EXECUTION COPY
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AGREEMENT AND PLAN OF REORGANIZATION AND MERGER
by and between
XXXXX'X FOOD & DRUG CENTERS, INC.
and
XXXX XXXXX, INC.
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Dated as of May 11, 1997
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Table of Contents
Page
1. The Mergers................................................................ 2
1.1 Organization of Holdings............................................... 2
1.2 Directors and Officers of Holdings..................................... 2
1.3 Xxxxx'x Sub Merger..................................................... 3
1.4 Xxxx Xxxxx Sub Merger.................................................. 3
1.5 The Closing............................................................ 4
1.6 Effective Time......................................................... 4
1.7 Effects of the Mergers................................................. 4
1.8 Certificates of Incorporation and Bylaws of the Surviving
Corporations........................................................... 4
1.9 Directors and Officers of the Surviving Corporations................... 5
1.10 Execution of Related Agreements........................................ 5
2. Conversion of Securities................................................... 5
2.1 Conversion of Securities............................................... 5
2.2 Payment for Xxxxx'x Common Shares, Xxxx Xxxxx Common Shares and
Series I Preferred Shares..............................................10
2.3 Fractional Shares......................................................11
2.4 Dissenting Shares......................................................12
2.5 No Transfer after the Effective Time...................................12
3. Representations and Warranties of Xxxxx'x..................................13
3.1 Existence; Good Standing; Corporate Authority..........................13
3.2 Authorization; Validity and Effect of Agreement........................13
3.3 Capitalization.........................................................14
3.4 Subsidiaries...........................................................14
3.5 Other Interests........................................................14
3.6 No Conflict; Required Filings and Consents.............................15
3.7 Compliance.............................................................15
3.8 SEC Documents..........................................................16
3.9 Litigation.............................................................17
3.10 Absence of Certain Changes.............................................17
3.11 Taxes..................................................................17
3.12 Employee Benefit Plans.................................................18
3.13 State Takeover Statutes................................................19
3.14 No Brokers.............................................................19
3.15 Opinion of Financial Advisor...........................................20
3.16 No Other Agreements to Sell Xxxxx'x or its Assets......................20
3.17 Assets.................................................................20
3.18 Contracts and Commitments..............................................21
3.19 Absence of Breaches or Defaults........................................22
3.20 Labor Matters..........................................................23
3.21 Insurance..............................................................24
3.22 Affiliate Transactions.................................................24
3.23 Environmental Matters..................................................24
3.24 Information in Joint Proxy Statement/Prospectus and Form S-4...........25
-i-
3.25 Vote Required..........................................................26
3.26 Standstill and Confidentiality Agreements..............................26
4. Representations and Warranties of Xxxx Xxxxx...............................26
4.1 Existence; Good Standing; Corporate Authority..........................26
4.2 Authorization; Validity and Effect of Agreement........................26
4.3 Capitalization.........................................................27
4.4 Subsidiaries...........................................................27
4.5 Other Interests........................................................28
4.6 No Conflict; Required Filings and Consents.............................28
4.7 Compliance.............................................................29
4.8 SEC Documents..........................................................29
4.9 Litigation.............................................................30
4.10 Absence of Certain Changes.............................................30
4.11 Taxes..................................................................30
4.12 Employee Benefit Plans.................................................32
4.13 State Takeover Statutes................................................33
4.14 No Brokers.............................................................33
4.15 Opinion of Financial Advisor...........................................33
4.16 No Other Agreements to Sell Xxxx Xxxxx or its Assets...................33
4.17 Assets.................................................................33
4.18 Contracts and Commitments..............................................35
4.19 Absence of Breaches or Defaults........................................36
4.20 Labor Matters..........................................................36
4.21 Insurance..............................................................38
4.22 Affiliate Transactions.................................................38
4.23 Environmental Matters..................................................38
4.24 Information in Joint Proxy Statement/Prospectus and Form S-4...........39
4.25 Vote Required..........................................................39
4.26 Standstill and Confidentiality Agreements..............................39
5. Covenants..................................................................40
5.1 Acquisition Proposals..................................................40
5.2 Interim Operations of Xxxxx'x..........................................41
5.3 Interim Operations of Xxxx Xxxxx.......................................43
5.4 Meeting of Stockholders................................................45
5.5 Further Assurance and Cooperation......................................46
5.6 Certain Filings and Consents...........................................46
5.7 Inspection of Records..................................................47
5.8 Publicity..............................................................47
5.9 Joint Proxy Statement/Prospectus and the Form S-4......................47
5.10 Listing Application....................................................48
5.11 Further Action.........................................................48
5.12 Affiliate Letters......................................................48
5.13 Expenses...............................................................49
5.14 Indemnification........................................................49
5.15 Consents...............................................................50
5.16 Financing Arrangements.................................................50
5.17 Financial Information..................................................51
5.18 Letter of Xxxxx'x Accountants..........................................51
5.19 Letter of Xxxx Xxxxx'x Accountants....................................51
5.20 Registration Statement on Form S-8.....................................51
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5.21 Tax Matters Certificates...............................................51
5.22 Standstill and Confidentiality Agreements..............................51
5.23 Assumption of Obligations by Holdings, Xxxxx'x Sub and Xxxx Xxxxx......52
6. Conditions.................................................................52
6.1 Conditions to Each Party's Obligation to Effect the Mergers............52
6.2 Conditions to Obligation of Xxxxx'x to Effect the Mergers..............53
6.3 Conditions to Obligation of Xxxx Xxxxx to Effect the Mergers..........54
7. Termination................................................................55
7.1 Termination by Mutual Consent..........................................55
7.2 Termination by Either Xxxx Xxxxx or Xxxxx'x............................55
7.3 Termination by Xxxxx'x.................................................56
7.4 Termination by Xxxx Xxxxx..............................................56
7.5 Effect of Termination and Abandonment..................................57
8. General Provisions.........................................................58
8.1 Non-survival of Representations and Warranties.........................58
8.2 Notices................................................................58
8.3 Assignment; Binding Effect.............................................58
8.4 Entire Agreement.......................................................59
8.5 Amendment..............................................................59
8.6 Governing Law..........................................................59
8.7 Counterparts...........................................................59
8.8 Headings...............................................................59
8.9 Interpretation.........................................................59
8.10 Waivers................................................................60
8.11 Incorporation of Schedules.............................................60
8.12 Severability...........................................................60
8.13 Enforcement of Agreement...............................................60
9. Definitions................................................................60
9.1 Defined Terms...........................................................60
9.2 Other Defined Terms.....................................................65
List of Exhibits
Exhibit A - Form of Certificate of Incorporation of Holdings
Exhibit B - Form of Bylaws of Holdings
Exhibit C - Form of Registration Rights Agreement
Exhibit D - Form of New Management Agreement
Exhibit E - Forms of Affiliate Letter
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Exhibit F - Forms of Tax Matters Certificate
Exhibit G - Form of Xxxxx'x Legal Opinion
Exhibit H - Form of Xxxx Xxxxx Legal Opinion
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EXECUTION COPY
Agreement and Plan of Reorganization and Merger
Agreement and Plan of Reorganization and Merger (this "Agreement"),
dated as of May 11, 1997, by and between Xxxxx'x Food & Drug Centers, Inc., a
Delaware corporation ("Xxxxx'x"), and Xxxx Xxxxx, Inc., a Delaware corporation
("Xxxx Xxxxx").
Recitals
A. The respective Boards of Directors of Xxxx Xxxxx and Xxxxx'x xxxx
it advisable and in the best interests of their respective companies and
shareholders to consummate, and have approved, including for purposes of Section
251(b) of the General Corporation Law of the State of Delaware (the "DGCL"), the
business combination transactions provided for herein in which:
(i) Xxxx Xxxxx and Xxxxx'x will form a Delaware holding company,
Xxxxx-Xxxxx Holdco, Inc. ("Holdings"); and
(ii) Holdings will form two subsidiaries, one of which will merge
with and into Xxxx Xxxxx with Xxxx Xxxxx continuing as the surviving
corporation (the "Xxxx Xxxxx Merger"), and the other of which will
merge with and into Xxxxx'x with Xxxxx'x continuing as the surviving
corporation (the "Xxxxx'x Merger" and together with the Xxxx Xxxxx
Merger, the "Mergers"), and (1) each issued and outstanding Xxxx Xxxxx
Common Share (as hereinafter defined), and each issued and outstanding
Xxxxx'x Common Share (as hereinafter defined) that is not a Dissenting
Share (as hereinafter defined), will be converted into the right to
receive common stock, par value $.01 per share, of Holdings ("Holdings
Common Stock") and (2) each issued and outstanding Series I Preferred
Share (as hereinafter defined) that is not a Dissenting Share will be
converted into the right to receive in cash the amount of thirty-three
and one-third cents ($.33 1/3) per share, without the payment of any
interest thereon, all as more fully set forth below;
B. For federal income tax purposes, it is intended that each of the
Mergers qualify as a tax-free exchange within the meaning of Section 351(a) of
the Internal Revenue Code of 1986, as amended (the "Code");
C. As a condition to its willingness to enter into this Agreement,
Xxxx Xxxxx has required that, simultaneously with the execution hereof, certain
holders owning Xxxxx'x Common Shares or Series I Preferred Shares representing,
in the aggregate, at least 50.1% of the voting power of the issued and
outstanding shares of capital stock of Xxxxx'x enter into the Voting Agreements,
dated as of the date hereof (the "Voting Agreements"), with Xxxx Xxxxx,
agreeing, among other matters, to vote all of such Xxxxx'x Common Shares or
Series I Preferred Shares in favor of the Mergers and the approval and adoption
of this Agreement;
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D. As a condition to its willingness to enter into this Agreement,
Xxxxx'x has required that, simultaneously with the execution hereof, Xxxx Xxxxx
enter into the Option Agreement, dated as of the date hereof, with Xxxxx'x,
pursuant to which Xxxx Xxxxx is granting Xxxxx'x an option to purchase up to
19.9% of Xxxx Xxxxx Common Stock (as hereinafter defined) on the terms and
conditions set forth therein; and
X. Xxxxx'x and Xxxx Xxxxx desire to make certain representations,
warranties and agreements in connection with the Mergers and also to prescribe
various conditions to the Mergers.
Capitalized terms used in this Agreement and not otherwise defined
herein shall have the meanings set forth in Section 9.1 hereof.
1. The Mergers
1.1 Organization of Holdings. As promptly as practicable following the
execution of this Agreement, Xxxxx'x and Xxxx Xxxxx shall cause Holdings to be
organized under the laws of the State of Delaware. The initial certificate of
incorporation and bylaws of Holdings shall be substantially in the forms
attached hereto as Exhibits A and B, respectively. The authorized capital stock
of Holdings shall consist initially of 100 shares of Holdings Common Stock and
100 shares of undesignated preferred stock, of which 50 shares of Holdings
Common Stock will be issued to Xxxxx'x and 50 shares of Holdings Common Stock
will be issued to Xxxx Xxxxx. Prior to the Effective Time (as hereinafter
defined), Xxxxx'x and Xxxx Xxxxx shall cause Holdings to amend its certificate
of incorporation to increase the number of authorized shares thereunder to
provide for the issuance of Holdings Common Stock pursuant to the Mergers.
Immediately after the Effective Time, Xxxxx'x and Xxxx Xxxxx shall cause
Holdings to amend its certificate of incorporation to change its name from
Xxxxx-Xxxxx Holdco, Inc. to Xxxx Xxxxx, Inc.
1.2 Directors and Officers of Holdings. (a) Upon formation of
Holdings, Xxxxx'x and Xxxx Xxxxx shall cause to be elected as directors of
Holdings (and as of the Effective Time the Holdings Board of Directors shall
consist of) (i) four (4) of Xxxxx'x current directors (including Xxxxxx X.
Xxxxxx and three (3) others selected by Xxxxx'x Board of Directors) and (ii)
seven (7) individuals selected by Xxxx Xxxxx'x Board of Directors, one of which
shall be Xxxxxx X. Xxxxxx. The members of the Board of Directors shall be
divided among the classes substantially proportionately between Xxxx Xxxxx'x
current directors and Xxxxx'x current directors, as set forth on Section 1.2 of
the Disclosure Schedule. Each director shall remain in office until his
successor is duly elected or appointed and qualified or until such director's
earlier death, resignation or removal in accordance with the certificate of
incorporation and bylaws of Holdings.
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(b) As of the Effective Time, Xxxxxx X. Xxxxxx shall be the Chairman
of the Board of Directors of Holdings (which position shall not constitute an
officer position of Holdings) and Xxxxxx X. Xxxxxx shall be the President and
Chief Executive Officer of Holdings.
1.3 Xxxxx'x Sub Merger.
(a) As promptly as practicable after the formation of Holdings, the
Xxxxx'x and Xxxx Xxxxx shall cause Holdings to form a wholly-owned corporation
called Xxxxx Merger Sub, Inc. ("Xxxxx'x Sub") under the laws of the State of
Delaware. The Xxxxx'x and Xxxx Xxxxx shall cause Holdings to cause Xxxxx'x Sub
to execute and deliver this Agreement. Xxxxx'x shall be the surviving
corporation in the Xxxxx'x Merger and as a result thereof shall become a
wholly-owned subsidiary of Holdings.
(b) The certificate of incorporation and bylaws of Xxxxx'x Sub shall
be in such form as shall be determined by Holdings. Upon formation of Xxxxx'x
Sub, Holdings shall designate the Board of Directors and officers of Xxxxx'x
Sub.
(c) Xxxxx'x shall use its best efforts to cause the Xxxxx'x Merger to
be consummated in accordance with the terms of this Agreement. The Xxxxx'x and
Xxxx Xxxxx shall cause Holdings to execute a formal written consent under
Section 228 of the DGCL, as the sole stockholder of Xxxxx'x Sub, to the
execution, delivery and performance of this Agreement by Xxxxx'x Sub.
1.4 Xxxx Xxxxx Sub Merger.
(a) As promptly as practicable after the formation of Holdings, Xxxx
Xxxxx and Xxxxx'x shall cause Holdings to form a wholly-owned corporation called
Xxxx Xxxxx Merger Sub, Inc. ("Xxxx Xxxxx Sub") under the laws of the State of
Delaware. The parties shall cause Holdings to cause Xxxx Xxxxx Sub to execute
and deliver this Agreement. Xxxx Xxxxx shall be the surviving corporation in the
Xxxx Xxxxx Merger and as a result thereof shall become a wholly-owned subsidiary
of Holdings.
(b) The certificate of incorporation and bylaws of Xxxx Xxxxx Sub
shall be in such form as shall be determined by Holdings. Upon formation of Xxxx
Xxxxx Sub, Holdings shall designate the Board of Directors and officers of Xxxx
Xxxxx Sub.
(c) Xxxx Xxxxx shall use its best effort to cause the Xxxx Xxxxx
Merger to be consummated in accordance with the terms of this Agreement. The
parties shall cause Holdings to execute a formal written consent under Section
228 of the DGCL, as the sole stockholder of Xxxx Xxxxx Sub, to the execution,
delivery and performance of this Agreement by Xxxx Xxxxx Sub.
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1.5 The Closing. The closing (the "Closing") of the transactions
contemplated by this Agreement will take place at the offices of Cleary,
Gottlieb, Xxxxx & Xxxxxxxx, at 10:00 a.m., local time, on the third business day
following the date on which the last of the conditions set forth in Article 6 is
satisfied or waived in accordance herewith or at such other place, time or date
as the parties may agree. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date".
1.6 Effective Time. On the Closing Date, Xxxxx'x and Xxxx Xxxxx will
cause certificates of merger to be filed with the Secretary of State of the
State of Delaware as provided in Section 251 of the DGCL in order to effect the
Mergers. Upon completion of such filing, the respective Mergers will become
effective in accordance with the DGCL. The time and date on which the Mergers
become effective is herein referred to as the "Effective Time".
1.7 Effects of the Mergers. At the Effective Time,
(a) The separate existence of Xxxxx'x Sub shall cease and Xxxxx'x Sub
shall be merged with and into Xxxxx'x with Xxxxx'x continuing as the surviving
corporation (as such, "New Xxxxx'x");
(b) The separate existence of Xxxx Xxxxx Sub shall cease and Xxxx
Xxxxx Sub shall be merged with and into Xxxx Xxxxx with Xxxx Xxxxx continuing as
the surviving corporation (as such, "New Xxxx Xxxxx" and, together with New
Xxxxx'x, the "Surviving Corporations"); and
(c) The Mergers shall have all the effects of applicable law,
including, without limitation, the applicable provisions of the DGCL.
1.8 Certificates of Incorporation and Bylaws of the Surviving
Corporations.
(a) Immediately after the Effective Time, Holdings will cause New
Xxxxx'x and New Xxxx Xxxxx to amend their respective certificates of
incorporation (to be in effect immediately after the Effective Time, until
amended in accordance with their respective terms and the DGCL) to be
substantially identical to the certificates of incorporation of Xxxxx'x Sub and
Xxxx Xxxxx Sub, respectively, as in effect immediately prior to the Effective
Time, except that the name of New Xxxx Xxxxx shall not be Xxxx Xxxxx, Inc.
(b) Immediately after the Effective Time, Holdings will cause New
Xxxxx'x and New Xxxx Xxxxx to amend their respective bylaws (to be in effect
immediately after the Effective Time, until amended in accordance with their
respective terms and the DGCL) to be substantially identical to the bylaws of
Xxxxx'x Sub and Xxxx Xxxxx Sub, as in effect immediately prior to the Effective
Time.
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1.9 Directors and Officers of the Surviving Corporations. (a) The
members of the Board of Directors of each of New Xxxxx'x and New Xxxx Xxxxx will
be the respective members of the Board of Directors of Xxxxx'x Sub and Xxxx
Xxxxx Sub immediately prior to the Effective Time. All of the members of the
Board of Directors of New Xxxxx'x and New Xxxx Xxxxx will serve until their
respective successors are duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the respective
certificate of incorporation and bylaws of each of New Xxxxx'x and New Xxxx
Xxxxx.
(b) The officers of each of New Xxxxx'x and New Xxxx Xxxxx will
consist of the respective officers of Xxxxx'x and Xxxx Xxxxx immediately prior
to the Effective Time. Such persons will continue as officers of New Xxxxx'x and
New Xxxx Xxxxx until their respective successors have been duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the respective certificate of incorporation and bylaws of each
of New Xxxxx'x and New Xxxx Xxxxx.
1.10 Execution of Related Agreements. (a) On the Closing Date,
Holdings and the stockholders of Xxxxx'x named therein shall enter into a
Registration Rights Agreement (the "Registration Rights Agreement"), in the form
of Exhibit C hereto.
(b) On the Closing Date, the existing Management Services Agreement,
dated as of May 23, 1996, by and between The Yucaipa Companies, a California
general partnership (the "Partnership") and Xxxxx'x (the "Old Management
Agreement") shall terminate and Holdings and the Yucaipa Companies LLC ("Yucaipa
LLC") shall enter into a management agreement (the "New Management Agreement"),
in the form of Exhibit D hereto.
