board of Directors of the Company (or,
if appropriate, a committee thereof) shall adopt appropriate resolutions and
take all other actions necessary to provide for the cancellation of the Company
Options and the payments prescribed by Section 1.7(a).
(d) Prior to the Effective Time, the Board of Directors of Parent (or, if
appropriate, any Committee thereof) shall adopt appropriate resolutions and take
all other actions necessary to provide that, effective at the Effective Time,
all the outstanding Common Stock Purchase Warrants (the "Company Warrants")
heretofore granted under the Warrant Agreement of the Company dated December 31,
1992 (but not including the Yucaipa Warrant) shall be assumed by Parent and
converted automatically into a warrant to purchase shares of Parent Common Stock
and Escrow Percentage Interests (collectively, a "New Warrant") in an amount
and, if applicable, at an exercise price determined as provided below:
(i) The number of shares of Parent Common Stock to be subject to the
New Warrant shall be equal to the product of the number of shares of
Company Common Stock remaining subject (as of immediately prior to the
Effective Time) to the Company Warrants times the quotient of (i) the
Applicable Percentage of the Per Share Value divided by (ii) the Average
Parent Price, provided that any fractional shares of Parent Common Stock
resulting from such multiplication shall be rounded down to the nearest
share;
(ii) the Escrow Percentage Interest to be subject to the New Warrant
shall be equal to the quotient of the number of shares of Company Common
Stock remaining subject (as of
6
immediately prior to the Effective Time) to the Company Warrants divided by
the Fully-Diluted Basis and
(iii) the exercise price per share of Parent Common Stock under the
New Warrant shall be equal to the product of (i) the exercise price per
share of the Company Common Stock under the Company Warrants divided by the
Per Share Value, multiplied by (ii) Average Parent Price, provided that
such exercise price shall be rounded down to the nearest cent.
(e) As provided herein, the Company Options, Company Warrants and any other
plan, program or arrangement providing for the issuance or grant of any other
interest in respect of the capital stock of the Company or any Subsidiary of the
Company shall terminate as of the Effective Time and the Company shall take all
reasonable steps to ensure that following the Effective Time no participant in
any Company Option Plans shall have any right thereunder to acquire capital
stock of the Company, Sub or the Surviving Corporation, provided that, unless
exercised prior to the Effective Time, the Company Warrants shall represent the
ongoing right to acquire Parent Common Stock as set forth above. The Company
will take all reasonable steps to ensure that, as of the Effective Time, none of
Sub, the Company, the Surviving Corporation or any of their respective
Subsidiaries is or will be bound by any Company Options, Company Warrants, other
options, warrants, rights or agreements which would entitle any person, other
than Sub or its affiliates, to own any capital stock of the Company, Sub, the
Surviving Corporation or any of their respective subsidiaries or to receive any
payment in respect thereof, except as otherwise provided herein.
SECTION 1.8 Fractional Interests. No certificates or scrip
representing fractional shares of Parent Common Stock shall be issued in
connection with the Merger, and such fractional interests will not entitle the
owner thereof to any rights of a stockholder of Parent. In lieu of any such
fractional interests, each holder of shares of Company Stock exchanged pursuant
to Section 1.6(a) who would otherwise have been entitled to receive a fraction
of a share of Parent Common Stock (after taking into account all shares of
Company Stock then held of record by such holder) shall receive cash (without
interest) in an amount equal to the product of such fractional part of a share
of Parent Common Stock multiplied by the Average Parent Price (as defined
below).
SECTION 1.9 Surrender of Shares of Company Stock; Stock Transfer
Books. (a) Prior to the Closing Date, Sub shall designate a bank or trust
company reasonably acceptable to the Company to act as agent for the holders of
shares of Company Stock in connection with the Merger (the "Exchange Agent") to
receive the shares of Parent Common Stock (and any cash payable in lieu of any
fractional shares of Parent Common Stock) to which holders of shares of Company
Stock shall become entitled pursuant to Sections 1.6(a) and 1.8. Immediately
before the Effective
7
Time, Parent will, or will cause Sub to, make available to the Exchange Agent
sufficient shares of Parent Common Stock and cash to make all exchanges pursuant
to Section 1.9(b).
(b) Promptly after the Effective Time, Parent shall, or shall cause
the Surviving Corporation to, cause to be mailed to each record holder, as of
the Effective Time, of an outstanding certificate or certificates which
immediately prior to the Effective Time represented shares of Company Stock (the
"Certificates"), a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Exchange Agent) and
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing shares of Parent Common Stock therefor. Upon
surrender to the Exchange Agent of a Certificate, together with such letter of
transmittal, duly completed and validly executed in accordance with the
instructions thereto, and such other documents as may be reasonably required
pursuant to such instructions, the holder of such Certificate shall be entitled
to receive in exchange therefor, (i) a certificate representing that number of
whole shares of Parent Common Stock which such holder has the right to receive
pursuant to the provisions of Section 1.6(a), (ii) cash in lieu of any
fractional shares of Parent Common Stock to which such holder is entitled
pursuant to Section 1.8, after giving effect to any required tax withholdings,
and (iii) any dividends or distributions to which such holder is entitled
pursuant to Section 1.9(e), and the Certificate so surrendered shall forthwith
be cancelled. If the exchange of certificates representing shares of Parent
Common Stock is to be made to a person other than the person in whose name the
surrendered Certificate is registered, it shall be a condition of exchange that
the Certificate so surrendered shall be properly endorsed or shall be otherwise
in proper form for transfer and that the person requesting such exchange shall
have paid any transfer and other taxes required by reason of the exchange of
certificates representing shares of Parent Common Stock to a person other than
the registered holder of the Certificate surrendered or shall have established
to the satisfaction of the Surviving Corporation that such tax either has been
paid or is not applicable.
(c) At any time following 12 months after the Effective Time, Parent
shall be entitled to require the Exchange Agent to deliver to it or the
Surviving Corporation any shares of Parent Common Stock (and any cash payable in
lieu of any fractional shares of Parent Common Stock and dividends or other
distributions in respect thereof) which had been made available to the Exchange
Agent and which have not been disbursed to holders of Certificates, and
thereafter such holders shall be entitled to look to the Surviving Corporation
(subject to abandoned property, escheat or other similar laws) only as general
creditors thereof with respect to the shares of Parent Common Stock (and any
cash payable in lieu of any fractional
8
shares of Parent Common Stock) payable upon due surrender of their Certificates.
Notwithstanding the foregoing, neither Parent, the Surviving Corporation nor the
Exchange Agent shall be liable to any holder of a Certificate for shares of
Parent Common Stock (and any cash payable in lieu of any fractional shares of
Parent Common Stock) delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(d) At the Effective Time, the stock transfer books of the Company
shall be closed and thereafter there shall be no further registration of
transfers of shares of Company Stock on the records of the Company. From and
after the Effective Time, the holders of Certificates evidencing ownership of
shares of Company Stock outstanding immediately prior to the Effective Time
shall cease to have any rights with respect to such shares of Company Stock
except as otherwise provided for herein or by applicable law.
(e) No dividends or other distributions declared or made after the
Effective Time with respect to shares of Parent Common Stock shall be paid to
the holder of any unsurrendered Certificate with respect to the shares of Parent
Common Stock it is entitled to receive and no cash payment in lieu of fractional
interests shall be paid pursuant to Section 1.8 until the holder of such
Certificate shall surrender such Certificate in accordance with the provisions
of this Agreement. Upon such surrender, Parent shall cause to be paid to the
person in whose name the certificates representing such shares of Parent Common
Stock shall be issued, any dividends or distributions with respect to such
shares of Parent Common Stock which have a record date after the Effective Time
and shall have become payable between the Effective Time and the time of such
surrender. In no event shall the person entitled to receive such dividends or
distributions be entitled to receive interest thereon.
(f) If, at any time after the Effective Time, the Surviving
Corporation shall consider or be advised that any deeds, bills of sale,
assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of either Sub or the Company acquired or to be acquired by
the Surviving Corporation as a result of, or in connection with, the Merger or
otherwise to carry out this Agreement, the officers of the Surviving Corporation
shall be authorized to execute and deliver, in the name and on behalf of each of
Sub and the Company or otherwise, all such deeds, bills of sale, assignments and
assurances and to take and do, in such names and on such behalves or otherwise,
all such other actions and things as may be necessary or desirable to vest,
perfect or confirm any and all right, title and interest in, to and under such
rights, properties or assets in the Surviving Corporation or otherwise to carry
out the purposes of this Agreement.
9
SECTION 1.10 Closing and Closing Date. Unless this Agreement shall
have been terminated and the transactions herein contemplated shall have been
abandoned pursuant to the provisions of Section 7.1, the closing (the "Closing")
of the transactions contemplated by this Agreement shall take place (a) at 10:00
a.m. (Pacific time) on the second business day after all of the conditions to
the respective obligations of the parties set forth in Article VI hereof shall
have been satisfied or waived or (b) at such other time and date as Parent and
the Company shall agree (such date and time on and at which the Closing occurs
being referred to herein as the "Closing Date"). The Closing shall take place at
such location as Parent and the Company shall agree.
SECTION 1.11 Escrow. Immediately prior to the Effective Time, to the
extent required by Section 1.6(a) above, (i) Parent, the Stockholders'
Representatives (as defined in Section 1.13) and an escrow agent selected by
Parent and reasonably acceptable to the Company (the "Escrow Agent") shall enter
into the Escrow Agreement and (ii) Parent shall deposit with the Escrow Agent,
in trust, a number of fully paid and nonassessable shares of Parent Common Stock
("Escrowed Shares") equal to the quotient of (A) the product of (i) one (1)
minus the Applicable Percentage (expressed as a decimal) times (ii) the product
of the (a) Per Share Value times (b) the Fully-Diluted Basis divided by (B) the
Average Parent Price. All matters relating to the Escrowed Shares, to the extent
not referred to in this Agreement, shall be governed by the Escrow Agreement;
provided, that, in the event of any conflict between the terms of this Agreement
and the Escrow Agreement, the terms of this Agreement shall be controlling. The
Stockholders' Representatives shall have full power and authority to act on
behalf of the holders of the Escrow Percentage Interests with respect to all
matters relating to the Escrowed Shares and the Escrow Agreement. The Escrow
Agent shall hold and disburse the Escrowed Shares in accordance with Article
VIII hereof and the Escrow Agreement. The Escrowed Shares shall not be used for
any other purpose.
SECTION 1.12 Appraisal Rights. Notwithstanding any other provision of
this Agreement to the contrary, shares of Company Common Stock outstanding
immediately prior to the Effective Time ("Dissenting Shares") and held by a
holder (a "Dissenting Stockholder") who has not voted in favor of the Merger or
consented thereto in writing and who has demanded appraisal for such Company
Common Stock in accordance with the DGCL shall not be converted into a right to
receive the Common Merger Consideration, unless such holder fails to perfect or
withdraws or otherwise loses its right to appraisal or it is determined that
such holder does not have appraisal rights in accordance with the DGCL. If after
the Effective Time such holder fails to perfect or withdraws or loses its right
to appraisal, or if it is determined that such holder does not have an appraisal
right, such shares of Company Common Stock shall be
10
treated as if they had been exchanged as of the Effective Time for a right to
receive the Common Merger Consideration. The Company shall give Parent and Sub
prompt notice of any demands received by the Company for appraisal of shares of
Company Common Stock, and Parent and Sub shall have the right to participate in
all negotiations and proceedings with respect to such demands except as required
by applicable law. The Company shall not, except with the prior written consent
of Parent and Sub, make any payment with respect to, or settle or offer to
settle, any such demands.
SECTION 1.13 Stockholders' Representatives. Xxxxxx X. Xxxxxx, Xxxxxx
X. Xxxxxxxx and Xxxx Xxxxxxx (the "Stockholders' Representatives") are hereby
appointed as the Stockholders' Representatives on behalf of the Company's
stockholders and irrevocably constituted and appointed as each stockholder's
attorney-in-fact, to act, by majority action, in each stockholder's name, place
and stead in any way in which such stockholder could do any or all of the
following: (i) to execute and deliver in their capacity as the Stockholders'
Representatives any and all notices documents or certificates to be executed by
the Stockholders' Representatives in accordance with this Agreement; and (ii) to
take all other actions and do other things provided in or contemplated by this
Agreement to be taken or performed by the Stockholders' Representatives.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Sub that:
SECTION 2.1 Organization and Qualification. The Company and each of
its Subsidiaries is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization, with the corporate power and
authority to own and operate its business as presently conducted. The Company
and each of its Subsidiaries is duly qualified as a foreign corporation or other
entity to do business and is in good standing in each jurisdiction where the
character of its properties owned or held under lease or the nature of its
activities makes such qualification necessary, except for such failures of the
Company and any of its Subsidiaries to be so qualified as would not,
individually or in the aggregate, have a Material Adverse Effect (as defined in
Section 9.3). The Company has previously made available to Parent true and
correct copies of its certificate of incorporation and bylaws or other
organizational documents and the charter documents and bylaws or other
organizational documents of each of its Subsidiaries, as currently in effect.
11
SECTION 2.2 Authorization; Validity and Effect of Agreement. The
Company has the requisite corporate power and authority to execute, deliver and
perform its obligations under this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the Company
and the performance by the Company of its obligations hereunder and the
consummation of the transactions contemplated hereby have been duly authorized
by the Board of Directors of the Company and all other necessary corporate
action on the part of the Company, other than the adoption and approval of this
Agreement by the stockholders of the Company, and no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement and the
transactions contemplated hereby and the execution, delivery and performance of
the Stockholders Agreements by the parties thereto. The Board of Directors of
the Company has approved for the purposes of Section 251(b) of the DGCL the
agreement of merger contained in this Agreement. This Agreement has been duly
and validly executed and delivered by the Company and constitutes a legal, valid
and binding obligation of the Company, enforceable against it in accordance with
its terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing.
SECTION 2.3 Capitalization. The authorized capital stock of the
Company consists of 60,000,000 shares of Company Voting Common Stock, 25,000,000
shares of Company Non-Voting Common Stock and 50,000,000 shares of preferred
stock, each having a par value of $.01 per share (of which 25,000,000 shares
have been designated as Series A Preferred Stock and 25,000,000 shares have been
designated as Series B Preferred Stock), of which 16,976,595 shares of Company
Voting Common Stock, 16,683,244 shares of Series A Preferred Stock (none of
which are held in the Company treasury) and 3,100,000 shares of Series B
Preferred Stock (none of which are held in the Company treasury), are issued and
outstanding and 3,304,114 shares of Company Voting Common Stock are subject to
Company Options. There are no outstanding shares of Company Non-Voting Common
Stock. All of the issued and outstanding shares of Company Common Stock are
validly issued, fully paid and non-assessable. As of the date hereof, except as
otherwise disclosed in Section 2.3 of the disclosure schedule delivered by the
Company to Parent and Sub prior to the execution of this Agreement (the
"Disclosure Schedule"), there are no existing options, warrants, calls,
subscriptions, convertible securities or other securities, agreements,
commitments, or obligations which would require the Company or any of its
Subsidiaries to issue or sell shares of Company Common Stock, Company Preferred
Stock or any other equity securities, or securities convertible into or
exchangeable or exercisable for shares of Company Common Stock, Company
Preferred Stock or any other equity securities of the Company or any of its
12
Subsidiaries. Except as set forth in Section 2.3 of the Disclosure Schedule, the
Company has no commitments or obligations to purchase or redeem any shares of
Company Common Stock.
SECTION 2.4 Subsidiaries. The only Subsidiaries of the Company are
those set forth in Section 2.4 of the Disclosure Schedule. All of the
outstanding shares of capital stock and other ownership interests of each of the
Company's Subsidiaries are validly issued, fully paid, non-assessable and free
of preemptive rights, rights of first refusal or similar rights. Except as set
forth in Section 2.4 of the Disclosure Schedule, the Company owns, directly or
indirectly, all of the issued and outstanding capital stock and other ownership
interests of each of its Subsidiaries, free and clear of all Encumbrances (as
defined in Section 9.3), and there are no existing options, warrants, calls,
subscriptions, convertible securities or other securities, agreements,
commitments or obligations of any character relating to the outstanding capital
stock or other securities of any Subsidiary of the Company or which would
require any Subsidiary of the Company to issue or sell any shares of its capital
stock, ownership interests or securities convertible into or exchangeable for
shares of its capital stock or ownership interests.
SECTION 2.5 Other Interests. Except as set forth in Section 2.5 of the
Disclosure Schedule, neither the Company nor any of the Company's Subsidiaries
owns, directly or indirectly, any interest or investment in the equity or debt
for borrowed money of any corporation, partnership, limited liability company,
joint venture, business, trust or other Person (other than the Company's
Subsidiaries).
SECTION 2.6 No Conflict; Required Filings and Consents. (a) Except as
set forth in Section 2.6 of the Disclosure Schedule, neither the execution and
delivery of this Agreement nor the performance by the Company of its obligations
hereunder, nor the consummation of the transactions contemplated hereby, will:
(i) conflict with the Company's certificate of incorporation or bylaws; (ii)
assuming satisfaction of the requirements set forth in Section 2.6(b) below,
violate any statute, law, ordinance, rule or regulation, applicable to the
Company or any of its Subsidiaries or any of their properties or assets; or
(iii) violate, breach, be in conflict with or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under,
or permit the termination of any provision of, or result in the termination of,
the acceleration of the maturity of, or the acceleration of the performance of
any obligation of the Company or any of its Subsidiaries, or cause an indemnity
payment to be made by the Company or any of its Subsidiaries under, or result in
the creation or imposition of any lien upon any properties, assets or business
of the Company or any of its Subsidiaries under, any note, bond, indenture,
mortgage, deed of trust, lease, franchise,
13
permit, authorization, license, contract, instrument or other agreement or
commitment or any order, judgment or decree to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries or
any of their respective assets or properties is bound or encumbered, or give any
Person the right to require the Company or any of its Subsidiaries to purchase
or repurchase any notes, bonds or instruments of any kind except, in the case of
clauses (ii) and (iii), for such violations, breaches, conflicts, defaults or
other occurrences which, individually or in the aggregate, would not have a
Material Adverse Effect.
(b) Except (i) for applicable requirements, if any, of the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder (the
"Exchange Act"), the Securities Act of 1933, as amended, and the rules and
regulations thereunder (the "Securities Act"), and state securities or "blue
sky" laws ("Blue Sky Laws"), (ii) for the pre-merger notification requirements
of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended, and the
rules and regulations thereunder (the "HSR Act"), (iii) for the filing of a
certificates of merger pursuant to the DGCL, and (iv) with respect to matters
set forth in Sections 2.6(a) or 2.6(b) of the Disclosure Schedule, no consent,
approval or authorization of, permit from, or declaration, filing or
registration with, any governmental or regulatory authority, or any other Person
(as defined in Section 9.3) or entity is required to be made or obtained by the
Company or its Subsidiaries in connection with the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby, except where the failure to obtain such consent, approval,
authorization, permit or declaration or to make such filing or registration
would not, individually or in the aggregate, have a Material Adverse Effect.
SECTION 2.7 Compliance. Except as set forth in Section 2.7 of the
Disclosure Schedule, the Company and each of its Subsidiaries is in compliance
with all foreign, federal, state and local laws and regulations applicable to
its operations or with respect to which compliance is a condition of engaging in
the business thereof (including, without limitation, all Environmental Laws),
except to the extent that failure to comply would not, individually or in the
aggregate, have a Material Adverse Effect. To the knowledge of the Company,
except as set forth in Section 2.7 of the Disclosure Schedule, neither the
Company nor any of its Subsidiaries has received any notice asserting a failure,
or possible failure, to comply with any such law or regulation, the subject of
which notice has not been resolved as required thereby or otherwise to the
satisfaction of the party sending the notice, except for such failure as would
not, individually or in the aggregate, have a Material Adverse Effect. The
Company and its Subsidiaries have all permits, licenses and franchises from
governmental agencies required to conduct their respective businesses as they
are now being conducted and all such permits, licenses and franchises will
14
remain in effect after the Effective Time, except for such failures to have such
permits, licenses and franchises or failures to remain effective that would not,
individually or in the aggregate, have a Material Adverse Effect.
SECTION 2.8 SEC Documents. (a) The Company has delivered or made
available to Parent true and complete copies of each registration statement,
proxy or information statement, form, report and other documents required to be
filed by it with the Securities and Exchange Commission (the "SEC") since
January 1, 1996 (collectively, the "Company SEC Reports"). As of their
respective dates, the Company SEC Reports and any registration statements,
reports, forms, proxy or information statements and other documents filed by the
Company with the SEC after the date of this Agreement (i) complied, or, with
respect to those not yet filed, will comply, in all material respects with the
applicable requirements of the Securities Act and the Exchange Act and (ii) did
not, or, with respect to those not yet filed, will not, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in the light of
the circumstances under which they were made, not misleading.
(b) Each of the consolidated balance sheets of the Company included in
or incorporated by reference into the Company SEC Reports (including the related
notes and schedules) presents fairly, in all material respects, the consolidated
financial position of the Company and its consolidated Subsidiaries as of its
date, and each of the consolidated statements of income, retained earnings and
cash flows of the Company included in or incorporated by reference into the
Company SEC Reports (including any related notes and schedules) presents fairly,
in all material respects, the results of operations, retained earnings or cash
flows, as the case may be, of the Company and its Subsidiaries for the periods
set forth therein (subject, in the case of unaudited statements, to normal
year-end audit adjustments), in each case in accordance with GAAP consistently
applied during the periods involved, except as may be noted therein.
(c) Except as set forth in the Recent Company SEC Reports (as defined
below) or in Section 2.8 of the Disclosure Schedule and except for the
transactions expressly contemplated hereby, neither the Company nor any of its
Subsidiaries has any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) that would be required to be reflected on, or
reserved against in, a balance sheet of the Company or in the notes thereto,
prepared in accordance with GAAP consistently applied, except for (i)
liabilities or obligations that were so reserved on, or reflected in (including
the notes to), the consolidated balance sheet of the Company as of February 2,
1997 and (ii) liabilities or obligations arising in the ordinary course of
business (including trade indebtedness) since February 2, 1997 which would not,
individually or in the aggregate, have a Material Adverse Effect.
