Page 26 of 33 Pages
September 8, 1995
PaineWebber Incorporated
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Gentlemen:
In connection with the engagement of PaineWebber Incorporated
("PaineWebber") to advise and assist the undersigned (referred to herein
as "we," "our" or "us") with the matters set forth in the Agreement dated
September 8, 1995 between us and PaineWebber, we hereby agree to
indemnify and hold harmless PaineWebber, its affiliated companies, and
each of PaineWebber's and such affiliated companies' respective officers,
directors, agents, employees and controlling persons (within the meaning
of each of Section 20 of the Securities Exchange Act of 1934 and Section
15 of the Securities Act of 1933) (each of the foregoing, including
PaineWebber, being hereinafter referred to as an "Indemnified Person") to
the fullest extent permitted by law from and against any and all losses,
claims, damages, expenses (including reasonable fees, disbursements, and
other charges of counsel), actions (including actions brought by us or
our equity holders or derivative actions brought by any person claiming
through us or in our name), proceedings, arbitrations or investigations
(whether formal or informal), or threats thereof (all of the foregoing
being hereinafter referred to as "Liabilities"), based upon, relating to
or arising out of such engagement or any Indemnified Person's role
therein: PROVIDED, HOWEVER, that we shall not be liable under this
paragraph: (a) for any amount paid in settlement of claims without our
consent, unless our consent is unreasonably withheld, or (b) to the
extent that it is finally judicially determined, or expressly stated in
an arbitration award, that such Liabilities resulted primarily from the
willful misconduct or gross negligence of the Indemnified Person seeking
indemnification. If multiple claims are brought against any Indemnified
Person in an arbitration and at least one such claim is based on, relates
to or arises out of the engagement of PaineWebber by us or any
Indemnified Person's role therein, we agree that any award resulting
therefrom shall be deemed conclusively to be based on, relate to or arise
out of the engagement of PaineWebber by us or any Indemnified Person's
role therein, except to the extent that such award expressly states that
the award, or any portion thereof, is based solely upon, relates to or
arises out of other matters for which indemnification is not available
hereunder. In connection with our obligation to indemnify for expenses
as set forth above, we further agree to reimburse each Indemnified Person
for all such expenses (including reasonable fees, disbursements or other
charges of counsel) as they are incurred by such Indemnified Person;
PROVIDED, HOWEVER, that if an Indemnified Person is reimbursed hereunder
for any expenses, the amount so paid shall be refunded if and to the
extent it is finally judicially determined, or expressly stated in an
arbitration award, that the Liabilities in question resulted primarily
from the willful misconduct or gross negligence of such Indemnified
Person. We hereby also agree that neither PaineWebber nor any other
Indemnified Person shall
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have any liability to us (or anyone claiming through us or in our name)
in connection with PaineWebber's engagement by us except to the extent
that such Indemnified Person has engaged in willful misconduct or
been grossly negligent.
Promptly after PaineWebber receives notice of the commencement of any
action or other proceeding in respect of which indemnification or
reimbursement may be sought hereunder, PaineWebber will notify us
thereof; but the omission so to notify us shall not relieve us from any
obligation hereunder unless, and only to the extent that, such omission
results in our forfeiture of substantive rights or defenses. If any such
action or other proceeding shall be brought against any Indemnified
Person, we shall, upon written notice given reasonably promptly following
your notice to us of such action or proceeding, be entitled to assume the
defense thereof at our expense with counsel chosen by us and reasonably
satisfactory to such Indemnified Person; PROVIDED, HOWEVER, that any
Indemnified Person may at its own expense retain separate counsel to
participate in such defense. Notwithstanding the foregoing, such
Indemnified Person shall have the right to employ separate counsel at our
expense and to control its own defense of such action or proceeding if,
in the reasonable opinion of counsel to such Indemnified Person, a
difference of position or potential difference of position exists between
us and such Indemnified Person that would, in the opinion of counsel to
the Indemnified Person, make representation of both the Indemnified
Person and us inappropriate or inadvisable under generally accepted
standards of professional conduct; PROVIDED, HOWEVER, that in no event
shall we be required to pay fees and expenses under this indemnity for
more than one firm of attorneys (in addition to local counsel) in any
jurisdiction in any one legal action or group of related legal actions.
We agree that we will not, without the prior written consent of
PaineWebber, which consent will not be unreasonably withheld, settle or
compromise or consent to the entry of any judgment in any pending or
threatened claim, action or proceeding relating to the matters
contemplated by PaineWebber's engagement (whether or not any Indemnified
Person is a party thereto) unless such settlement, compromise or consent
includes an unconditional release of PaineWebber and each other
Indemnified Person from all liability arising or that may arise out of
such claim, action or proceeding.