2. Conversion of Securities
2.1 Conversion of Securities.
(a) Capital Stock of Merger Companies. As of the Effective Time, by
virtue of the Mergers and without any action on the part of the holder of any
shares of capital stock of the corporations involved: (i) each outstanding share
of common stock of Xxxxx'x Sub, par value $.01 per share, which is issued and
outstanding immediately prior to the Effective Time, shall be converted into and
become one (1) share of common stock of New Xxxxx'x and (ii) each outstanding
share of common stock of Xxxx Xxxxx Sub, par value $.01 per share, which is
issued and outstanding immediately prior to the Effective Time, shall be
converted into and become one (1) share of common stock of New Xxxx Xxxxx.
(b) Common Stock of Xxxxx'x and Xxxx Xxxxx.
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(i) As of the Effective Time, by virtue of the Mergers and without any
action on the part of the holder of any shares of capital stock of the
corporations involved: each share of Class A Common Stock, par value $.01 per
share, of Xxxxx'x ("Class A Common Stock"), Class B Common Stock, par value $.01
per share, of Xxxxx'x ("Class B Common Stock") and Class C Common Stock, par
value $.01 per share, of Xxxxx'x ("Class C Common Stock" and together with
shares of the Class A Common Stock and the Class B Common Stock, the "Xxxxx'x
Common Stock") issued and outstanding immediately prior to the Effective Time
(other than shares of Xxxxx'x Common Stock owned by Xxxx Xxxxx or any direct or
indirect Subsidiary of Xxxx Xxxxx (collectively, the "Xxxx Xxxxx Companies") or
held in the treasury of Xxxxx'x or owned by any of Xxxxx'x direct or indirect
Subsidiaries ("Xxxxx'x Common Treasury Shares")) will, by virtue of the Xxxxx'x
Merger and without any action on the part of the holder thereof, be converted
into 1.05 fully paid and nonassessable shares of Holdings Common Stock (the
"Xxxxx'x Exchange Ratio"). Shares of Xxxxx'x Common Stock other than those owned
by the Xxxx Xxxxx Companies and other than Xxxxx'x Common Treasury Shares are
referred to herein as "Xxxxx'x Common Shares." Notwithstanding the foregoing
provisions of this Section 2.1(b)(i), no Xxxxx'x Common Share which constitutes
a Dissenting Share will be deemed to be converted into Holdings Common Stock
hereunder and holders of Dissenting Shares, if any, will be entitled to payment,
solely from Xxxxx'x of the appraised value of such Dissenting Shares to the
extent permitted by and in accordance with Section 262 of the DGCL.
(ii) As of the Effective Time, by virtue of the Mergers and without
any action on the part of the holder of any shares of capital stock of the
corporations involved: each share of common stock, par value $.01 per share, of
Xxxx Xxxxx ("Xxxx Xxxxx Common Stock") issued and outstanding immediately prior
to the Effective Time (other than Xxxx Xxxxx Common Stock owned by Xxxxx'x or
any direct or indirect Subsidiary of Xxxxx'x (collectively, the "Xxxxx'x
Companies") or held in the treasury of Xxxx Xxxxx or owned by any of Xxxx
Xxxxx'x direct or indirect wholly owned Subsidiaries ("Xxxx Xxxxx Common
Treasury Shares")) will, by virtue of the Xxxx Xxxxx Merger and without any
action on the part of the holder thereof, be converted into one (1) fully paid
and nonassessable share of Holdings Common Stock (the "Xxxx Xxxxx Exchange
Ratio"). Shares of Xxxx Xxxxx Common Stock other than those owned by the Xxxxx'x
Companies and other than Xxxx Xxxxx Common Treasury Shares are referred to
herein as "Xxxx Xxxxx Common Shares."
(iii) All Xxxx Xxxxx Common Shares and all Xxxxx'x Common Shares to be
converted into shares of Holdings Common Stock pursuant to this Section 2.1
will, by virtue of the Mergers and without any action on the part of the holders
thereof, cease to be outstanding, be canceled and retired and cease to exist,
and each holder of a certificate previously representing any such Xxxxx'x Common
Shares or Xxxx Xxxxx Common Shares will thereafter cease to have any rights with
respect to such Xxxxx'x Common Shares or Xxxx Xxxxx Common Shares, except the
right to receive, upon the surrender of such certificate in accordance with
Section 2.2, certificates representing the number of shares of Holdings Common
Stock specified
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above and cash in lieu of fractional shares of Holdings Common Stock as
contemplated by Section 2.3 (with respect to the Xxxxx'x Common Shares, the
"Xxxxx'x Common Consideration", with respect to the Xxxx Xxxxx Common Shares,
the "Xxxx Xxxxx Common Consideration" and collectively, the "Common
Consideration").
(iv) Each Xxxxx'x Common Treasury Share, and each share of Xxxxx'x
Common Stock owned by any of the Xxxx Xxxxx Companies, immediately prior to the
Effective Time, will, by virtue of the Mergers and without any action on the
part of the holder thereof, cease to be outstanding, be canceled and retired
without payment of any consideration therefor and cease to exist.
(v) Each Xxxx Xxxxx Common Treasury Share, and each share of Xxxx
Xxxxx Common Stock owned by the Xxxxx'x Companies, immediately prior to the
Effective Time, will, by virtue of the Mergers and without any action on the
part of the holder thereof, cease to be outstanding, be canceled and retired
without payment of any consideration therefor and cease to exist.
(c) Series I Preferred Stock.
(i) As of the Effective Time, by virtue of the Xxxxx'x Merger and
without any action on the part of the holder of any shares of capital stock of
the corporations involved: each share of Series I Preferred Stock, par value
$.01 per share, of Xxxxx'x ("Series I Preferred Stock") issued and outstanding
immediately prior to the Effective Time (other than shares of Series I Preferred
Stock owned by the Xxxx Xxxxx Companies or held in the treasury of Xxxxx'x or
owned by any Xxxxx'x Company ("Xxxxx'x Preferred Treasury Shares")) will, by
virtue of the Mergers and without any action on the part of the holder thereof,
be converted into the right to receive in cash the amount of thirty-three and
one-third cents ($.33 1/3) per share, without the payment of any interest
thereon (the "Preferred Consideration"). Shares of Series I Preferred Stock
other than those owned by the Xxxx Xxxxx Companies and other than the Xxxxx'x
Preferred Treasury Shares are referred to herein as the "Series I Preferred
Shares." Notwithstanding the foregoing provisions of this Section 2.1(c)(i), no
Series I Preferred Shares which constitute Dissenting Shares will be deemed to
be converted into and to represent the right to receive the cash payment
described above and holders of Dissenting Shares, if any, will be entitled to
payment, solely from Xxxxx'x of the appraised value of such Dissenting Shares to
the extent permitted by and in accordance with Section 262 of the DGCL.
(ii) All Series I Preferred Shares to be converted to cash pursuant to
this Section 2.1 will, by virtue of the Mergers and without any action on the
part of the holders thereof, cease to be outstanding, be canceled and retired
and cease to exist, and each holder of a certificate previously representing any
such Series I Preferred Shares will thereafter cease to have any rights with
respect to such Series I Preferred Shares, except the right to receive, upon the
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surrender of such certificate in accordance with Section 2.2, a cash payment in
the amount of the Preferred Consideration.
(iii) At the Effective Time, each Xxxxx'x Preferred Treasury Share and
each Series I Preferred Share owned by any of the Xxxx Xxxxx Companies,
immediately prior to the Effective Time, will, by virtue of the Mergers and
without any action on the part of the holder thereof, cease to be outstanding,
be canceled and retired without payment of any consideration therefor and cease
to exist.
(d) Xxxxx'x and Xxxx Xxxxx Options. (i) At the Effective Time, each
holder of a then outstanding option to purchase Xxxxx'x Common Shares, whether
or not then exercisable or vested in accordance with its terms (the "Xxxxx'x
Options"), which theretofore has been granted under Xxxxx'x Amended and Restated
1989 Stock Option Plan, as amended, (the "Xxxxx'x Stock Option Plan"), shall
become a fully vested and immediately exercisable option to acquire, on
substantially the same terms and conditions as were applicable under such
Xxxxx'x Option immediately prior to the Effective Time, except as otherwise set
forth in this Section 2.1(d), for each Xxxxx'x Common Share subject to such
Xxxxx'x Option the same number of shares of Holdings Common Stock as the holder
of such Xxxxx'x Option would have been entitled to receive in the Mergers had
such holder exercised such Xxxxx'x Option in full immediately prior to the
Effective Time (rounded downward to the nearest whole number), at a price per
share (rounded upward to the nearest whole cent) equal to (i) the aggregate
exercise price for Xxxxx'x Common Shares purchasable pursuant to such Xxxxx'x
Option (without regard to vesting provisions) divided by (ii) the number of full
shares of Holdings Common Stock deemed purchasable pursuant to such Xxxxx'x
Option. Except as set forth in this Section 2.1(d)(i), any and all rights under
any provisions of the Xxxxx'x Stock Option Plan or in any other plan, program or
arrangement providing for the issuance or grant of any other interest in respect
of the capital stock of Xxxxx'x or any Subsidiary thereof shall be canceled as
of the Effective Time except as provided in Section 2.1(e) hereof. As soon as
practicable following the date of this Agreement, and, in any event, prior to
the Effective Time, the Board of Directors of Xxxxx'x (or, if appropriate, any
committee administering the Xxxxx'x Stock Option Plan) and Xxxxx'x shall take
all action necessary to give effect to the provisions of this Section 2.1(d)(i)
and to ensure that no Person shall have any right under any Stock Option Plan
(or any Xxxxx'x Option granted thereunder) following the Effective Time except
for the right to exercise Xxxxx'x Options for shares of Holdings Common Stock as
provided in this paragraph and except as provided in this Section 2.1. As soon
as practicable following the date of this Agreement, and, in any event, prior to
the Effective Time, the Board of Directors of Xxxxx'x (or, if appropriate, any
committee thereof) and Xxxxx'x shall take all action necessary to either
terminate any other plan, program or arrangement with respect to, including any
right to acquire, equity securities of Xxxxx'x, or to amend or modify such other
plans, programs or arrangements to provide for the issuance of shares of
Holdings Common Stock in lieu of equity securities of Xxxxx'x.
8
(ii) At the Effective Time, each holder of a then outstanding option
to purchase Xxxx Xxxxx Common Shares, whether or not then exercisable or vested
in accordance with its terms (the "Xxxx Xxxxx Options"), which theretofore has
been granted under Xxxx Xxxxx'x 1983 Stock Option Plan, as amended and Xxxx
Xxxxx'x Amended 1990 Stock Incentive Plan (together, the "Xxxx Xxxxx Stock
Option Plans"), shall become an option to acquire, on substantially the same
terms and conditions as were applicable under such Xxxx Xxxxx Option immediately
prior to the Effective Time, except as otherwise set forth in this Section
2.1(d), for each Xxxx Xxxxx Common Share subject to such Xxxx Xxxxx Option one
(1) share of Holdings Common Stock. Except as set forth in this Section
2.1(d)(ii), any and all rights under any provisions of the Xxxx Xxxxx Stock
Option Plans or in any other plan, program or arrangement providing for the
issuance or grant of any other interest in respect of the capital stock of Xxxx
Xxxxx or any Subsidiary thereof shall be canceled as of the Effective Time. As
soon as practicable following the date of this Agreement, and, in any event,
prior to the Effective Time, the Board of Directors of Xxxx Xxxxx (or, if
appropriate, any committee administering the Xxxx Xxxxx Stock Option Plans) and
Xxxx Xxxxx shall take all action necessary to give effect to the provisions of
this Section 2.1(d)(ii) and to ensure that no Person shall have any right under
any Xxxx Xxxxx Stock Option Plan (or any Xxxx Xxxxx Option granted thereunder)
following the Effective Time except for the right to exercise Xxxx Xxxxx Options
for shares of Holdings Common Stock as provided in this paragraph and except as
provided in this Section 2.1. As soon as practicable following the date of this
Agreement, and, in any event, prior to the Effective Time, the Board of
Directors of Xxxx Xxxxx (or, if appropriate, any committee thereof) and Xxxx
Xxxxx shall take all action necessary to either terminate any other plan,
program or arrangement with respect to, including any right to acquire, equity
securities of Xxxx Xxxxx or to amend or modify such other plans, programs or
arrangements to provide for the issuance of shares of Holdings Common Stock in
lieu of equity securities of Xxxx Xxxxx.
(e) Xxxxx'x Warrants. At the Effective Time, Xxxxx'x and Xxxx Xxxxx
will cause Holdings to execute an agreement in form reasonably satisfactory to
Xxxx Xxxxx and Xxxxx'x (a "Supplemental Warrant Agreement"), providing that any
holder of a warrant issued pursuant to the Warrant Agreement, dated as of May
23, 1996, between Xxxxx'x and the Partnership (a "Xxxxx'x Warrant"), will have
the right until the expiration date thereof to exercise such Xxxxx'x Warrant at
the existing exercise price for the number of shares of Holdings Common Stock to
which a holder of the number of Xxxxx'x Common Shares that would otherwise have
been deliverable upon the exercise of such Xxxxx'x Warrant would have been
entitled pursuant to Section 2.1(b) hereof if such Xxxxx'x Warrant had been
exercised in full immediately prior to the Effective Time (such exercise price
and number of shares of Holdings Common Stock to thereafter be subject to the
adjustment provisions of the Xxxxx'x Warrant). At the Effective Time, the
Xxxxx'x Warrants shall be exercisable, for 1,934,683 shares, in the aggregate,
of Holdings Common Stock.
9
2.2 Payment for Xxxxx'x Common Shares, Xxxx Xxxxx Common Shares and
Series I Preferred Shares. (a) At the Effective Time, (i) Xxxxx'x and Xxxx Xxxxx
will cause Holdings to make available to such bank or trust company as may be
selected by Xxxx Xxxxx and reasonably acceptable to Xxxxx'x (the "Exchange
Agent"), for the benefit of the holders of Xxxxx'x Common Shares and Xxxx Xxxxx
Common Shares, a sufficient number of certificates representing shares of
Holdings Common Stock to effect the delivery of the aggregate Common
Consideration pursuant to Section 2.1(b), and (ii) Xxxxx'x and Xxxx Xxxxx will
cause Holdings to make available to the Exchange Agent for the benefit of
holders of Series I Preferred Shares, a sufficient amount of cash representing
the amount to effect delivery of the Preferred Consideration pursuant to Section
2.1(c) (the certificates representing shares of Holdings Common Stock and any
cash delivered to the Exchange Agent pursuant to Section 2.3 comprising the
aggregate Common Consideration and the cash delivered to the Exchange Agent
comprising the Preferred Consideration, being hereinafter referred to as the
"Exchange Fund"). The Exchange Agent will, pursuant to irrevocable instructions,
deliver the shares of Holdings Common Stock contemplated to be issued pursuant
to Section 2.1(b) and make the payments contemplated to be paid pursuant to
Section 2.1(c) out of the Exchange Fund, and, except as provided in Section 2.3,
the Exchange Fund will not be used for any other purpose.
(b) Promptly after the Effective Time, the Exchange Agent will mail to
each holder of record of a certificate or certificates which immediately prior
to the Effective Time represented outstanding Xxxxx'x Common Shares or Xxxx
Xxxxx Common Shares (the "Common Certificates") or outstanding Series I
Preferred Shares (the "Preferred Certificates") (i) a form of letter of
transmittal (which will specify that delivery will be effected, and risk of loss
and title to the Common Certificates and the Preferred Certificates will pass,
only upon proper delivery of the Common Certificates or the Preferred
Certificates, as the case may be, to the Exchange Agent) and (ii) instructions
for use in effecting the surrender of the Common Certificates and the Preferred
Certificates for payment therefor.
(c) Upon surrender of Common Certificates for cancellation to the
Exchange Agent, together with such letter of transmittal duly executed and any
other required documents, the holder of such Common Certificates will be
entitled to receive for each Xxxxx'x Common Share represented by such Common
Certificates the Xxxxx'x Common Consideration and for each Xxxx Xxxxx Common
Share represented by such Common Certificates the Xxxx Xxxxx Common
Consideration, and the Common Certificates so surrendered will promptly be
canceled. Until so surrendered, Common Certificates will represent solely the
right to receive the Common Consideration and holders thereof shall not be
holders of record of Holdings. No dividends or other distributions that are
declared payable to the holders of record of shares of Holdings Common Stock
after the Effective Time will be paid to Persons entitled by reason of the
Mergers to receive shares of Holdings Common Stock until such Persons surrender
their Common Certificates. Upon such surrender, there will be paid to the Person
in whose name the shares of Holdings Common Stock are issued any dividends or
other distributions on such shares of
10
Holdings Common Stock which have a record date after the Effective Time and
prior to such surrender, and a payment date prior to such surrender. In no event
will the Persons entitled to receive such dividends or other distributions be
entitled to receive interest on such dividends or other distributions. If any
cash or certificate representing shares of Holdings Common Stock is to be paid
to or issued in a name other than that in which the Common Certificate
surrendered in exchange therefor is registered, it will be a condition of such
exchange that the Common Certificate so surrendered be properly endorsed and
otherwise in proper form for transfer and that the Person requesting such
exchange pay to the Exchange Agent any transfer or other taxes required by
reason of the issuance of certificates for such shares of Holdings Common Stock
in a name other than that of the registered holder of the Common Certificate
surrendered, or establish to the satisfaction of the Exchange Agent that such
tax has been paid or is not applicable. Notwithstanding the foregoing, neither
the Exchange Agent nor any party hereto will be liable to a holder of Xxxxx'x
Common Shares or Xxxx Xxxxx Common Shares for any shares of Holdings Common
Stock or dividends thereon or, in accordance with Section 2.3, cash in lieu of
fractional shares of Holdings Common Stock, delivered to a public official
pursuant to applicable abandoned property, escheat or similar law. The Exchange
Agent will not be entitled to vote or exercise any rights of ownership with
respect to such shares of Holdings Common Stock for the account of the Persons
entitled thereto.
(d) Upon surrender of Preferred Certificates for cancellation to the
Exchange Agent, together with such letter of transmittal duly executed and any
other required documents, the holder of such Preferred Certificates will be
entitled to receive for each of the Series I Preferred Shares represented by
such Preferred Certificates the Preferred Consideration, and the Preferred
Certificates so surrendered will be promptly canceled. Until so surrendered,
Preferred Certificates will represent solely the right to receive the Preferred
Consideration. If the Preferred Consideration is to be paid to a Person other
than that in which the Preferred Certificate surrendered in exchange therefor is
registered, it will be a condition of such exchange that the Preferred
Certificate so surrendered be properly endorsed and otherwise in proper form for
transfer. Notwithstanding the foregoing, neither the Exchange Agent nor any
party hereto will be liable to a holder of Series I Preferred Shares for any
cash delivered to a public official pursuant to applicable abandoned property,
escheat or similar law.