15
SECTION 2.9 Litigation. Except as set forth in the Company SEC Reports
filed prior to the date of this Agreement (the "Recent Company SEC Reports") or
in Section 2.9 of the Disclosure Schedule, there is no Action instituted,
pending or, to the knowledge of the Company, threatened, in each case against
the Company or any of its Subsidiaries, which would, individually or in the
aggregate, directly or indirectly, have a Material Adverse Effect, nor is there
any outstanding judgment, decree or injunction, in each case against the Company
or any of its Subsidiaries, or any statute, rule or order of any domestic or
foreign court, governmental department, commission or agency applicable to the
Company or any of its Subsidiaries which has or will have, individually or in
the aggregate, any Material Adverse Effect.
SECTION 2.10 Absence of Certain Changes. Except as set forth in the
Recent Company SEC Reports or in Section 2.10 of the Disclosure Schedule and
except for the transactions expressly contemplated hereby, since February 2,
1997, the Company and its Subsidiaries have conducted their respective
businesses only in the ordinary and usual course consistent with past practices
and there has not been any (i) change in the Company's business, operations,
condition (financial or otherwise), results of operations, assets or
liabilities, except for changes contemplated hereby or changes which have not,
individually or in the aggregate, had a Material Adverse Effect, or (ii)
condition, event or occurrence which, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Effect. Except as set
forth in the Recent Company SEC Reports or in Section 2.10 of the Disclosure
Schedule, from February 2, 1997 through the date of this Agreement, neither the
Company nor any of its Subsidiaries has taken any of the actions prohibited by
Section 4.1 hereof.
SECTION 2.11 Taxes. Except as set forth in Section 2.11 of the
Disclosure Schedule:
(a) the Company and its Subsidiaries have (A) duly filed (or
there have been filed on their behalf) with the appropriate governmental
authorities all Tax Returns (as defined in Section 9.3) required to be
filed by them and such Tax Returns are true, correct and complete in all
respects, except where any such failure to file, or failure to be true,
correct and complete, would not, individually or in the aggregate, have a
Material Adverse Effect, and (B) duly paid in full all Taxes shown to be
due on such Tax Returns;
(b) the Company and its Subsidiaries have complied in all
material respects with all applicable laws, rules and regulations relating
to the withholding of Taxes and the payment of such withheld Taxes to the
proper governmental authorities, except where any such failure to
16
comply, withhold or pay over would not, individually or in the aggregate,
have a Material Adverse Effect;
(c) all federal income Tax Returns of the Company and its
Subsidiaries have been audited, and no federal or material state, local or
foreign audits or other administrative proceedings or court proceedings are
presently being conducted with regard to any Taxes or Tax Returns of the
Company or its Subsidiaries and neither the Company nor its Subsidiaries
has received a written notice of any pending audits with respect to
material Taxes or material Tax Returns of the Company, and neither the
Company nor any of its Subsidiaries has waived in writing any statute of
limitations with respect to material Taxes;
(d) neither the Internal Revenue Service nor any other taxing
authority (whether domestic or foreign) has asserted in writing against the
Company or any of its Subsidiaries any deficiency or claim for Taxes,
except where any such deficiency or claim for Taxes, if decided adversely
to the Company or any of its Subsidiaries, would not, individually or in
the aggregate, have a Material Adverse Effect;
(e) There are no material liens for Taxes upon any Property or
Assets of the Company or any Subsidiary thereof, except for liens for Taxes
not yet due and payable and liens for Taxes that are being contested in
good faith by appropriate proceedings, and no material written power of
attorney that has been granted by the Company or its Subsidiaries (other
than to the Company or a Subsidiary) currently is in force with respect to
any matter relating to Taxes;
(f) Neither the Company nor any of its Subsidiaries has, with
regard to any assets or property held or acquired by any of them, agreed to
have Section 341(f)(2) of the Code apply to any disposition of a subsection
(f) asset (as such term is defined in Section 341(f)(4) of the Code) owned
by the Company or any of its Subsidiaries; and
(g) Since June 14, 1995, none of the Company or its Subsidiaries
has been a member of an Affiliated Group filing a consolidated federal
income tax return other than a group the common parent of which is the
Company.
SECTION 2.12 Employee Benefit Plans.
(a) Section 2.12 of the Disclosure Schedule contains a complete list
of all Employee Plans of the Company and its Subsidiaries. True and complete
copies or written descriptions of the Employee Plans of the Company and its
Subsidiaries, including, without limitation, trust instruments, if any, that
17
form a part thereof, and all amendments thereto have been furnished or made
available to Parent and its counsel.
(b) Except as described in Section 2.12 of the Disclosure Schedule,
each of the Employee Plans of the Company and of its ERISA Affiliates (other
than any Multiemployer Plan) has been administered and is in compliance with the
terms of such Employee Plan and all applicable laws, rules and regulations
except for noncompliance which could not reasonably be expected, individually or
in the aggregate, to have a Material Adverse Effect.
(c) No "reportable event" (as such term is used in section 4043 of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")),
"prohibited transaction" (as such term is used in section 406 of ERISA or
section 4975 of the Code), "nondeductible contributions" (as such term is used
in Section 4972 of the Code) or "accumulated funding deficiency" (as such term
is used in section 412 or 4971 of the Code) has heretofore occurred with respect
to any Employee Plan (other than any Multiemployer Plan) of the Company or any
ERISA Affiliate, except for such events which would not, individually or in the
aggregate, have a Material Adverse Effect.
(d) No litigation or administrative or other proceeding involving any
Employee Plans of the Company or any of its ERISA Affiliates (other than any
Multiemployer Plan) has occurred or are threatened where an adverse
determination could, individually or in the aggregate, have a Material Adverse
Effect.
(e) Except as set forth in Section 2.12 of the Disclosure Schedule,
neither the Company nor any ERISA Affiliate of the Company has incurred any
withdrawal liability with respect to any Multiemployer Plan under Title IV of
ERISA which remains unsatisfied, except for such liabilities as would not,
individually or in the aggregate, have a Material Adverse Effect.
(f) All of the Employee Plans of the Company or its Subsidiaries
(other than any Multiemployer Plan) can be terminated by the Company without
incurring any material liability. The Company and its Subsidiaries can withdraw
from participation in any Employee Plan that is a Multiemployer Plan. Any
termination of, or withdrawal from, any Employee Plans of the Company or its
Subsidiaries, on or prior to the Closing Date, would not subject the Company to
any liability under Title IV of ERISA that would individually, or in the
aggregate, have a Material Adverse Effect.
(g) Neither the Company nor any of its Affiliates is aware of any
situation with respect to a Multiemployer Plan described in (b), (c) or (d)
above, except as described in Section 2.12 of the Disclosure Schedule.
18
(h) The transactions contemplated by this Agreement will not cause the
occurrence of a situation described in Section 2.12 (b), (c), (d) or (e) as of
the Effective Time.
SECTION 2.13 No Other Agreements to Sell the Company or its Assets.
The Company has no legal obligation, absolute or contingent, to any other Person
to sell any material portion of the Assets of the Company, to sell any material
portion of the capital stock or other ownership interests of the Company or any
of its Subsidiaries, or to effect any merger, consolidation or other
reorganization of the Company or any of its Subsidiaries or to enter into any
agreement with respect thereto.
SECTION 2.14 Assets. (a) Except as set forth in Section 2.14(a) of the
Disclosure Schedule, the Company and its Subsidiaries have good and marketable
title to or a valid leasehold estate in all of the material properties and
assets, real or personal, reflected on the Company's balance sheet at February
2, 1997 (except for properties or assets subsequently sold in the ordinary
course of business consistent with past practice). Except as set forth in
Section 2.14(a) of the Disclosure Schedule, the Company and its Subsidiaries
have good and marketable title or a valid right to use all of the real
properties that are necessary, and all of the personal assets and properties
that are materially necessary, for the conduct of the business of the Company or
any of its Subsidiaries free and clear of all Encumbrances (other than Permitted
Encumbrances).
(b) Section 2.14(b) of the Disclosure Schedule sets forth a complete
and accurate list of each improved or unimproved real property (whether owned or
leased, "Property") and/or store, office, plant or warehouse ("Facility") owned
or leased by the Company or any of its Subsidiaries, and the current use of such
Property or Facility and indicating whether the Property or Facility is owned or
leased.
(c) There are no pending or, to the best knowledge of the Company,
threatened condemnation or similar proceedings against the Company or any of its
Subsidiaries or to the knowledge of the Company, otherwise relating to any of
the Properties or Facilities of the Company and its Subsidiaries except for such
proceedings which would not, individually or in the aggregate, have a Material
Adverse Effect.
(d) Section 2.14(d) of the Disclosure Schedule sets forth a complete
and accurate list of all Leases (including subleases and licenses) of personal
property entered into by the Company or any of its Subsidiaries and involving
any annual expense to the Company or any such Subsidiary in excess of $250,000
and/or not cancelable (without material liability) within two (2) years.
19
(e) Section 2.14(e) of the Disclosure Schedule indicates each Lease
entered into by the Company or any of its Subsidiaries, as a tenant or
subtenant.
(f) The Company or its Subsidiaries, as the case may be, has in all
material respects performed all obligations on its part required to have been
performed with respect to (i) all Assets leased by it or to it (whether as
lessor or lessee), and (ii) all Leases and there exists no material default or
event which, with the giving of notice or lapse of time or both, would become a
default on the part of the Company or any of its Subsidiaries under any Lease,
in each case except where the failure to perform or such default or event would
not, individually or in the aggregate, have a Material Adverse Effect.
(g) To the knowledge of the Company, each of the Leases is valid,
binding and enforceable in accordance with its terms (subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing) and is in full force and
effect, and assuming all consents required by the terms thereof or applicable
law have been obtained, the Leases will continue to be valid, binding and
enforceable in accordance with their respective terms and in full force and
effect immediately following the consummation of the transactions contemplated
hereby, in each case except where the failure to be valid, binding and
enforceable and in full force and effect would not, individually or in the
aggregate, have a Material Adverse Effect.
(h) Except as shown on Section 2.14(h) of the Disclosure Schedule, the
Company has delivered to Parent, or otherwise made available, originals or true
copies of all material Leases (as the same may have been amended or modified, in
any material respect, from time to time).
(i) The company has provided to Parent a true and complete list of all
"radius clauses" to which it is bound under any real property leases.
SECTION 2.15 Contracts and Commitments. Section 2.15 of the Disclosure
Schedule contains a complete and accurate list of all contracts (written or
oral), plans, undertakings, commitments or agreements ("Contracts") of the
following categories to which the Company or any of its Subsidiaries is a party
or by which any of them is bound as of the date of this Agreement:
(a) employment contracts, including, without limitation, contracts to
employ executive officers and other contracts with officers, directors or
stockholders of the Company, and all severance, change in control or similar
20
arrangements with any officers, employees or agents of the Company that will
result in any obligation (absolute or contingent) of the Company or any of its
Subsidiaries to make any payment to any officers, employees or agents of the
Company following either the consummation of the transactions contemplated
hereby, termination of employment, or both;
(b) labor contracts;
(c) material distribution, franchise, license, sales, agency or
advertising contracts;
(d) Contracts for the purchase of inventory which are not cancelable
(without material penalty, cost or other liability) within one (1) year
(other than Contracts for the purchase of holiday goods in accordance with
customary industry practices) and other Contracts made in the ordinary
course of business involving annual expenditures or liabilities in excess
of $400,000 which are not cancelable (without material penalty, cost or
other liability) within ninety (90) days, other than purchase orders made
in the ordinary course of business consistent with past practice;
(e) promissory notes, loans, agreements, indentures, evidences of
indebtedness or other instruments providing for the lending of money,
whether as borrower, lender or guarantor, in excess of $250,000;
(f) Contracts (other than Leases) containing covenants limiting the
freedom of the Company or any of its Subsidiaries to engage in any line of
business or compete with any Person or operate at any location;
(g) joint venture or partnership agreements or joint development or
similar agreements pursuant to which any third party is entitled to develop
any Property and/or Facility on behalf of the Company or its Subsidiaries;
and
(h) any Contract where the customer under such Contract is a federal,
state or local government.
True copies of the written Contracts identified in Section 2.15 of the
Disclosure Schedule have been delivered or made available to Parent.
SECTION 2.16 Absence of Breaches or Defaults. Neither the Company nor
any of its Subsidiaries is and, to the knowledge of the Company, no other party
is in default under, or in breach or violation of, any Contract identified on
Section 2.15 of the Disclosure Schedule and, to the knowledge of the Company, no
event has occurred which, with the giving of notice or passage of time or both
would constitute a default under any Contract identified on Section 2.15 of the
Disclosure Schedule, except for defaults, breaches, violations or events which,
individually or
21
in the aggregate, would not have a Material Adverse Effect. Other than Contracts
which have terminated or expired in accordance with their terms, each of the
Contracts identified on Section 2.15 of the Disclosure Schedule is valid,
binding and enforceable in accordance with its terms (subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered on a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing) and is in full force and
effect, and assuming all consents required by the terms thereof or applicable
law have been obtained, such Contracts will continue to be valid, binding and
enforceable in accordance with their respective terms and in full force and
effect immediately following the consummation of the transactions contemplated
hereby, in each case except where the failure to be valid, binding, enforceable
and in full force and effort would not, individually or in the aggregate, have a
Material Adverse Effect. No event has occurred which either entitles, or would,
on notice or lapse of time or both, entitle the holder of any indebtedness for
borrowed money affecting the Company or any of its Subsidiaries (except for the
execution or consummation of this Agreement and the Stockholders Agreements) to
accelerate, or which does accelerate, the maturity of any indebtedness affecting
the Company or any of its Subsidiaries, except as set forth in Section 2.16 of
the Disclosure Schedule.
SECTION 2.17 Labor Matters.
(a) Section 2.17(a) of the Disclosure Schedule contains a complete
list of all organizations representing the employees of the Company or any of
its Subsidiaries. As of the date hereof, there is no strike, work stoppage or
labor disturbance, pending or, to the best knowledge of the Company, threatened,
which involves any employees of the Company or any of its Subsidiaries.
(b) Section 2.17(b) of the Disclosure Schedule contains as of the date
hereof (i) a list of all material unfair employment or labor practice charges
which are presently pending which to the knowledge of the Company have been
filed with any governmental authority by or on behalf of any employee against
the Company or any of its Subsidiaries and (ii) a list of all material
employment-related litigation, including, without limitation, arbitrations or
administrative proceedings which are presently pending, filed by or on behalf of
any former, current or prospective employee against the Company or any of its
Subsidiaries.
(c) Except as described in Sections 2.17(a) and (b) of the Disclosure
Schedule, there are not presently pending or, to the best knowledge of the
Company, threatened, against the Company or any of its Subsidiaries any claims
by any governmental authority, labor organization, or any former, current or
22
prospective employee alleging that the Company or any such employer has violated
any applicable laws respecting employment practices except where such claims
would not, individually or in the aggregate, have a Material Adverse Effect.
Except as set forth in Section 2.17 of the Disclosure Schedule, the Company and
each of its Subsidiaries is in compliance in all respects with its obligations
under all statutes, executive orders and other governmental regulations or
judicial decrees governing its employment practices, including, without
limitation, provisions relating to wages, hours, equal opportunity and payment
of social security and other taxes and has timely filed all regular federal and
state employment related reports and other documents, except for such failures
to be in compliance which would not, individually or in the aggregate, have a
Material Adverse Effect.
SECTION 2.18 Insurance. All material fire and casualty, general
liability, business interruption, product liability, and sprinkler and water
damage insurance policies maintained by the Company or any of its Subsidiaries,
are with reputable insurance carriers, provide adequate coverage for normal
risks incident to the business of the Company and its Subsidiaries and their
respective Properties and Assets, and are in character and amount comparable to
that carried by Persons engaged in similar businesses and subject to the same or
similar perils or hazards, except for any such failures to maintain insurance
policies that, individually or in the aggregate, are not reasonably likely to
have a Material Adverse Effect.
SECTION 2.19 Affiliate Transactions. Except for the transactions
expressly contemplated hereby or as set forth in the Recent Company SEC Reports
and as set forth in Section 2.19 of the Disclosure Schedule, from January 28,
1996 through the date of this Agreement there have been no transactions,
agreements, arrangements or understandings between the Company or any of its
Subsidiaries, on the one hand, and Company affiliates (other than wholly owned
Subsidiaries of the Company) or other Persons, on the other hand, that would be
required to be disclosed under Item 404 of Regulation S-K under the Securities
Act.
SECTION 2.20 Environmental Matters. Except as set forth in Section
2.20 of the Disclosure Schedule, each of the Properties and Facilities and each
previously owned, operated or leased property and facility of the Company or any
of its Subsidiaries (collectively, the "Company Historic and Current
Properties") has been and was maintained by the Company in compliance with all
Environmental Laws, except where the failure to so comply, or any aggregation of
such failures, would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Except as set forth in Section 2.20
of the Disclosure Schedule, to the best knowledge of the Company, no conditions
exist with respect to the soil, surface waters, groundwaters, land, stream
sediments, surface or subsurface strata, ambient air, and any other
environmental medium on or off the Company Historic and Current Properties,
which, individually
23
or in the aggregate, could result in any damage, claim, or liability to or
against the Company or any of its Subsidiaries by any third party (including
without limitation, any government entity), including, without limitation, any
condition resulting from the operation of Company business and/or operations in
the vicinity of any of the Company Historic and Current Properties and/or any
activity or operation formerly conducted by any Person on the Company Historic
and Current Properties, except in any such case which would not, individually or
in the aggregate, be reasonably expected to have a Material Adverse Effect. With
the exception of retail consumer products sold in the ordinary course of
business and materials and supplies used in the ordinary course of business or
except as set forth in Section 2.20 of the Disclosure Schedule, the Company has
not generated, manufactured, refined, transported, treated, stored, handled,
disposed, transferred, produced, or processed any Hazardous Materials, except in
any such case which would not, individually or in the aggregate, be reasonably
expected to have a Material Adverse Effect. Except as set forth in Section 2.20
of the Disclosure Schedule, (i) there are no existing uncured notices of
noncompliance, notices of violation, administrative actions, or lawsuits against
the Company or any of its Subsidiaries arising under Environmental Laws or
relating to the use, handling, storage, treatment, recycling, generation, or
release of Hazardous Materials, nor has the Company received any uncured
notification of any allegation of any responsibility for any disposal, release,
or threatened release at any location of any Hazardous Materials, except in any
such case which would not, individually or in the aggregate, be reasonably
expected to have a Material Adverse Effect; (ii) there have been no spills or
releases of Hazardous Materials at any of the Company Historic and Current
Properties in excess of quantities reportable under Environmental Laws, except
in any such case which would not be reasonably expected to have, individually or
in the aggregate, a Material Adverse Effect; (iii) there are no consent decrees,
consent orders, judgments, judicial or administrative orders, or liens by any
governmental authority relating to any Environmental Law which have not already
been fully satisfied and which regulate, obligate, or bind the Company or any of
its Subsidiaries, except in any such case which would not, individually or in
the aggregate, be reasonably expected to have a Material Adverse Effect; and
(iv) to the knowledge of the Company, except as set forth in Section 2.20 of the
Disclosure Schedule, no Company Historic and Current Properties or Facilities
are listed on the federal National Priorities List, the federal Comprehensive
Environmental Response Compensation Liability Information System list, or any
similar state listing of sites known to be contaminated with Hazardous
Materials. Except as set forth in Section 2.20 of the Disclosure Schedule, there
are no projected expenses or capital costs that will be required in the next two
years to maintain compliance with Environmental Laws, except in any such case
which would not be reasonably expected to have, individually or in the
aggregate, a Material Adverse Effect.
24
SECTION 2.21 Form S-4; Proxy Solicitation Statement. None of the
information supplied by the Company for inclusion or incorporation by reference
in (i) the registration statement on Form S-4 to be filed with the SEC by Parent
in connection with the issuance of shares of Parent Common Stock in the Merger,
or any of the amendments or supplements thereto (collectively, the "Form S-4")
will, at the time the Form S-4 is filed with the SEC, at any time it is amended
or supplemented and at the time it becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, and (ii) the proxy statement for use relating to the approval by
the stockholders of Parent of the issuance of shares of Parent Common Stock in
the Merger or any of the amendments or supplements thereto (collectively, the
"Proxy Statement"), will, at the date it is first mailed to Parent's
stockholders and at the time of the meeting of Parent's stockholders held to
vote on approval of the issuance of the shares of Parent Common Stock in the
Merger, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading.
SECTION 2.22 Opinion of Financial Advisor. The Company has received
the written opinion of Xxxxxxxxx, Xxxxxx & Xxxxxxxx Securities Corporation and
Xxxxxx Xxxxxxx Xxxx Xxxxxx (the "Company Financial Advisors"), dated the date
hereof, to the effect that the consideration to be received in the Merger by the
Company's stockholders is fair to such stockholders from a financial point of
view. An executed copy of such opinion has been delivered to Parent. The Company
has been authorized by the Company Financial Advisors to permit, subject to
prior review and consent by such Company Financial Advisors (such consent not to
be unreasonably withheld), the inclusion of such fairness opinion (or a
reference thereto) in the Form S-4 and the Proxy Statement.
SECTION 2.23 Brokers. No broker, finder or investment banker (other
than the Company Financial Advisors) is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Company. The
Company has heretofore furnished to Parent a complete and correct copy of all
agreements between the Company and the Company Financial Advisors pursuant to
which such firm would be entitled to any payment relating to the transactions
contemplated hereby.
SECTION 2.24 DGCL Section 203; State Takeover Statutes. To the
Company's knowledge, neither Section 203 of the DGCL nor any other state
takeover statute or similar statute or regulation applies or purports to apply
to the Merger, this Agreement, the Stockholders Agreements or any of the
transactions contemplated hereby or thereby and no provision of the certificate
of incorporation, by-laws or other governing
25
instruments of the Company or any of its Subsidiaries would, directly or
indirectly, restrict or impair the ability of Parent to vote, or otherwise to
exercise the rights of a stockholder with respect to, shares of the Company and
its Subsidiaries that may be acquired or controlled by Parent.