If the indemnification of an Indemnified Person provided for hereunder
is finally judicially determined by a court of competent jurisdiction to
be unenforceable, then we agree, in lieu of indemnifying such Indemnified
Person, to contribute to the amount paid or payable by such Indemnified
Person as a result of such Liabilities in such proportion as is
appropriate to reflect the relative benefits received, or sought to be
received, by us on the one hand and by PaineWebber on the other from the
transactions in connection with which PaineWebber has been engaged. If
the allocation provided in the preceding sentence is not permitted by
applicable law, then we agree to contribute to the amount paid or payable
by such Indemnified Person as a result of such Liabilities in such
proportion as is appropriate to reflect not only the relative benefits
referred to in such preceding sentence but also the relative fault of us
and of such Indemnified Person. Notwithstanding the foregoing, in no
event shall the aggregate amount required to be contributed by all
Indemnified Persons taking into account our contributions as described
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above exceed the amount of fees actually received by PaineWebber pursuant
to such engagement. The relative benefits received or sought to be
received by us on the one hand and by PaineWebber on the other shall be
deemed to be in the same proportion as (a) the total value of the
transactions with respect to which PaineWebber has been engaged bears to
(b) the fees paid or payable to PaineWebber with respect to such
engagement.
The rights accorded to Indemnified Persons hereunder shall be in
addition to any rights that any Indemnified Person may have at common
law, by separate agreement or otherwise.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE. WE HEREBY CONSENT, SOLELY FOR THE
PURPOSE OF ALLOWING AN INDEMNIFIED PERSON TO ENFORCE ITS RIGHTS
HEREUNDER, TO PERSONAL JURISDICTION AND SERVICE AND VENUE IN ANY COURT IN
WHICH ANY CLAIM FOR WHICH INDEMNIFICATION MAY BE SOUGHT HEREUNDER IS
BROUGHT AGAINST PAINEWEBBER OR ANY OTHER INDEMNIFIED PERSON. We and
PaineWebber also hereby irrevocably waive any right we and PaineWebber
may have to a trial by jury in respect of any claim based upon or arising
out of this agreement. This agreement may not be amended or otherwise
modified except by an instrument signed by both PaineWebber and us. If
any provision hereof shall be determined to be invalid or unenforceable
in any respect, such determination shall not affect such provision in any
other respect or any other provision of this agreement, which shall
remain in full force and effect. If there is more than one indemnitor
hereunder, each indemnifying person
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agrees that its liabilities hereunder shall be joint and several. Each
Indemnified Person is an intended beneficiary hereunder.
The foregoing indemnification agreement shall remain in effect
indefinitely, notwithstanding any termination of PaineWebber's
engagement.
Very truly yours,
KASH N' XXXXX FOOD STORES, INC.
By:________________________________
Name:
Title:
Acknowledged and Agreed to:
PAINEWEBBER INCORPORATED
By:________________________________
Name:
Title:
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June 5, 1996 PAINEWEBBER
Board of Directors
Kash n' Xxxxx Food Stores, Inc.
0000 Xxxxxx Xxxx
Xxxxx, Xxxxxxx 00000
Attention:Xx. Xxxxxx X. Xxxxxxx
Chairman, President and Chief Executive Officer
Madame and Gentlemen:
Kash n' Xxxxx Food Stores, Inc. (the "Company") proposes to enter
into an Agreement and Plan of Merger (the "Agreement") pursuant to which
(i) a subsidiary ("Sub") of the acquiring company ("Parent") will make a
tender offer (the "Offer") for all of the outstanding shares of common
stock, par value $0.01, per share ("Common Stock") of the Company at a
specified price net to the seller in cash (the "Consideration") and
(ii) following completion of the Offer, each issued and outstanding share
of Common Stock (other than (a) shares owned by the Company as treasury
stock, (b) shares owned by Parent, Sub or any other wholly-owned
subsidiary of Parent and (c) shares held by parties perfecting appraisal
rights) will be converted in a merger (the "Merger") solely into the
right to receive the Consideration. The Board of Directors of the
Company has requested that PaineWebber Incorporated ("PaineWebber")
render an opinion (the "Opinion") as to whether or not the Consideration
to be received by the holders of the Common Stock in the Offer and the
Merger, taken as a whole, is fair, from a financial point of view, to
such shareholders.
As compensation for XxxxxXxxxxx's services in rendering the
Opinion, the Company agrees to pay PaineWebber a fee of $250,000 payable
in cash on the date PaineWebber delivers the Opinion. In the event that
an update or revised Opinion is requested, the Company agrees to pay
PaineWebber an additional fee to be mutually agreed upon payable in cash
on such date PaineWebber delivers an updated or revised Opinion. In
addition, the Company agrees to reimburse PaineWebber, upon request made
from time to time, for all of its reasonable out-of-pocket expenses
incurred in connection with this engagement, including the reasonable
fees, disbursements and other charges of its legal counsel. The
Company's obligations to pay PaineWebber's compensation (and reimburse
PaineWebber for fees and expenses) as set forth herein shall be without
regard to the conclusion set forth in the Opinion or whether PaineWebber
determines that a favorable Opinion cannot be delivered.