(e) Any portion of the Exchange Fund that remains unclaimed by the
former stockholders of Xxxxx'x or Xxxx Xxxxx for twelve (12) months after the
Effective Time will be delivered to Holdings and any former stockholders of
Xxxxx'x or Xxxx Xxxxx will thereafter look only to Holdings for payment of their
claim for the Xxxxx'x Common Consideration for Xxxxx'x Common Shares or the Xxxx
Xxxxx Common Consideration for Xxxx Xxxxx Common Shares or the Preferred
Consideration for Series I Preferred Shares.
2.3 Fractional Shares. No fractional shares of Holdings Common Stock
will be issued in the Mergers. In lieu of any such fractional securities, each
holder of Xxxxx'x
11
Common Shares or Xxxx Xxxxx Common Shares who would otherwise have been entitled
to a fraction of a share of Holdings Common Stock upon surrender of Common
Certificates for exchange pursuant to this Article 2 will be paid an amount in
cash (without interest), rounded to the nearest cent, determined by multiplying
(a) the per share last sale price of Holdings Common Stock (as reported on the
NYSE Composite Transactions Reporting System) on the date of the Effective Time
(or, if Holdings Common Stock does not trade on the New York Stock Exchange,
Inc. (the "NYSE") on such date, the first date of trading of Holdings Common
Stock on the NYSE after the Effective Time) by (b) the fractional interest to
which such holder otherwise would be entitled. Promptly upon request from the
Exchange Agent, Holdings will make available to the Exchange Agent the cash
necessary for this purpose.
2.4 Dissenting Shares. (a) Notwithstanding the provisions of Section
2.1 or any other provision of this Agreement to the contrary, the shares of
Class A Common Stock that are also Xxxxx'x Common Shares and the Series I
Preferred Shares that are issued and outstanding immediately prior to the
Effective Date and are held by stockholders who have not voted such shares of
Class A Common Stock or Series I Preferred Shares, as the case may be, in favor
of the adoption of this Agreement and who properly demand appraisal of such
shares of Class A Common Stock or such Series I Preferred Shares, in accordance
with Section 262 of the DGCL (the "Dissenting Shares"), will not be converted as
provided in Section 2.1(b) or 2.1(c), as the case may be, at or after the
Effective Time unless and until the holder of such Dissenting Shares fails to
perfect or effectively withdraws or loses such right to appraisal and payment
under the DGCL. If a holder of Dissenting Shares so fails to perfect or
effectively withdraws or loses such right to appraisal and payment, then, as of
the Effective Time or the occurrence of such event, whichever last occurs, such
holder's Dissenting Shares will be converted into and represent solely the right
provided in Section 2.1(b) or 2.1(c), as the case may be.
(b) Xxxxx'x will give Xxxx Xxxxx (i) prompt written notice of any
written demands for appraisal, withdrawals of demands for appraisal and any
other instruments served pursuant to Section 262 of the DGCL and received by
Xxxxx'x and (ii) the opportunity to direct all negotiations and proceedings with
respect to demands for appraisal under Section 262 of the DGCL. Xxxxx'x will not
voluntarily make any payment with respect to any demands for appraisal and will
not, except with the prior written consent of Xxxx Xxxxx, settle or offer to
settle any such demands.
2.5 No Transfer after the Effective Time. No transfers of Xxxxx'x
Common Shares or Series I Preferred Shares will be made on the stock transfer
books of Xxxxx'x, and no transfers of Xxxx Xxxxx Common Shares will be made on
the stock transfer books of Xxxx Xxxxx, after the close of business on the day
prior to the date of the Effective Time.
12
3. Representations and Warranties of Xxxxx'x
Xxxxx'x hereby represents and warrants to Xxxx Xxxxx as follows:
3.1 Existence; Good Standing; Corporate Authority. Xxxxx'x 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 power and authority
to own and operate its businesses as presently conducted. Xxxxx'x 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 Xxxxx'x and any of its
Subsidiaries to be so qualified as would not, individually or in the aggregate,
have a Material Adverse Effect. Xxxxx'x has previously provided Xxxx Xxxxx with
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.
3.2 Authorization; Validity and Effect of Agreement. Xxxxx'x has the
requisite corporate power and authority to execute, deliver and perform its
obligations under this Agreement, each other document or agreement to be
executed by Xxxxx'x under this Agreement (each a "Xxxxx'x Transaction Document")
and to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement by Xxxxx'x and the performance by
Xxxxx'x of its obligations hereunder, the execution and delivery of each of the
Xxxxx'x Transaction Documents by Xxxxx'x and the performance of its obligations
thereunder and the consummation of the transactions contemplated hereby and
thereby have been duly authorized by the Board of Directors of Xxxxx'x and all
other necessary corporate action on the part of Xxxxx'x, other than the adoption
and approval of this Agreement by the stockholders of Xxxxx'x, and no other
corporate proceedings on the part of Xxxxx'x are necessary to authorize this
Agreement, the Xxxxx'x Transaction Documents and the transactions contemplated
hereby and thereby and the execution, delivery and performance of the Voting
Agreement by the parties thereto. The Board of Directors of Xxxxx'x has approved
for the purposes of Section 251(b) of the DGCL the agreement of merger contained
in this Agreement and the Xxxxx'x Merger. This Agreement has been duly and
validly executed and delivered by Xxxxx'x and constitutes a legal, valid and
binding obligation of Xxxxx'x, enforceable against it in accordance with its
terms, except to the extent that such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting the enforcement of creditors' rights generally or by general
principles of equity. Each Xxxxx'x Transaction Document has been or, as of the
Effective Time, will have been, duly and validly authorized, executed and
delivered by Xxxxx'x, and constitutes or will constitute as of such time a
legally valid and binding obligation of Xxxxx'x, enforceable against it in
accordance with its terms, except to the extent that such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
13
moratorium or other laws affecting the enforcement of creditors' rights
generally or by general principles of equity.
3.3 Capitalization. The authorized capital stock of Xxxxx'x consists
of 20,000,000 shares of Class A Common Stock, 100,000,000 shares of Class B
Common Stock, 20,000,000 shares of Class C Common Stock and 85,000,000 shares of
preferred stock having a par value of $.01 per share, ("Xxxxx'x Preferred
Stock") 34,524,579 shares of which have been designated as Series I Preferred
Stock. As of the date hereof, 3,855,600 shares of Class A Common Stock (none of
which are held in Xxxxx'x treasury), 11,949,630 shares of Class B Common Stock
(none of which are held in Xxxxx'x treasury), no shares of Class C Common Stock,
9,956,749 shares of Series I Preferred Stock (none of which are held in Xxxxx'x
treasury) and no other shares of Xxxxx'x Preferred Stock are issued and
outstanding. All of the issued and outstanding shares of Xxxxx'x Common Stock
and Series I Preferred Stock are validly issued, fully paid and non-assessable.
As of the date hereof, except as otherwise disclosed in Section 3.3 of the
Disclosure Schedule, there are no existing options, warrants, calls,
subscriptions, convertible securities or other securities, agreements,
commitments, or obligations which would require Xxxxx'x to issue or sell shares
of Xxxxx'x Common Stock, Xxxxx'x Preferred Stock or any other equity securities,
or securities convertible into or exchangeable or exercisable for shares of
Xxxxx'x Common Stock, Xxxxx'x Preferred Stock or any other equity securities of
Xxxxx'x or any of its Subsidiaries. Except as set forth in Section 3.3 of the
Disclosure Schedule, Xxxxx'x has no commitments or obligations to purchase or
redeem any shares of Xxxxx'x Common Stock or (except as specified in Xxxxx'x
certificate of incorporation with respect to its Series I Preferred Stock)
Xxxxx'x Preferred Stock.
3.4 Subsidiaries. The only Subsidiaries of Xxxxx'x are those set forth
in Section 3.4 of the Disclosure Schedule. All of the outstanding shares of
capital stock and other ownership interests of each of Xxxxx'x Subsidiaries are
validly issued, fully paid, non-assessable and free of preemptive rights or
rights of first refusal. Except as set forth in Section 3.4 of the Disclosure
Schedule, Xxxxx'x 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 Xxxxx'x
or which would require any Subsidiary of Xxxxx'x 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.
3.5 Other Interests. Except as set forth in Section 3.5 of the
Disclosure Schedule, neither Xxxxx'x nor any of Xxxxx'x Subsidiaries owns,
directly or indirectly, any interest or investment (whether equity or debt) in
any corporation, partnership, limited liability company, joint venture,
business, trust or other Person (other than Xxxxx'x Subsidiaries).
14
3.6 No Conflict; Required Filings and Consents. (a) Except as set
forth in Section 3.6(a) of the Disclosure Schedule, neither the execution and
delivery of this Agreement and the Xxxxx'x Transaction Documents, nor the
performance by Xxxxx'x of its obligations hereunder and thereunder, nor the
consummation of the transactions contemplated hereby or thereby, will: (i)
conflict with Xxxxx'x 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 Xxxxx'x 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 Xxxxx'x or any of its Subsidiaries, or result in the creation or
imposition of any lien upon any properties, assets or business of Xxxxx'x 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 Xxxxx'x or any
of its Subsidiaries is a party or by which Xxxxx'x 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 Xxxxx'x or any of its Subsidiaries to purchase or
repurchase any notes, bonds or instruments of any kind except, in each case, for
such violations, conflicts, defaults or other occurrences which, individually or
in the aggregate, would not have, and would not reasonably be expected to 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
certificates of merger pursuant to the DGCL, or (iv) with respect to matters set
forth in Sections 3.6(a) or 3.6(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
or entity (including, without limitation, any landlord under any lease) is
required to be made or obtained by Xxxxx'x or its Subsidiaries in connection
with the execution, delivery and performance of this Agreement, the Xxxxx'x
Transaction Documents and the consummation of the transactions contemplated
hereby and thereby 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.
3.7 Compliance. Except as set forth in Section 3.7 of the Disclosure
Schedule, Xxxxx'x 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
15
Laws), except to the extent that failure to comply would not, individually or in
the aggregate, have a Material Adverse Effect. Except as set forth in Section
3.7 of the Disclosure Schedule, to the best knowledge of Xxxxx'x, neither
Xxxxx'x 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. Xxxxx'x
and its Subsidiaries have all material 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
remain in effect after the Effective Time, except for such failures to remain
effective that would not, individually or in the aggregate, have a Material
Adverse Effect.
3.8 SEC Documents. (a) Xxxxx'x has delivered or made available to Xxxx
Xxxxx 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 "Xxxxx'x SEC Reports"). As of their respective dates, the
Xxxxx'x SEC Reports and any registration statements, reports, forms, proxy or
information statements and other documents filed by Xxxxx'x 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 Xxxxx'x included in or
incorporated by reference into the Xxxxx'x SEC Reports (including the related
notes and schedules) presents fairly, in all material respects, the consolidated
financial position of Xxxxx'x and its consolidated Subsidiaries as of its date,
and each of the consolidated statements of income, retained earnings and cash
flows of Xxxxx'x included in or incorporated by reference into the Xxxxx'x 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 Xxxxx'x 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) Neither Xxxxx'x 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 Xxxxx'x 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
16
balance sheet of Xxxxx'x as of December 28, 1996 and (ii) liabilities or
obligations arising in the ordinary course of business (including trade
indebtedness) since December 28, 1996 which would not, individually or in the
aggregate, have a Material Adverse Effect.
3.9 Litigation. Except as set forth in Section 3.9 of the Disclosure
Schedule or the Xxxxx'x SEC Reports, there is no Action instituted, pending or,
to the best knowledge of Xxxxx'x, threatened, which, if adversely decided,
would, individually or in the aggregate, directly or indirectly, have a Material
Adverse Effect, nor is there any outstanding judgment, decree, or injunction or
any statute, rule or order of any domestic or foreign court, governmental
department, commission or agency which has or will have, individually or in the
aggregate, any Material Adverse Effect.
3.10 Absence of Certain Changes. Except as set forth in Section 3.10
of the Disclosure Schedule or the Xxxxx'x SEC Reports and except for the
transactions expressly contemplated hereby, since December 28, 1996, Xxxxx'x 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
change in Xxxxx'x' business, operations, condition (financial or otherwise),
results of operations, prospects, assets, liabilities, working capital or
reserves, except for changes contemplated hereby or changes which have not,
individually or in the aggregate, had a Material Adverse Effect. Except as set
forth in Section 3.10 of the Disclosure Schedule or the Xxxxx'x SEC Reports,
from December 28, 1996 through the date of this Agreement, neither Xxxxx'x nor
any of its Subsidiaries has taken any of the actions prohibited by Section 5.2
hereof.
3.11 Taxes. Except as set forth in Section 3.11 of the Disclosure
Schedule:
(a) Xxxxx'x 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 material respects, and (B) duly paid in full or made
provision in accordance with GAAP (or there has been paid or provision has been
made on their behalf) for the payment of all Taxes for all periods (or portions
thereof) ending on or prior to the Closing Date;
(b) Xxxxx'x and its Subsidiaries have complied in all material
respects with all applicable laws, rules and regulations relating to the payment
and withholding of Taxes and have, within the time and the manner prescribed by
law, withheld and paid over to the proper governmental authorities all amounts
required to be so withheld and paid over under applicable laws;
(c) No federal, state, local or foreign audits or other administrative
proceedings or court proceedings are presently pending with regard to any Taxes
or Tax Returns of Xxxxx'x or its Subsidiaries and neither Xxxxx'x nor its
Subsidiaries has received a written notice of any pending audits or proceedings;
17
(d) Neither the Internal Revenue Service nor any other taxing
authority (whether domestic or foreign) has asserted, or to the best knowledge
of Xxxxx'x, is threatening to assert, against Xxxxx'x or any of its Subsidiaries
any deficiency or claim for Taxes;
(e) There are no material liens for Taxes upon any Property or Assets
of Xxxxx'x 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;
(f) Neither Xxxxx'x nor any of its Subsidiaries has agreed to or is
required to make any adjustment under Section 481(a) of the Code;
(g) The applicable statutes of limitation for the assessment of
federal income Taxes upon Xxxxx'x and its Subsidiaries for all periods have
expired, except as set forth on Section 3.11 of the Disclosure Schedule;
(h) Neither Xxxxx'x nor any of its Subsidiaries is a party to any
material agreement providing for the allocation or sharing of Taxes;
(i) Neither Xxxxx'x nor any of its Subsidiaries has, with regard to
any assets or property held or acquired by any of them, filed a consent to the
application of Section 341(f) of the Code, or 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 Xxxxx'x or any of its
Subsidiaries; and
(j) Neither Xxxxx'x nor any of its Subsidiaries is obligated, or will
be obligated by reason of the transaction, to pay compensation to any employee
not deductible by reason of Sections 280G or 162(m) of the Code.
3.12 Employee Benefit Plans.
(a) Section 3.12 of the Disclosure Schedule contains a complete list
of all Employee Plans of Xxxxx'x and its Subsidiaries. True and complete copies
or descriptions of the Employee Plans of Xxxxx'x 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
Xxxx Xxxxx and its counsel.
(b) Except as described in Section 3.12 of the Disclosure Schedule,
each of the Employee Plans of Xxxxx'x and of its Subsidiaries (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 would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect.
18
(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
Xxxxx'x Employee Plan (other than any Multiemployer Plan) which would,
individually or in the aggregate, have a Material Adverse Effect.
(d) No litigation or administrative or other proceeding involving any
Employee Plans of Xxxxx'x or any of its ERISA Affiliates (other than any
Multiemployer Plan) has occurred or are threatened where an adverse
determination would, individually or in the aggregate, have a Material Adverse
Effect.
(e) Except as set forth in Section 3.12 of the Disclosure Schedule,
neither Xxxxx'x nor any ERISA Affiliate of Xxxxx'x has incurred any withdrawal
liability with respect to any Multiemployer Plan under Title IV of ERISA which
remains unsatisfied in an amount which would, individually or in the aggregate,
have a Material Adverse Effect.
(f) All of the Employee Plans of Xxxxx'x or its Subsidiaries (other
than any Multiemployer Plan) can be terminated by Xxxxx'x. Xxxxx'x 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 Xxxxx'x or its Subsidiaries, on or prior to the Closing Date, would not
subject Xxxxx'x to any material liability under Title IV of ERISA.
(g) Neither Xxxxx'x 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 Disclosure Schedule.
(h) The transactions contemplated by this Agreement will not cause the
occurrence of a situation described in (b), (c), (d) or (e) as of or after the
Effective Time.
3.13 State Takeover Statutes. The Board of Directors of Xxxxx'x has
approved this Agreement and the transactions contemplated hereby, and the
execution, delivery and performance of the Voting Agreement for purposes of
Section 203 of the DGCL and any other "fair price", "merger moratorium",
"control share acquisition" or other anti-takeover statute or similar statute or
regulation that might be applicable and such approval is sufficient to render
inapplicable to this Agreement, the Voting Agreement and the transactions
contemplated hereby and thereby, the restrictions on business combinations
contained in Section 203 of the DGCL.
3.14 No Brokers. Except (a) as set forth in Section 3.14 of the
Disclosure Schedule, including the fee to be paid to Yucaipa LLC in connection
with certain financial advisory services and with the cancellation of the Old
Management Agreement, (b) fees to be
19
paid to Xxxxxxxxx, Lufkin & Xxxxxxxx Securities Corporation (the arrangements of
which have been disclosed to Xxxx Xxxxx prior to the date hereof) and (c) the
fees to be paid pursuant to the New Management Agreement, no broker, finder,
investment banker, or other person or firm is entitled to any brokerage,
finder's or other fee or commission in connection with this Agreement or the
transactions contemplated hereby based upon arrangements made by or on behalf of
Xxxxx'x, any of its Subsidiaries or any of their respective directors, officers
or employees.
3.15 Opinion of Financial Advisor. Xxxxx'x has received the opinion of
Xxxxxxxxx, Lufkin & Xxxxxxxx Securities Corporation to the effect that, as of
the date hereof, the Xxxxx'x Exchange Ratio is fair to the holders of Xxxxx'x
Common Stock from a financial point of view. Xxxxx'x has delivered to Xxxx Xxxxx
a true, complete and correct copy of such opinion.
3.16 No Other Agreements to Sell Xxxxx'x or its Assets. Except as set
forth in Section 3.16 of the Disclosure Schedule, Xxxxx'x has no legal
obligation, absolute or contingent, to any other Person to sell any material
portion of the Assets of Xxxxx'x, to sell the capital stock or other ownership
interests of Xxxxx'x or any of its Subsidiaries, or to effect any merger,
consolidation or other reorganization of Xxxxx'x or any of its Subsidiaries or
to enter into any agreement with respect thereto. As of the date hereof, Xxxxx'x
is not engaged, directly or indirectly, in any discussions or negotiations with
any other party with respect to an Acquisition Proposal.