SECTION 2.25 Vote Required. The affirmative vote of the holders of a
majority of the outstanding shares of Company Voting Common Stock and Series A
Preferred Stock (voting together as a single class) entitled to vote thereon is
the only vote of the holders of any class or series of the Company's capital
stock necessary to approve the Merger. The Board of Directors of the Company
(the "Company Board") (at a meeting duly called and held) has (i) unanimously
approved this Agreement, (ii) determined that the Merger is fair to and in the
best interests of the holders of Company Common Stock, (iii) resolved to
recommend this Agreement and the Merger to such holders for approval and
adoption and (iv) directed that this Agreement be submitted to the Company's
stockholders. The Company hereby agrees to the inclusion in the Form S-4 and the
Proxy/Consent Solicitation Statement of the recommendations of the Company Board
described in this Section 2.25.
SECTION 2.26 Tax Matters. Neither the Company nor any of its
Affiliates, has taken or agreed to take any action, or knows of any
circumstances, that (without regard to any action taken or agreed to be taken by
Parent or any of its affiliates) would prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a)(1)(B) or Sections
368(a)(1)(A) and 368(a)(2)(E) of the Code.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
PARENT AND SUB
Parent and Sub hereby, jointly and severally, represent and warrant to
the Company that:
SECTION 3.1 Organization and Qualification. Each of Parent and Sub is
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, with the corporate power and authority to own
and operate its businesses as presently conducted. Each of Parent and Sub is
duly qualified as a foreign corporation or other entity to do business and is in
good standing in each jurisdiction where the character of its properties owned
or held under lease or the nature of its activities makes such qualification
necessary, except for such failures of Parent and Sub to be so qualified as
would not, individually or in the aggregate, have a Material Adverse Effect.
Parent has previously made available to the Company true and correct copies of
the certificate of incorporation and bylaws of each of Parent and Sub.
26
SECTION 3.2 Authorization; Validity and Effect of Agreement. Each of
Parent and Sub has the requisite corporate power and authority to execute,
deliver and perform its obligations under this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Parent and Sub and the performance by them of their respective obligations
hereunder and the consummation by them of the transactions contemplated hereby
have been duly authorized by the Board of Directors of Parent and Sub, and all
other necessary corporate action on the part of Parent or Sub, other than the
approval of the issuance of the shares of Parent Common Stock in the Merger by
the stockholders of Parent, and no other corporate proceedings on the part of
Parent or Sub are necessary to authorize this Agreement and the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Parent and Sub and constitutes a legal, valid and binding
obligation of Parent and Sub, enforceable against them in accordance with its
terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles (whether considered in
a proceeding in equity or at law) and an implied covenant of good faith and fair
dealing.
SECTION 3.3 Capitalization. (a) The authorized capital stock of Parent
consists of (i) 400,000,000 shares of Parent Common Stock and (ii) 100,000,000
shares of preferred stock, par value $.01 per share ("Parent Preferred Stock").
As of November 5, 1997, 91,506,211 shares of Parent Common Stock and no shares
of Parent Preferred Stock were issued and outstanding; and no shares of Parent
Common Stock are held in Parent's treasury as of the date hereof. All of the
issued and outstanding shares of Parent Common Stock are validly issued, fully
paid and non-assessable. Except pursuant to the exercise of employee options
prior to the date hereof, since November 5, 1997, no shares of Parent Common
Stock or Parent Preferred Stock have been issued. As of the date hereof, except
as set forth on Section 3.3 of the disclosure schedule delivered by Parent to
the Company prior to the execution of this Agreement (the "Parent Disclosure
Schedule"), there are no existing options, warrants, calls, subscriptions,
convertible securities or other securities, agreements (other than this
Agreement), commitments or obligations which would require Parent to issue or
sell shares of Parent Common Stock, Parent Preferred Stock or any other equity
securities, or securities convertible into or exchangeable or exercisable for
shares of Parent Common Stock, Parent Preferred Stock or any other equity
securities of Parent as of the date hereof. Except as set forth on Section 3.3
of the Parent Disclosure Schedule, Parent has no commitments or obligations to
purchase or redeem any shares of capital stock of any class of Parent Common
Stock.
(b) The authorized capital stock of Sub consists of 100 shares of
common stock, par value $.01 per share, 100 shares
27
of which are duly authorized, validly issued and outstanding, fully paid and
nonassessable and owned by Parent free and clear of all liens, claims and
encumbrances. Sub was formed solely for the purpose of engaging in a business
combination transaction with the Company and has engaged in no other business
activities and has conducted its operations only as contemplated hereby.
SECTION 3.4 Subsidiaries. The only Subsidiaries of Parent are those
set forth in Section 3.4 of the Parent Disclosure Schedule. All of the
outstanding shares of capital stock and other ownership interests of each of
Parent's Subsidiaries are validly issued, fully paid, non-assessable and free of
preemptive rights, rights of first refusal or similar rights. Except as set
forth in Section 3.4 of the Parent Disclosure Schedule, Parent owns, directly or
indirectly, all of the issued and outstanding capital stock and other ownership
interests of each of its Subsidiaries, free and clear of all Encumbrances, and
there are no existing options, warrants, calls, subscriptions, convertible
securities or other securities, agreements, commitments or obligations of any
character relating to the outstanding capital stock or other securities of any
Subsidiary of Parent or which would require any Subsidiary of Parent to issue or
sell any shares of its capital stock, ownership interests or securities
convertible into or exchangeable for shares of its capital stock or ownership
interests.
SECTION 3.5 Other Interests. Except as set forth in Section 3.5 of the
Parent Disclosure Schedule, neither Parent nor any of Parent's Subsidiaries
owns, directly or indirectly, any interest or investment in the equity or debt
for borrowed money of any corporation, partnership, limited liability company,
joint venture, business, trust or other Person (other than Parent's
Subsidiaries).
SECTION 3.6 No Conflict; Required Filings and Consents. (a) Except as
set forth in Section 3.6 of the Parent Disclosure Schedule, neither the
execution and delivery of this Agreement nor the performance by Parent and Sub
of their obligations hereunder, nor the consummation of the transactions
contemplated hereby, will: (i) conflict with Parent's or Sub's certificate of
incorporation or bylaws; (ii) assuming satisfaction of the requirements set
forth in Section 3.6(b) below, violate any statute, law, ordinance, rule or
regulation, applicable to Parent or any of its Subsidiaries or any of their
properties or assets; or (iii) violate, breach, be in conflict with or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or permit the termination of any provision
of, or result in the termination of, the acceleration of the maturity of, or the
acceleration of the performance of any obligation of Parent or any of its
Subsidiaries, or cause an indemnity payment to be made by Parent or any of its
Subsidiaries under, or result in the creation of imposition of any lien upon any
properties, assets or
28
business of Parent or any of its Subsidiaries under, any note, bond, indenture,
mortgage, deed of trust, lease, franchise, permit, authorization, license,
contract, instrument or other agreement or commitment or any order, judgment or
decree to which Parent or any of its Subsidiaries is a party or by which Parent
or any of its Subsidiaries or any of their respective assets or properties is
bound or encumbered, or give any Person the right to require Parent or any of
its Subsidiaries to purchase or repurchase any notes, bonds or instruments of
any kind except, in the case of clauses (ii) and (iii), for such violations,
breaches, conflicts, defaults or other occurrences which, individually or in the
aggregate, would not have a Material Adverse Effect.
(b) Except (i) for applicable requirements, if any, of the Exchange
Act, the Securities Act and Blue Sky Laws, (ii) for the pre-merger notification
requirements of the HSR Act, (iii) for the filing of a certificate of merger
pursuant to the DGCL, and (iv) with respect to matters set forth in Section
3.6(a) or 3.6(b) of the Parent Disclosure Schedule, no consent, approval or
authorization of, permit from, or declaration, filing or registration with, any
governmental or regulatory authority, or any other Person or entity is required
to be made or obtained by Parent or Sub in connection with the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby, except where the failure to obtain such
consent, approval, authorization, permit or declaration or to make such filing
or registration would not, individually or in the aggregate, have a Material
Adverse Effect.
SECTION 3.7 Compliance. Parent and each of its Subsidiaries is in
compliance with all foreign, federal, state and local laws and regulations
applicable to its operations or with respect to which compliance is a condition
of engaging in the business thereof (including, without limitation, all
Environmental Laws), except to the extent that failure to comply would not,
individually or in the aggregate, have a Material Adverse Effect. To the
knowledge of Parent, neither Parent nor any of its Subsidiaries has received any
notice asserting a failure, or possible failure, to comply with any such law or
regulation, the subject of which notice has not been resolved as required
thereby or otherwise to the satisfaction of the party sending the notice, except
for such failure as would not, individually or in the aggregate, have a Material
Adverse Effect. Parent and its Subsidiaries have all permits, licenses and
franchises from governmental agencies required to conduct their respective
businesses as they are now being conducted, except for such failures to have
such permits, licenses and franchises that would not, individually or in the
aggregate, have a Material Adverse Effect.
SECTION 3.8 SEC Documents. (a) Parent has delivered or made available
to the Company true and complete copies of each
29
registration statement, proxy or information statement, form, report and other
documents required to be filed by it (or by Xxxx Xxxxx Stores, Inc. ("FMSI") or
Xxxxx'x Food & Drug Centers, Inc. ("Xxxxx'x") with the SEC since January 1, 1996
(collectively, the "Parent SEC Reports"). As of their respective dates, the
Parent SEC Reports and any registration statements, reports, forms, proxy or
information statements and other documents filed by Parent with the SEC after
the date of this Agreement (i) complied, or, with respect to those not yet
filed, will comply, in all material respects with the applicable requirements of
the Securities Act and the Exchange Act and (ii) did not, or, with respect to
those not yet filed, will not, contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements made therein, in the light of the circumstances under which
they were made, not misleading.
(b) Each of the consolidated balance sheets included in or
incorporated by reference into Parent SEC Reports (including the related notes
and schedules) presents fairly, in all material respects, the consolidated
financial position of Parent (or FMSI or Xxxxx'x, as the case may be) and its
consolidated Subsidiaries as of its date, and each of the consolidated
statements of income, retained earnings and cash flows of Parent (or FMSI or
Xxxxx'x, as the case may be) included in or incorporated by reference into
Parent SEC Reports (including the related notes and schedules) presents fairly,
in all material respects, the results of operations, retained earnings or cash
flows, as the case may be, of Parent (or FMSI or Xxxxx'x as the case may be) and
its Subsidiaries for the periods set forth therein (subject, in the case of
unaudited statements, to normal year-end audit adjustments), in each case in
accordance with GAAP consistently applied during the periods involved, except as
may be noted therein.
(c) Except as set forth in the Parent SEC Reports filed prior to the
date of this Agreement or reports filed by Xxxxx'x with the SEC prior to the
date of this Agreement (together, the "Recent Parent SEC Reports"), neither
Parent nor any of its Subsidiaries has any liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise) that would be
required to be reflected on, or reserved against in, a balance sheet of Parent
or in the notes thereto, prepared in accordance with GAAP consistently applied,
except for (i) liabilities or obligations that were so reserved on, or reflected
in (including the notes to), the consolidated balance sheets of FMSI and Xxxxx'x
as of February 1, 1997, (ii) liabilities and obligations incurred or acquired in
connection with the transactions pursuant to the Xxxxx'x Merger Agreement and
(iii) liabilities or obligations arising in the ordinary course of business
(including trade indebtedness) since February 1, 1997 which would not,
individually or in the aggregate, have a Material Adverse Effect.
30
SECTION 3.9 Litigation. Except as set forth in Section 3.9 of the
Parent Disclosure Schedule or in the Recent Parent SEC Reports, there is no
Action instituted, pending or, to the knowledge of Parent, threatened, in each
case against Parent or any of its Subsidiaries, which would, individually or in
the aggregate, directly or indirectly, have a Material Adverse Effect, nor is
there any outstanding judgment, decree or injunction, in each case against
Parent or any of its Subsidiaries, or any statute, rule or order of any domestic
or foreign court, governmental department, commission or agency applicable to
Parent or any of its Subsidiaries which has or will have, individually or in the
aggregate, any Material Adverse Effect.
SECTION 3.10 Absence of Certain Changes. Except as set forth in
Section 3.10 of the Parent Disclosure Schedule or the Recent Parent SEC Reports
(including, without limitation, the transactions contemplated by the proxy
statement of Parent dated August 6, 1997) and except for the transactions
expressly contemplated hereby, since February 2, 1997, Parent and its
Subsidiaries have conducted their respective businesses only in the ordinary and
usual course consistent with past practices and there has not been any (i)
change in Parent's business, operations, condition (financial or otherwise),
results of operations, assets or liabilities, except for changes contemplated
hereby or changes which have not, individually or in the aggregate, had a
Material Adverse Effect, or (ii) condition, event or occurrence which,
individually or in the aggregate, could reasonably be expected to result in a
Material Adverse Effect.
SECTION 3.11 Taxes. Except as set forth in Section 3.11 of the Parent
Disclosure Schedule:
(a) Parent and its Subsidiaries have (A) duly filed (or there have
been filed on their behalf) with the appropriate governmental authorities all
Tax Returns required to be filed by them and such Tax Returns are true, correct
and complete in all respects, except where any such failure to file, or failure
to be true, correct and complete, would not, individually or in the aggregate,
have a Material Adverse Effect, and (B) duly paid in full all Taxes shown to be
due on such Tax Returns;
(b) Parent and its Subsidiaries have complied in all material respects
with all applicable laws, rules and regulations relating to the withholding of
Taxes and the payment of such withheld Taxes to the proper governmental
authorities except where any such failure to comply, withhold or pay over would
not, individually or in the aggregate, have a Material Adverse Effect;
(c) all federal income Tax Returns of Parent and its Subsidiaries for
periods since January 29, 1994 have been audited, and no federal or material
state, local or foreign audits or other administrative proceedings or court
proceedings
31
are presently being conducted with regard to any Taxes or Tax Returns of Parent
or its Subsidiaries and neither Parent nor its Subsidiaries has received a
written notice of any pending audits or proceedings with respect to material
Taxes or material Tax Returns of Parent, and neither Parent nor any of its
Subsidiaries has waived in writing any statute of limitations with respect to
material Taxes;
(d) neither the Internal Revenue Service nor any other taxing
authority (whether domestic or foreign) has asserted in writing against Parent
or any of its Subsidiaries (other than to Parent as a Subsidiary) any deficiency
or claim for Taxes, except where any such deficiency or claim for Taxes, if
decided adversely to Parent or any of its Subsidiaries, would not, individually
or in the aggregate, have a Material Adverse Effect;
(e) there are no material liens for Taxes upon any Property or Assets
of Parent or any Subsidiary thereof, except for liens for Taxes not yet due and
payable and liens for Taxes that are being contested in good faith by
appropriate proceedings, and no material written power of attorney that has been
granted by Parent or its Subsidiaries other than to Parent or a Subsidiary
currently is in force with respect to any matter relating to Taxes;
(f) neither Parent nor any of its Subsidiaries has, with regard to any
assets or property held or acquired by any of them, agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as
such term is defined in Section 341(f)(4) of the Code) owned by Parent or any of
its Subsidiaries; and
(g) since June 14, 1995, none of Parent or its Subsidiaries has been a
member of an Affiliated Group filing a consolidated federal income tax return
other than a group the common parent of which is Parent.
SECTION 3.12 Employee Benefit Plans.
(a) Section 3.12 of the Parent Disclosure Schedule contains a complete
list of all Employee Plans of Parent and its Subsidiaries. True and complete
copies or written descriptions of the Employee Plans of Parent and its
Subsidiaries, including, without limitation, trust instruments, if any, that
form a part thereof, and all amendments thereto have been furnished or made
available to the Company and its counsel.
(b) Except as described in Section 3.12 of the Parent Disclosure
Schedule, each of the Employee Plans of Parent and of its ERISA Affiliates
(other than any Multiemployer Plan) has been administered and is in compliance
with the terms of such Employee Plan and all applicable laws, rules and
regulations except for noncompliance which could not reasonably be expected,
32
individually or in the aggregate, to have a Material Adverse Effect.
(c) No "reportable event" (as such term is used in section 4043 of the
Employee Retirement Income Security Act of 1974 ("ERISA")), "prohibited
transaction" (as such term is used in section 406 of ERISA or section 4975 of
the Code), "nondeductible contributions" (as such term is used in Section 4972
of the Code) or "accumulated funding deficiency" (as such term is used in
section 412 or 4971 of the Code) has heretofore occurred with respect to any
Employee Plan (other than any Multiemployer Plan) of Parent or any ERISA
Affiliate, except for such events which would not, individually or in the
aggregate, have a Material Adverse Effect.
(d) No litigation or administrative or other proceeding involving any
Employee Plans of Parent or any of its ERISA Affiliates (other than any
Multiemployer Plan) has occurred or are threatened where an adverse
determination could, individually or in the aggregate, have a Material Adverse
Effect.
(e) Except as set forth in Section 3.12 of the Parent Disclosure
Schedule, neither Parent nor any ERISA Affiliate of Parent has incurred any
withdrawal liability with respect to any Multiemployer Plan under Title IV of
ERISA which remains unsatisfied, except for such liabilities as would not,
individually or in the aggregate, have a Material Adverse Effect.
(f) All of the Employee Plans of Parent or its Subsidiaries (other
than any Multiemployer Plan) can be terminated by Parent without incurring any
material liability. Parent and its Subsidiaries can withdraw from participation
in any Employee Plan that is a Multiemployer Plan. Any termination of, or
withdrawal from, any Employee Plans of Parent or its Subsidiaries, on or prior
to the Closing Date, would not subject Parent to any material liability under
Title IV of ERISA that would, individually or in the aggregate, have a Material
Adverse Effect.
(g) Neither Parent nor any of its Affiliates is aware of any situation
with respect to a Multiemployer Plan described in (b), (c) or (d) above, except
as described in Section 3.12 of the Parent Disclosure Schedule.
(h) The transactions contemplated by this Agreement will not cause the
occurrence of a situation described in Section 3.12 (b), (c), (d) or (e) as of
the Effective Time.
SECTION 3.13 Assets. (a) Except as set forth in Section 3.13(a) of the
Parent Disclosure Schedule, Parent and its Subsidiaries have good and marketable
title to or a valid leasehold estate in all of the material properties and
assets, real or personal, reflected on Parent's balance sheet at February 1,
1997 (except for properties or assets subsequently sold in the
33
ordinary course of business consistent with past practice). Except as set forth
in Section 3.13(a) of the Parent Disclosure Schedule, Parent and its
Subsidiaries have good and marketable title or a valid right to use all of the
real properties that are necessary, and all of the personal assets and
properties that are materially necessary, for the conduct of the business of
Parent or any of its Subsidiaries free and clear of all Encumbrances (other than
Permitted Encumbrances).
(b) Section 3.13(b) of the Parent Disclosure Schedule sets forth a
complete and accurate list of each Property and/or Facility owned or leased by
Parent or any of its Subsidiaries, and the current use of such Property or
Facility and indicating whether the Property or Facility is owned or leased.
(c) There are no pending or, to the knowledge of Parent, threatened
condemnation or similar proceedings against Parent or any of its Subsidiaries
or, to the knowledge of Parent, otherwise relating to any of the Properties or
Facilities of Parent and its Subsidiaries except for such proceedings which
would not, individually or in the aggregate, have a Material Adverse Effect.
(d) Section 3.13(d) of the Parent Disclosure Schedule sets forth a
complete and accurate list of all Leases (including subleases and licenses) of
personal property entered into by Parent or any of its Subsidiaries and
involving any annual expense to Parent or any such Subsidiary in excess of
$250,000 and not cancelable (without material liability) within two (2) years.
(e) Section 3.13(e) of the Parent Disclosure Schedule indicates each
Lease entered into by Parent or any of its Subsidiaries as a tenant or
subtenant.
(f) Parent or its Subsidiaries, as the case may be, has in all
material respects performed all obligations on its part required to have been
performed with respect to (i) all Assets leased by it or to it (whether as
lessor or lessee), and (ii) all Leases and there exists no material default or
event which, with the giving of notice or lapse of time or both, would become a
default on the part of Parent or any of its Subsidiaries under any Lease, in
each case except where the failure to perform or such default or event would
not, individually or in the aggregate, have a Material Adverse Effect.
(g) To the knowledge of Parent, each of the Leases is valid, binding
and enforceable in accordance with its terms (subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at law)
and an implied covenant of good faith and fair dealing) and is in full force and
effect, and assuming all
34
consents required by the terms thereof or applicable law have been obtained, the
Leases will continue to be valid, binding and enforceable in accordance with
their respective terms and in full force and effect immediately following the
consummation of the transactions contemplated hereby, in each case except where
the failure to be valid, binding and enforceable and in full force and effect
would not, individually or in the aggregate, have a Material Adverse Effect.
(h) Except as shown on Section 3.13(h) of the Parent Disclosure
Schedule, Parent has delivered to the Company, or otherwise made available,
originals or true copies of all material Leases (as the same may have been
amended or modified, in any material respect, from time to time).
SECTION 3.14 Contracts and Commitments. Section 3.14 of the Parent
Disclosure Schedule contains a complete and accurate list of all Contracts of
the following categories to which Parent or any of its Subsidiaries is a party
or by which any of them is bound as of the date of this Agreement:
(a) employment contracts, including, without limitation, contracts to
employ executive officers and other contracts with officers, directors or
stockholders of Parent, and all severance, change in control or similar
arrangements with any officers, employees or agents of Parent that will
result in any obligation (absolute or contingent) of Parent or any of its
Subsidiaries to make any payment to any officers, employees or agents of
Parent following either the consummation of the transactions contemplated
hereby, termination of employment, or both;
(b) labor contracts;
(c) material distribution, franchise, license, sales, agency or
advertising contracts;
(d) Contracts for the purchase of inventory which are not cancelable
(without material penalty, cost or other liability) within one (1) year
(other than Contracts for the purchase of holiday goods in accordance with
customary industry practices) and other Contracts made in the ordinary
course of business involving annual expenditures or liabilities in excess
of $400,000 which are not cancelable (without material penalty, cost or
other liability) within ninety (90) days;
(e) promissory notes, loans, agreements, indentures, evidences of
indebtedness or other instruments providing for the lending of money,
whether as borrower, lender or guarantor, in excess of $250,000;
(f) Contracts containing covenants limiting the freedom of Parent or
any of its Subsidiaries to engage in
35
any line of business or compete with any Person or operate at any location;
(g) joint venture or partnership agreements or joint development or
similar agreements pursuant to which any third party is entitled to develop
any Property and/or Facility on behalf of Parent or its Subsidiaries;
(h) any Contract where the customer under such Contract is a federal,
state or local government; and
(i) any Contract providing for the acquisition, directly or indirectly
(by merger or otherwise) of material assets or capital stock of another
Person.