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It is understood that the Opinion, if rendered, will be dated as of
a date reasonably proximate to the date of the Schedule 14D-9 to be filed
with the Securities and Exchange Commission (the "SEC") in connection
with the Offer and any proxy statement or information statement required
to be filed with the SEC in connection with the Merger. If the Opinion
is included in such Schedule 14D-9, proxy statement or information
statement, it will be reproduced therein in full, and any description of
or reference to PaineWebber or summary of the Opinion will be in a form
reasonably acceptable to PaineWebber and its counsel. Except as provided
in this letter, the Opinion will not be reproduced, summarized, described
or referred to or otherwise made public without PaineWebber's prior
written consent.
The Company will furnish PaineWebber (and will request that the
Parent furnish PaineWebber) with such information as PaineWebber believes
appropriate to its assignment (all such information so furnished being
the "Information"). The Company recognizes and confirms that PaineWebber
(a) will use and rely primarily on the Information and on information
available from generally recognized public sources in rendering the
Opinion and does not assume any responsibility to independently verify
the same, (b) does not assume responsibility for the accuracy or
completeness of the Information and such other information and (c) will
not make an appraisal of any assets of the Parent or the Company. To the
best of the Company's knowledge, the Information to be furnished by the
Company, when delivered, will be true and correct in all material
respects and will not contain any material misstatement of fact or omit
to state any material fact necessary to make the statements contained
therein not misleading. The Company will promptly notify PaineWebber if
it learns of any material inaccuracy or misstatement in, or material
omission from, any Information theretofore delivered to PaineWebber. All
such Information, whether oral or written, will be kept confidential in
accordance with the terms of that certain letter agreement (the "Letter
Agreement") dated September 8, 1995, by and between PaineWebber and the
Company.
It is understood that PaineWebber is being engaged hereunder solely
to provide the services described above to the Board of Directors of the
Company, and that PaineWebber is not acting as an agent of, and its
engagement hereunder is not intended to confer rights on the equity
holders of the Company or any other third party.
In addition to the fees provided for above, the Company shall pay
to PaineWebber PaineWebber's customary hourly fees for each hour that a
PaineWebber employee shall be required to testify (or be available on
site to testify) in any court proceedings, or in oral depositions in
connection with any such proceedings, relating to or arising out of the
Opinion or PaineWebber's engagement hereunder.
Reference is made to the Letter Agreement and the related
indemnification agreement (the "Indemnification Agreement") attached
thereto and incorporated by reference therein. The Company agrees that
the indemnification and other agreements set forth in the Indemnification
Agreement shall apply in connection with PaineWebber's
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engagement hereunder, shall survive the termination, expiration or
suppression of this letter agreement, and are incorporated by reference
herein.
THIS AGREEMENT WILL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF DELAWARE APPLICABLE TO AGREEMENTS MADE AND
TO BE PERFORMED ENTIRELY IN SUCH STATE. EACH OF THE COMPANY AND
PAINEWEBBER AGREE THAT ANY ACTION OR PROCEEDING BASED HEREON, OR ARISING
OUT OF PAINEWEBBER'S ENGAGEMENT HEREUNDER, SHALL BE BROUGHT AND
MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF DELAWARE OR IN THE
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE. THE COMPANY
AND PAINEWEBBER EACH HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE
COURTS OF THE STATE OF DELAWARE AND OF THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE FOR THE PURPOSE OF ANY SUCH ACTION OR
PROCEEDING AS SET FORTH ABOVE AND IRREVOCABLY AGREE TO BE BOUND BY ANY
JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH ACTION OR PROCEEDING.
EACH OF THE COMPANY AND PAINEWEBBER HEREBY IRREVOCABLY WAIVE, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR
HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH ACTION OR
PROCEEDING BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT
ANY SUCH ACTION OR PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
The Company (for itself, anyone claiming through it or its name,
and on behalf of its equity holders) and PaineWebber each hereby
irrevocably waive any right they may have to a trial by jury in respect
of any claim based upon or arising out of this letter agreement or the
transactions contemplated hereby. This letter agreement may not be
assigned by either party without the prior written consent of the other
party.
This letter agreement (including the Indemnification Agreement)
embodies the entire agreement and understanding between the parties
hereto relating to the subject matter hereof and supersedes all prior
agreements and understandings relating to such subject matter, other than
the Letter Agreement. This letter agreement may not be amended or
otherwise modified or waived except by an instrument in writing signed by
both PaineWebber and the Company. If any provision of this letter
agreement is determined to be invalid or unenforceable in any respect,
such determination will not affect such provision in any other respect or
any other provision of this letter agreement, which will remain in full
force and effect.
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If the foregoing correctly sets forth our agreement, please so
indicate by signing and returning to us the enclosed duplicate original
copy of this letter agreement.
Very truly yours,
PAINEWEBBER INCORPORATED
By _________________________________
Xxxxx X. Xxxx, Xx.
Managing Director
Accepted and Agreed to as of
the date first written above:
Kash n' Xxxxx Food Stores, Inc.
By ____________________________________
Xxxxxx X. Xxxxxxx
Chairman, President and Chief Executive Officer