3.17 Assets.
(a) Except as set forth in Section 3.17(a) of the Disclosure Schedule,
Xxxxx'x and its Subsidiaries have good and marketable title to or a valid
leasehold estate in all of the properties and assets, real or personal,
reflected on Xxxxx'x balance sheet at December 28, 1996 (except for properties
or assets subsequently sold in the ordinary course of business consistent with
past practice), and 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
Xxxxx'x or any of its Subsidiaries free and clear of all Encumbrances (other
than Permitted Encumbrances).
(b) Section 3.17(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 Xxxxx'x 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 Xxxxx'x,
threatened condemnation or similar proceedings relating to any of the Properties
or Facilities of Xxxxx'x and its Subsidiaries except for such proceedings which
would not, individually or in the aggregate, have a Material Adverse Effect.
20
(d) Section 3.17(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 Xxxxx'x or any of its Subsidiaries and involving any
annual expense to Xxxxx'x or any such Subsidiary in excess of $250,000 and not
cancelable (without material liability) within two (2) years.
(e) Section 3.17(e) of the Disclosure Schedule indicates with respect
to each Lease entered into by Xxxxx'x or any of its Subsidiaries, as a tenant or
subtenant: (i) the term (including renewal options), (ii) current fixed rent,
and (iii) any Lease requiring consent or approval of the lessor for the
transaction contemplated hereby or permitting (or granting an option to) the
lessor to terminate the Lease or option terms or requiring payment of
consideration to the lessor (other than immaterial processing fees).
(f) Xxxxx'x 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 Xxxxx'x or any of its Subsidiaries under any Lease, in
each case except where the failure to perform would not, individually or in the
aggregate, have a Material Adverse Effect.
(g) To the best knowledge of Xxxxx'x, each of the Leases is valid,
binding and enforceable in accordance with its terms 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.
(h) Subject to the provisions of Section 3.18 below and except as
shown on Section 3.17(h) of the Disclosure Schedule, Xxxxx'x has delivered to
Xxxx Xxxxx, 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).
3.18 Contracts and Commitments. Section 3.18 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 Xxxxx'x 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 Xxxxx'x, and any other Contracts with or for the benefit of
Xxxxx'x or its affiliates, and all severance, change in control or similar
arrangements with any officers, employees or agents of Xxxxx'x that will result
in any obligation (absolute or contingent) of Xxxxx'x or
21
any of its Subsidiaries to make any payment to any officers, employees or agents
of Xxxxx'x 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 $150,000 which are not
cancelable (without material penalty, cost or other liability) within thirty
(30) days;
(e) promissory notes, loans, agreements, indentures, evidences of
indebtedness or other instruments relating to the lending of money, whether as
borrower, lender or guarantor, in excess of $250,000;
(f) Contracts containing covenants limiting the freedom of Xxxxx'x or
any of its Subsidiaries to engage in any line of business or compete with any
Person or operate at any location;
(g) powers of attorney;
(h) 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 Xxxxx'x or its Subsidiaries;
(i) any other Contract, whether similar or dissimilar to the
foregoing, which would be material to Xxxxx'x and its Subsidiaries taken as a
whole;
(j) any Contract with any federal, state or local government; and
(k) Contracts involving annual expenditures or liabilities in excess
of $250,000.
True copies of the written Contracts identified in Section 3.18 of the
Disclosure Schedule have been delivered or made available to Xxxx Xxxxx.
3.19 Absence of Breaches or Defaults. Except as set forth in Section
3.19 of the Disclosure Schedule, neither Xxxxx'x nor any of its Subsidiaries is
and, to the best knowledge
22
of Xxxxx'x, no other party is in default under, or in breach or violation of,
any Contract identified on Section 3.18 of the Disclosure Schedule and, to the
best knowledge of Xxxxx'x, 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 3.18 of the Disclosure Schedule, except for defaults,
breaches, violations or events which, individually or in the aggregate, would
not have a Material Adverse Effect. Each of the Contracts identified on Section
3.18 of the Disclosure Schedule is valid, binding and enforceable in accordance
with its terms 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. No event has occurred
which either entitles, or would, on notice or lapse of time or both, entitle the
holder of any indebtedness affecting Xxxxx'x or any of its Subsidiaries (except
for the execution of this Agreement, the Voting Agreement and the Xxxxx'x
Transaction Agreements) to accelerate, or which does accelerate, the maturity of
any indebtedness affecting Xxxxx'x or any of its Subsidiaries, except as set
forth in Section 3.19 of the Disclosure Schedule.
3.20 Labor Matters.
(a) Section 3.20(a) of the Disclosure Schedule contains a complete
list of all organizations representing the employees of Xxxxx'x or any of its
Subsidiaries. There is no strike, work stoppage or labor disturbance pending or,
to the best knowledge of Xxxxx'x, threatened, which involves any employees of
Xxxxx'x or any of its Subsidiaries.
(b) Section 3.20(b) of the Disclosure Schedule contains a list of all
material unfair employment or labor practice charges which are presently
pending, as well as a description and the status of each, which to the best
knowledge of Xxxxx'x have been filed with any governmental authority by or on
behalf of any employee of Xxxxx'x or any of its Subsidiaries and a list of all
material employment-related litigation, including, without limitation,
arbitrations or administrative proceedings which are presently pending (together
with a description and the status of each such litigation or proceeding), filed
by or on behalf of any former, current or prospective employee of Xxxxx'x or any
of its Subsidiaries.
(c) Except as described in Sections 3.9, 3.20(a) and (b) of the
Disclosure Schedule, there are not presently pending or, to the best knowledge
of Xxxxx'x, threatened, against Xxxxx'x or any of its Subsidiaries any material
claims by any governmental authority, labor organization, or any former, current
or prospective employee alleging that Xxxxx'x or any such employer has violated
any applicable laws respecting employment practices. Xxxxx'x 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, except as described in Section
23
3.20(d) of the Disclosure Schedule, has timely filed all regular federal and
state employment related reports and other documents.
(d) Except as described in Section 3.20(d) of the Disclosure Schedule,
(i) Xxxxx'x has paid, or caused to be paid, in full to all employees of Xxxxx'x
and its Subsidiaries all wages, salaries, commissions, bonuses, benefits and
other compensation due to such employees or otherwise arising under any policy,
practice, agreement, plan, program, statute or other law, (ii) neither Xxxxx'x
nor any of its Subsidiaries is liable for any severance pay or other payments to
any employee or former employee arising from the termination of employment, nor
xxxx Xxxxx'x or its Subsidiaries have any liability under any benefit or
severance policy, practice, agreement, arrangement, plan, or program, including,
without limitation, any change in control agreement, arrangement, plan or
program which exists or arises, or may be deemed to exist or arise, as a result
of or in connection with the transactions contemplated hereunder or as a result
of the termination by Xxxxx'x or such Subsidiaries or any successor thereto of
any Persons employed on or prior to the Closing Date, (iii) Xxxxx'x and its
Subsidiaries have not closed any plant or facility, effectuated any layoffs of
employees or implemented any early retirement, separation or window program
within the past year, nor has Xxxxx'x or its Subsidiaries planned or announced
any such future action or program for the future, and (iv) Xxxxx'x is in
compliance with its obligations, if any, pursuant to the Worker Adjustment and
Retraining Notification Act of 1988, and all other notification and bargaining
obligations arising under any collective bargaining agreement, statute or
otherwise.
3.21 Insurance. All material fire and casualty, general liability,
business interruption, product liability, and sprinkler and water damage
insurance policies maintained by Xxxxx'x or any of its Subsidiaries are with
reputable insurance carriers, provide full and adequate coverage for all normal
risks incident to the business of Xxxxx'x and its Subsidiaries and their
respective Properties and Assets, and are in character and amount at least
equivalent to that carried by Persons engaged in similar businesses and
substantially equivalent 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.
3.22 Affiliate Transactions. Except as set forth in Section 3.22 of
the Disclosure Schedule or in the Xxxxx'x SEC Reports, from December 30, 1995
through the date of this Agreement there have been no transactions, agreements,
arrangements or understandings between Xxxxx'x or any of its Subsidiaries, on
the one hand, and Xxxxx'x affiliates (other than wholly owned Subsidiaries of
Xxxxx'x) 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.
3.23 Environmental Matters. Except as set forth in Section 3.23 of the
Disclosure Schedule, each of the Properties and Facilities of Xxxxx'x or any of
its Subsidiaries has been maintained by Xxxxx'x in compliance with all
Environmental Laws, except where the
24
failure to so comply, or any aggregation of such failures, would not,
individually or in the aggregate, have a Material Adverse Effect. Except as set
forth in Section 3.23 of the Disclosure Schedule, to the best knowledge of
Xxxxx'x, 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 Properties, which, individually
or in the aggregate, could result in any damage, claim, or liability to or
against Xxxxx'x 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 Xxxxx'x' business and/or operations in the
vicinity of any of the Properties and/or any activity or operation formerly
conducted by any Person on the 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 3.23 of the Disclosure
Schedule, Xxxxx'x 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 3.23 of the Disclosure Schedule, (i) there are no
existing uncured notices of noncompliance, notices of violation, administrative
actions, or lawsuits against Xxxxx'x or any of its Subsidiaries arising under
Environmental Laws or relating to the use, handling, storage, treatment,
recycling, generation, or release of Hazardous Materials at any of the
Properties, nor has Xxxxx'x 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 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 Xxxxx'x 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) except as set forth in
Section 3.23 of the Disclosure Schedule, no 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.
3.24 Information in Joint Proxy Statement/Prospectus and Form S-4.
Information supplied by Xxxxx'x or any of its affiliates for inclusion or
incorporation by reference in (i) the Joint Proxy Statement/Prospectus (as
hereinafter defined) (or any amendment thereof or supplement thereto), at the
date mailed to Xxxx Xxxxx'x and to Xxxxx'x stockholders and at the time of the
respective meetings of the stockholders of Xxxx Xxxxx and of the
25
stockholders of Xxxxx'x contemplated hereby or (ii) the Form S-4 (as hereinafter
defined) at any time the Form S-4 is filed with the SEC, at any time it is
amended or supplemented and at any time it becomes effective under the
Securities Act, will not 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.
3.25 Vote Required. The approval by a majority of the voting power
represented by the outstanding shares of Xxxxx'x Common Stock and Series I
Preferred Stock (with holders of shares of Class B Common Stock entitled to one
vote per share and holders of shares of Class A Common Stock and Series I
Preferred Stock entitled to 10 votes per share) (the "Xxxxx'x Stockholder
Approval") is the only vote of the holders of any class or series of Xxxxx'x
capital stock necessary to approve the transactions contemplated by this
Agreement.
3.26 Standstill and Confidentiality Agreements. Except as set forth in
Section 3.26 of the Disclosure Schedule, neither Xxxxx'x nor any of its
Subsidiaries is a party to any confidentiality or standstill agreement other
than confidentiality agreements with employees, consultants and providers or
purchasers of goods and services entered into in the ordinary course of
business.
4. Representations and Warranties of Xxxx Xxxxx.
Xxxx Xxxxx hereby represents and warrants to Xxxxx'x as follows:
4.1 Existence; Good Standing; Corporate Authority. Xxxx Xxxxx 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 power and
authority to own and operate its businesses as presently conducted. Xxxx Xxxxx
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 Xxxx
Xxxxx and any of its Subsidiaries to be so qualified as would not, individually
or in the aggregate, have a Material Adverse Effect. Xxxx Xxxxx has previously
provided Xxxxx'x with 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.
4.2 Authorization; Validity and Effect of Agreement. Xxxx Xxxxx has
the requisite corporate power and authority to execute, deliver and perform its
obligations under this Agreement, each other document or agreement to be
executed by Xxxx Xxxxx under this Agreement (each a "Xxxx Xxxxx Transaction
Document") and the Option Agreement and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of
26
this Agreement by Xxxx Xxxxx and the performance by Xxxx Xxxxx of its
obligations hereunder, the execution and delivery of each of the Xxxx Xxxxx
Transaction Documents by Xxxx Xxxxx and the performance of its obligations
thereunder and the consummation of the transactions contemplated hereby and
thereby have been duly authorized by the Board of Directors of Xxxx Xxxxx and
all other necessary corporate action on the part of Xxxx Xxxxx, other than the
adoption and approval of this Agreement by the stockholders of Xxxx Xxxxx, and
no other corporate proceedings on the part of Xxxx Xxxxx are necessary to
authorize this Agreement, the Xxxx Xxxxx Transaction Documents and the
transactions contemplated hereby and thereby. The Board of Directors of Xxxx
Xxxxx has approved for the purposes of Section 251(b) of the DGCL the agreement
of merger contained in this Agreement and the Xxxx Xxxxx Merger. This Agreement
has been duly and validly executed and delivered by Xxxx Xxxxx and constitutes a
legal, valid and binding obligation of Xxxx Xxxxx, enforceable against it in
accordance with its terms, except to the extent that such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws affecting the enforcement of creditors' rights generally or by
general principles of equity. Each Xxxx Xxxxx Transaction Document has been or,
as of the Effective Time, will have been, duly and validly authorized, executed
and delivered by Xxxx Xxxxx, and constitutes or will constitute as of such time
a legally valid and binding obligation of Xxxx Xxxxx, enforceable against it in
accordance with its terms, except to the extent that such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws affecting the enforcement of creditors' rights generally or by
general principles of equity.
4.3 Capitalization. The authorized capital stock of Xxxx Xxxxx
consists of (i) 100,000,000 shares of Xxxx Xxxxx Common Stock and (ii) 5,000,000
shares of preferred stock, par value $.01 per share ("Xxxx Xxxxx Preferred
Stock"). As of the date hereof, 26,422,292 shares of Xxxx Xxxxx Common Stock and
no shares of Xxxx Xxxxx Preferred Stock are issued and outstanding; 2,200,200
shares of Xxxx Xxxxx Common Stock are held in Xxxx Xxxxx'x treasury as of the
date hereof. All of the issued and outstanding shares of Xxxx Xxxxx Common Stock
and Xxxx Xxxxx Preferred Stock are validly issued, fully paid and
non-assessable. Except as set forth on Section 4.3 of the 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 Xxxx Xxxxx to issue or sell
shares of Xxxx Xxxxx Common Stock, Xxxx Xxxxx Preferred Stock or any other
equity securities, or securities convertible into or exchangeable or exercisable
for shares of Xxxx Xxxxx Common Stock, Xxxx Xxxxx Preferred Stock or any other
equity securities of Xxxx Xxxxx as of the date hereof. Except as set forth on
Section 4.3 of the Disclosure Schedule, Xxxx Xxxxx has no commitments or
obligations to purchase or redeem any shares of capital stock of any class of
Xxxx Xxxxx Common Stock or Xxxx Xxxxx Preferred Stock.
4.4 Subsidiaries. The only Subsidiaries of Xxxx Xxxxx are those set
forth in Section 4.4 of the Disclosure Schedule. All of the outstanding shares
of capital stock and other
27
ownership interests of each of Xxxx Xxxxx'x Subsidiaries are validly issued,
fully paid, non-assessable and free of preemptive rights or rights of first
refusal. Except as set forth in Section 4.4 of the Disclosure Schedule, Xxxx
Xxxxx 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 Xxxx Xxxxx or which would require
any Subsidiary of Xxxx Xxxxx 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.
4.5 Other Interests. Except as set forth in Section 4.5 of the
Disclosure Schedule, neither Xxxx Xxxxx nor any of Xxxx Xxxxx'x Subsidiaries
owns, directly or indirectly, any interest or investment (whether equity or
debt) in any corporation, partnership, limited liability company, joint venture,
business, trust or other Person (other than Xxxx Xxxxx'x Subsidiaries).
4.6 No Conflict; Required Filings and Consents. (a) Except as set
forth in Section 4.6(a) of the Disclosure Schedule, neither the execution and
delivery of this Agreement and the Xxxx Xxxxx Transaction Documents, nor the
performance by Xxxx Xxxxx of its obligations hereunder and thereunder, nor the
consummation of the transactions contemplated hereby or thereby, will: (i)
conflict with Xxxx Xxxxx'x certificate of incorporation or bylaws; (ii) assuming
satisfaction of the requirements set forth in Section 4.6(b) below, violate any
statute, law, ordinance, rule or regulation, applicable to Xxxx Xxxxx 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 Xxxx Xxxxx or any of its Subsidiaries, or result in the creation
or imposition of any lien upon any properties, assets or business of Xxxx Xxxxx
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 Xxxx
Xxxxx or any of its Subsidiaries is a party or by which Xxxx Xxxxx 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 Xxxx Xxxxx or any of its
Subsidiaries to purchase or repurchase any notes, bonds or instruments of any
kind except, in each case, for such violations, conflicts, defaults or other
occurrences which, individually or in the aggregate, would not have, and would
not reasonably be expected to 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 XXX
00
Xxx, (xxx) for the filing of certificates of merger pursuant to the DGCL, or
(iv) with respect to matters set forth in Sections 4.6(a) or 4.6(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 or entity (including, without limitation, any
landlord under any lease) is required to be made or obtained by Xxxx Xxxxx or
its Subsidiaries in connection with the execution, delivery and performance of
this Agreement, the Xxxx Xxxxx Transaction Documents and the consummation of the
transactions contemplated hereby and thereby 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.
4.7 Compliance. Except as set forth in Section 4.7 of the Disclosure
Schedule, Xxxx Xxxxx 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. Except as set forth in Section 4.7 of
the Disclosure Schedule, to the best knowledge of Xxxx Xxxxx, neither Xxxx Xxxxx
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. Xxxx
Xxxxx and its Subsidiaries have all material 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
remain in effect after the Effective Time, except for such failure to remain
effective that would not, individually or in the aggregate, have a Material
Adverse Effect.
4.8 SEC Documents. (a) Xxxx Xxxxx has delivered or made available to
Xxxxx'x 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 SEC since January 1, 1996 (collectively, the "Xxxx Xxxxx SEC
Reports"). As of their respective dates, the Xxxx Xxxxx SEC Reports and any
registration statements, reports, forms, proxy or information statements and
other documents filed by Xxxx Xxxxx 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 Xxxx Xxxxx included in
or incorporated by reference into the Xxxx Xxxxx SEC Reports (including the
related notes and
29
schedules) presents fairly, in all material respects, the consolidated financial
position of Xxxx Xxxxx and its consolidated Subsidiaries as of its date, and
each of the consolidated statements of income, retained earnings and cash flows
of Xxxx Xxxxx included in or incorporated by reference into the Xxxx Xxxxx 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 Xxxx Xxxxx 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) Neither Xxxx Xxxxx 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 Xxxx Xxxxx 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 Xxxx Xxxxx as of February 1, 1997 and (ii) 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.