True copies of the written Contracts identified in Section 3.14 of the
Parent Disclosure Schedule have been delivered or made available to the Company.
SECTION 3.15 Absence of Breaches or Defaults. Neither Parent nor any
of its Subsidiaries is and, to the knowledge of Parent, no other party is in
default under, or in breach or violation of, any Contract identified on Section
3.14 of the Parent Disclosure Schedule and, to the knowledge of Parent, no event
has occurred which, with the giving of notice or passage of time or both would
constitute a default under any Contract identified on Section 3.14 of the Parent
Disclosure Schedule, except for defaults, breaches, violations or events which,
individually or in the aggregate, would not have a Material Adverse Effect.
Other than Contracts which have terminated or expired in accordance with their
terms, each of the Contracts identified on Section 3.14 of the Parent Disclosure
Schedule is valid, binding and enforceable in accordance with its terms (subject
to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing) and is
in full force and effect, and assuming all consents required by the terms
thereof or applicable law have been obtained, such Contracts will continue to be
valid, binding and enforceable in accordance with their respective terms and in
full force and effect immediately following the consummation of the transactions
contemplated hereby, in each case, except where the failure to be valid,
binding, enforceable and in full force and effect would not, individually or in
the aggregate, have a Material Adverse Effect. No event has occurred which
either entitles, or would, on notice or lapse of time or both, entitle the
holder of any indebtedness for borrowed money affecting Parent or any of its
Subsidiaries to accelerate, or which does accelerate, the maturity of any
indebtedness affecting Parent or any of its Subsidiaries, except as set forth in
Section 3.15 of the Parent Disclosure Schedule.
36
SECTION 3.16 Labor Matters.
(a) Section 3.16(a) of the Parent Disclosure Schedule contains a
complete list of all organizations representing the employees of Parent or any
of its Subsidiaries. As of the date hereof, there is no strike, work stoppage or
labor disturbance, pending or, to the knowledge of Parent, threatened, which
involves any employees of Parent or any of its Subsidiaries.
(b) Section 3.16(b) of the Parent Disclosure Schedule contains as of
the date hereof (i) a list of all material unfair employment or labor practice
charges which are presently pending which, to the knowledge of Parent, have been
filed with any governmental authority by or on behalf of any employee against
Parent or any of its Subsidiaries and (ii) a list of all material
employment-related litigation, including, without limitation, arbitrations or
administrative proceedings which are presently pending, filed by or on behalf of
any former, current or prospective employee against Parent or any of its
Subsidiaries.
(c) Except as described in Sections 3.16(a) and (b) of the Parent
Disclosure Schedule, there are not presently pending or, to the knowledge of
Parent, threatened, against Parent or any of its Subsidiaries any material
claims by any governmental authority, labor organization, or any former, current
or prospective employee alleging that Parent or any such employer has violated
any applicable laws respecting employment practices, except where such claims
would not, individually or in the aggregate, have a Material Adverse Effect.
Parent and each of its Subsidiaries is in compliance in all material respects
with its obligations under all statutes, executive orders and other governmental
regulations or judicial decrees governing its employment practices, including,
without limitation, provisions relating to wages, hours, equal opportunity and
payment of social security and other taxes and has timely filed all regular
federal and state employment related reports and other documents, except for
such failures to be in compliance which would not, individually or in the
aggregate, have a Material Adverse Effect.
SECTION 3.17 Insurance. All material fire and casualty, general
liability, business interruption, product liability, and sprinkler and water
damage insurance policies maintained by Parent or any of its Subsidiaries are
with reputable insurance carriers, provide adequate coverage for normal risks
incident to the business of Parent and its Subsidiaries and their respective
Properties and Assets, and are in character and amount comparable to that
carried by Persons engaged in similar businesses and subject to the same or
similar perils or hazards, except for any such failures to maintain insurance
policies that, individually or in the aggregate, are not reasonably likely to
have a Material Adverse Effect.
SECTION 3.18 Environmental Matters. Except as set forth in Section
3.18 of the Parent Disclosure Schedule, each of
37
the Properties and Facilities or each previously owned, operated or leased
property and facility of Parent or any of its Subsidiaries (collectively, the
"Parent Historic and Current Properties") has been and was maintained by Parent
in compliance with all Environmental Laws, except where the failure to so
comply, or any aggregation of such failures, would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. Except as
set forth in Section 3.18 of the Parent Disclosure Schedule, to the best
knowledge of Parent, no conditions exist with respect to the soil, surface
waters, groundwaters, land, stream sediments, surface or subsurface strata,
ambient air, and any other environmental medium on or off the Parent Historic
and Current Properties, which, individually or in the aggregate, could result in
any damage, claim, or liability to or against Parent or any of its Subsidiaries
by any third party (including without limitation, any government entity),
including, without limitation, any condition resulting from the operation of
Parent business and/or operations in the vicinity of any of the Parent Historic
and Current Properties and/or any activity or operation formerly conducted by
any Person on the Parent Historic and Current Properties, except in any such
case which would not, individually or in the aggregate, be reasonably expected
to have a Material Adverse Effect. With the exception of retail consumer
products sold in the ordinary course of business and materials and supplies used
in the ordinary course of business or except as set forth in Section 3.18 of the
Parent Disclosure Schedule, Parent has not generated, manufactured, refined,
transported, treated, stored, handled, disposed, transferred, produced, or
processed any Hazardous Materials, except in any such case which would not,
individually or in the aggregate, be reasonably expected to have a Material
Adverse Effect. Except as set forth in Section 3.18 of the Parent Disclosure
Schedule, (i) there are no existing uncured notices of noncompliance, notices of
violation, administrative actions, or lawsuits against Parent or any of its
Subsidiaries arising under Environmental Laws or relating to the use, handling,
storage, treatment, recycling, generation, or release of Hazardous Materials,
nor has Parent received any uncured notification of any allegation of any
responsibility for any disposal, release, or threatened release at any location
of any Hazardous Materials, except in any such case which would not,
individually or in the aggregate, be reasonably expected to have a Material
Adverse Effect; (ii) there have been no spills or releases of Hazardous
Materials at any of the Parent Historic and Current Properties in excess of
quantities reportable under Environmental Laws, except in any such case which
would not be reasonably expected to have, individually or in the aggregate, a
Material Adverse Effect; (iii) there are no consent decrees, consent orders,
judgments, judicial or administrative orders, or liens by any governmental
authority relating to any Environmental Law which have not already been fully
satisfied and which regulate, obligate, or bind Parent or any of its
Subsidiaries, except in any such case which would not, individually or in the
aggregate, be reasonably expected to have a Material Adverse
38
Effect; and (iv) to the knowledge of Parent, except as set forth in Section 3.18
of the Parent Disclosure Schedule, no Parent Historic and Current Properties or
Facilities are listed on the federal National Priorities List, the federal
Comprehensive Environmental Response Compensation Liability Information System
list, or any similar state listing of sites known to be contaminated with
Hazardous Materials. Except as set forth in Section 3.18 of the Disclosure
Schedule, there are no projected expenses or capital costs that will be required
in the next two years to maintain compliance with Environmental Laws, except in
any such case which would not be reasonably expected to have, individually or in
the aggregate, a Material Adverse Effect.
SECTION 3.19 Form S-4; Proxy Statement. None of the information
supplied by Parent or Sub for inclusion or incorporation by reference in (i) the
Form S-4 will, at the time the Form S-4 is filed with the SEC, at any time it is
amended or supplemented and at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading, and (ii) the Proxy Statement will, at the
date it is first mailed to the Company's stockholders and Parent's stockholders
and at the time of the meeting of the Company's stockholders held to vote on
approval of this Agreement and at the time of the meeting of Parent's
stockholders held to vote on approval of the issuance of the shares of Parent
Common Stock in the Merger, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. The Proxy Statement and the Form S-4 will comply
as to form in all material respects with the requirements of the Securities Act,
the Exchange Act and the rules and regulations thereunder, except that no
representation is made by Parent or Sub with respect to statements made or
incorporated by reference therein based on information supplied by the Company
for inclusion or incorporation by reference in the Proxy Statement and the Form
S-4.
SECTION 3.20 Brokers. No broker, finder or investment banker (other
than Xxxxxxx, Xxxxx & Co. and Salomon Brothers Inc, the fees and expenses of
which shall be paid by Parent) is entitled to any brokerage, finder's or other
fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Parent or Sub.
SECTION 3.21 Vote Required. The affirmative vote of the holders of a
majority of the outstanding shares of Parent Common Stock entitled to vote
thereon is the only vote of the holders of any class or series of Parent's
capital stock necessary to approve the issuance of Parent Common Stock in the
Merger. The Board of Directors of Parent (the "Parent Board") (at a meeting duly
called and held) has (i) unanimously approved this Agreement, (ii) determined
that the transactions
39
contemplated hereby are fair to and in the best interests of the holders of
Parent Common Stock, (iii) resolved to recommend this Agreement, the issuance of
Parent Common Stock in the Merger and the other transactions contemplated hereby
to such holders for approval and adoption and (iv) directed that the issuance of
Parent Common Stock in the Merger be submitted to Parent's stockholders. Parent
hereby agrees to the inclusion in the Form S-4 and the Joint Proxy Statement of
the recommendations of the Parent Board described in this Section 3.21.
SECTION 3.22 Opinions of Financial Advisors. Parent has received the
opinions of Xxxxxxx, Xxxxx & Co. and Salomon Brothers Inc, dated the date of
this Agreement, to the effect that the consideration to be paid by Parent in
connection with the Merger is fair to Parent and the holders of the Parent
Common Stock from a financial point of view.
SECTION 3.23 Tax Matters. Neither Parent nor Sub has taken or agreed
to take any action, or knows of any circumstances, that (without regard to any
action taken or agreed to be taken by the Company or any of its affiliates)
would prevent the Merger from qualifying as a reorganization within the meaning
of Section 368(a)(1)(B) or Sections 368(a)(1)(A) and 368(a)(2)(E) of the Code.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 4.1 Conduct of Business of the Company Pending the Merger.
Except as set forth in Section 4.1 of the Disclosure Schedule, the Company
covenants and agrees that, during the period from the date hereof to the
Effective Time (except as otherwise contemplated by the terms of this
Agreement), unless Parent shall otherwise agree in writing in advance, the
businesses of the Company and its Subsidiaries shall be conducted, in all
material respects, only in, and the Company and its Subsidiaries shall not take
any action except in, the ordinary course of business and in a manner consistent
with past practice and, in all material respects, in compliance with applicable
laws; and the Company and its Subsidiaries shall each use its reasonable best
efforts consistent with the foregoing to preserve substantially intact the
business organization of the Company and its Subsidiaries, to keep available the
services of the present officers, employees and consultants of the Company and
its Subsidiaries and to preserve the present relationships of the Company and
its Subsidiaries with customers, suppliers, advertisers, distributors and other
persons with which the Company or any of its Subsidiaries has significant
business relations. By way of amplification and not limitation, neither the
Company nor any of its Subsidiaries shall (except as set forth in Section 4.1 of
the Disclosure Schedule and except as otherwise contemplated by the terms of
this Agreement) between
40
the date of this Agreement and the Effective Time, directly or indirectly do, or
propose or commit to do, any of the following without the prior written consent
of Parent:
(a) make or commit to make any capital expenditures in excess of
amounts reflected in the most recent financial model disclosed to Parent
prior to the date of this Agreement;
(b) incur any indebtedness for borrowed money or guarantee such
indebtedness of another Person (other than the Company or a wholly-owned
Subsidiary of the Company) or enter into any "keep well" or other agreement
to maintain the financial condition of another Person (other than the
Company or a wholly-owned Subsidiary of the Company) or make any loans, or
advances of borrowed money or capital contributions to, or equity
investments in, any other Person (other than the Company or a wholly owned
Subsidiary of the Company) or issue or sell any debt securities, other than
borrowings under existing lines of credit in the ordinary course of
business consistent with past practice;
(c)(i) amend its certificate of incorporation or bylaws or the charter
or bylaws of any of its Subsidiaries; (ii) split, combine or reclassify the
outstanding shares of its capital stock or other ownership interests or
declare, set aside or pay any dividend payable in cash, stock or property
or make any other distribution with respect to such shares of capital stock
or other ownership interests; (iii) redeem, purchase or otherwise acquire,
directly or indirectly, any shares of its capital stock or other ownership
interests; or (iv) sell or pledge any stock of any of its Subsidiaries;
(d)(i) Other than upon exercise of options or warrants or the
conversion of Company Preferred Stock or as required by the terms of
Employee Plans disclosed in Section 2.3 of the Disclosure Schedule, issue
or sell or agree to issue or sell any additional shares of, or grant,
confer or award any options, warrants or rights of any kind to acquire any
shares of, its capital stock of any class; (ii) enter into any agreement,
contract or commitment out of the ordinary course of its business, to
dispose of or acquire, or relating to the disposition or acquisition of, a
segment of its business; (iii) except in the ordinary course of business
consistent with past practice, sell, pledge, dispose of or encumber any
material Assets (including without limitation, any indebtedness owed to
them or any claims held by them); or (iv) acquire (by merger,
consolidation, acquisition of stock or assets or otherwise) any
corporation, partnership or other business organization or division thereof
or any material Assets (other than inventory in the ordinary course of
business consistent with past practice) or make any material investment,
either by
41
purchase of stock or other securities, or contribution to capital, in any
case, in any material amount of property or assets, in or of any other
Person;
(e) enter into any employment or severance agreement with any officer
or director or, except in the ordinary course of business consistent with
past practice, grant any severance or termination pay (other than pursuant
to policies or agreements in effect on the date hereof as disclosed in the
Recent Company SEC Reports or set forth in Section 4.1(e) of the Disclosure
Schedule) or increase the benefits payable under its severance or
termination pay policies or agreements in effect on the date hereof;
(f) adopt or amend any bonus, profit sharing, compensation, stock
option, pension, retirement, deferred compensation, employment or other
employee benefit plan, agreement, trust, fund or other arrangement for the
benefit or welfare of any director, officer or employee or increase in any
manner the compensation or fringe benefits of any director, officer or
employee or grant, confer, award or pay any forms of cash incentive,
bonuses or other benefit not required by any existing plan, arrangement or
agreement except as required by law, except for incentives, merit increases
and promotional increases in the ordinary course of business consistent
with past practice;
(g) enter into or amend any Contract for the purchase of inventory
with a term in excess of three years which is not cancelable within one (1)
year without penalty, cost or liability;
(h) negotiate, enter into, or modify any material collective
bargaining agreements, other than renewals in the ordinary course of
business consistent with past practice;
(i) make any material change in its tax or accounting policies or any
material reclassification of assets or liabilities except as required by
law or GAAP;
(j) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise),
except the payment, discharge or satisfaction of (i) liabilities or
obligations in the ordinary course of business consistent with past
practice or in accordance with the terms thereof as in effect on the date
hereof or (ii) claims settled or compromised to the extent permitted by
Section 4.1(k), or waive, release, grant or transfer any rights of material
value or modify or change in any material respect any existing Contract, in
each case other than in the ordinary course of business consistent with
past practice;
42
(k) settle or compromise any litigation, other than litigation not in
excess of amounts reserved for in the most recent consolidated financial
statements of the Company included in the Recent Company SEC Documents or,
if not so reserved for, in an aggregate amount not in excess of $1,500,000
(but not more than $1,000,000 on any one case) (provided in either case
such settlement documents do not involve any material non-monetary
obligations on the part of the Company and its Subsidiaries);
(l) intentionally take any action (without regard to any action taken
or agreed to be taken by Parent or any of its affiliates) with knowledge
that such action would prevent (x) Parent from accounting for the business
combination to be effected by the Merger as a pooling of interests or (y)
the Merger from qualifying as a reorganization within the meaning of
Section 368(a)(1)(B) or Sections 368(a)(1)(A) and 368(a)(2)(E) of the Code;
and
(m) take, or offer or propose to take, or agree to take in writing or
otherwise, any of the actions described in Sections 4.1(a) through 4.1(m)
or any action which would result in any of the conditions set forth in
Article VI not being satisfied.
SECTION 4.2 Conduct of Business of Parent Pending the Merger. (a)
Parent covenants and agrees that, during the period from the date hereof to the
Effective Time (except as otherwise contemplated by the terms of this Agreement
and except that nothing in this Agreement shall restrict Parent from taking any
actions in respect of the consummation of the transactions pursuant to the QFC
Merger Agreement), unless the Company shall otherwise agree in writing in
advance, the businesses of Parent and its Subsidiaries shall be conducted, in
all material respects, only in, and Parent and its Subsidiaries shall not take
any action except in, the ordinary course of business and in a manner consistent
with past practice and, in all material respects, in compliance with applicable
laws; and Parent and its Subsidiaries shall each use its reasonable efforts
consistent with the foregoing to preserve substantially intact the business
organization of Parent and its Subsidiaries, to keep available the services of
the present officers, employees and consultants of Parent and its Subsidiaries
and to preserve the present relationships of Parent and its Subsidiaries with
customers, suppliers, advertisers, distributors and other persons with which
Parent or any of its Subsidiaries has significant business relations.
(b) By way of amplification and not limitation, neither Parent nor any
of its Subsidiaries shall (except as otherwise contemplated by the terms of this
Agreement), between the date of this Agreement and the Effective Time, directly
or indirectly do, or propose or commit to do, any of the following without the
prior written consent of the Company:
43
(i) amend Parent's certificate of incorporation or increase or
decrease the size of its Board of Directors (except as contemplated hereby
and in the QFC Merger Agreement);
(ii) other than in connection with acquisitions having a value
(on a per-acquisition basis) of not more than $50,000,000, issue, deliver,
sell, pledge, dispose of or encumber, or authorize or commit to the
issuance, sale, pledge, disposition or encumbrance of, any shares of
capital stock of any class, or any options, warrants, convertible
securities or other rights of any kind to acquire any shares of capital
stock, or any other ownership interest (including but not limited to stock
appreciation rights or phantom stock), of Parent or any of its Subsidiaries
(except for the issuance of shares of Parent Common Stock issuable in
accordance with the terms of Parent's employee benefit plans and
arrangements or other existing stock-based contractual requirements,
directors' deferred compensation plan and the warrant issued to Yucaipa and
except for the issuance of shares of Parent Common Stock pursuant to the
QFC Merger Agreement);
(iii) (A) split, combine or reclassify or otherwise alter the
Parent Common Stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of
Parent Common Stock, or (B) redeem, purchase or otherwise acquire, directly
or indirectly, any shares of Parent Common Stock;
(iv) other than pursuant to the QFC Merger Agreement, acquire (by
merger, consolidation or acquisition of stock or assets) any corporation,
partnership or other business organization or division thereof, if any such
action could reasonably be expected to (A) delay materially the date of
mailing of the Joint Proxy Statement, (B) delay materially obtaining the
antitrust clearances referenced in Section 5.8(a)(iii), (C) increase the
amount in respect of Lost EBITDA or (D) if it were to occur after such date
of mailing, require an amendment of the Proxy Statement;
(v) consummate any acquisition pursuant to any Contract disclosed
pursuant to Section 3.14(i) other than substantially in accordance with the
terms so disclosed (including without waiver of any condition to Parent's
obligations to consummate such acquisition) excluding insignificant
deviations from such terms; or
(vi) take, or offer or propose to take, or agree to take in
writing or otherwise, any of the actions described in Sections 4.2(b)(i)
through 4.2(b)(v) or any action which would result in any of the conditions
set forth in Article VI not being satisfied.
44
(c) Parent shall not, and shall not permit any of its Subsidiaries to,
intentionally take any action that (without regard to any action taken or agreed
to be taken by the Company or any of its Affiliates) with knowledge that such
action would prevent the Merger from qualifying as a reorganization within the
meaning of Section 368(a)(1)(B) or Sections 368(a)(1)(A) and Section
368(a)(2)(E) of the Code.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 Preparation of Form S-4 and the Proxy Statement;
Stockholder Meetings. (a) Promptly following the date of this Agreement, the
Company and Parent shall prepare the Proxy Statement, and Parent shall prepare
and file with the SEC the Form S-4, in which the Proxy Statement may be included
as a prospectus. Each of the Company and Parent shall use its reasonable best
efforts to have the Form S-4 declared effective under the Securities Act as
promptly as practicable after such filing. Each of the Company and Parent will
use its reasonable best efforts to cause the Proxy Statement to be mailed to its
respective stockholders as promptly as practicable after the Form S-4 is
declared effective under the Securities Act. Parent shall also take any action
(other than qualifying to do business in any jurisdiction in which it is not now
so qualified) required to be taken under any applicable state securities law in
connection with the issuance of Parent Common Stock in the Merger, and the
Company shall furnish all information concerning the Company and the holders of
the Company Common Stock and rights to acquire Company Common Stock pursuant to
the Stock Plans as may be reasonably required in connection with any such
action. Each of Parent and the Company shall furnish all information concerning
itself to the other as may be reasonably requested in connection with any such
action and the preparation, filing and distribution of the Form S-4 and the
preparation, filing and distribution of the Proxy Statement. The Company, Parent
and Sub each agree to correct any information provided by it for use in the Form
S-4 or the Proxy Statement which shall have become false or misleading. The
Company acknowledges that Parent will include in the Proxy Statement such
information concerning the transactions pursuant to the QFC Merger Agreement as
may be required to be included to permit Parent and QFC to seek any approvals of
stockholders which may be required to be obtained in connection with the
transactions pursuant to the QFC Merger Agreement.