4.9 Litigation. Except as set forth in Section 4.9 of the Disclosure
Schedule or the Xxxx Xxxxx SEC Reports, there is no Action instituted, pending
or, to the best knowledge of Xxxx Xxxxx, threatened, which, if adversely
decided, would, individually or in the aggregate, directly or indirectly, have a
Material Adverse Effect, nor is there any outstanding judgment, decree, or
injunction or any statute, rule or order of any domestic or foreign court,
governmental department, commission or agency which has or will have,
individually or in the aggregate, any Material Adverse Effect.
4.10 Absence of Certain Changes. Except as set forth in Section 4.10
of the Disclosure Schedule or the Xxxx Xxxxx SEC Reports and except for the
transactions expressly contemplated hereby, since February 1, 1997, Xxxx Xxxxx
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 change in Xxxx Xxxxx' business, operations, condition (financial or
otherwise), results of operations, prospects, assets, liabilities, working
capital or reserves, except for changes contemplated hereby or changes which
have not, individually or in the aggregate, had a Material Adverse Effect.
Except as set forth in Section 4.10 of the Disclosure Schedule or the Xxxx Xxxxx
SEC Reports, from February 1, 1997 through the date of this Agreement, neither
Xxxx Xxxxx nor any of its Subsidiaries has taken any of the actions prohibited
by Section 5.3 hereof.
4.11 Taxes. Except as set forth in Section 4.11 of the Disclosure
Schedule:
(a) Xxxx Xxxxx and its Subsidiaries have (A) duly filed (or there have
been filed on their behalf) with the appropriate governmental authorities all
Tax Returns
30
required to be filed by them and such Tax Returns are true, correct and complete
in all material respects, and (B) duly paid in full or made provision in
accordance with GAAP (or there has been paid or provision has been made on their
behalf) for the payment of all Taxes for all periods (or portions thereof)
ending on or prior to the Closing Date;
(b) Xxxx Xxxxx and its Subsidiaries have complied in all material
respects with all applicable laws, rules and regulations relating to the payment
and withholding of Taxes and have, within the time and the manner prescribed by
law, withheld and paid over to the proper governmental authorities all amounts
required to be so withheld and paid over under applicable laws;
(c) No federal, state, local or foreign audits or other administrative
proceedings or court proceedings are presently pending with regard to any Taxes
or Tax Returns of Xxxx Xxxxx or its Subsidiaries and neither Xxxx Xxxxx nor its
Subsidiaries has received a written notice of any pending audits or proceedings;
(d) Neither the Internal Revenue Service nor any other taxing
authority (whether domestic or foreign) has asserted, or to the best knowledge
of Xxxx Xxxxx, is threatening to assert, against Xxxx Xxxxx or any of its
Subsidiaries any deficiency or claim for Taxes;
(e) There are no material liens for Taxes upon any Property or Assets
of Xxxx Xxxxx 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;
(f) Neither Xxxx Xxxxx nor any of its Subsidiaries has agreed to or is
required to make any adjustment under Section 481(a) of the Code;
(g) The applicable statutes of limitation for the assessment of
federal income Taxes upon Xxxx Xxxxx and its Subsidiaries for all periods have
expired, except as set forth on Section 4.11 of the Disclosure Schedule;
(h) Neither Xxxx Xxxxx nor any of its Subsidiaries is a party to any
material agreement providing for the allocation or sharing of Taxes;
(i) Neither Xxxx Xxxxx nor any of its Subsidiaries has, with regard to
any assets or property held or acquired by any of them, filed a consent to the
application of Section 341(f) of the Code, or 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 Xxxx Xxxxx or any of its
Subsidiaries; and
31
(j) Neither Xxxx Xxxxx nor any of its Subsidiaries is obligated, or
will be obligated by reason of the transaction, to pay compensation to any
employee not deductible by reason of Sections 280G or 162(m) of the Code.
4.12 Employee Benefit Plans.
(a) Section 4.12 of the Disclosure Schedule contains a complete list
of all Employee Plans of Xxxx Xxxxx and its Subsidiaries. True and complete
copies or descriptions of the Employee Plans of Xxxx Xxxxx 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
Xxxxx'x and its counsel.
(b) Except as described in Section 4.12 of the Disclosure Schedule,
each of the Employee Plans of Xxxx Xxxxx and of its Subsidiaries (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 would 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),
"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 Xxxx Xxxxx Employee Plan (other than any Multiemployer Plan) which would,
individually or in the aggregate, have a Material Adverse Effect.
(d) No litigation or administrative or other proceeding involving any
Employee Plans of Xxxx Xxxxx or any of its ERISA Affiliates (other than any
Multiemployer Plan) has occurred or are threatened where an adverse
determination would, individually or in the aggregate, have a Material Adverse
Effect.
(e) Except as set forth in Section 4.12 of the Disclosure Schedule,
neither Xxxx Xxxxx nor any ERISA Affiliate of Xxxx Xxxxx has incurred any
withdrawal liability with respect to any Multiemployer Plan under Title IV of
ERISA which remains unsatisfied in an amount which would, individually or in the
aggregate, have a Material Adverse Effect.
(f) All of the Employee Plans of Xxxx Xxxxx or its Subsidiaries (other
than any Multiemployer Plan) can be terminated by Xxxx Xxxxx. Xxxx Xxxxx 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 Xxxx Xxxxx or its Subsidiaries, on or prior to the Closing Date, would not
subject Xxxx Xxxxx to any material liability under Title IV of ERISA.
32
(g) Neither Xxxx Xxxxx 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 4.12 of the Disclosure Schedule.
(h) The transactions contemplated by this Agreement will not cause the
occurrence of a situation described in (b), (c), (d) or (e) as of or after the
Effective Time.
4.13 State Takeover Statutes. The Board of Directors of Xxxx Xxxxx has
approved this Agreement and the transactions contemplated hereby for purposes of
Section 203 of the DGCL and any other "fair price", "merger moratorium",
"control share acquisition" or other anti-takeover statute or similar statute or
regulation that might be applicable and such approval is sufficient to render
inapplicable to this Agreement and the transactions contemplated hereby, the
restrictions on business combinations contained in provisions of Section 203 of
the DGCL.
4.14 No Brokers. Except for fees to be paid to Salomon Brothers Inc
(the arrangements of which have been disclosed to Xxxxx'x prior to the date
hereof), no broker, finder, investment banker, or other person or firm is
entitled to any brokerage, finder's or other fee or commission in connection
with this Agreement or the transactions contemplated hereby based upon
arrangements made by or on behalf of Xxxx Xxxxx, any of its Subsidiaries or any
of their respective directors, officers or employees.
4.15 Opinion of Financial Advisor. Xxxx Xxxxx has received the opinion
of Salomon Brothers Inc to the effect that, as of the date hereof, the Xxxx
Xxxxx Exchange Ratio is fair to the holders of Xxxx Xxxxx Common Shares from a
financial point of view. Xxxx Xxxxx has delivered to Xxxxx'x a true, complete
and correct copy of such opinion.
4.16 No Other Agreements to Sell Xxxx Xxxxx or its Assets. Except as
set forth in Section 4.16 of the Disclosure Schedule, Xxxx Xxxxx has no legal
obligation, absolute or contingent, to any other Person to sell any of its
Assets, to sell the capital stock or other ownership interests of Xxxx Xxxxx or
any of its Subsidiaries, or to effect any merger, consolidation or other
reorganization of Xxxx Xxxxx or any of its Subsidiaries or to enter into any
agreement with respect thereto. As of the date hereof, Xxxx Xxxxx is not
engaged, directly or indirectly, in any discussions or negotiations with any
other party with respect to an Acquisition Proposal.
4.17 Assets.
(a) Except as set forth in Section 4.17(a) of the Disclosure Schedule,
Xxxx Xxxxx and its Subsidiaries have good and marketable title to or a valid
leasehold estate in all of the properties and assets, real or personal,
reflected on Xxxx Xxxxx'x balance sheet at February 1, 1997 (except for
properties or assets subsequently sold in the ordinary course of business
33
consistent with past practice), and 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 Xxxx Xxxxx or any of its Subsidiaries free and clear of all
Encumbrances (other than Permitted Encumbrances).
(b) Section 4.17(b) of the Disclosure Schedule sets forth a complete
and accurate list of each Property and/or Facility owned or leased by Xxxx Xxxxx
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 Xxxx Xxxxx,
threatened condemnation or similar proceedings relating to any of the Properties
or Facilities of Xxxx Xxxxx and its Subsidiaries except for such proceedings
which would not, individually or in the aggregate, have a Material Adverse
Effect.
(d) Section 4.17(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 Xxxx Xxxxx or any of its Subsidiaries and involving any
annual expense to Xxxx Xxxxx or any such Subsidiary in excess of $250,000 and
not cancelable (without material liability) within two (2) years.
(e) Section 4.17(e) of the Disclosure Schedule indicates with respect
to each Lease entered into by Xxxx Xxxxx or any of its Subsidiaries, as a tenant
or subtenant: (i) the term (including renewal options), (ii) current fixed rent,
and (iii) any Lease requiring consent or approval of the lessor for the
transaction contemplated hereby or permitting (or granting an option to) the
lessor to terminate the Lease or option terms or requiring payment of
consideration to the lessor (other than immaterial processing fees).
(f) Xxxx Xxxxx 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 Xxxx Xxxxx or any of its Subsidiaries under any Lease, in
each case except where the failure to perform would not, individually or in the
aggregate, have a Material Adverse Effect.
(g) To the best knowledge of Xxxx Xxxxx, each of the Leases is valid,
binding and enforceable in accordance with its terms 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.
34
(h) Subject to the provisions of Section 4.18 below and except as
shown on Section 4.17(h) of the Disclosure Schedule, Xxxx Xxxxx has delivered to
Xxxxx'x, 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).
4.18 Contracts and Commitments. Section 4.18 of the Disclosure
Schedule contains a complete and accurate list of all Contracts of the following
categories to which Xxxx Xxxxx 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 Xxxx Xxxxx, and any other Contracts with or for the benefit of
Xxxx Xxxxx or its affiliates, and all severance, change in control or similar
arrangements with any officers, employees or agents of Xxxx Xxxxx that will
result in any obligation (absolute or contingent) of Xxxx Xxxxx or any of its
Subsidiaries to make any payment to any officers, employees or agents of Xxxx
Xxxxx 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 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 $150,000 which are not
cancelable (without material penalty, cost or other liability) within thirty
(30)days;
(e) promissory notes, loans, agreements, indentures, evidences of
indebtedness or other instruments relating to the lending of money, whether as
borrower, lender or guarantor, in excess of $250,000;
(f) Contracts containing covenants limiting the freedom of Xxxx Xxxxx
or any of its Subsidiaries to engage in any line of business or compete with any
Person or operate at any location;
(g) powers of attorney;
35
(h) 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 Xxxx Xxxxx or its Subsidiaries;
(i) any other Contract, whether similar or dissimilar to the
foregoing, which would be material to Xxxx Xxxxx and its Subsidiaries taken as a
whole;
(j) any Contract with any federal, state or local government; and
(k) Contracts involving annual expenditures or liabilities in excess
of $250,000.
True copies of the written Contracts identified in Section 4.18 of the
Disclosure Schedule have been delivered or made available to Xxxxx'x.
4.19 Absence of Breaches or Defaults. Except as set forth in Section
4.19 of the Disclosure Schedule, neither Xxxx Xxxxx nor any of its Subsidiaries
is and, to the best knowledge of Xxxx Xxxxx, no other party is in default under,
or in breach or violation of, any Contract identified on Section 4.18 of the
Disclosure Schedule and, to the best knowledge of Xxxx Xxxxx, 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 4.18 of the
Disclosure Schedule, except for defaults, breaches, violations or events which,
individually or in the aggregate, would not have a Material Adverse Effect. Each
of the Contracts identified on Section 4.18 of the Disclosure Schedule is valid,
binding and enforceable in accordance with its terms 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. No event has occurred which either entitles, or would, on notice or
lapse of time or both, entitle the holder of any indebtedness affecting Xxxx
Xxxxx or any of its Subsidiaries (except for the execution of this Agreement and
the Xxxx Xxxxx Transaction Agreements) to accelerate, or which does accelerate,
the maturity of any indebtedness affecting Xxxx Xxxxx or any of its
Subsidiaries, except as set forth in Section 4.19 of the Disclosure Schedule.
4.20 Labor Matters.
(a) Section 4.20(a) of the Disclosure Schedule contains a complete
list of all organizations representing the employees of Xxxx Xxxxx or any of its
Subsidiaries. There is no strike, work stoppage or labor disturbance pending or,
to the best knowledge of Xxxx Xxxxx, threatened, which involves any employees of
Xxxx Xxxxx or any of its Subsidiaries.
36
(b) Section 4.20(b) of the Disclosure Schedule contains a list of all
material unfair employment or labor practice charges which are presently
pending, as well as a description and the status of each, which to the best
knowledge of Xxxx Xxxxx have been filed with any governmental authority by or on
behalf of any employee of Xxxx Xxxxx or any of its Subsidiaries and a list of
all material employment-related litigation, including, without limitation,
arbitration or administrative proceedings which are presently pending (together
with a description and the status of each such litigation or proceeding), filed
by or on behalf of any former, current, or prospective employee of Xxxx Xxxxx or
any of its Subsidiaries.
(c) Except as described in Sections 4.9, 4.20(a) and (b) of the
Disclosure Schedule, there are not presently pending or, to the best knowledge
of Xxxx Xxxxx, threatened, against Xxxx Xxxxx or any of its Subsidiaries any
material claims by any governmental authority, labor organization, or any
former, current or prospective employee alleging that Xxxx Xxxxx or any such
employer has violated any applicable laws respecting employment practices. Xxxx
Xxxxx 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, except as described in Section
4.20(d) of the Disclosure Schedule, has timely filed all regular federal and
state employment related reports and other documents.
(d) Except as described in Section 4.20(d) of the Disclosure Schedule,
(i) Fred Meyer has paid, or caused to be paid, in full to all employees of Fred
Meyer and its Subsidiaries all wages, salaries, commissions, bonuses, benefits
and other compensation due to such employees or otherwise arising under any
policy, practice, agreement, plan, program, statute or other law, (ii) neither
Fred Meyer nor any of its Subsidiaries is liable for any severance pay or other
payments to any employee or former employee arising from the termination of
employment, nor will Fred Meyer or its Subsidiaries have any liability under any
benefit or severance policy, practice, agreement, arrangement, plan or program,
including, without limitation, any change in control agreement, arrangement,
plan or program which exists or arises, or may be deemed to exist or arise, as a
result of or in connection with the transactions contemplated hereunder or as a
result of the termination by Fred Meyer or such Subsidiaries or any successor
thereto of any Persons employed on or prior to the Closing Date, (iii) Fred
Meyer and its Subsidiaries have not closed any plant or facility, effectuated
any layoffs of employees or implemented any early retirement, separation or
window program within the past year, nor has Fred Meyer or its Subsidiaries
planned or announced any such future action or program for the future, and (iv)
Fred Meyer is in compliance with its obligations, if any, pursuant to the Worker
Adjustment and Retraining Notification Act of 1988, and all other notification
and bargaining obligations arising under any collective bargaining agreement,
statute or otherwise.
37
4.21 Insurance. All material fire and casualty, general liability,
business interruption, product liability, and sprinkler and water damage
insurance policies maintained by Fred Meyer or any of its Subsidiaries are with
reputable insurance carriers, provide full and adequate coverage for all normal
risks incident to the business of Fred Meyer and its Subsidiaries and their
respective Properties and Assets, and are in character and amount at least
equivalent to that carried by Persons engaged in similar businesses and
substantially equivalent 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.
4.22 Affiliate Transactions. Except as set forth in Section 4.22 of
the Disclosure Schedule or in the Fred Meyer SEC Reports, from December 30, 1995
through the date of this Agreement there have been no transactions, agreements,
arrangements or understandings between Fred Meyer or any of its Subsidiaries, on
the one hand, and Fred Meyer's affiliates (other than wholly owned Subsidiaries
of Fred Meyer) 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.
4.23 Environmental Matters. Except as set forth in Section 4.23 of the
Disclosure Schedule, each of the Properties and Facilities of Fred Meyer or any
of its Subsidiaries has been maintained by Fred Meyer 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, have a Material
Adverse Effect. Except as set forth in Section 4.23 of the Disclosure Schedule,
to the best knowledge of Fred Meyer, 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
Properties, which, individually or in the aggregate, could result in any damage,
claim, or liability to or against Fred Meyer 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 Fred Meyer'
business and/or operations in the vicinity of any of the Properties and/or any
activity or operation formerly conducted by any Person on the 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 4.23 of the Disclosure Schedule, Fred Meyer 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 4.23 of the
Disclosure Schedule, (i) there are no existing uncured notices of noncompliance,
notices of violation, administrative actions, or lawsuits against Fred Meyer or
any of its Subsidiaries arising under Environmental Laws or relating to the use,
handling, storage, treatment, recycling, generation, or release of
38
Hazardous Materials at any of the Properties, nor has Fred Meyer 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 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 Fred Meyer 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)
except as set forth in Section 4.23 of the Disclosure Schedule, no 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.
4.24 Information in Joint Proxy Statement/Prospectus and Form S-4.
Information supplied by Fred Meyer or any of its affiliates for inclusion or
incorporation by reference in (i) the Joint Proxy Statement/Prospectus (or any
amendment thereof or supplement thereto), at the date mailed to Smith's and to
Fred Meyer's stockholders and at the time of the respective meetings of the
stockholders of Smith's and of the stockholders of Fred Meyer contemplated
hereby or (ii) the Form S-4 at any time the Form S-4 is filed with the SEC, at
any time it is amended or supplemented and at any time it becomes effective
under the Securities Act, will not 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.
4.25 Vote Required. The approval by a majority of the voting power
represented by the outstanding shares of Fred Meyer Common Stock (the "Fred
Meyer Stockholder Approval") is the only vote of the holders of any class or
series of Fred Meyer's capital stock necessary to approve the transactions
contemplated by this Agreement.
4.26 Standstill and Confidentiality Agreements. Except as set forth in
Section 4.26 of the Disclosure Schedule, neither Fred Meyer nor any of its
Subsidiaries is a party to any confidentiality or standstill agreement other
than confidentiality agreements with employees, consultants and providers or
purchasers of goods and services entered into in the ordinary course of
business.