(b) The Company, acting through its Board of Directors, shall, in
accordance with its Certificate of Incorporation and By-Laws and subject to the
other provisions of this Section 5.1(b), promptly and duly solicit consents as
soon as practicable following the date upon which the Form S-4 becomes effective
for the purpose of voting to approve and adopt this Agreement and the
transactions contemplated hereby and (i)
45
recommend approval and adoption of this Agreement and the Merger by the
stockholders of the Company and include in the Proxy Statement such
recommendation and (ii) take all reasonable and lawful action to solicit and
obtain such approval. Parent, acting through its Board of Directors, shall,
subject to and in accordance with applicable law and its certificate of
incorporation and by-laws, promptly and duly call, give notice of, convene and
hold as soon as practicable following the date upon which the Form S-4 becomes
effective a meeting of the holders of Parent Common Stock for the purpose of
voting to approve the issuance of the Parent Common Stock in the Merger, and (i)
recommend approval of the issuance of the Parent Common Stock in the Merger by
the stockholders of Parent and include in the Proxy Statement such
recommendation and (ii) take all reasonable and lawful action to solicit and
obtain such approval.
(c) The Company will cause its transfer agent to make stock transfer
records relating to the Company available to the extent reasonably necessary to
effectuate the intent of this Agreement and the Stockholders Agreements.
SECTION 5.2 Accountants' Letters. (a) The Company shall use its
reasonable best efforts to cause to be delivered to Parent a "comfort" letter of
Xxxxxx Xxxxxxxx LLP, the Company's independent public accountants, dated a date
within two business days before the date on which the Form S-4 shall become
effective and addressed to Parent, in form and substance reasonably satisfactory
to Parent and customary in scope and substance for letters delivered by
independent public accountants in connection with registration statements
similar to the Form S-4. In connection with the Company's efforts to obtain such
letter, if requested by Xxxxxx Xxxxxxxx LLP, Parent shall provide a
representation letter to Xxxxxx Xxxxxxxx LLP, complying with the Statement on
Auditing Standards No. 72 ("SAS 72"), if then required.
(b) Parent shall use its reasonable best efforts to cause to be
delivered to the Company a "comfort" letter of Deloitte & Touche LLP (Portland
office), Parent's independent public accountants, dated a date within two
business days before the date on which the Form S-4 shall become effective and
addressed to the Company, in form and substance reasonably satisfactory to the
Company and customary in scope and substance for letters delivered by
independent public accountants in connection with registration statements
similar to the Form S-4. In connection with Parent's efforts to obtain such
letter, if requested by Deloitte & Touche LLP, the Company shall provide a
representation letter to Deloitte & Touche LLP complying with SAS 72, if then
required.
SECTION 5.3 Access to Information; Confidentiality. (a) From the date
hereof to the Effective Time, each of the Company and Parent shall, and shall
cause its Subsidiaries, officers, directors, employees, auditors and other
agents to,
46
afford the officers, employees, auditors and other agents of Parent or the
Company, respectively, who shall agree to be bound by the provisions of this
Section 5.3 as though a party hereto, complete access at all reasonable times to
its officers, employees, agents, properties, offices, plants and other
facilities and to all books and records, and shall furnish Parent or the
Company, respectively, with all financial, operating and other data and
information as Parent or the Company, respectively, through its officers,
employees or agents may from time to time request; provided, that the Company
shall not be required to make available to Parent any books and records or other
information relating to potential Transactions (as defined in Section 5.4) which
were considered by the Company prior to the date of this Agreement to the extent
that any confidentiality agreement in existence on the date hereof with the
Company prohibits the Company from making such books, records and other
information available to Parent; and provided, further, that the Company may
provide information which is of a sensitive competitive nature in a form which
minimizes the potential of unauthorized disclosure.
(b) Each of the Company and Parent will hold and will cause its
directors, officers, employees, agents, advisors (including, without limitation,
counsel and auditors) and controlling persons to hold any such information which
is nonpublic in confidence on the same terms and conditions as set forth in the
letter agreements, as amended from time to time, between the Company and Parent
(the "Confidentiality Agreements").
(c) No investigation pursuant to this Section 5.3 shall affect any
representations or warranties of the parties herein or the conditions to the
obligations of the parties hereto.
SECTION 5.4 No Solicitation of Transactions. The Company shall, and
shall cause its Subsidiaries and their respective officers, directors,
employees, representatives and agents to, immediately cease any existing
discussions or negotiations, if any, with any parties conducted heretofore with
respect to any acquisition or exchange of all or any material portion of the
assets of, or more than 20% of the outstanding equity interest in the Company or
any material equity interest in any of its Subsidiaries, or any business
combination with the Company or any of its Subsidiaries. Neither the Company or
any of its Subsidiaries, nor any of its or their respective officers, directors,
employees, representatives or agents, shall, directly or indirectly, encourage,
solicit, participate in, facilitate or initiate discussions or negotiations
with, or provide any information to, any Person or group (other than Parent and
Sub or any designees of Parent or Sub) concerning any merger, sale of assets,
sale of more than 20% of the outstanding shares of capital stock or similar
transactions (including an exchange of stock or assets) involving the Company or
any Subsidiary or
47
division of the Company or any business combination with the Company or any of
its Subsidiaries (each a "Transaction"). The Company shall notify Parent
immediately if it receives any unsolicited proposal concerning a Transaction,
the identity of the person making any such proposal and all the terms and
conditions thereof and shall keep Parent promptly advised of all developments
relating thereto. Nothing contained in this Section 5.4 shall prohibit the
Company from taking and disclosing to its stockholders a position contemplated
by Rule 14e-2(a) promulgated under the Exchange Act.
SECTION 5.5 Employee Benefits Matters. The Company shall or Parent
shall cause the Company and the Surviving Corporation to promptly pay or provide
when due all compensation and benefits earned through or prior to the Effective
Time as provided pursuant to the terms of any Employee Plans in existence as of
the date hereof for all employees (and former employees) and directors (and
former directors) of the Company. Parent and the Company agree that the Company
and the Surviving Corporation shall pay promptly or provide when due all
compensation and benefits required to be paid pursuant to the terms of any
individual agreement with any employee, former employee, director or former
director in effect and disclosed to Parent as of the date hereof. Nothing herein
shall require the continued employment of any person or prevent the Company
and/or the Surviving Corporation from taking any action or refraining from
taking any action which the Company could take or refrain from taking prior to
or after the Effective Time, including, without limitation, any action the
Company or the Surviving Corporation could take to terminate any plan under its
terms as in effect as of the date hereof.
SECTION 5.6 Directors' and Officers' Indemnification; Insurance. (a)
The By-Laws of the Surviving Corporation shall contain provisions no less
favorable with respect to indemnification and exculpation from liability than
are set forth in the Certificate of Incorporation and By-Laws of the Company,
which provisions shall not be amended, repealed or otherwise modified for a
period of six years from the Effective Time in any manner that would adversely
affect the rights thereunder of individuals who at the Effective Time were
directors, officers, employees or agents of the Company. Without limiting the
generality of the foregoing, in the event any person entitled to indemnification
under this Section 5.6 becomes involved in any claim, action, proceeding or
investigation after the Effective Time, the Surviving Corporation shall
periodically advance to such person his or her reasonable legal and other
reasonably incurred expenses (including the cost of any investigation and
preparation incurred in connection therewith), subject to such person providing
an undertaking to reimburse all amounts so advanced in the event of a final
non-appealable determination by a court of competent jurisdiction that such
person is not entitled thereto.
48
(b) For six years from the Effective Time, Parent shall maintain in
effect the current directors' and officers' liability insurance covering those
persons who are currently covered by the Company's directors' and officers'
liability insurance policy to the extent that it provides coverage for events
occurring on or prior to the Effective Time (a copy of which has been heretofore
delivered to Parent), so long as the annual premium therefor would not be in
excess of 150% of the last annual premium paid prior to the date of this
Agreement (the "Company's Current Premium"). If such premiums for such insurance
would at any time exceed 150% of the Company's Current Premium, then Parent
shall cause to be maintained policies of insurance which in Parent's good faith
determination, provide the maximum coverage available at an annual premium equal
to 150% of the Company's Current Premium. The Company represents to Parent that
the Company's Current Premium is $412,715.
(c) Parent hereby covenants not to take or permit to be taken, any
action that would limit, restrict or otherwise prevent the Surviving Corporation
from performing, or render it unable to perform, each of its obligation under
this Section 5.6. From and after the Effective Time, Parent shall guarantee the
obligations of the Surviving Corporation under this Section 5.6.
(d) The provision of this Section 5.6 are intended for the benefit of,
and shall be enforceable by, each person entitled to indemnification under this
Section 5.6, his or her heirs and his or her personal representatives.
SECTION 5.7 Notification of Certain Matters. The Company shall give
prompt notice to Parent, and Parent shall give prompt notice to the Company, of
(i) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate and (ii) any failure of
the Company, Parent or Sub, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 5.7 shall not limit or otherwise affect the remedies available hereunder
to the party receiving such notice.
SECTION 5.8 Further Action. (a) Upon the terms and subject to the
conditions hereof, each of the parties hereto shall use its reasonable best
efforts to take, or cause to be taken, all appropriate action, and to do or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement, including, without limitation, (i) cooperating
in the preparation and filing of the Form S-4, the Proxy Statement, and required
filings under the HSR Act and any amendments to any thereof, (ii) using its
reasonable best efforts to make all required regulatory filings and applications
and to obtain all licenses, permits, consents, approvals,
49
authorizations, qualifications and orders of governmental authorities and
parties to contracts with the Company and its Subsidiaries as are necessary for
the consummation of the transactions contemplated by this Agreement and to
fulfill the conditions to the Merger, (iii) in the case of Parent, promptly, if
required by the FTC or its staff, the Assistant Attorney General in charge of
the Antitrust Division or her staff, any state attorney general or its staff or
any other similar governmental entity, in each case in order to consummate the
Merger, taking all steps and making all undertakings to secure antitrust
clearance (including steps to effect the sale or other disposition of particular
Store Facilities of Parent, its Subsidiaries, QFC, its Subsidiaries and/or the
Company and its Subsidiaries and to hold separate such Store Facilities pending
such sale or other disposition), (iv) cooperating in all respects with each
other in connection with any investigation or other inquiry, including any
proceeding initiated by a private party, in connection with the transactions
contemplated hereby or pursuant to the QFC Merger, (v) keeping the other party
informed in all material respects of any material communication received by such
party from, or given by such party to, the FTC, the Antitrust Division of the
Department of Justice (the "DOJ") or any other governmental authority and of any
material communication received or given in connection with any proceeding by a
private party, in each case regarding any of the transactions contemplated
hereby or pursuant to the QFC Merger, and (vi) permitting the other party to
review any material communication given by it to, and consult with each other in
advance of any meeting or conference with, the FTC, the DOJ or any such other
governmental authority or, in connection with any proceeding by a private party,
with any other Person, and to the extent permitted by the other Person, give the
other party the opportunity to attend and participate in such meetings and
conferences. In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement, the proper
officers and directors of each party to this Agreement shall use their
reasonable best efforts to take all such necessary action. In furtherance and
not in limitation of the covenants of the parties contained in this Section 5.8,
if any administrative or judicial action or proceeding, including any proceeding
by a private party, is instituted (or threatened to be instituted) challenging
any transaction contemplated by this Agreement as violative of any Antitrust
Law, each of the parties shall cooperate in all respects with each other and use
its reasonable best efforts to contest and resist any such action or proceeding,
and to have vacated, lifted, reversed or overturned any decree, judgment,
injunction or other order, whether temporary, preliminary or permanent, that is
in effect and that prohibits, prevents or restricts, and to resolve any
challenge or objection raised by any governmental authority or private party.
For purposes of meeting, holding discussions and entering into any proposed
settlement with such governmental authorities, Parent shall appoint a committee
consisting of Xxxxxx X. Xxxxxx (or his
50
designee), Xxxxx X. Xxxxx (or his designee) and one representative designated by
each of the Company and QFC.
(b) The Company shall make, subject to the condition that the
transactions contemplated herein and therein actually occur, any undertakings
(including undertakings to make sales or other dispositions) provided that such
divestitures need not themselves be made until after the transactions
contemplated hereby actually occur) required in order to obtain the antitrust
clearances referred to in Section 5.8(a)(iii).
(c) Within five business days after such time as any agreement is
reached by Parent with the FTC or its staff, the Assistant Attorney General in
charge of the Antitrust Division or her staff, any state attorney general or its
staff or any other similar governmental entity in accordance with Section
5.8(a)(iii) to sell or dispose of any Store Facilities (the "Settlement
Agreement"), Parent shall furnish or cause to be furnished to the Company a
report (the "Preliminary Report"), based on such information as Parent shall
determine to be relevant, stating in reasonable detail Parent's good faith
determination of the Estimated Gain and Lost EBITDA with respect to such Store
Facilities. Unless the Company provides specific written notice to Parent of an
objection to any aspect of the Preliminary Report before the close of business
on the 10th business day after the Company's receipt thereof, the Preliminary
Report shall then become binding upon Parent and the Company, and shall be the
"Final Report". If the Company, by delivering its own report (the "Company
Report") stating in reasonable detail the Company's good faith determination of
the Estimated Gain and Lost EBITDA to Parent before the close of business on
such business day, makes any good faith objection to any aspect of Parent's
proposed Estimated Gain set forth in the Preliminary Report, then those aspects
as to which the objection was made shall not become binding, Parent and the
Company shall discuss such objection in good faith and, if they reach written
agreement amending the Preliminary Report (or portions thereof), the Preliminary
Report, as amended by such written agreement, shall become binding upon Parent
and the Company, and shall be the Final Report. If Parent and the Company do not
reach such written agreement within five days after the Company gives such
notices of objection, those aspects as to which such objection was made
(relating to Estimated Gain, and not Lost EBITDA) and as to which written
agreement has not been reached shall be submitted for arbitration to one or more
independent business and/or real estate appraisal firm of recognized national
standing with expertise in the valuation of businesses and/or properties
comparable to the Store Facilities chosen by agreement of Parent and the Company
(whose fees shall be shared equally by Parent and the Company). Such firm shall
prepare a valuation report with respect to the real estate and other assets
comprising the Store Facilities, which report, when delivered to Parent and the
Company, shall become binding upon Parent and the Company for purposes of
determining the Estimated Gain, and shall (unless a
51
determination made in such report is higher or lower than both the determination
set forth in the Preliminary Report and the determination set forth in the
Company Report, in which case the determination set forth in the Preliminary
Report or the Company Report, whichever is closer to such firm's determination,
shall), together with those aspects of the Preliminary Report as to which no
objection was made or as to which written agreement has been reached, be the
Final Report. The "Estimated Gain" is the amount set forth in the Final Report
and is equal to the aggregate net proceeds estimated to be realized by Parent or
any of its Subsidiaries on the sale or other disposition of any Store Facilities
pursuant to this Section 5.8 in excess of the book value of the Store Facilities
to be so divested as of the date of determination thereof. The foregoing
notwithstanding, if within three (3) days following issuance of the Final
Report, the Company shall produce a signed bona fide offer from a qualified
buyer to purchase any or all of the Store Facilities to be disposed of at a
price higher than that contained in the Final Report, then, in such event, the
Estimated Gain shall be increased by the amount by which such offer exceeds the
valuation in the Final Report for such Store Facility or Facilities.
(d) For purpose of this Section 5.8, the book value of the Store
Facilities shall be based on historical cost of fixtures, equipment, and
leasehold improvements (on land and buildings, if owned).
(e) Any action to be taken or determination to be made by the Company
under this Section 5.8 that is not taken or made until after the Effective Time
shall be taken or made by the Stockholders' Representatives in lieu of the
Company.
SECTION 5.9 Public Announcements. Parent and the Company shall consult
with each other before issuing any press release or otherwise making any public
statements with respect to the Merger and shall not issue any such press release
or make any such public statement prior to such consultation, except as may be
required by law or any listing agreement with its securities exchange.
SECTION 5.10 Stock Exchange Listing. Parent shall use its reasonable
best efforts to have approved for listing on the NYSE prior to the Effective
Time, subject to official notice of issuance, the Parent Common Stock to be
issued pursuant to the Merger.
SECTION 5.11 Affiliates. Prior to the Closing Date, the Company shall
deliver to Parent a letter identifying all persons who are, at the time this
Agreement is submitted for approval to the stockholders of the Company,
"affiliates" of the Company for purposes of Rule 145 under the Securities Act.
The Company shall use its reasonable best efforts to cause each such person to
deliver to Parent on or prior to the Closing Date a
52
written agreement substantially in the form attached as Exhibit C hereto.
SECTION 5.12 Directorships. On or prior to the Effective Time of the
Merger, Parent's Board of Directors will increase its size by two and elect Mr.
Xxxxxx Xxxxx and one other person designated by the Company to be directors of
Parent, with such elections to become effective at the Effective Time.
SECTION 5.13 Treatment of Yucaipa Consulting Agreement and Warrant.
(a) It is also contemplated that the Consulting Agreement between the Company
and Yucaipa will be terminated and the Company or Parent will make a termination
payment to Yucaipa or its assignee in the amount of $20,000,000 in lieu of all
other payments required thereunder (the "Yucaipa Payment"). Prior to the
Effective Time, the parties will negotiate the arrangements for such termination
and payment with Yucaipa. Subject to Section 5.13(b), at the Effective Time,
Yucaipa's Common Stock Purchase Warrant dated June 14, 1995 (the "Yucaipa
Warrant") shall be terminated in consideration for Parent's delivery at the
Effective Time to Yucaipa, or its assignee, shares of Parent Common Stock and
Escrow Percentage Interests equal to the number of shares of Parent Common Stock
and Escrow Percentage Interests which the holder of 2% of the Company Common
Stock, measured on a Fully Diluted Basis (after giving effect to such 2% of the
Company Common Stock as though it were outstanding), would have received in the
Merger, so that the total consideration payable under Section 1.6, 1.7, 1.11 and
this 5.13 equals the Aggregate Purchase Price.
SECTION 5.14 Parent Representations and Warranties. The Company agrees
and acknowledges that the representations and warranties set forth in Article
III hereof are being made without any regard to QFC, the QFC Merger Agreement or
the transactions contemplated thereby and that no facts or developments relating
to QFC, the QFC Merger Agreement or the transactions contemplated thereby shall
constitute a breach of such representations and warranties as initially made and
as made on the Closing Date in accordance with Section 6.2(a), except that,
after Closing, QFC shall be treated as a Subsidiary of Parent for purposes of
Section 4.2 and Section 3.10 of this Agreement.
SECTION 5.15 Registration Rights Agreement. On the Closing Date,
Parent and the Stockholders shall enter into a registration rights agreement
(the "Registration Rights Agreement") providing for (i) "shelf" and "demand"
registration rights to the Stockholders (except that Yucaipa and its Affiliates
shall not have such "demand") in substantially the form of Sections 5.15(b) and
(c), respectively, and (ii) other customary provisions for agreements of this
nature (but not providing for registration in addition to those contemplated by
Sections 5.15(b) and (c)) as mutually agreed between such parties. After the
date hereof, each of such parties shall
53
endeavor in good faith to negotiate and finalize the form of the Registration
Rights Agreement.
(b) As soon as practicable following the mailing of the Proxy
Statement, Parent shall prepare and file with the SEC a shelf registration
statement on an appropriate form that shall include all shares of Parent Common
Stock to be acquired by the Stockholders pursuant to the Merger ("Registrable
Securities"), and may include securities of Parent for sale for Parent's own
account. Parent shall use its reasonable best efforts to cause such shelf
registration statement to be declared effective as soon as practicable after the
Effective Time; provided, however, that to the extent necessary to preserve
"pooling-of-interest" accounting treatment for the transactions contemplated by
the QFC Merger Agreement (as reasonably determined by Parent and its independent
public accountants), Parent shall have no such obligation to effect such
registration until 15 days after the first public release by Parent of the
combined financial results of Parent and the Company. Parent shall only be
obligated to keep such shelf registration statement effective until the one year
anniversary date of the date such shelf registration statement has been declared
effective ("Shelf Termination Date").
(c) Upon written notice to Parent from a Stockholder or Stockholders
at any time after the Shelf Termination Date (but not later than the date that
is 180 days after the Shelf Termination Date) (the "Demand Request") requesting
that Parent effect the registration under the Securities Act of any or all of
the Registrable Securities held by such requesting Stockholders, which notice
shall specify the intended method or methods of disposition of such Registrable
Securities, Parent shall prepare and, within 60 days after such request, file
with the SEC a registration statement with respect to such Registrable
Securities and thereafter use its reasonable best efforts to cause such
registration statement to be declared effective under the Securities Act for
purposes of dispositions in accordance with the intended method or methods of
disposition stated in such request. Notwithstanding any other provision of this
Section 5.15 to the contrary: (i) the Stockholders may collectively exercise
their rights to request registration under this Section 5.15(c) on not more than
one occasion (such registration being referred to herein as the "Demand
Registration"), (ii) Parent shall not be required to effect any Demand
Registration unless the aggregate number of Registrable Securities to be
registered pursuant to the Demand Registration is equal to or more than 35% of
the initial Registrable Securities shares, and (iii) the method of disposition
requested by Stockholders in connection with any Demand Registration may not,
without Parent's written consent, be an offering on a delayed or continuous
basis pursuant to Rule 415 promulgated under the Securities Act.
(d) Parent agrees to amend the existing Registration Rights Agreement
dated September 9, 1997, among it, Affiliates of Yucaipa and the other
stockholders of Parent identified therein,
54
to provide for the shares issuable to Yucaipa and its Affiliates under this
Agreement to be "Registrable Securities" for purposes thereof.
SECTION 5.16 Subsequent Sale. From and after the date of this
Agreement and for a period of 12 months following the Effective Time, Parent
shall not sell, transfer or (other than in connection with a sale, merger or
other business combination involving all or substantially all of the capital
stock or assets of Parent or its affiliates) otherwise dispose of the Company or
its principal Subsidiary, or all or substantially all of their respective
assets, or enter into an agreement with respect thereto, without the prior
written approval of the Company or, following the Effective Time, the
Stockholder Representatives.
SECTION 5.17 Continuity of Business Enterprise. Parent will continue
at least one significant historic business line of the Company or use at least a
significant portion of the Company's historic business assets in a business, in
each case within the meaning of Treasury Regulation Section 1.368-1(d).
ARTICLE VI
CONDITIONS OF MERGER
SECTION 6.1 Conditions to Obligation of Each Party to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Closing Date of the following
conditions:
(a) This Agreement shall have been approved by the affirmative vote of
the holders of a majority of the outstanding shares of Company Voting
Common Stock and Series A Preferred Stock (voting together as a single
class) entitled to vote thereon. The issuance of Parent Common Stock in the
Merger shall have been approved by the affirmative vote of the holders of a
majority of the outstanding shares of Parent Common Stock.
(b) No statute, rule, regulation, executive order, decree, ruling,
injunction or other order (whether temporary, preliminary or permanent)
shall have been enacted, entered, promulgated or enforced by any court or
governmental authority of competent jurisdiction which prohibits,
restrains, enjoins or restricts the consummation of the Merger; provided,
however, that the parties shall use their reasonable best efforts to cause
any such decree, ruling, injunction or other order to be vacated or lifted.
(c) Any waiting period applicable to the Merger under the HSR Act
shall have terminated or expired.
55
(d) The Form S-4 and any required post-effective amendment thereto
shall have become effective under the Securities Act and shall not be the
subject of any stop order or proceedings seeking a stop order, and any
material "blue sky" and other state securities laws applicable to the
registration of the Parent Common Stock to be exchanged for Company Common
Stock shall have been complied with.
(e) The shares of Parent Common Stock issuable to the holders of
Company Common Stock pursuant to this Agreement shall have been approved
for listing on the NYSE, subject to official notice of issuance.
SECTION 6.2 Conditions to Obligations of the Company to Effect the
Merger. The obligation of the Company to effect the Merger shall be subject to
the fulfillment at or prior to the Closing Date of the following additional
conditions:
(a) Parent and Sub shall have performed or complied with in all
material respects their agreements and covenants contained in this
Agreement required to be performed or complied with at or prior to the
Closing Date and the representations and warranties of Parent and Sub
contained in this Agreement qualified as to materiality shall be true in
all respects, and those not so qualified shall be true in all material
respects, in each case when made and on and as of the Closing Date with the
same force and effect as if made on and as of such date, except as
expressly contemplated or otherwise expressly permitted by this Agreement.
The Company shall have received a certificate signed on behalf of Parent by
the chief executive officer and chief financial officer of Parent to such
effect.
(b) The opinion, based on appropriate representations of Parent, the
Company, and certain stockholders of the Company, of Xxxxxx & Xxxxxxx,
counsel to the Company, to the effect that the Merger will be treated for
Federal income tax purposes as a reorganization within the meaning of
Section 368(a) of the Code, dated on or about the date of and referred to
in the Proxy Statement as first mailed to stockholders of the Company,
shall not have been withdrawn or modified in any material respect.
(c) There shall not be pending or threatened by any governmental
entity any suit, action or proceeding, which could reasonably be expected,
if adversely determined, to result in criminal or material uninsured and
unindemnified or unindemnifiable personal liability on the part of one or
more directors of the Company, (i) challenging or seeking to restrain or
prohibit the consummation of the Merger or any of the other transactions
contemplated by this Agreement or (ii) seeking to prohibit or limit the
ownership or operation by the Company, Parent or any of their respective
Subsidiaries of any material portion of the business or assets of the
Company, Parent or any of their respective Subsidiaries, or to dispose of
or hold separate any material portion of the business or
56
assets of the Company, Parent or any of their respective Subsidiaries, as a
result of the Merger or any of the other transactions contemplated by this
Agreement.
(d) To the extent required hereunder, each of Parent and the Escrow
Agent shall have executed and delivered the Escrow Agreement in the form of
Exhibit B hereto and Parent shall have deposited the Escrowed Shares with
the Escrow Agent.
(e) Parent shall have executed and delivered the Registration Rights
Agreement.
SECTION 6.3 Conditions to Obligations of Parent and Sub to Effect the
Merger. The obligations of Parent and Sub to effect the Merger shall be subject
to the fulfillment at or prior to the Closing Date of the following additional
conditions:
(a) The Company shall have performed or complied with in all material
respects its agreements and covenants contained in this Agreement required
to be performed or complied with at or prior to the Closing Date and the
representations and warranties of the Company contained in this Agreement
qualified as to materiality shall be true in all respects, and those not so
qualified shall be true in all material respects, in each case when made
and on and as of the Closing Date with the same force and effect as if made
on and as of such date, except as expressly contemplated or otherwise
expressly permitted by this Agreement. Parent shall have received a
certificate signed on behalf of the Company by the chief executive officer
and chief financial officer of the Company to such effect.
(b) The opinion, dated on or about the date of and referred to in the
Proxy Statement as first mailed to stockholders of the Company, based on
appropriate representations of the Company and Parent and principal
stockholders of the Company, of Xxxxxxx Xxxxxxx & Xxxxxxxx, counsel to
Parent, to the effect that Parent, Sub and the Company will not recognize
income, gain or loss for Federal income tax purposes as a result of the
Merger, shall not have been withdrawn or modified in any material respect,
unless if such opinion is withdrawn or modified, the amount of income, gain
or loss potentially recognizable will not have, or could not reasonably be
expected to have, a Material Adverse Effect with respect of Parent.
(c) Subject to Parent's compliance with Section 5.8, there shall not
be pending or threatened by any governmental entity any suit, action or
proceeding (i) challenging or seeking to restrain or prohibit the
consummation of the
57
Merger or any of the other transactions contemplated by this Agreement or
seeking to obtain from Parent or any of its Subsidiaries any damages that
are material in relation to Parent and its Subsidiaries taken as a whole,
(ii) seeking to prohibit or limit the ownership or operation by the
Company, Parent or any of their respective Subsidiaries of any material
portion of the business or assets of the Company, Parent or any of their
respective Subsidiaries, to dispose of or hold separate any material
portion of the business or assets of the Company, Parent or any of their
respective Subsidiaries, as a result of the Merger or any of the other
transactions contemplated by this Agreement, or (iii) seeking to prohibit
Parent or any of its Subsidiaries from effectively controlling in any
material respect the business or operations of the Company or its
Subsidiaries.
(d) No more than 5% of the outstanding shares of Company Common Stock
shall be held by Dissenting Stockholders.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 Termination. This Agreement may be terminated and the
Merger contemplated hereby may be abandoned at any time prior to the Closing
Date, whether before or after approval of matters presented in connection with
the Merger by the stockholders of the Company:
(a) By mutual written consent of Parent and the Company;
(b) By either Parent or the Company, if the Merger shall not have been
consummated on or before August 31, 1998 (other than due to the failure of
the party seeking to terminate this Agreement to perform its obligations
under this Agreement required to be performed at or prior to the Effective
Time);
(c) By Parent or the Company, if any required approval of the
stockholders of the Company for this Agreement or the Merger shall not have
been obtained by reason of the failure to obtain the required vote upon a
vote held at a duly held meeting of stockholders or at any adjournment
thereof;
(d) By the Company or Parent, if the required approval of the
stockholders of Parent for the issuance of Parent Common Stock pursuant to
this Agreement shall not have been obtained by reason of the failure to
obtain the required vote upon a vote held at a duly held meeting of
stockholders or at any adjournment thereof;
58
(e) By Parent (subject to Parent's compliance with Section 5.8) or the
Company if any court or other governmental body of competent jurisdiction
shall have issued a final order, decree or ruling or taken any other final
action restraining, enjoining or otherwise prohibiting the Merger and such
order, decree, ruling or other action is or shall have become final and
nonappealable;
(f) By the Company if prior to the Closing Date (i) any representation
or warranty on the part of Parent contained in this Agreement is incorrect
in any material respect and which could reasonably be expected to have a
Material Adverse Effect with respect to Parent or which could reasonably be
expected to materially adversely affect (or materially delay) the
consummation of the Merger or (ii) there shall have been a breach of any
covenant or agreement on the part of Parent contained in this Agreement
which could reasonably be expected to have a Material Adverse Effect with
respect to Parent or which could reasonably be expected to materially
adversely affect (or materially delay) the consummation of the Merger,
which breach, in the case of clause (ii), shall not have been cured prior
to 10 days following notice thereof; or
(g) By Parent if prior to the Closing Date (i) there shall have been a
breach of any representation or warranty on the part of the Company
contained in this Agreement which could reasonably be expected to have a
Material Adverse Effect with respect to the Company or which could
reasonably be expected to materially adversely affect (or materially delay)
the consummation of the Merger, (ii) there shall have been a breach of any
covenant or agreement on the part of the Company contained in this
Agreement which could reasonably be expected to have a Material Adverse
Effect with respect to the Company or which could reasonably be expected to
materially adversely affect (or materially delay) the consummation of the
Merger, which breach, in the case of clause (ii), shall not have been cured
prior to 10 days following notice thereof.
SECTION 7.2 Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 7.1, this Agreement shall forthwith become
void and there shall be no liability on the part of any party hereto except as
set forth in Section 7.3 and Section 8.1; provided, however, that nothing herein
shall relieve any party from liability for any willful breach hereof.
SECTION 7.3 Fees and Expenses. Each party shall bear its own expenses
in connection with this Agreement, the Stockholders Agreement and the
transactions contemplated hereby and thereby.
59
SECTION 7.4 Amendment. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective Boards of Directors
at any time before or after any required approval of matters presented in
connection with the Merger by the stockholders of either the Company or Parent;
provided, however, that after any such approval, there shall be made no
amendment that by law requires further approval by such stockholders without the
further approval of such stockholders. This Agreement may not be amended except
by an instrument in writing signed by the parties hereto.
SECTION 7.5 Waiver. At any time prior to the Closing Date, any party
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any such extension or waiver shall be valid if set
forth in an instrument in writing signed by the party or parties to be bound
thereby. The failure of any party to this Agreement to assert any of its rights
under this Agreement or otherwise shall not constitute a waiver of such rights.
ARTICLE VIII
RELEASE OF ESCROWED SHARES
SECTION 8.1 Delivery of the Escrowed Shares. The Escrow Agent shall
deliver to each Holder no later than the fifth business day (the "Distribution
Date") after the earliest of (i) the termination of the QFC Merger Agreement,
(ii) the execution of the Settlement Agreement (as defined below) or (iii) six
months following the Effective Time, any Escrowed Shares required to be so
delivered under the Escrow Agreement. The amount of Escrowed Shares to be
released from Escrow pursuant to any Settlement Agreement following the
Effective Time shall be determined in accordance with the terms of the Escrow
Agreement.
SECTION 8.2 Voting of and Dividends on the Escrowed Shares. All
Escrowed Shares shall be deemed to be owned by the Holders in accordance with
their Escrow Percentage Interests and the Holders shall be entitled to vote the
same; provided, however, that there shall also be deposited in escrow and held
by the Escrow Agent, subject to the terms of this Article VIII, all shares of
Parent Common Stock issued as a result of any non-taxable stock dividend or
stock split, with respect to the Escrowed Shares. Any cash dividends or taxable
distributions on the shares of Parent Common Stock held by the Escrow Agent as
part of the Escrowed Shares shall be payable promptly to the Holders.
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ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1 Non-Survival of Representations, Warranties and
Agreements. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 7.1, as the case may be, except that the agreements set
forth in Article I and Sections 5.5, 5.6, 5.8, 5.16 and 5.17 shall survive the
Effective Time and those set forth in Section 5.3 and Section 7.3 shall survive
termination of this Agreement.
SECTION 9.2 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telecopy, telegram or telex or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties at the following addresses
(or at such other address for a party as shall be specified by like notice):
if to Parent or Sub:
Xxxx Xxxxx, Inc.
0000 XX 00xx Xxxxxx
Xxxxxxxx, XX 00000
Attention: General Counsel
Fax: (000) 000-0000
with an additional copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Fax: (000) 000-0000
if to the Company:
Food 4 Less Holdings, Inc.
c/o Ralphs Grocery Company
0000 X. Xxxxxxx Xxxx.
Xxxxxxx, XX 00000
Attention: Legal Dept.
Fax: (000) 000-0000
with a copy to:
Xxxxxx & Xxxxxxx
000 X. Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Fax: (000) 000-0000
61
SECTION 9.3 Certain Definitions. For purposes of this Agreement, the
term:
"Action" shall mean any action, order, writ, injunction, judgment or
decree outstanding or claim, suit, litigation, proceeding, arbitration or
investigation by or before any court, governmental or other regulatory or
administrative agency or commission or any other Person.
"Affiliate" shall mean, with respect to any Person, any other Person
that directly, or through one or more intermediaries, controls or is
controlled by or is under common control with such Person.
"Aggregate Exercise Price" shall mean the sum of (i) the aggregate
cash consideration payable to the Company upon the exercise of all Company
Options outstanding immediately prior to their cancellation as provided in
Section 1.7 and (ii) the aggregate cash consideration received by the
Company from the issuance of shares of Company Common Stock after the date
hereof and prior to the Effective Time, to the extent permitted by this
Agreement.
"Aggregate Purchase Price" shall mean the following:
(i) the Average Parent Price times 22,500,000, if the Average
Parent Price is greater than $26.6667;
(ii) $600,000,000, if the Average Parent Price is less than or
equal to $26.6667 but greater than $25.00; or
(iii) the Average Parent Price times 24,000,000, if the Average
Parent Price is less than or equal to $25.00.
"Applicable Percentage" shall mean a percentage equal to the greater
of (a) 90% and (b) the percentage determined by (i) subtracting the Total
Deduction Amount attributable to any Pending Settlement Proposal from (ii)
the Aggregate Purchase Price and (iii) dividing the resulting amount by the
Aggregate Purchase Price; provided that if the Settlement Agreement has
been entered into as of the Effective Time, the Applicable Percentage shall
be 100%.
"Assets" shall mean, with respect to any Person, all land, buildings,
improvements, leasehold improvements, Fixtures and Equipment and other
assets, real or personal, tangible or intangible, owned, leased or licensed
by such Person or any of its Subsidiaries.
"Average Parent Price" shall be equal to the average of the closing
prices of the Parent Common Stock on the New
62
York Stock Exchange ("NYSE") as reported on the NYSE Composite Transaction
Tape for the 15 trading days randomly selected by lot out of the 35 trading
days ending on the second trading day preceding the Effective Time.
"Benefit Arrangement" shall mean, with respect to any Person, any
employment, consulting, severance, change in control or other similar
contract, arrangement or policy and each plan, arrangement (written or
oral), program, agreement or commitment providing for insurance coverage
(including without limitation any self-insured arrangements), workers'
compensation, disability benefits, life, health, disability or accident
benefits (including without limitation any "voluntary employees'
beneficiary association" as defined in Section 501(c)(9) of the Code
providing for the same or other benefits) or for deferred compensation,
profit-sharing bonuses, stock options, stock appreciation rights, stock
purchases or other forms of incentive compensation, which is (A) not a
Welfare Plan, Pension Plan or Multiemployer Plan, (B) is entered into,
maintained, contributed to or required to be contributed to, as the case
may be, by such Person or any ERISA Affiliate or under which such Person or
any ERISA Affiliate may incur any liability, and (C) covers any employee or
former employee of such Person or any ERISA Affiliate (with respect to
their relationship with such entities).
"Contract" shall mean any contract (written or oral), plan,
undertaking or other commitment or agreement.
"Employee Plans" shall mean all Benefit Arrangements, Multiemployer
Plans, Pension Plans and Welfare Plans.
"ERISA Affiliate" shall mean, with respect to any Person, any entity
which is (or at any relevant time was) a member of a "controlled group of
corporations" with, under "common control" with, or a member of as
"affiliated service group" with, such Person as defined in Section 414(b),
(c), (m) or (o) of the Code.
"Encumbrances" shall mean any claim, lien, pledge, option, charge,
easement, security interest, deed of trust, mortgage, right-of-way,
covenant, condition, restriction, encumbrance or other rights of third
parties.
"Environmental Laws" shall mean any federal, state or local law,
statute, ordinance, order, decree, rule or regulation relating to releases,
discharges, emissions or disposals to air, water, land or groundwater of
Hazardous Materials; to the withdrawal or use of groundwater; to the use
handling or disposal of polychlorinated byphenyls, asbestos or urea
formaldehyde or any other Hazardous Material; to the treatment, storage,
disposal or management of Hazardous Materials; to exposure to toxic,
hazardous or
63
other controlled, prohibited or regulated substances; and to the
transportation, release or any other use of Hazardous Materials, including
the Comprehensive Environmental Response, Compensation and Liability Act,
42 U.S.C. 9601, et seq. ("CERCLA"), the Resource Conservation and Recovery
Act, 42 U.S.C. 6901, et seq. ("RCRA"), the Toxic Substances Control Act, 15
U.S.C. 2601, et seq. ("TSCA"), the Occupational, Safety and Health Act, 29
U.S.C. 651, et seq., the Clean Air Act, 42 U.S.C. 7401, et seq., the
Federal Water Pollution Control Act, 33 U.S.C. 1251, et seq., the Safe
Drinking Xxxxx Xxx, 00 X.X.X. 000x, et seq., the Hazardous Materials
Transportation act, 49 U.S.C. 1802 et seq. ("HMTA") and the Emergency
Planning and Community Right to Know Act, 42 U.S.C. 11001 et seq.
("EPCRA"), and other comparable state and local laws and all rules,
regulations and guidance documents promulgated pursuant thereto or
published thereunder.
"Fixtures and Equipment" shall mean, with respect to any Person, all
of the furniture, fixtures, furnishings, machinery and equipment owned,
leased or licensed by such Person and located in, at or upon the facilities
of such Person.
"Fully Diluted Basis" shall mean the Total Share Amount minus the
quotient of (i) the Aggregate Exercise Price divided by (ii) the Per Share
Value.
"GAAP" shall mean generally accepted accounting principles in the
United States of America, as in effect from time to time, consistently
applied.
"Hazardous Materials" shall mean each and every element, compound,
chemical mixture, contaminant, pollutant, material, waste or other
substance which is defined, determined or identified as hazardous or toxic
under Environmental Laws or the release of which is regulated under
Environmental Laws. Without limiting the generality of the foregoing, the
term includes: "hazardous substances" as defined in CERCLA; "extremely
hazardous substances" as defined in EPCRA; "hazardous waste" as defined in
RCRA; "hazardous materials" as defined in HMTA; "chemical substance or
mixture" as defined in TSCA; crude oil, petroleum products or any fraction
thereof; radioactive materials including source, byproduct or special
nuclear materials; asbestos or asbestos-containing materials; chlorinated
fluorocarbons ("CFCs"); and radon.
"Leases" shall mean, with respect to any Person, all leases (including
subleases, licenses, any occupancy agreement and any other agreement) of
real or personal property, in each case to which such Person or any of its
Subsidiaries is a party, whether as lessor, lessee, guarantor or otherwise,
or by which any of them or their
64
respective properties or assets are bound, or which otherwise relate to the
operation of their respective businesses.
"Lost EBITDA" shall be equal to the aggregate earnings (or losses)
before interest, taxes, corporate allocation costs for administration
(including costs for management information systems), depreciation and
amortization from the continuing operations of any Store Facilities to be
divested pursuant to Section 5.8 during the twelve-month period ending on
the second most recent month-end prior to the earlier of (i) the agreement
of Parent with the applicable governmental or regulatory authority to
divest such Store Facilities pursuant to Section 5.8 and (ii) the Effective
Time; provided, that, for any new Store Facility to be divested which has
not been in operation for such twelve-month period (each a "New Facility"),
Lost EBITDA for such New Facility shall be an amount equal to 80% of the
Average Facility EBITDA. "Average Facility EBITDA" is equal to the
aggregate Lost EBITDA of all Facilities (other than New Facilities) owned
by the company which is divesting such New Facility, assuming all such
Store Facilities are to be divested pursuant to Section 5.8, divided by the
total number of such Store Facilities (other than New Facilities).
"Material Adverse Effect" shall mean, with respect to either of the
Company or Parent, as the context requires, a material adverse change in or
effect on the business, results of operations, or condition (financial or
otherwise) of such Person and its Subsidiaries taken as a whole or any
change which materially impairs or materially delays the ability of such
Person to consummate the transactions contemplated by this Agreement;
provided, that (i) the failure of Parent to consummate the transactions
pursuant to the QFC Merger Agreement and (ii) changes or effects as a
result of any sales or dispositions of Facilities pursuant to Section 5.8
shall not constitute a Material Adverse Effect.
"Multiemployer Plan" shall mean, with respect to any Person, any
"multiemployer plan," as defined in Section 4001(a)(3) of ERISA, (A) which
such Person or any ERISA Affiliate maintains, administers, contributes to
or is required to contribute to, or, after September 25, 1980, maintained,
administered, contributed to or was required to contribute to, or under
which such Person or any ERISA Affiliate may incur any liability and (B)
which covers any employee or former employee of such Person or any ERISA
Affiliate (with respect to their relationship with such entities).
"Multiemployer Welfare Plan" shall mean a Welfare Plan that is a
"multiemployer plan," as defined in Section 3(37) of ERISA.
65
"Pending Settlement Proposal" shall mean a proposal made by any
regulatory authority referred to in Section 5.8 with respect to the
divestiture of Store Facilities which is outstanding or otherwise under
consideration by Parent and the Company at the Effective Time.
"Pension Plan" shall mean, with respect to any Person, any "employee
pension benefit plan" as defined in Section 3(2) of ERISA (other than a
Multiemployer Plan) (A) which such Person or any ERISA Affiliate maintains,
administers, contributes to or is required to contribute to, or, within the
six years prior to the Closing Date, maintained, administered, contributed
to or was required to contribute to, or under which such Person or any
ERISA Affiliate may incur any liability and (B) which covers any employee
or former employee of such Person or any ERISA Affiliate (with respect to
their relationship with such entities).
"Per Share Value" shall mean an amount equal to the result obtained by
dividing (a) the sum of (i) 0.98 times the Aggregate Purchase Price plus
(ii) the Aggregate Exercise Price by (b) the Total Share Amount.