39
5. Covenants
5.1 Acquisition Proposals. Prior to the Effective Time, each of Fred
Meyer and Smith's agree (a) that neither it nor any of its Subsidiaries will,
nor will it or any of its Subsidiaries permit their respective officers,
directors, employees, agents and representatives (including, without limitation,
any investment banker, attorney or accountant retained by it or any of its
Subsidiaries) to, directly or indirectly, initiate, solicit or encourage, any
inquiries or the making or implementation of any proposal or offer (including
without limitation any proposal or offer to its stockholders) with respect to an
Acquisition Proposal or engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions with, any Person
relating to an Acquisition Proposal, or otherwise facilitate any effort or
attempt to make or implement an Acquisition Proposal; and (b) that it will
immediately advise the other party hereto orally and in writing of (i) any
inquiry or any request for information or data, (ii) any request or invitation
to engage in negotiations or discussions with any Person relating to an
Acquisition Proposal, (iii) any request to otherwise facilitate any effort or
attempt to make or implement an Acquisition Proposal or (iv) any Acquisition
Proposal, and in each case, the material terms and conditions of such inquiry,
request, invitation or Acquisition Proposal and the identity of the Person
making any such inquiry, request, invitation or Acquisition Proposal. Each party
will keep the other party fully and timely informed of the status and details
(including amendments and proposed amendments) of any such inquiry, request,
invitation or Acquisition Proposal, provided, however, that nothing contained in
this Section 5.1 will prohibit the Board of Directors of either Fred Meyer or
Smith's from, to the extent applicable, complying with Rule 14e-2 promulgated
under the Exchange Act with regard to an Acquisition Proposal or from making any
disclosure to, or communicating with, its shareholders if, in the good faith
judgment of the Board of Directors of Fred Meyer or Smith's, as applicable,
after consultation with outside counsel, failure to so disclose or communicate
would be inconsistent with its fiduciary duties under applicable law. In
addition, nothing in this Section 5.1 will (x) permit Fred Meyer or Smith's to
terminate this Agreement or either of their Boards of Directors to withdraw or
alter its approval, within the meaning of Section 251(b) of the DGCL, of the
agreement of merger contained in this Agreement and the Smith's Merger or the
Fred Meyer Merger, as the case may be, (y) permit Fred Meyer or Smith's to enter
into any agreement with respect to an Acquisition Proposal for as long as this
Agreement remains in effect (it being agreed that for as long as this Agreement
remains in effect, neither Fred Meyer nor Smith's will enter into any agreement
with any Person that provides for, or in any way facilitates, an Acquisition
Proposal), or (z) affect any other obligation of Fred Meyer or Smith's under
this Agreement. Each of Fred Meyer and Smith's shall, and shall cause its
Subsidiaries and their respective officers, directors, employees, agents and
representatives to, immediately cease and cause to be terminated all discussions
and negotiations that have taken place prior to the date hereof, if any, with
respect to any Acquisition Proposal.
40
5.2 Interim Operations of Smith's. Prior to the Effective Date, except
as set forth in Section 5.2 of the Disclosure Schedule or as otherwise
specifically provided for in this Agreement or as Fred Meyer may specifically
consent in writing, which consent shall not be unreasonably withheld, Smith's
shall conduct its business and the business of its Subsidiaries only in the
ordinary and usual course as such business has been conducted, and shall use
reasonable best efforts to keep intact the business organization in all material
respects. Without limiting the foregoing, except as set forth in Section 5.2 of
the Disclosure Schedule or as otherwise specifically provided for in this
Agreement or as Fred Meyer may specifically consent in writing, which consent
shall not be unreasonably withheld, Smith's shall, and shall cause its
Subsidiaries to, preserve intact its business organizations and goodwill, keep
available the services of its officers and employees and maintain satisfactory
relationships with those Persons having business relationships with it. Smith's
shall use all reasonable efforts to avoid, and to cause each of its Subsidiaries
to avoid, the occurrence of a breach of any representation or warranty hereunder
as of the Closing Date, or the failure to satisfy any condition to the
obligations of any party hereto. In addition, prior to the Effective Time,
except as set forth in Section 5.2 of the Disclosure Schedule or as otherwise
specifically provided for in this Agreement or as Fred Meyer may specifically
consent in writing, which consent shall not be unreasonably withheld, neither
Smith's nor any of its Subsidiaries shall:
(a) make or commit to make any capital expenditures in excess of
$500,000 in the aggregate, other than expenditures for routine maintenance and
repair or pursuant to existing contracts or commitments or expenditures
reflected in capital expenditure budgets disclosed in the Smith's SEC Reports;
(b) incur any material amount of indebtedness for borrowed money or
make any loans, advances or capital contributions to, or investments (other than
non-controlling investments in the ordinary course of business) in, any other
Person other than a wholly owned Subsidiary of Smith's, 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 and other than
refinancings contemplated by this Agreement;
(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;
(iv) sell or pledge any stock of any of its Subsidiaries; or (v) make or enter
into any commitment for any of the foregoing actions;
(d) (i) 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
41
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, sell, pledge, dispose of or encumber any material Assets
(including without limitation, any indebtedness owed to them or any material
claims held by them); (iv) acquire (by merger, consolidation, acquisition of
stock or assets or otherwise) any corporation, partnership or other business
organization or division thereof or make any material investment, either by
purchase of stock or other securities, contribution to capital, property
transfer or purchase, in any case, of any material amount of property or assets,
in or of any other Person; or (v) enter into any contract, agreement, commitment
or arrangement with respect to any of the foregoing;
(e) grant any severance or termination pay (other than pursuant to
policies or agreements in effect on the date hereof as disclosed in the Smith's
SEC Reports and set forth in Section 5.2(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 or enter into any employment or
severance agreement with any officer, director or employee, except for certain
employment contracts and amendments to certain severance arrangements and
deferred compensation agreements as set forth in Section 5.2(e) of the
Disclosure Schedule;
(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;
(g) enter into or amend any Contract for the purchase of inventory
which is not cancelable within one (1) year without penalty, cost or liability,
or any other Contract involving annual expenditures or liabilities in excess of
$250,000 which is not cancelable within two (2) years without penalty, cost or
liability;
(h) negotiate, enter into, or modify any agreement or agree to be
bound by any agreement with any collective bargaining agent relating to its
business, except for agreements with respect to routine employee grievance
matters in the ordinary course of business;
(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) fail to notify Fred Meyer upon (i) the occurrence of any event or
change in circumstances as a result of which any representation or warranty of
Smith's contained in this Agreement would be untrue or incorrect if such
representation or warranty were made immediately following the occurrence of
such event or change in circumstance, promptly (and in any event within two (2)
business days of an executive officer of Smith's obtaining knowledge
42
thereof) and (ii) any material failure of Smith's or any of its Subsidiaries or
Affiliates to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement; provided, however, that
no such notification shall affect the representations or warranties of the
parties or the conditions to the obligations of the parties hereunder; and
(k) fail to promptly deliver to Fred Meyer true and correct copies of
any report, statement or schedule filed with the SEC subsequent to the date of
this Agreement.
5.3 Interim Operations of Fred Meyer. Prior to the Effective Date,
except as set forth in Section 5.3 of the Disclosure Schedule or as otherwise
specifically provided for in this Agreement or as Smith's may specifically
consent in writing, which consent shall not be unreasonably withheld, Fred Meyer
shall conduct its business and the business of its Subsidiaries only in the
ordinary and usual course as such business has been conducted, and shall use
reasonable best efforts to keep intact the business organization in all material
respects. Without limiting the foregoing, except as set forth in Section 5.3 of
the Disclosure Schedule or as otherwise specifically provided for in this
Agreement or as Smith's may specifically consent in writing, which consent shall
not be unreasonably withheld, Fred Meyer shall, and shall cause its Subsidiaries
to, preserve intact its business organizations and goodwill, keep available the
services of its officers and employees and maintain satisfactory relationships
with those Persons having business relationships with it. Fred Meyer shall use
all reasonable efforts to avoid, and to cause each of its Subsidiaries to avoid,
the occurrence of a breach of any representation or warranty hereunder as of the
Closing Date, or the failure to satisfy any condition to the obligations of any
party hereto. In addition, prior to the Effective Time, except as set forth in
Section 5.3 of the Disclosure Schedule or as otherwise specifically provided for
in this Agreement or as Smith's may specifically consent in writing, which
consent shall not be unreasonably withheld, neither Fred Meyer nor any of its
Subsidiaries shall:
(a) make or commit to make any capital expenditures in excess of
$500,000 in the aggregate, other than expenditures for routine maintenance and
repair or pursuant to existing contracts or commitments or expenditures
reflected in capital expenditure budgets disclosed in the Fred Meyer SEC
Reports;
(b) incur any material amount of indebtedness for borrowed money or
make any loans, advances or capital contributions to, or investments (other than
non-controlling investments in the ordinary course of business) in, any other
Person other than a wholly owned Subsidiary of Fred Meyer, 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 and other than
refinancings contemplated by this Agreement;
(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
43
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; (iv) sell or pledge any stock of any of its
Subsidiaries; or (v) make or enter into any commitment for any of the foregoing
actions;
(d) (i) 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, sell,
pledge, dispose of or encumber any material Assets (including without
limitation, any indebtedness owed to them or any material claims held by them);
(iv) acquire (by merger, consolidation, acquisition of stock or assets or
otherwise) any corporation, partnership or other business organization or
division thereof or make any material investment, either by purchase of stock or
other securities, contribution to capital, property transfer or purchase, in any
case, of any material amount of property or assets, in or of any other Person;
or (v) enter into any contract, agreement, commitment or arrangement with
respect to any of the foregoing;
(e) grant any severance or termination pay (other than pursuant to
policies or agreements in effect on the date hereof as disclosed in the Fred
Meyer SEC Reports and set forth in Section 5.3(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 or enter into any employment or
severance agreement with any officer, director or employee, except for certain
employment contracts and amendments to certain severance arrangements and
deferred compensation agreements as set forth in Section 5.3(e) of the
Disclosure Schedule;
(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;
(g) enter into or amend any Contract for the purchase of inventory
which is not cancelable within one (1) year without penalty, cost or liability,
or any other Contract involving annual expenditures or liabilities in excess of
$250,000 which is not cancelable within two (2) years without penalty, cost or
liability;
(h) negotiate, enter into, or modify any agreement or agree to be
bound by any agreement with any collective bargaining agent relating to its
business, except for agreements with respect to routine employee grievance
matters in the ordinary course of business;
44
(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) fail to notify Smith's upon (i) the occurrence of any event or
change in circumstances as a result of which any representation or warranty of
Fred Meyer contained in this Agreement would be untrue or incorrect if such
representation or warranty were made immediately following the occurrence of
such event or change in circumstance, promptly (and in any event within two (2)
business days of an executive officer of Fred Meyer obtaining knowledge thereof)
and (ii) any material failure of Fred Meyer or any of its Subsidiaries or
Affiliates to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement; provided, however, that
no such notification shall affect the representations or warranties of the
parties or the conditions to the obligations of the parties hereunder; and
(k) fail to promptly deliver to Smith's true and correct copies of any
report, statement or schedule filed with the SEC subsequent to the date of this
Agreement.
5.4 Meeting of Stockholders Each of Fred Meyer and Smith's will take
all action necessary in accordance with applicable law and its certificate of
incorporation and bylaws to convene a meeting of its stockholders as promptly as
practicable to consider and vote upon the adoption of this Agreement and the
transactions contemplated hereby, as required by applicable law. The Board of
Directors of each of Fred Meyer and Smith's, respectively, will recommend that
its stockholders vote in favor of such adoption and Fred Meyer and Smith's will
each take all lawful action to solicit such approval, including, without
limitation, timely mailing the Joint Proxy Statement/Prospectus; provided,
however, that nothing contained in this Section 5.4 shall prohibit either Fred
Meyer or Smith's from taking and disclosing to its stockholders a position
contemplated by Rule 14e-2(a) promulgated under the Exchange Act or from making
any disclosure to, or having any communication with, their respective
stockholders if, in the good faith judgment of the Board of Directors of Fred
Meyer or Smith's, as applicable, after consultation with outside counsel,
failure so to disclose or communicate would be inconsistent with its fiduciary
duties under applicable law; provided, however, that neither Fred Meyer or
Smith's nor their respective Boards of Directors, nor any committee of either of
such Boards, shall withdraw or modify, or propose publicly to withdraw or
modify, their approval or recommendation with respect to this Agreement or the
Mergers or approve or recommend, or propose publicly to approve or recommend,
any Acquisition Proposal. The respective meetings of the stockholders of Fred
Meyer and Smith's shall be held as soon as practicable and in any event (to the
extent permissible under applicable law) within forty-five (45) days after the
date upon which the Joint Proxy Statement/Prospectus shall have been approved
for release to the stockholders of Fred Meyer and of Smith's by the SEC;
provided, however, that notwithstanding anything to the contrary contained in
this Agreement, Fred Meyer and Smith's may adjourn or postpone their respective
meetings of stockholders to the extent necessary, in the opinion of their
45
respective counsel, to supplement or amend the Joint Proxy Statement Prospectus
in advance of a vote on this Agreement and the Mergers. The parties shall
coordinate and cooperate with respect to the timing of such meetings and shall
endeavor to hold such meetings on the same day.
5.5 Further Assurance and Cooperation. Subject to the terms and
conditions herein provided, Smith's and Fred Meyer agree to use all reasonable
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable to consummate and make effective
as promptly as practicable the transactions contemplated by this Agreement and
to cooperate with each other in connection therewith, (a) to obtain all
necessary waivers, consents and approvals from other parties to material loan
agreements, leases and other contracts (provided that neither Smith's nor Fred
Meyer shall agree to any substantial modification to any such agreement, lease
or contract or to any payment of funds in order to obtain such waiver, consent
or approval without the prior written consent of the other), (b) to defend any
lawsuits or other legal proceedings challenging this Agreement or the
consummation of the transactions contemplated hereby, (c) to lift or rescind any
injunction or restraining order or other order adversely affecting the ability
of the parties to consummate the transactions contemplated thereby, (d) to
effect all necessary registrations and filings (including any registrations and
filings which may be required to be made by Holdings pursuant to any federal or
state securities laws), and (e) to fulfill all conditions to this Agreement.
5.6 Certain Filings and Consents. Each party hereto shall (a) as
promptly as practicable make any required filings and submissions under the HSR
Act with respect to the Mergers, (b) cooperate with each other in determining
whether any other filings are required to be made or consents, approvals,
permits or authorizations are required to be obtained under any other federal,
state, local or foreign law or regulation or whether any consents, approvals or
waivers are required to be obtained from other parties to loan agreements,
leases or other contracts in connection with the consummation of the Mergers and
the other transactions contemplated by this Agreement, and (c) actively assist
each other in obtaining any consents, permits, authorizations, approvals or
waivers which are required. Each party hereto shall promptly inform the other of
any material communication between such party and the Federal Trade Commission,
the Department of Justice or any other government or governmental authority
regarding the Mergers or the other transactions contemplated by this Agreement.
If any party receives a request for additional information or documentary
material from any such government or governmental authority, then such party
shall endeavor in good faith to make, or cause to be made, as soon as reasonably
practicable and after consultation with the other party, an appropriate response
to such request. Notwithstanding the foregoing, in connection with proceedings
under or relating to the HSR Act or any other federal or state antitrust law,
all analyses, appearances, presentations, memoranda, briefs, arguments, and
opinions made or submitted by or on behalf of any party hereto shall be subject
to the joint approval or disapproval and the joint control of Smith's and Fred
Meyer, acting with the advice of their respective counsel, provided that nothing
herein shall prevent any party hereto or their authorized
46
representatives from making or submitting any such analysis, appearance,
presentation, memorandum, brief, argument, or opinion in response to a subpoena
or as otherwise required by law. Smith's and Fred Meyer shall cooperate in
connection with reaching any understandings, undertaking or agreements (oral or
written) involving the Federal Trade Commission, the Department of Justice or
any other governmental authority in connection with the transactions
contemplated hereby. Smith's and Fred Meyer shall use all reasonable efforts to
resolve such objections, if any, as may be asserted with respect to the
transactions contemplated hereby under any applicable federal or state antitrust
laws; provided, however, that in no event shall Smith's or Fred Meyer or any of
their respective Subsidiaries or Holdings or any of its Subsidiaries be required
in that connection to (i) effect any divestitures of any material assets of
Smith's or Fred Meyer or their respective Subsidiaries, (ii) hold separate any
such material assets or (iii) agree to any material restrictions on the
operations of Holdings, or their respective Subsidiaries of any material portion
of the business or assets of Smith's or Fred Meyer or their respective
Subsidiaries.
5.7 Inspection of Records. From the date hereof to the Effective Time,
subject to the confidentiality agreements dated March 17, 1997 and March 26,
1997 between Fred Meyer and Smith's (the "Confidentiality Agreements"), each of
the parties will (a) allow all designated officers, attorneys, accountants and
other representatives of the other reasonable access at all reasonable times to
the offices, records and files, correspondence, audits and properties, as well
as to all information relating to commitments, contracts, titles and financial
position, or otherwise pertaining to the business and affairs, of the parties
and their respective Subsidiaries, as the case may be, (b) furnish to the other,
the other's counsel, financial advisors, auditors and other authorized
representatives such financial and operating data and other information as such
Persons may reasonably request, and (c) instruct the employees, counsel and
financial advisors of the parties, as the case may be, to cooperate with the
other in the other's investigation of the business of it and its Subsidiaries.
No investigation shall affect the representations and warranties of the parties
or the conditions to the obligations of the parties hereunder.
5.8 Publicity. The initial press release relating to this Agreement
will be a joint press release and thereafter Smith's and Fred Meyer will,
subject to their respective legal obligations (including requirements of stock
exchanges and other similar regulatory bodies), consult with each other, and use
reasonable efforts to agree upon the text of any press release, before issuing
any such press release or otherwise making public statements with respect to the
transactions contemplated hereby and in making any filings with any governmental
or regulatory authorities or with any national securities exchange with respect
thereto.
5.9 Joint Proxy Statement/Prospectus and the Form S-4. Fred Meyer and
Smith's will cooperate and promptly prepare and file with the SEC as soon as
practicable a joint proxy statement/prospectus and a form of proxy in connection
with the vote of Fred Meyer's and of Smith's stockholders with respect to the
Mergers and the offer to such stockholders of the
47
securities to be issued pursuant to the Mergers (the "Joint Proxy
Statement/Prospectus") and will cause Holdings to prepare and file with the SEC
the registration statement on Form S-4 (the "Form S-4") under the Securities
Act, in which the Joint Proxy Statement/Prospectus shall be included as a
prospectus. The respective parties will cause the Form S-4 to comply in all
material respects with the applicable provisions of the Securities Act and the
Exchange Act. Each of Smith's and Fred Meyer will use its best efforts to have
the Form S-4 declared effective by the SEC as promptly as practicable and to
keep the Form S-4 effective as long as is necessary to consummate the Mergers.
Smith's and Fred Meyer will cause Holdings to take any action required to be
taken to obtain, prior to the effective date of the Form S-4, all necessary
state securities law or "Blue Sky" permits or approvals required to carry out
the transactions contemplated by this Agreement and all expenses incident
thereto will be shared equally by Fred Meyer and Smith's. No amendment or
supplement to the Form S-4 or the Joint Proxy Statement/Prospectus will be made
by Fred Meyer or Smith's without the approval of the other party, such approval
not to be unreasonably withheld or delayed. Each of Smith's and Fred Meyer shall
use reasonable best efforts to cause the Joint Proxy Statement/Prospectus to be
mailed to its respective stockholders as soon as practicable after the date
hereof.