"Permitted Encumbrances" shall mean any Encumbrances resulting from
(i) all statutory or other liens for Taxes or assessments which are not yet
due or delinquent or the validity of which are being contested in good
faith by appropriate proceedings for which adequate reserves are being
maintained in other accordance with GAAP; (ii) all cashiers', landlords',
workers' and repairers' liens, and other similar liens imposed by law,
incurred in the ordinary course of business; (iii) all laws and
governmental rules, regulations, ordinances and restrictions; (iv) all
leases, subleases, licenses, concessions or service contracts to which any
Person or any of its Subsidiaries is a party; (v) Encumbrances identified
on title policies or preliminary title reports or other documents or
writing delivered or made available for inspection to any Person prior to
the date hereof [or included in the Public Records]; and (vi) all other
liens and mortgages (but solely to the extent such liens or mortgages
secure indebtedness described or referred to in the Disclosure Schedule),
covenants, imperfections in title, charges, easements, restrictions and
other Encumbrances which, in the case of any such Encumbrances pursuant to
clause (i) through (vi), do not materially detract from or materially
interfere with the value or present use of the asset subject thereto or
affected thereby.
"Person" shall mean any individual, corporation, partnership, limited
liability company, joint venture, governmental agency or instrumentality,
or any other entity.
66
"QFC" shall mean Quality Food Centers, Inc., a Washington corporation.
"QFC Merger Agreement" shall mean the Agreement and Plan of Merger
dated as of November 6, 1997, among QFC, Q- Acquisition Corp. and Xxxx
Xxxxx, Inc.
"Xxxxx'x Merger Agreement" shall mean the Agreement and Plan of
Reorganization and Merger by and between Xxxxx'x Food & Drug Centers, Inc.
and Parent, dated as of May 11, 1997.
"Store Facilities" shall mean any retail supermarket operated by the
Company or its Subsidiaries or by QFC or its Subsidiaries in the State of
California (including any real property, leasehold interest, equipment or
inventory associated therewith).
"Subsidiary" shall mean, with respect to any Person, any corporation
or other organization, whether incorporated or unincorporated, of which
such Person directly or indirectly owns or controls at least a majority of
the securities or other interests having by their terms ordinary voting
power to elect a majority of the board of directors or others performing
similar functions.
"Tax" or "Taxes" shall mean all federal, state, local, foreign and
other taxes, levies, imposts, assessments, impositions or other similar
government charges, including, without limitation, income, estimated
income, business, occupation, franchise, real property, payroll, personal
property, sales, transfer, stamp, use, employment, commercial rent or
withholding, occupancy, premium, gross receipts, profits, windfall profits,
deemed profits, license, lease, severance, capital, production,
corporation, ad valorem, excise, duty or other taxes, including interest,
penalties and additions (to the extent applicable) thereto, whether
disputed or not.
"Tax Return" shall mean any report, return, document, declaration or
other information or filing required to be supplied to any taxing authority
or jurisdiction (foreign or domestic) with respect to Taxes, including,
without limitation, information returns, any documents with respect to or
accompanying payments of estimated Taxes, or with respect to or
accompanying requests for the extension of time in which to file any such
report, return, document, declaration or other information.
"Total Deduction Amount" shall be equal to (i) the product of (A) four
and (B) the Lost EBITDA in excess of $15 million, minus (ii) 50% of the
Estimated Gain (as defined in Section 5.8).
67
"Total Share Amount" shall mean the sum of the following, all measured
immediately prior to the Effective Time: (i) the total number of shares of
Company Common Stock then issued and outstanding plus (ii) the total number
of shares of Company Common Stock then issuable upon conversion into shares
of Company Common Stock of the shares of Company Preferred Stock then
outstanding plus (iii) the total number of shares of Company Common Stock
issuable upon exercise of the Company Options then outstanding plus (iv)
the total number of shares of Company Common Stock issuable upon exercise
of the Common Stock Purchase Warrants or any other rights to acquire any
Company Common Stock then outstanding (without duplication of clauses (ii)
or (iii) above), but excluding the Yucaipa Warrant referred to in Section
5.13.
"Welfare Plan" shall mean, with respect to any Person, any "employee
welfare benefit plan" as defined in Section 3(1) of ERISA, (A) which such
Person or any ERISA Affiliate maintains, administers, contributes to or is
required to contribute to, or under which such Person or any ERISA
Affiliate may incur any liability and (B) which covers any employee or
former employee of such Person or any ERISA Affiliate (with respect to
their relationship with such entities).
SECTION 9.4 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the fullest extent
possible.
SECTION 9.5 Entire Agreement; Assignment. This Agreement, together
with the Stockholders Agreement and the Confidentiality Agreement, constitutes
the entire agreement among the parties with respect to the subject matter hereof
and supersedes all prior agreements and undertakings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof.
Any attempted assignment which does not comply with the provisions of this
Section 9.5 shall be null and void ab initio.
SECTION 9.6 Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and, except as provided in
the following sentence, nothing in this Agreement, express or implied, is
intended to or shall confer upon any other person any rights, benefits or
68
remedies of any nature whatsoever under or by reason of this Agreement. The
parties hereto expressly intend the provisions of Section 5.6 to confer a
benefit upon and be enforceable by, as third party beneficiaries of this
Agreement, the third persons referred to in, or intended to be benefitted by,
such provisions.
SECTION 9.7 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware.
SECTION 9.8 Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 9.9 Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
XXXX XXXXX, INC.
Attest:
XXXXXXX XXXXXXXX, By: XXXXXX X. XXXXXX
---------------------------------- -------------------------------------
EVP Title: CEO & PRESIDENT
FFL ACQUISITION CORP.
Attest:
XXX XXXXXXX By: XXXXX X. XXXXX
---------------------------------- -------------------------------------
Title:
FOOD 4 LESS HOLDINGS, INC.
Attest:
XXXX XXXXXXXX By: XXXXXX X. XXXXXXXX
---------------------------------- -------------------------------------
Title:
ANNEX A
STOCKHOLDERS AGREEMENT, dated as of November 6, 1997, between Xxxx Xxxxx,
Inc., a Delaware corporation ("Parent"), and stockholder identified on Schedule
A attached hereto ("Stockholder").
WHEREAS, Parent, FFL Acquisition Corp., a Delaware corporation and wholly
owned subsidiary of Parent ("Sub"), and Food 4 Less Holdings, Inc., a Delaware
corporation (the "Company"), propose to enter into an Agreement and Plan of
Merger dated as of the date hereof (as the same may be amended or supplemented,
the "Merger Agreement"; capitalized terms used but not defined herein shall have
the meanings set forth in the Merger Agreement) providing for the merger of Sub
with and into the Company (the "Merger"), upon the terms and subject to the
conditions set forth in the Merger Agreement;
WHEREAS, Stockholder owns the number of shares of Common Stock, par value
$.01 per share, of the Company (the "Company Voting Common Stock") and the
number of shares of Series A Preferred Stock, par value $.01 per share, of the
Company (the "Company Voting Preferred Stock"; together with the Company Voting
Common Stock, the "Company Voting Stock") set forth opposite his or its name on
Schedule A attached hereto (such shares of Company Voting Stock, together with
any other shares of capital stock of the Company acquired by such Stockholder
after the date hereof and during the term of this Agreement, being collectively
referred to herein as the "Subject Shares"); and
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, Parent has requested that Stockholder enter into this Agreement.
NOW, THEREFORE, to induce Parent to enter into, and in consideration of its
entering into, the Merger Agreement, and in consideration of the premises and
the representations, warranties and agreements contained herein, the parties
agree as follows:
1. Representations and Warranties of Stockholder. Stockholder hereby
represents and warrants to Parent as of the date hereof in respect of himself or
itself as follows:
(a) Authority. Stockholder has all requisite power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. This Agreement has been duly authorized, executed and delivered by
Stockholder and constitutes a valid and binding obligation of Stockholder
enforceable in accordance with its terms. The execution and delivery of this
Agreement do not, and the consummation of the transactions contemplated hereby
and compliance with the terms hereof will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time or both) under
any provision of, any trust agreement, loan or credit agreement, note, bond,
2
mortgage, indenture, lease or other agreement, instrument, permit, concession,
franchise, license, judgment, order, notice, decree, statute, law, ordinance,
rule or regulation applicable to Stockholder or to Stockholder's property or
assets.
(b) The Subject Shares. Stockholder is the beneficial owner of, and
has good and marketable title to, the Subject Shares set forth on Schedule A
attached hereto, free and clear of any Encumbrances. Except as otherwise
indicated on Schedule A, Stockholder has the sole right to vote, and the sole
power of disposition with respect to, such Subject Shares, and none of such
Subject Shares is subject to any voting trust or other agreement, arrangement or
restriction with respect to the voting or disposition of such Subject Shares,
except as contemplated by this Agreement.
2. Representations and Warranties of Parent. Parent hereby represents and
warrants to Stockholder that Parent has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by Parent, and
the consummation of the transactions contemplated hereby, have been duly
authorized by all necessary corporate action on the part of Parent. This
Agreement has been duly executed and delivered by Parent and constitutes a valid
and binding obligation of Parent enforceable in accordance with its terms. The
execution and delivery of this Agreement do not, and the consummation of the
transactions contemplated hereby and compliance with the terms hereof will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time or both) under any provision of, the certificate of
incorporation or by-laws of Parent, any trust agreement, loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise, license, judgment, order, notice,
decree, statute, law, ordinance, rule or regulation applicable to Parent or to
Parent's property or assets.
3. Covenants of Stockholder. Until the termination of this Agreement in
accordance with Section 7, Stockholder agrees as follows:
(a) The Stockholder shall execute any written consent with respect to
the Subject Shares in favor of such matters submitted to the stockholders of the
Company in connection with the Merger including, without limitation, the
adoption by the Company of the Merger Agreement and the approval of the terms
thereof and each of the other transactions contemplated by the Merger Agreement
and the matters referred to in Sections 1.7 and 5.13 thereof (with the written
approval of Parent) and immediately deliver the same to the Company (with a copy
to Parent).
3
(b) At any meeting of stockholders of the Company (or at any
adjournment thereof) called to vote upon the Merger and the Merger Agreement or
at any adjournment thereof or in any other circumstances upon which a vote,
consent or other approval with respect to the Merger and the transactions
contemplated by the Merger Agreement is sought, Stockholder shall be present (in
person or by proxy) and shall vote (or cause to be voted) the Subject Shares in
favor of the Merger, the adoption by the Company of the Merger Agreement and the
approval of the terms thereof and each of the other transactions contemplated by
the Merger Agreement.
(c) At any meeting of stockholders of the Company or at any
adjournment thereof or in any other circumstances upon which Stockholder's vote,
consent or other approval is sought, Stockholder shall vote (or cause to be
voted) the Subject Shares against (i) any merger agreement or merger (other than
the Merger Agreement and the Merger), consolidation, combination, sale of
substantial assets, reorganization, recapitalization, dissolution, liquidation
or winding-up of or by the Company or any other takeover or acquisition proposal
(collectively, "Acquisition Proposal") or (ii) any amendment of the Company's
certificate of incorporation or by-laws or other proposal or transaction
involving the Company or any of its subsidiaries, which amendment or other
proposal or transaction could in any manner impede, frustrate, prevent or
nullify the Merger, the Merger Agreement or any of the other transactions
contemplated by the Merger Agreement or change in any manner the voting rights
of any class of capital stock of the Company. Stockholder further agrees not to
commit or agree to take any action inconsistent with the foregoing.
(d) Except as provided in the immediately succeeding sentence of this
Section 3(d), Stockholder agrees not to (i) sell, transfer, pledge, assign or
otherwise dispose of (but excluding any bona fide gift to a charitable
institution, in an amount not to exceed 5% of the Subject Shares, gift to a
member of its immediate family or a trust for the benefit thereof on the terms
set forth in the next sentence) (collectively, "Transfer"), or enter into any
contract, option or other arrangement (including any profit-sharing arrangement)
with respect to the Transfer of, the Subject Shares to any person other than
pursuant to the terms of the Merger or to a transferee (other than a federally
regulated bank holding company) following the due execution and delivery to
Parent by such transferee of a legal, valid and binding counterpart to this
Agreement or (ii) enter into any voting arrangement, whether by proxy, voting
agreement, voting trust or otherwise, and agrees not to commit or agree to take
any of the foregoing actions. Notwithstanding the foregoing, Stockholder shall
have the right, (i) for estate planning purposes, to Transfer Subject Shares to
a transferee only following the due execution and delivery to
4
Parent by each transferee of a legal, valid and binding counterpart to this
Agreement, and (ii) to pledge the Subject Shares for purposes of securing
customary margin or similar loans (and other customary steps related thereto,
including transferring the certificate evidencing the shares into the name of
the lender or its nominee) following due execution by such transferee of a
legal, valid and binding counterpart.
(e) During the term of this Agreement, Stockholder will not take, nor
cause to be taken, any actions which would result in the conversion of any of
Stockholder's shares of Series A Preferred Stock, par value $.01 per share, into
shares of Series B Preferred Stock, par value $.01 per share.
(f) During the term of this Agreement, Stockholder shall not, nor
shall he or it cause or permit any of his or its affiliates or any director,
officer, employee, investment banker, attorney or other adviser or
representative of Stockholder or his or its affiliates acting in its capacity as
such to, (i) directly or indirectly solicit, initiate or encourage the
submission of any Acquisition Proposal or (ii) directly or indirectly
participate in any discussions or negotiations regarding, or furnish to any
person any information with respect to, or take any other action to facilitate
any inquiries or the making of any proposal that constitutes or may reasonably
be expected to lead to, any Acquisition Proposal.
(g) Until after the Merger is consummated or the Merger Agreement is
terminated, Stockholder shall use all reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, and to assist and cooperate
with the other parties in doing, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious manner practicable, the
Merger and the other transactions contemplated by the Merger Agreement.
4. Affiliate Letter; Tax Certificates. Stockholder shall execute and
deliver the agreement contemplated by the last sentence of Section 5.11(a) of
the Merger Agreement and such tax certificates as may be reasonably requested by
tax counsel of Parent or for the Company in connection with the rendering of the
tax opinions contemplated by the Merger Agreement, provided that nothing
contained in this Section 4 shall restrict Stockholder's ability to dispose of
its property in accordance with law, and provided further that such tax
certificates in no event will be required if the stockholder continuity rules
now applicable to the Merger cease to be so applicable or cease to require such
certificates to be delivered.
5
5. Further Assurances. Stockholder will, from time to time, execute and
deliver, or cause to be executed and delivered, such additional or further
consents, documents and other instruments as Parent may reasonably request for
the purpose of effectively carrying out the transactions contemplated by this
Agreement.
6. Assignment. Except as provided in Section 3(d), neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
any of the parties without the prior written consent of the other parties,
except that Parent may assign, in its sole discretion, any or all of its rights,
interests and obligations hereunder to any direct or indirect wholly owned
subsidiary of Parent. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.
7. Termination. This Agreement shall terminate upon the earlier of (a)
August 31, 1998, (b) the Effective Time, (c) upon the execution of any amendment
to the Merger Agreement not approved by Stockholder or (d) the termination of
the Merger Agreement.
8. General Provisions.
(a) Amendments. This Agreement may not be amended except by an
instrument in writing signed by each of the parties hereto.
(b) Notice. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or sent by overnight
courier (providing proof of delivery) to Parent in accordance with Section 9.2
of the Merger Agreement and to Stockholder at the address set forth on Schedule
A attached hereto (or at such other address for a party as shall be specified by
like notice).
(c) Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section to this Agreement unless
otherwise indicated. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Wherever the words "include," "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation."
(d) Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when two or more of the counterparts have been signed by
each of the parties and delivered to the other party, it being
6
understood that each party need not sign the same counterpart.
(e) Entire Agreement; No Third-Party Beneficiaries. This Agreement
(including the documents and instruments referred to herein) (i) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof
and (ii) is not intended to confer upon any Person other than the parties hereto
any rights or remedies hereunder.
(f) Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Delaware regardless of the laws
that might otherwise govern under applicable principles of conflicts of law
thereof.
9. Stockholder Capacity. No person executing this Agreement who is or
becomes during the term hereof a director or officer of the Company makes any
agreement or understanding herein in his capacity as the beneficial owner of
Stockholder's Subject Shares and nothing herein shall limit or affect any
actions taken by Stockholder in his capacity as an officer or director of the
Company to the extent specifically permitted by the Merger Agreement.
10. Enforcement. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Delaware or in a Delaware state court, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (i) consents to submit such party to the
personal jurisdiction of any Federal court located in the state of Delaware or
any Delaware state court in the event any dispute arises out of this Agreement
or any of the transactions contemplated hereby, (ii) agrees that such party will
not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from such court, (iii) agrees that such party will not bring
any action relating to this Agreement or the transactions contemplated hereby in
any court other than a Federal court sitting in the state of Delaware or a
Delaware state court and (iv) waives any right to trial by jury with respect to
any claim or proceeding related to or arising out of this Agreement or any of
the transactions contemplated hereby.
IN WITNESS WHEREOF, Parent has caused this Agreement to be signed by its
officer thereunto duly authorized and each Stockholder has signed this
Agreement, all as of the date first written above.
XXXX XXXXX, INC.
By: XXXXX X. XXXXX
-------------------------------------
Name: Xxxxx X. Xxxxx
Title: S.V.P. & General Counsel
By:
-------------------------------------
Name:
7
F4L EQUITY PARTNERS, L.P.
By: Yucaipa Capital Advisors, Inc.,
as general partner
By: XXXXXX X. XXXXXX
-------------------------------------
Name:
Title:
XXXXXX X. XXXXXX
-----------------------------------------
Xxxxxx X. Xxxxxx
FFL PARTNERS
By: XXXXXX X. XXXXXX
-------------------------------------
Name:
Title:
8
YUCAIPA CAPITAL FUND, L.P.
By: Yucaipa Capital Advisors, Inc.,
as general partner
By: XXXXXX X. XXXXXX
-------------------------------------
Name:
Title:
THE YUCAIPA COMPANIES
By: XXXXXX X. XXXXXX
-------------------------------------
Name:
Title:
YUCAIPA/F4L PARTNERS
By: The Yucaipa Companies,
as general partner
By: XXXXXX X. XXXXXX
-------------------------------------
Name:
Title:
By: Yucaipa Capital Fund, L.P.,
as general partner
By: Yucaipa Capital Advisors, Inc.
as general partner
By: XXXXXX X. XXXXXX
---------------------------
Name:
Title:
7
Schedule A
Beneficial Holder Shares
----------------- ------
F4L Equity Partners, L.P. 7,737,732
Xxxxxx X. Xxxxxx 1,346,294
FFL Partners 744,392
Yucaipa Capital Fund 683,857
The Yucaipa Companies 238,018
Yucaipa/F4L Partners 162,390
EXHIBIT A
RESTATED CERTIFICATE OF INCORPORATION
OF
FOOD 4 LESS HOLDINGS, INC.
A DELAWARE CORPORATION
Pursuant to Sections 242 and 245 of the Delaware General Corporation Law,
the undersigned hereby makes this Restated Certificate of Incorporation of the
Delaware corporation Food 4 Less Holdings, Inc., whose Certificate of
Incorporation was filed in the office of the Secretary of State of Delaware on
Decemer 19, 1994, and certifies as follows:
ARTICLE I
The name of the Corporation is Food 4 Less Holdings, Inc.
ARTICLE II
The registered office and registered agent of the Corporation is The
Corporation Trust Company, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxx Xxxxxx Xxxxxx,
Xxxxxxxx 00000.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or activity
for which Corporations may be organized under the General Corporation Law of
Delaware.
ARTICLE IV
The total number of shares of stock that the Corporation shall have
authority to issue is one hundred (100) shares of Common Stock having a par
value of $.01 per share.
ARTICLE V
The Board of Directors of the Corporation may alter, amend or repeal the
Bylaws of the Corporation.
ARTICLE VI
A. The Corporation shall indemnify to the fullest extent then permitted by
law any person who is made, or threatened to be made, a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative, investigative or otherwise (including an action, suit or
proceeding by or in the right of the Corporation) by reason of the fact that the
person is or was a director or officer of the Corporation, or serves or served
at the request of the Corporation as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise, against
all expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement, actually and reasonably incurred in connection therewith. Expenses
incurred by an officer or director in defending a civil or criminal action, suit
or proceeding shall be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of such director or officer to repay such amount if it shall
ultimately be determined that he or she is not entitled to be indemnified by the
Corporation as authorized in this Article. The indemnification provided hereby
shall not be deemed exclusive of any other rights to which those indemnified may
be entitled under any statute, bylaw, agreement, vote of shareholders or
directors or otherwise, both as to action in any official capacity and as to
action in another capacity while holding an office, and shall continue as to a
person who has ceased to be a director or officer and shall inure to the benefit
of the heirs, executors and administrators of such person. The foregoing right
to indemnification shall not apply in respect of actions, suits or proceedings
(or parts thereof) against the Corporation unless such action, suit or
proceeding shall have been approved by the Board of Directors.
Any person other than a director or officer who is or was an employee or
agent of the Corporation, or fiduciary within the meaning of the Employee
Retirement Income Security Act of 1974 with respect to any employee benefit plan
of the Corporation, or is or was serving at the request of the Corporation as an
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, may be indemnified to such extent as the Board of Directors in
its discretion at any time or from time to time may authorize.
B. No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except to the extent such exemption from liability or
limitation thereof is not permitted under the General Corporation Law of the
State of Delaware as the same exists or may hereafter be amended. Any amendment,
modification or repeal of the foregoing sentence shall not adversely affect any
right or protection of a director of the Corporation hereunder in respect of any
act or omission occurring prior to the time of such amendment, modification or
repeal.
ARTICLE VII
The number of directors constituting the entire Board of Directors of the
Corporation shall be not less than one nor more than five as fixed from time to
time by the Board of Directors, provided, however, that the number of directors
shall not be reduced so as to shorten the term of any director at the time in
office, and provided further, that the number of directors constituting the
entire Board of Directors shall be two until otherwise fixed by the Board of
Directors.