5.10 Listing Application. Each of Smith's and Fred Meyer will cause
Holdings to promptly prepare and submit to the NYSE a listing application
covering the shares of Holdings Common Stock issuable in the Mergers, and will
use its best efforts to obtain, prior to the Effective Time, approval for the
listing of such Holdings Common Stock, subject to official notice of issuance.
5.11 Further Action. Each party hereto will, subject to the other
terms and conditions set forth herein and to the fulfillment at or before the
Effective Time of each of the conditions of performance set forth herein or the
waiver thereof, perform such further acts and execute such documents as may be
reasonably required to effect the Mergers.
5.12 Affiliate Letters. At least 15 days prior to the Closing Date,
each of Smith's and Fred Meyer will deliver to the other party a list of names
and addresses of those Persons who were, in its respective reasonable judgment,
at the record date for its respective stockholders' meeting to approve the
Mergers, "affiliates" within the meaning of Rule 145 of the rules and
regulations promulgated under the Securities Act. Each party will use all
reasonable efforts to deliver or cause to be delivered to the other, prior to
the Closing Date, from each of the "affiliates" identified in the foregoing
list, an Affiliate Letter in the form attached hereto as Exhibit E. Holdings
will be entitled, to the extent it is so required by applicable law (as advised
by outside counsel experienced in such matters) to place legends as specified in
such Affiliate Letters on the certificates evidencing any Holdings Common Stock
to be received by such "affiliates" pursuant to the terms of this Agreement, and
to issue appropriate stop-transfer instructions to the transfer agent for
Holdings Common Stock, consistent with the terms of such Affiliate Letters.
48
5.13 Expenses. Whether or not the Mergers are consummated, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby will be paid by the party incurring such expenses except as
expressly provided herein, including Section 7.5, and except that (a) the filing
fee in connection with the HSR Act filing, (b) the filing fee in connection with
the filing of the Form S-4 or Joint Proxy Statement/Prospectus with the SEC, and
(c) the expenses incurred in connection with the preparation, printing and
mailing the Form S-4 and the Joint Proxy Statement/Prospectus, will be shared
equally by Smith's and Fred Meyer.
5.14 Indemnification. (a) From and after the Effective Time, Holdings
shall indemnify, defend and hold harmless the present and former directors,
officers and employees of Smith's, Fred Meyer and their respective Subsidiaries
(each, an "Indemnified Party") against all costs or expenses (including
reasonable attorneys' fees), judgments, fines, losses, claims, damages or
liabilities (collectively, "Costs") incurred in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of actions or omissions occurring
at or prior to the Effective Time (including, without limitation, the
transactions contemplated by this Agreement and the Voting Agreement) to the
fullest extent that such persons are indemnified under the laws of the State of
Delaware and the certificates of incorporation and bylaws, as in effect on the
date hereof, of Smith's, Fred Meyer and their respective Subsidiaries or any
existing indemnification agreement with either Fred Meyer or Smith's (and during
such period Holdings shall also advance expenses (including expenses
constituting Costs described in Section 5.14(e)) as incurred to the fullest
extent permitted under applicable law, provided that the person to whom expenses
are advanced provides an undertaking to repay such advances if it is ultimately
determined that such person is not entitled to indemnification with no bond or
security to be required); provided that any determination required to be made
with respect to whether an officer's or director's conduct complies with the
standards set forth under Delaware law and any such certificate of incorporation
or bylaws shall be made by independent counsel (which shall not be counsel that
provides material services to Holdings or its Subsidiaries) selected by Holdings
and reasonably acceptable to such officer or director; and provided, further,
that in the absence of applicable Delaware judicial precedent to the contrary,
such counsel, in making such determination, shall presume such officer's or
director's conduct complied with such standard and Holdings shall have the
burden to demonstrate that such officer's or director's conduct failed to comply
with such standard.
(b) For a period of five (5) years after the Effective Time, Holdings
will maintain officers' and directors' liability insurance covering the
Indemnified Parties who are currently covered, in their capacities as current or
former officers and directors, by Smith's or Fred Meyer's existing officers' and
directors' liability insurance policies on terms substantially no less
advantageous to the Indemnified Parties than such existing insurance.
49
(c) Any Indemnified Party wishing to claim indemnification under
Section 5.14(a), upon learning of any claim, action, suit, proceeding or
investigation described above, shall promptly notify Holdings thereof; provided
that the failure so to notify shall not affect the obligations of Holdings under
Section 5.14(a) unless and to the extent such failure materially increases
Holding's liability under such subsection (a).
(d) If Holdings or any of its successors or assigns shall consolidate
with or merge into any other entity and shall not be the continuing or surviving
entity of such consolidation or merger or shall transfer all or substantially
all of its assets to any entity, then and in each case, proper provision shall
be made so that the successors and assigns of Holdings shall assume the
obligations set forth in this Section 5.14.
(e) Holdings shall pay all reasonable Costs, including attorneys'
fees, that may be incurred by any Indemnified Party in enforcing the indemnity
and other obligations provided for in this Section 5.14. The rights of each
Indemnified Party hereunder shall be in addition to any other rights such
Indemnified Party may have under applicable law.
(f) Smith's and Fred Meyer will cause Holdings to keep in effect
provisions in its certificate of incorporation and by-laws providing for
exculpation of director and officer liability and its indemnification of the
Indemnified Parties to the fullest extent permitted under the DGCL, which
provisions will not be amended except as required by applicable law or except to
make changes permitted by law that would enlarge the Indemnified Parties' right
of indemnification.
(g) The provisions of this Section 5.14 will survive the consummation
of the Mergers and expressly are intended to benefit each Indemnified Party.
5.15 Consents. Smith's and Fred Meyer will use all reasonable efforts
to obtain each of the consents identified in Section 3.6 and 4.6, respectively,
of the Disclosure Schedule.
5.16 Financing Arrangements. Smith's and Fred Meyer shall cooperate
with each other, with a view to obtaining financing for Holdings on terms and
conditions reasonably satisfactory to Smith's and Fred Meyer, the funds of
which, if obtained, shall be used to repay substantially all outstanding
indebtedness of Smith's, Fred Meyer and their respective Subsidiaries.
50
5.17 Financial Information. Smith's and Fred Meyer shall each deliver
to the other as soon as available all interim and other financial statements and
other management reports generated in the ordinary course of business prepared
by or for Smith's or Fred Meyer, prior to the Closing.
5.18 Letter of Smith's Accountants. Smith's shall use reasonable
efforts to cause to be delivered to Fred Meyer and Holdings a letter of Ernst &
Young, LLP, Smith's independent auditors, dated a date within two business days
before the date on which the Form S-4 shall become effective and addressed to
Holdings, in form reasonably satisfactory to Fred Meyer and customary in scope
and substance for letters delivered by independent public accountants in
connection with registration statements similar to the Form S-4.
5.19 Letter of Fred Meyer's Accountants. Fred Meyer shall use
reasonable efforts to cause to be delivered to Smith's and Holdings a letter of
Deloitte & Touche, LLP, Fred Meyer's independent auditors, dated a date within
two business days before the date on which the Form S-4 shall become effective
and addressed to Holdings, in form reasonably satisfactory to Smith's and
customary in scope and substance for letters delivered by independent public
accountants in connection with registration statements similar to the Form S-4.
5.20 Registration Statement on Form S-8. No later than the Effective
Time, Smith's and Fred Meyer shall cause Holdings to prepare and file with the
SEC a registration statement on Form S-8 (or another appropriate form)
registering a number of shares of Holdings Common Stock at least equal to the
sum of (x) the number of shares of Holdings Common Stock subject to options to
be received by the holders of Smith's Options pursuant to Section 2.1(d)(i) and
(y) the number of shares of Holdings Common Stock subject to options to be
received by the holders of Fred Meyer Options pursuant to Section 2.1(d)(ii).
Such registration statement shall be kept effective (and the current status of
the prospectus or prospectuses required thereby shall be maintained) at least
for so long as any options with respect to Holdings Common Stock received by the
holders of Smith's Options and Fred Meyer Options pursuant to Section 2.1(d)
remain outstanding.
5.21. Tax Matters Certificates. In connection with the opinions to be
rendered by counsel to the parties pursuant to Sections 6.2(f) and 6.3(h), at
the Closing, Smith's, Fred Meyer and Holdings shall deliver, and each of Smith's
and Fred Meyer will use its best efforts to cause each of its stockholders
owning five percent (5%) or more of any class of the voting stock of Smith's or
Fred Meyer, to deliver Tax Matters Certificates to the respective counsel of
Smith's, Fred Meyer or Holdings, as the case may be, which certificates shall be
in substantially the forms set forth on Exhibit F. Such counsel shall, in
rendering such opinions, be entitled to rely on representations contained in
such Tax Matters Certificates.
5.22. Standstill and Confidentiality Agreements. During the period
from the date of this Agreement through the Effective Time, neither Fred Meyer
nor Smith's shall
51
terminate, amend, modify or waive any provision of any confidentiality or
standstill agreement to which it or any of its respective Subsidiaries is a
party. During such period, Fred Meyer or Smith's, as the case may be, shall
enforce, to the fullest extent permitted under applicable law, the provisions of
any such agreement, including by obtaining injunctions to prevent any breaches
of such agreements and to enforce specifically the terms and provisions thereof
in any court of the United States of America or of any state having
jurisdiction.
5.23. Assumption of Obligations by Holdings, Smith's Sub and Fred
Meyer. As soon as practicable after the formation of Holdings, Smith's and Fred
Meyer shall cause Holdings (i) to sign and become a party to this Agreement and
to assume the obligations applicable to it hereunder and (ii) to cause Smith's
Sub and Fred Meyer Sub to sign and become a party to this Agreement and to
assume their respective obligations hereunder and under the agreements of merger
contained herein. Upon their execution of this Agreement, Holdings, Smith's Sub
and Fred Meyer Sub will be bound by the provision hereof and Fred Meyer and
Smith's hereby agree that upon such execution such entities shall be a party
hereto.
6. Conditions
6.1 Conditions to Each Party's Obligation to Effect the Mergers. The
respective obligations of each party to effect the Mergers will be subject to
the fulfillment or waiver by both parties at or prior to the Closing Date of the
following conditions:
(a) This Agreement, the Smith's Merger and the Fred Meyer Merger shall
each have been approved in the manner required by applicable law by the
respective holders of the issued and outstanding shares of capital stock of
Smith's and of Fred Meyer;
(b) The waiting period applicable to the consummation of the Mergers
under the HSR Act shall have expired or been terminated;
(c) Neither of the parties hereto shall be subject to any order,
decree, ruling or injunction of a court of competent jurisdiction or by a
governmental, regulatory or administrative agency or commission, and no law,
statute, rule or regulation shall have been promulgated or enacted by a
governmental or regulatory authority, which prohibits the consummation of the
transactions contemplated by this Agreement or would otherwise impair the
ability of Holdings to operate the business of Smith's and Fred Meyer on a
consolidated basis following the Closing;
(d) The Form S-4 shall have become effective and shall be effective at
the Effective Time, and no stop order suspending effectiveness of the Form S-4
shall have been issued, no action, suit, proceeding or investigation by the SEC
to suspend the effectiveness thereof shall have been initiated and be continuing
or, to the knowledge of Fred Meyer or Smith's, be threatened in writing, and all
necessary approvals under state securities laws relating
52
to the issuance or trading of Holdings Common Stock to be issued to Smith's and
Fred Meyer stockholders in connection with the Mergers shall have been received;
(e) All consents, licenses, permits, authorizations, orders and
approvals of (or filings or registrations with) any governmental or regulatory
authorities required in connection with the execution, delivery and performance
of this Agreement shall have been obtained or made, except for filings in
connection with the Mergers and any other documents required to be filed after
the Effective Time and except where the failure to have obtained or made any
such consent, license, permit, authorization, order, approval, filing or
registration would not have a Material Adverse Effect on Holdings following the
Effective Time;
(f) Holdings Common Stock to be issued to Smith's and Fred Meyer
stockholders in connection with the Mergers shall have been approved for listing
on the NYSE, subject only to official notice of issuance; and
(g) After the Effective Time, no Person will have any right under any
stock option plan (or any option granted thereunder) or other plan, program or
arrangement to acquire any equity securities of Smith's, Fred Meyer or any of
their respective Subsidiaries.
6.2 Conditions to Obligation of Smith's to Effect the Mergers. The
obligation of Smith's to effect the Mergers will be subject to the fulfillment
or waiver by Smith's at or prior to the Closing Date of the following additional
conditions:
(a) Fred Meyer shall have performed and complied in all material
respects with all material obligations and agreements required to be performed
and complied with by it under this Agreement at or prior to the Closing Date;
(b) The representations and warranties of Fred Meyer contained in this
Agreement that are qualified as to materiality shall be true and correct, and
such representations and warranties of Fred Meyer that are not so qualified
shall be true and correct in all material respects, in each case both as of the
date of this Agreement and on the Closing Date as though made on and as of the
Closing Date, except to the extent such representations and warranties are
expressly made as of an earlier date, in which case, such representations and
warranties shall be true and correct as of such date;
(c) Smith's shall have received a certificate from the President or an
Executive Vice President of Fred Meyer, dated as of the Closing Date, to the
effect that the conditions set forth in paragraphs (a) and (b) above have been
satisfied;
(d) From the date of this Agreement through the Effective Time, a
Material Adverse Effect with respect to Fred Meyer shall not have occurred;
53
(e) Holdings shall have duly executed the Supplemental Warrant
Agreement and, upon the execution by the other parties thereto, such agreement
shall be in full force and effect as of the Effective Time;
(f) Smith's shall have received on the Closing Date a legal opinion
from its tax counsel, Latham & Watkins, substantially to the effect that, on the
basis of the facts, representations and assumptions set forth in such opinion,
the Fred Meyer Merger, taken together with the Smith's Merger, will be treated
as an exchange under Section 351(a) of the Code;
(g) Smith's shall have received on the Closing Date a legal opinion
from counsel to Fred Meyer (which counsel shall be reasonably acceptable to
Smith's) in substantially the form attached hereto as Exhibit G; and
(h) Holdings shall have duly executed the Registration Rights
Agreement and the New Management Agreement and, upon execution by the other
parties thereto, such agreements shall be in full force and effect as of the
Effective Time.
6.3 Conditions to Obligation of Fred Meyer to Effect the Mergers. The
obligation of Fred Meyer to effect the Mergers will be subject to the
fulfillment or waiver by Fred Meyer at or prior to the Closing Date of the
following additional conditions:
(a) Smith's shall have performed and complied in all material respects
with all material obligations and agreements required to be performed and
complied with by it under this Agreement at or prior to the Closing Date;
(b) The representations and warranties of Smith's contained in this
Agreement that are qualified as to materiality shall be true and correct, and
such representations and warranties of Smith's that are not so qualified shall
be true and correct in all material respects, in each case both as of the date
of this Agreement and on the Closing Date as though made on and as of the
Closing Date, except to the extent such representations and warranties are
expressly made as of an earlier date, in which case, such representations and
warranties shall be true and correct as of such date;
(c) Fred Meyer shall have received from Smith's a certificate from the
President or an Executive Vice President of Smith's, dated as of the Closing
Date, to the effect that the conditions set forth in paragraphs (a) and (b)
above have been satisfied;
(d) From the date of this Agreement through the Effective Time, a
Material Adverse Effect on Smith's shall not have occurred;
(e) The Voting Agreements covering at least 50.1%, in the aggregate,
of the voting power of the issued and outstanding shares of capital stock of
Smith's shall be in full
54
force and effect and each party thereto shall have performed and complied in all
material respects with all material obligations and agreements required to be
performed or complied with by such party at or prior to the Effective Time;
(f) The Old Management Agreement shall have been terminated and shall
be of no further force and effect and the New Management Agreement shall have
been duly executed by the parties thereto and shall be in full force and effect
as of the Effective Time;
(g) The motion filed by Larry F. Klang on October 15, 1996 relating to
Smith's 1996 recapitalization transactions shall not have been granted and there
shall have been no development with respect to the legal proceedings related to
the class action complaint filed by Larry F. Klang on May 22, 1996 as amended on
May 30, 1996 that has had or could reasonably be expected to have a Material
Adverse Effect with respect to Smith's or Holdings or a material adverse effect
on the intended benefits of the Mergers to Fred Meyer, Smith's or Holdings;
(h) Fred Meyer shall have received on the Closing Date a legal opinion
from its tax counsel, Cleary, Gottlieb, Steen & Hamilton, substantially to the
effect that, on the basis of the facts, representations and assumptions set
forth in such opinion, the Smith's Merger, taken together with the Fred Meyer
Merger, will be treated as an exchange under Section 351(a) of the Code; and
(i) Fred Meyer shall have received on the Closing Date a legal opinion
from counsel to Smith's (which counsel shall be reasonably acceptable to Fred
Meyer) in substantially the form attached hereto as Exhibit H.
7. Termination
7.1 Termination by Mutual Consent. This Agreement may be terminated
and the Mergers may be abandoned at any time prior to the Effective Time,
whether before or after the approval of this Agreement by the respective
stockholders of Smith's and Fred Meyer, by the mutual written consent of Fred
Meyer and Smith's.
7.2 Termination by Either Fred Meyer or Smith's. This Agreement may be
terminated and the Mergers may be abandoned by action of the Board of Directors
of either Fred Meyer or Smith's if (a) the Mergers shall not have been
consummated by January 31, 1998 (the "Outside Date"); provided, however, that
the right to terminate this Agreement pursuant to this clause (a) shall not be
available to any party whose breach of any of its obligations hereunder in any
manner has caused, or proximately contributed to, the failure or inability to
consummate the Mergers by the Outside Date, (b) a United States federal or state
court of competent jurisdiction or United States federal or state governmental,
regulatory or administrative agency or
55
commission issues an order, decree or ruling or takes any other action
permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or other action
becomes final and non-appealable, (c) the meeting of Smith's stockholders (or
any adjournment thereof) is held to consider this Agreement and the Smith's
Merger and the Smith's Stockholder Approval is not obtained or (d) the meeting
of Fred Meyer's stockholders (or any adjournment thereof) is held to consider
this Agreement and the Fred Meyer Merger and the Fred Meyer Stockholder Approval
is not obtained.