FOOD 4 LESS HOLDINGS, INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
2
EXHIBIT B
ESCROW AGREEMENT, dated as of _______, ____, among XXXX XXXXX, INC., a
Delaware corporation ("Parent"), Xxxxxx X. Xxxxxx, Xxxxxx X. Xxxxxxxx and Xxxx
Xxxxxxx, (in such capacity, collectively, the "Stockholders' Representatives"),
and [ESCROW AGENT] (the "Escrow Agent").
WHEREAS, Parent, FFL ACQUISITION CORP., a Delaware corporation and a wholly
subsidiary of Parent ("Sub"), and Food 4 Less Holdings, Inc., a Delaware
corporation (the "Company"), have entered into an Agreement and Plan of Merger
dated as of November 6, 1997 (the "Merger Agreement"; capitalized terms used
herein without definition shall have the respective meanings set forth in the
Merger Agreement) providing for, among other things, the merger of Sub with and
into the Company, with the Company being the surviving corporation;
WHEREAS, in connection with the Merger, Parent has deposited with the
Escrow Agent, in trust, __________ shares of Common Stock, par value $.01 per
share, of Parent ("Parent Common Stock") (the "Escrowed Shares"), as contingent
consideration to be paid to the Holders (as defined below);
WHEREAS, each Person identified on Schedule I hereto (a "Holder") holds a
percentage interest in the Escrowed Shares set forth opposite such Person's name
("Escrow Percentage Interest");
WHEREAS, the Merger Agreement provides that the Stockholders'
Representatives shall have full power and authority to act on behalf of the
Holders with respect to all matters relating to the Escrowed Shares and the
Merger Agreement;
WHEREAS, the Escrow Agent shall distribute the Escrowed Shares in
accordance with the terms of this Agreement and the Merger Agreement;
WHEREAS, the Merger Agreement contemplated the due execution and delivery
of this Agreement on or prior to the Closing Date;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, and Stockholders' Representatives and the Escrow Agent hereby agree as
follows:
ARTICLE I
PROVISIONS RELATING TO THE ESCROW DEPOSIT
Section 1.1 Receipt of Escrow Deposit. The Escrow Agent hereby acknowledges
receipt of the Escrowed Shares from Parent. Parent acknowledges that the
Escrowed Shares have been registered in the name of the Escrow Agent.
Section 1.2 Voting and Other Rights. During the time that the Escrowed
Shares are held by the Escrow Agent, the Holders shall be entitled to exercise
all rights, and be entitled
2
to all benefits, of a stockholder of Parent, on a pro rata basis in accordance
with their respective Escrow Percentage Interests, including, without
limitation, all rights to vote on matters submitted to the holders of the Parent
Common Stock. The Escrow Agent shall, at the written request from time to time
of the Holders, execute and deliver appropriate proxies in respect to the Parent
Common Stock. Promptly after receipt thereof, the Escrow Agent shall mail to the
Holders copies of any communications to stockholders received by the Escrow
Agent in respect of the Parent Common Stock.
Section 1.3 Distribution of Dividends and Other Distributions; Adjustments;
Liability for Taxes. (a) All Escrowed Shares shall be deemed to be owned by the
Holders in accordance with their Escrow Percentage Interests; provided, however,
that there shall also be deposited in escrow and held by the Escrow Agent,
subject to the terms of this Agreement, all shares of Parent Common Stock issued
as a result of any non-taxable stock dividend or stock split, with respect to
the Escrowed Shares. Any cash dividends or taxable distributions on the shares
of Parent Common Stock held by the Escrow Agent as part of the Escrowed Shares
shall be payable promptly to the Holders.
(b) Parent and the Holders shall treat the escrow hereunder as a grantor
trust for tax purposes, of which each of the Holders is the grantor. Each Holder
shall pay all income, withholding and any other taxes imposed on or measured by
income distributed to such Holder for the time it is held in escrow hereunder,
and shall file all tax and information returns applicable thereto.
Section 1.4 Distribution of Escrowed Shares. (a) On or prior to the
Distribution Date (as defined in the Merger Agreement), Parent and the
Stockholders' Representatives shall certify the Total Deduction Amount to the
Escrow Agent and promptly thereafter, the Escrow Agent shall distribute the
Escrowed Shares as follows: (i) first to Parent, a number of Escrowed Shares
equal to the total fees and other amounts required to have been paid or payable
to the Escrow Agent by Parent pursuant to Section 2.8 divided by the Average
Parent Price, (ii) second to Parent, a number of Escrowed Shares equal to the
Total Deduction Amount divided by the Average Parent Price and (iii) subject to
Section 1.4(b), the remaining number of Escrowed Shares, if any, and any other
property shall be distributed to the Holders in accordance with their respective
Escrow Percentage Interests.
(b) No certificates or scrip representing fractional shares of Parent
Common Stock shall be issued or delivered to the Holders pursuant to this
Section 1.4, and such fractional interests will not entitle the owner thereof to
any rights of a stockholder of Parent. In lieu of any such fractional interests,
3
each Holder who would otherwise have been entitled to receive a fraction of a
share of Parent Common Stock shall receive cash (without interest) in an amount
equal to the product of such fractional part of a share of Parent Common Stock
multiplied by the Average Parent Price. Parent shall redeem from the Escrow
Agent all such fractional interests in exchange for an amount in cash necessary
to make the cash payments described in the immediately preceding sentence.
ARTICLE II
PROVISIONS RELATING TO THE ESCROW AGENT
Section 2.1 Appointment of Escrow Agent. Parent and the Holders hereby
appoint __________, and _________ hereby accepts appointment, as the initial
Escrow Agent hereunder.
Section 2.2 Resignation of Escrow Agent. Any Escrow Agent (the "Resigning
Escrow Agent") may at any time, upon not less than 30 days' prior written notice
(the "Resignation Notice") to Parent and the Stockholders' Representatives,
resign, and be discharged of all of its duties under this Agreement, such notice
to specify the date when such resignation shall occur (the "Resignation Date").
Upon receipt of the Resignation Notice, Parent and the Stockholders'
Representatives shall confer in good faith and, having due regard to the
proposed successor's experience, ability and fees, shall (a) appoint a successor
to the Resigning Escrow Agent (a "Successor Escrow Agent") to act as the Escrow
Agent hereunder, which Successor Escrow Agent shall be a financial institution
with offices in the United States of America, and (b) notify the Resigning
Escrow Agent of such appointment; provided, however, that if Parent and the
Stockholders' Representatives shall fail to mutually so appoint a Successor
Escrow Agent, the Resigning Escrow Agent may petition a court to appoint a
Successor Escrow Agent hereunder. Notwithstanding the Resignation Date set forth
by the Resigning Escrow Agent in its Resignation Notice, no such resignation
shall become effective until a Successor Escrow Agent shall have delivered to
each of the Resigning Escrow Agent, Parent and the Stockholders' Representatives
a copy of the instrument under which it was appointed and an executed
counterpart of an instrument accepting its appointment and assuming all of the
Resigning Escrow Agent's obligations as the Escrow Agent hereunder, except for
obligations attributable to acts or omissions of the Resigning Escrow Agent. On
the first business day next following the later to occur of (A) the Resignation
Date and (B) the date of delivery to the Resigning Escrow Agent, parent and the
Stockholders' Representatives of the instruments referred to in the next
preceding sentence, the Resigning Escrow Agent shall deliver to the Successor
Escrow Agent all Escrowed Shares, its records of all payments and distributions
theretofore made from the Escrow Shares (or copies of such records), copies
4
of all written notices given or received by the Escrow Agent pursuant to this
Agreement and all transmittal letters and other documents received or held by it
under this Agreement.
Section 2.3 Duties and Rights of Escrow Agent. (a) The duties of the Escrow
Agent are only such as are herein specifically provided, being purely
ministerial in nature, and no implied covenants or obligations shall be inferred
against it herein. The Escrow Agent shall not be responsible for any recitals of
fact in this Agreement or any related agreement, including, but not limited to,
the Merger Agreement, and shall not be subject to, nor obliged to, recognize any
other agreement between the other parties hereto even though reference thereto
may be made in this Agreement. The Escrow Agent shall incur no liability
whatever for any error in judgment or any act or omission to act except in the
case of its willful misconduct or gross negligence.
(b) The Escrow Agent shall not be required to, and shall not, expend or
risk any of its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder.
Section 2.4 Reliance upon Counsel. If the Escrow Agent believes it
appropriate to do so, the Escrow Agent may consult with counsel concerning any
of the Escrow Agent's duties hereunder or any litigation or problems relating to
this Agreement, and the Escrow Agent shall be fully protected in any action or
omission to act taken in good faith in accordance with such counsel's advice.
The Escrow Agent may rely on its counsel as to the "final unappealable" nature
of any court order for purposes of this Agreement. If any property subject
hereto is at anytime attached, garnished or levied upon, under any court order,
writ, judgment or decree, or in case the payment, assignment, transfer,
conveyance or delivery of any such property decree, or in case any court order,
writ, judgment or decree shall be made or entered by any court affecting such
property, or any part thereof, then, in any such events, the Escrow Agent is
authorized, in its sole discretion, to rely upon and comply with any such court
order, writ, judgment or decree, which it is advised by legal counsel of its own
choosing is binding upon it, and if it complies with any such court order, writ,
judgment or decree, it shall not be liable to Parent or the Holders or to any
other Person by reason of such compliance even though such court order, writ,
judgment or decree may be subsequently reversed, modified, annulled, set aside
or vacated.
Section 2.5 Legal Proceedings. The Escrow Agent shall not be required to
defend any legal proceedings which may be instituted against it in respect of
this Agreement or any of the Escrowed Shares unless required to do so by Parent
or the Holders and indemnified to its reasonable satisfaction by Parent or the
Holders against the cost and expenses thereof. The Escrow Agent
5
shall not be required to institute any legal proceedings of any kind, but may,
at its election, bring an interpleader action against Parent and the Holders in
any court, if the Escrow Agent deems such action necessary to resolve any
dispute as to its duties hereunder or the disposition of any of the assets in
the Escrow Account.
Section 2.6 Sufficiency of Documents. The Escrow Agent shall have no
responsibility for the form, genuineness, execution, value, validity or
sufficiency for any purpose of any securities, certificate, stock power,
telecopy, letter, instructions, notice, document or other item delivered to it
and reasonably believed by it to be genuine, and it shall be fully protected in
acting in accordance with any written instructions given to it hereunder in
accordance with the provisions hereof, or given jointly at any time by Parent
and the Holders and reasonably believed by it to have been signed by the proper
party or parties. The Escrow Agent shall not be obliged to inquire as to the
form, manner of execution or validity of any documents deposited or received by
it pursuant to the provisions of this Agreement, nor shall the Escrow Agent be
obliged to inquire as to the identity, authority or rights of the Persons
executing the same. The Escrow Agent shall not be responsible for the acts or
omissions of its nominees, correspondents, designees, subagents or subcustodians
appointed in good faith.
Section 2.7 Conflicting Demands. In case of conflicting demands upon it or
ambiguity or uncertainty, the Escrow Agent may withhold performance of any
action under this Agreement until such time as said conflicting demands,
ambiguity or uncertainty shall have been withdrawn or resolved or the rights of
the parties shall have been settled by court adjudication or otherwise.
Section 2.8 Fees and Expenses of Escrow Agent and Indemnification. (a)
Parent shall pay to the Escrow Agent (i) the fees identified on Schedule II
hereto, (ii) any reasonable legal fees or expenses incurred by the Escrow Agent
in connection with the execution and performance of its duties hereunder and
(iii) such other expenses of the Escrow Agent which may be reasonably necessary
to the performance of its duties and obligations hereunder. The fees and
expenses of the Escrow Agent shall be borne by Parent, except as set forth in
Section 1.4.
(b) Parent, on the one hand, and the Holders, on the other hand, severally
but not jointly and severally, shall be jointly and severally liable for and
shall reimburse and indemnify the Escrow Agent and hold the Escrow Agent
harmless from and against any and all claims, losses, liabilities, costs,
damages or expenses (including reasonable attorneys' fees and expenses)
(collectively, "Losses") arising out of or in connection with or related to this
Agreement or being Escrow Agent hereunder (including but not limited to Losses
incurred by the Escrow Agent in connection with its successful defense, in
6
whole or in part, of any claim of gross negligence or willful misconduct on its
part), provided, however, that nothing contained herein shall require the Escrow
Agent to be indemnified for Losses caused by its gross negligence or willful
misconduct.
ARTICLE III
PROVISIONS RELATING TO THE STOCKHOLDERS' REPRESENTATIVES
Section 3.1 Acceptance of Appointment of Stockholders' Representatives.
Each of Xxxxxx X. Xxxxxx, Xxxxxx X. Xxxxxxxx and Xxxx Xxxxxxx hereby accepts
appointment, as an initial Stockholders' Representative hereunder.
Section 3.2 Liability of Stockholders' Representatives. The Stockholders'
Representatives may act upon any instrument or other writing believed by them in
good faith to be genuine and to be signed or presented by the proper person and
shall not be liable in connection with the performance by them of their duties
pursuant to the provisions of this Agreement, except for their own willful
default or gross negligence. The Stockholders' Representatives may retain
counsel and act with respect to this Agreement and their obligations hereunder
on the advice of such counsel. The Stockholders' Representatives shall be
indemnified and held harmless by the Holders (i) first out of the Escrowed
Shares (but only after the balance of the Escrowed Shares, if any, becomes
available for distribution to the Holders hereunder free of any right whatsoever
of Parent to claim all or any portion thereof) and (ii) second by the Holders,
severally and not jointly and severally, from all losses, costs and expenses
which they may incur as a result of involvement in any litigation arising from
and relating to the performance of their duties hereunder, provided that such
litigation shall not result from any action taken or omitted by the
Stockholders' Representatives for which they shall have been adjudged grossly
negligent or in willful default of this Agreement.
ARTICLE IV
MISCELLANEOUS PROVISIONS
Section 4.1 Parties in Interest. This Agreement is not made for the benefit
of any Person other than Parent, the Holders, the Stockholders' Representatives
in their capacity as such, and the Escrow Agent (and their respective successors
and assigns), and no Person (other than Parent, the Holders, the Stockholders'
Representatives in their capacity as such, and the Escrow Agent and their
respective successors and assigns) shall acquire or have any right under or by
virtue of this Agreement.
7
Section 4.2 Amendments. This Agreement may not be amended or modified
except by a written agreement executed by Parent, the Stockholders'
Representatives and the Escrow Agent.
Section 4.3 Waivers. Any party hereto may extend the time for the
performance of or waive compliance with any of the duties or obligations of any
other party hereto contained herein. Any such extension or waiver shall be valid
only if set forth in any instrument in writing signed by the party to be bound
thereby. Any waiver, extension, permit, consent or approval of any kind or
character on the part of any party hereto with respect to any provisions of this
Agreement must be made in writing and shall be effective only to the extent
specifically set forth in such instrument.
Section 4.4 Binding Effect. This Agreement shall inure to the benefit of
and shall be binding upon the parties hereto and their respective successors and
assigns.
Section 4.5 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of any provision of this Agreement.
Section 4.6 Notices. Except as otherwise provided herein, all notices and
other communications hereunder shall be in writing delivered by hand, facsimile
or registered letter with return receipt requested and shall be deemed to have
been duly given or made when delivered by hand, or, in the case of facsimile
note or registered letter, when received by the addressee, addressed as follows:
(a) if to the Holders or the Stockholders' Representatives:
The Yucaipa Companies
00000 Xxxxx Xxxxxx Xxxxxxxxx, Xxxxx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Ralphs Grocery Company
0000 Xxxx Xxxxxxx Xxxxxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
8
Apollo Advisors, L.P.
1999 Avenue of the Stars, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to:
Xxxxxx & Xxxxxxx
000 Xxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
(b) if to Parent:
Xxxx Xxxxx, Inc.
0000 XX 00xx Xxxxxx
Xxxxxxxx, Xxxxxx 00000
Attention: General Counsel
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
and
(b) if to the Escrow Agent:
Section 4.7 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of New York.
9
Section 4.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be constitute one and the same agreement.
Section 4.9 Further Cooperation. At any time and from time to time, each
party hereto shall promptly execute and deliver all such documents and
instruments, and do all such acts and things, as any other party hereto may
reasonably request in order to further effect the purposes of this Agreement.
Section 4.10 Severability of Provisions. In the event that any provision of
this Agreement shall prove to be invalid or unenforceable, such provision shall
be deemed to be separable from the other provisions of this Agreement which
shall remain binding on all parties thereto.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
XXXX XXXXX, INC.
By:
-------------------------------------
STOCKHOLDERS' REPRESENTATIVES
-----------------------------------------
Name:
-----------------------------------------
Name:
-----------------------------------------
Name:
[ESCROW AGENT],
as Escrow Agent
By:
-------------------------------------
Name:
Title:
SCHEDULE I
EXHIBIT C
Form of Company Affiliate Letter
Dear Sirs:
The undersigned, a holder of shares of Common Stock, par value $.01 per
share ("Company Common Stock") of Food 4 Less Holdings, Inc., a Delaware
corporation (the "Company"), is entitled to receive in connection with the
merger (the "Merger") of FFL Acquisition Corp. with and into the Company,
securities (the "Parent Securities") of Xxxx Xxxxx, Inc., a Delaware corporation
("Parent"), including upon the exercise of any outstanding stock options, stock
appreciation rights, limited stock appreciation rights, performance units, stock
purchase rights [and restricted stock] heretofore granted under any stock
option, performance unit or similar plan of the Company or any of its
subsidiaries being assumed by Parent. The undersigned acknowledges that the
undersigned may be deemed an "affiliate" of the Company within the meaning of
Rule 145 ("Rule 145") promulgated under the Securities Act of 1933, as amended
(the "Act") by the Securities and Exchange Commission (the "SEC"), although
nothing contained herein should be construed as an admission of such fact.
It in fact the undersigned were an affiliate under the Act, the
undersigned's ability to sell, assign or transfer the Parent Securities received
by the undersigned in connection with the Merger may be restricted unless such
transaction is registered under the Act or an exemption from such registration
is available. The undersigned understands that such exemptions are limited and
the undersigned has obtained advice of counsel as to the nature and conditions
of such exemptions, including information with respect to the applicability to
the sale of such securities of Rules 144 and 145(d) promulgated under the Act.
[The undersigned understands that Parent will not be required to maintain the
effectiveness of any registration statement under the Act for the purposes of
resale of Parent Securities by the undersigned.]1
The undersigned hereby represents to and covenants with Parent that the
undersigned will not sell, assign or transfer any of the Parent Securities
received by the undersigned in connection with the Merger except (i) pursuant to
an effective registration statement under the Act, (ii) in conformity with the
volume and other limitations of Rule 145 or (iii) in a transaction which, in the
opinion of the general counsel of Parent or other counsel reasonably
satisfactory to Parent or as described in a "no-action" or interpretive letter
from the staff of the SEC, is not required to be registered under the Act;
provided, however, that in any such case, such sale, assignment
--------
1/ Not to be included in letters delivered by the Stockholders.
2
or transfer shall only be permitted if, in the opinion of counsel ofParent, such
transaction would not have, directly or indirectly, any adverse consequences for
either Parent or Sub with respect to the treatment of the Merger for tax
purposes.
In the event of a sale or other disposition by the undersigned of Parent
Securities pursuant to Rule 145, the undersigned will supply Parent with
evidence of compliance with such Rule, in the form of a letter in the form of
Annex I hereto or other evidence reasonably satisfactory to Parent. The
undersigned understands that Parent may instruct its transfer agent to withhold
the transfer of any Parent Securities disposed of by the undersigned, but that,
provided such transfer is not prohibited by any other provision of this letter
agreement, upon receipt of such evidence of compliance, the transfer agent shall
effectuate the transfer of the Parent Securities sold as indicated in such
evidence.
The undersigned acknowledges and agrees that the legends set forth below
will be placed on certificates representing Parent Securities received by the
undersigned in connection with the Merger or held by a transferee thereof, which
legends will be removed by delivery of substitute certificates upon receipt of a
"no-action" letter from the staff of the SEC or an opinion in form and substance
reasonably satisfactory to Parent to the effect that such legends are no longer
required for purposes of the Act, if at such time such legends are no longer
required for purposes of the applicable provisions of the fourth paragraph of
this letter agreement.
There will be placed on the certificates for the Parent Securities issued
to the undersigned, or any substitutions therefor, a legend stating in
substance:
"The shares represented by this certificate were issued in a
transaction to which Rule 145 promulgated under the Securities
Act of 1933, as amended, applies. The shares have been acquired
by the holder not with a view to, or for resale in connection
with, any distribution thereof within the meaning of the
Securities Act of 1933, as amended. The shares may not be sold,
pledged or otherwise transferred, nor may the owner thereof
reduce the owner's risk relative thereto in any other way, except
in accordance with an exemption from the registration requirement
of the Securities Act of 1933, as amended."
3
The undersigned acknowledges that (i) the undersigned has carefully read this
letter and understands the requirement hereof and the limitations imposed upon
the distribution, sale, transfer of other disposition of Parent Securities and
(ii) the receipt by Parent of this letter is an inducement and a condition to
Parent's obligations to consummate the Merger.
Very truly yours,
[ ]
[ADDRESS]
Dated:
ANNEX I
TO EXHIBIT C
[Name] [Date]
On _______________________, the undersigned sold the securities
("Securities") of ______________________________ ("Parent") described below in
the space provided for that purpose (the "Securities"). The Securities were
received by the undersigned in connection with the merger of FFL Acquisition
Corp. with and into Food 4 Less Holdings, Inc.
Based upon the most recent report or statement filed by Parent with the
Securities and Exchange Commission, the Securities sold by the undersigned were
within the prescribed limitations set forth in paragraph (e) of Rule 144
promulgated under the Securities Act of 1933, as amended (the "Act").
The undersigned hereby represents that the Securities were sold in
"brokers' transactions" within the meaning of Section 4(4) of the Act or in
transactions directly with a "market maker" as that term is defined in Section
3(a)(38) of the Securities Exchange Act of 1934, as amended. The undersigned
further represents that the undersigned has not solicited or arranged for the
solicitation of orders to buy the Securities, and that the undersigned has not
made any payment in connection with the offer or sale of the Securities to any
person other than the broker who executed the order in respect of such sale.
Very truly yours,
[Space to be provided for description of securities]