7.3 Termination by Smith's. This Agreement may be terminated and the
Mergers may be abandoned at any time prior to the Effective Time, by action of
the Board of Directors of Smith's, if (a) (1) the Board of Directors of Fred
Meyer shall have withdrawn or modified in a manner adverse to Smith's its
recommendation that Fred Meyer stockholders vote in favor of this Agreement or
the Fred Meyer Merger or shall have recommended an Acquisition Proposal relating
to Fred Meyer to Fred Meyer's stockholders or otherwise materially breached its
obligations under Sections 5.1 or 5.4 hereof, or (2) any Alternative Transaction
relating to Fred Meyer of the type described in clause (ii) of the definition of
Acquisition Proposal shall have occurred, (b) there has been a breach by Fred
Meyer of any representation or warranty contained in this Agreement, or any
representation or warranty of Fred Meyer shall have become untrue in any
respect, in either case such that the condition set forth in Section 6.2(b)
would be incapable of being satisfied by the Outside Date, or (c) there has been
a breach of any of the covenants set forth in this Agreement on the part of Fred
Meyer, which breach is not curable or, if curable, is not cured within twenty
(20) calendar days after written notice of such breach is given by Smith's to
Fred Meyer, in either case such that the condition set forth in Section 6.2(a)
would be incapable of being satisfied by the Outside Date.
7.4 Termination by Fred Meyer. This Agreement may be terminated and
the Mergers may be abandoned at any time prior to the Effective Time, by action
of the Board of Directors of Fred Meyer if (a)(1) the Board of Directors of
Smith's shall have withdrawn or modified in a manner adverse to Fred Meyer its
recommendation that Smith's stockholders vote in favor of this Agreement or the
Smith's Merger or shall have recommended an Acquisition Proposal relating to
Smith's to Smith's stockholders or otherwise materially breached its obligations
under Sections 5.1 or 5.4 hereof, or (2) any Alternative Transaction relating to
Smith's described in clause (ii) of the definition thereof shall have occurred,
(b) there has been a breach by Smith's of any representation or warranty
contained in this Agreement, or any representation or warranty of Smith's shall
have become untrue in any respect, in either case such that the conditions set
forth in Section 6.3(b) would be incapable of being satisfied by the Outside
Date, (c) there has been a breach of any of the covenants set forth in this
Agreement on the part of Smith's, which breach is not curable or, if curable, is
not cured within twenty (20) days after written notice of such breach is given
by Fred Meyer to Smith's, in either case such that the condition set forth in
Section 6.3(a) would be incapable of being satisfied by the Outside Date or (d)
there has been a material breach of any Voting Agreement by any party thereto
which
56
breach would deprive Fred Meyer of the intended benefits thereof with respect to
the approval of this Agreement and the Smith's Merger by the stockholders of
Smith's.
7.5 Effect of Termination and Abandonment. (a) In the event of
termination of this Agreement and the abandonment of the Mergers pursuant to
this Article 7, all obligations of the parties hereto will terminate, except the
obligations of the parties pursuant to this Section 7.5 and Section 5.13 and
except for the provisions of Article 8. Moreover, in the event of termination of
this Agreement pursuant to Section 7.2, 7.3 or 7.4, nothing herein will
prejudice the ability of the non-breaching party from seeking damages from any
other party for any willful breach of this Agreement, including without
limitation attorneys' fees, and the right to pursue any remedy at law or in
equity, except as provided in Section 7.5(e) below.
(b) In the event that (i) this Agreement is terminated by Smith's
pursuant to Section 7.2(d) and (ii) at the time of the event giving rise to such
termination Fred Meyer would not have been entitled to terminate this Agreement
pursuant to Section 7.4 or 7.2(c), then Fred Meyer will pay Smith's up to $5
million as reimbursement for expenses of Smith's actually incurred prior to such
termination relating to the transactions contemplated by this Agreement
(including but not limited to fees and expenses of Smith's counsel, accountants
and financial advisors, but excluding any discretionary fees paid to such
financial advisors).
(c) In the event that (i) this Agreement is terminated by Smith's
pursuant to Section 7.2(d), (ii) at the time of the event giving rise to such
termination, Fred Meyer would not have been entitled to terminate this Agreement
pursuant to Section 7.4 or 7.2(c) and (iii) at the time of the event giving rise
to such termination, any Acquisition Proposal relating to Fred Meyer was
pending, then, if within eighteen (18) months following such termination, any
Alternative Transaction relating to Fred Meyer is consummated (or if any
Alternative Transaction relating to Fred Meyer described in clause (ii) of the
definition Acquisition Proposal shall have been consummated prior to such
termination), Fred Meyer will pay Smith's a termination fee of $35 million (the
"Termination Fee").
(d) In the event that (i) this Agreement is terminated by Smith's
pursuant to Section 7.2(a), (ii) at the time of the event giving rise to such
termination, the Fred Meyer Shareholder Approval has not been obtained and Fred
Meyer would not have been entitled to terminate this Agreement pursuant to
Section 7.4 or 7.2(c) and (iii) at the time of the event giving rise to such
termination, any Acquisition Proposal relating to Fred Meyer is pending (or any
Alternative Transaction relating to Fred Meyer described in clause (ii) of the
definition Acquisition Proposal has been consummated), then Fred Meyer will pay
Smith's the Termination Fee.
(e) Any fees payable pursuant to Sections 7.5(b), (c) or (d) above
shall be paid within one business day after the occurrence of the event giving
rise to the obligation to make such payment. All such payments shall be made by
wire transfer to such bank account
57
as Smith's may designate. Fred Meyer's reimbursement of Smith's expenses
pursuant to Section 7.5(b) and/or payment of a termination fee pursuant to
Section 7.5(c) or Section 7.5(d), as the case may be, shall be the sole and
exclusive remedy of Smith's against Fred Meyer and any of its Subsidiaries and
their respective directors, officers, employees, agents, advisors or other
representatives with respect to the occurrences giving rise to such payment.
8. General Provisions
8.1 Non-survival of Representations and Warranties. All
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement will be deemed to the extent expressly provided
herein to be conditions to the Mergers and will not survive the Mergers. This
Section shall not limit any covenant or agreement of the parties which by its
terms contemplates performance after the Effective Time.
8.2 Notices. Any notice required to be given hereunder will be
sufficient if in writing, and sent by facsimile transmission and by courier
service (with proof of service), hand delivery or certified or registered mail
(return receipt requested and first-class postage prepaid), addressed as
follows:
If to Fred Meyer: If to Smith's:
Fred Meyer, Inc. Smith's Food & Drug Centers, Inc.
3800 S.E. 22nd Avenue 1550 South Redwood Road
Portland, Oregon 97202 Salt Lake City, Utah 84104
Attention: General Counsel Attention: General Counsel
Fax No.: (503) 220-7138 Fax No.: (801) 974-1676
With copies to: With copies to:
Cleary, Gottlieb, Steen & Hamilton Latham & Watkins
One Liberty Plaza 633 West Fifth Street, Suite 4000
New York, New York 10006 Los Angeles, California 90071
Attention: Daniel S. Sternberg, Esq. Attention: Thomas C. Sadler, Esq.
Fax No.: 212-225-3999 Fax No.: 213-891-8763
or to such other address as any party will specify by written notice so given,
and such notice will be deemed to have been delivered as of the date so
telecommunicated, personally delivered or mailed.
8.3 Assignment; Binding Effect. Neither this Agreement nor any of the
rights, interests or obligations hereunder will be assigned by any of the
parties hereto (whether by
58
operation of law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement will be binding upon
and will inure to the benefit of the parties hereto and their respective
successors and assigns. Notwithstanding anything contained in this Agreement to
the contrary, except for the provisions of Section 5.14, nothing in this
Agreement, expressed or implied, is intended to confer on any Person other than
the parties hereto or their respective heirs, successors, executors,
administrators and assigns any rights, remedies, obligations or liabilities
under or by reason of this Agreement.
8.4 Entire Agreement. This Agreement, the Exhibits, the Disclosure
Schedule and any documents delivered by the parties in connection herewith,
together with the Confidentiality Agreements, which will survive the execution
and delivery of this Agreement, constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings among the parties with respect thereto. No
addition to or modification of any provision of this Agreement will be binding
upon any party hereto unless made in writing and signed by all parties hereto.
8.5 Amendment. This Agreement may be amended by the parties hereto, by
action taken by their respective Board of Directors, at any time before or after
approval of matters presented in connection with the Mergers by the respective
stockholders of Fred Meyer and Smith's but after any such stockholder approval,
no amendment will be made which by law requires the further approval of such
stockholders without obtaining such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
8.6 Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of Delaware without regard to its rules of
conflict of laws.
8.7 Counterparts. This Agreement may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered will be
an original, but all such counterparts will together constitute one and the same
instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the parties hereto.
8.8 Headings. Headings of the Articles and Sections of this Agreement
are for the convenience of the parties only, and will be given no substantive or
interpretive effect whatsoever.
8.9 Interpretation. In this Agreement, unless the context otherwise
requires, words describing the singular number will include the plural and vice
versa, and words denoting any gender will include all genders and words denoting
natural Persons will include corporations and partnerships and vice versa.
59
8.10 Waivers. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of any party, will be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties, covenants
or agreements contained in this Agreement. The waiver by any party hereto of any
provision hereunder shall be valid only if set forth in an instrument in writing
signed on behalf of such party and will not operate or be construed as a waiver
of any prior or subsequent breach of the same or any other provision hereunder.
8.11 Incorporation of Schedules. The Disclosure Schedule attached
hereto and referred to herein is hereby incorporated herein and made a part
hereof for all purposes as if fully set forth herein.
8.12 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction will, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision will be interpreted
to be only so broad as is enforceable.
8.13 Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties will be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any Delaware Court, this
being in addition to any other remedy to which they are entitled at law or in
equity.
9. Definitions
9.1 Defined Terms. As used herein, the terms below shall have the
following meanings:
"Acquisition Proposal" means with respect to Smith's or Fred Meyer,
respectively, any proposal or offer or public disclosure of an intention to make
a proposal or offer (in each case, other than the transactions contemplated by
this Agreement) with respect to: (i) any merger, consolidation,
recapitalization, liquidation, dissolution or similar transaction involving
Smith's or Fred Meyer or any of their respective Subsidiaries, or (ii) any
purchase or acquisition (or option or agreement to purchase or acquire),
including by way of a merger, consolidation, tender or exchange offer (including
a self tender), of any equity securities (or securities convertible into equity
securities) pursuant to which any Person (or group of Persons) other than
Smith's or Fred Meyer or their respective affiliates (a "Third Party"), acquires
60
beneficial ownership of 20% or more of the outstanding voting power of Fred
Meyer or Smith's, or (iii) any other transaction pursuant to which any Third
Party acquires control of assets of Smith's or Fred Meyer having a fair market
value (as determined by the Board of Directors of Smith's or Fred Meyer, as the
case may be, in good faith) equal to more than 20% of the fair market value of
all the assets of Smith's or Fred Meyer, as the case may be, and their
respective Subsidiaries, taken as a whole, immediately prior to such
transaction.
"Alternative Transaction" means with respect to Smith's or Fred Meyer,
respectively, any transaction of the nature described in clauses (i), (ii) or
(iii) of the definition of Acquisition Proposal.
"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.
"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.
"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, supplemental unemployment benefits, vacation benefits, retirement
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 or
post-retirement insurance, compensation or benefits which (A) is 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 an 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.
61
"Disclosure Schedule" means the schedules dated as of the date hereof
and delivered by or on behalf of each party hereto to the other party hereto in
connection with this Agreement and which set forth exceptions to the
representations and warranties contained in herein hereof and certain other
information called for by other provisions of this Agreement.
"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.
"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 an "affiliated
service group" with, such Person as defined in Section 414(b), (c), (m) or (o)
of the Code.
"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 biphenyls, 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 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 Water Act, 42 U.S.C. 300f, 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 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.
"GAAP" shall mean generally accepted accounting principles in the
United States of America, as in effect from time to time, consistently applied.
62
"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; 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 respective properties or assets are bound, or which otherwise
relate to the operation of their respective businesses.
"Material Adverse Effect" shall mean, with respect to any of Holdings
(following the Mergers), Smith's or Fred Meyer , as the context requires, a
material adverse change in or effect on the business, results of operations,
assets, liabilities, prospects or conditions (financial or otherwise) of such
Person and its Subsidiaries taken as a whole or any change which impairs or
materially delays the ability of such Person to consummate the transactions
contemplated by this Agreement.
"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.
"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).
63
"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
accordance with GAAP; (ii) all cashiers', 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 delivered or made available for
inspection to any Person prior to the date hereof; and (vi) all other liens and
mortgages (but solely to the extent such liens or mortgages secure indebtedness
described 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.
"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.
"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 tile any such report, return, document,
declaration or other information.
"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
64
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).
9.2 Other Defined. Terms The following terms shall have the respective
meanings given to such terms in the Sections set forth below:
Term Section
---- -------
Agreement Preamble
Blue Sky Laws Section 3.6(b)
Cap Section 5.14(b)
Class A Common Stock Section 2.1(b)(i)
Class B Common Stock Section 2.1(b)(i)
Class C Common Stock Section 2.1(b)(i)
Closing Section 1.5
Closing Date Section 1.5
Code Preamble
Common Certificates Section 2.2(b)
Common Consideration Section 2.1(b)(iii)
Confidentiality Agreements Section 5.7
Contracts Section 3.18
Costs Section 5.14(a)
DGCL Preamble
Dissenting Shares Section 2.4(a)
Effective Time Section 1.6
ERISA Section 3.12(c)
Exchange Act Section 3.6(b)
Exchange Agent Section 2.2(a)
Exchange Fund Section 2.2(a)
Facility Section 3.17(b)
Form S-4 Section 5.9
Fred Meyer Preamble
Fred Meyer Common Consideration Section 2.1(b)(iii)
Fred Meyer Common Shares Section 2.1(b)(ii)
Fred Meyer Common Stock Section 2.1(b)(ii)
Fred Meyer Common Treasury Shares Section 2.1(b)(ii)
Fred Meyer Companies Section 2.1(b)(i)
Fred Meyer Exchange Ratio Section 2.1(b)(ii)
Fred Meyer Merger Preamble
Fred Meyer Options Section 2.1(d)(ii)
65
Fred Meyer Preferred Stock Section 4.3
Fred Meyer SEC Reports Section 4.8(a)
Fred Meyer Stock Option Plans Section 2.1(d)(ii)
Fred Meyer Stockholder Approval Section 4.25
Fred Meyer Sub Section 1.4(a)
Fred Meyer Transaction Document Section 4.2
Holdings Preamble
Holdings Common Stock Preamble
HSR Act Section 3.6(b)
Indemnified Party Section 5.14(a)
Joint Proxy Statement/Prospectus Section 5.9
Mergers Preamble
New Fred Meyer Section 1.7(b)
New Management Agreement Section 1.10(b)
New Smith's Section 1.7(a)
NYSE Section 2.3
Old Management Agreement Section 1.10(b)
Outside Date Section 7.2
Partnership Section 1.10(a)
Preferred Certificates Section 2.2(b)
Preferred Consideration Section 2.1(c)(i)
Property Section 3.17(b)
Registration Rights Agreement Section 1.10(a)
SEC Section 3.8(a)
Securities Act Section 3.6(b)
Series I Preferred Shares Section 2.1(b)(i)
Series I Preferred Stock Section 2.1(c)(i)
Smith's Preamble
Smith's Common Consideration Section 2.1(b)(iii)
Smith's Common Shares Section 2.1(b)(i)
Smith's Common Stock Section 2.1(b)(i)
Smith's Common Treasury Shares Section 2.1(b)(i)
Smith's Companies Section 2.1(b)(ii)
Smith's Exchange Ratio Section 2.1(b)(i)
Smith's Merger Preamble
Smith's Options Section 2.1(d)(i)
Smith's Preferred Stock Section 3.3
Smith's Preferred Treasury Shares Section 2.1(c)(i)
Smith's SEC Reports Section 3.8(a)
Smith's Stock Option Plan Section 2.1(d)(i)
Smith's Stockholder Approval Section 3.25
66
Smith's Sub Section 1.3(a)
Smith's Transaction Document Section 3.2
Smith's Warrant Section 2.1(e)
Superior Proposal Section 5.1
Supplemental Warrant Agreement Section 2.1(e)
Surviving Corporations Section 1.7(b)
Termination Fee Section 7.5(c)
Voting Agreements Preamble
Yucaipa LLC Section 1.10(b)
67
IN WITNESS WHEREOF, the parties have executed this Agreement and
caused the same to be duly delivered on their behalf on the day and year first
written above.
SMITH'S FOOD & DRUG CENTERS, INC.
By: RONALD W. BURKLE
----------------------------------------
Name: Ronald W. Burkle
Title: Chief Executive Officer
FRED MEYER, INC.
By: ROBERT G. MILLER
----------------------------------------
Name: Robert G. Miller
Title: Chairman of the Board and Chief
Executive Officer
68
EXHIBIT A
FORM OF
CERTIFICATE OF INCORPORATION OF
MEYER-SMITH HOLDCO, INC.
A DELAWARE CORPORATION
The undersigned, for the purposes of incorporating and organizing a
corporation under the General Corporation Law of the State of Delaware, executes
this Certificate of Incorporation and certifies as follows:
ARTICLE I
The name of the Corporation is MEYER-SMITH HOLDCO, INC.
ARTICLE II
The registered office and registered agent of the Corporation is The
Corporation Trust Company, 1209 Orange Street, Wilmington, New Castle County,
Delaware 19801.
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
A. The total number of shares of stock that the Corporation shall have
authority to issue is two hundred (200) shares, consisting of one hundred (100)
shares of Common Stock having a par value of $.01 per share and one hundred
(100) shares of Preferred Stock having a par value of $.01 per share.
B. The Board of Directors is authorized, subject to limitations prescribed
by law and the provisions of this Article IV, to provide for the issuance of the
shares of Preferred Stock in series, and by filing a certificate pursuant to the
applicable law of the State of Delaware, to establish from time to time the
number of shares to be included in each such series, and to fix the designation,
powers, preferences and rights of the shares of each such series and the
qualifications, limitations or restrictions thereof.
The authority of the Board of Directors with respect to each series
shall include determination of the following:
(1) The number of shares constituting that series and the distinctive
designation of that series;
(2) The dividend rate, if any, on the shares of that series, whether
dividends shall be cumulative, and, if so, from which date or
dates, and the relative rights of priority, if any, of payment of
dividends on shares of that series;
(3) Whether that series shall have voting rights, in addition to the
voting rights provided by law, and, if so, the terms of such
voting rights and the voting powers, if any, of the holders of
such series;
(4) Whether that series shall have conversion privileges, and, if so,
the terms and conditions of such conversion, including provision
for adjustment of the conversion rate in such events as the Board
of Directors shall determine;
(5) Whether or not the shares of that series shall be redeemable,
and, if so, the terms and conditions of such redemption,
including the date or dates upon or after which they shall be
redeemable, and the amount per share payable in case of
redemption, which amount may vary under different conditions and
at different redemption dates;
(6) Whether that series shall have a sinking fund for the redemption
or purchase of shares of that series, and, if so, the terms and
amount of such sinking fund;
(7) The rights of the shares of that series in the event of voluntary
or involuntary liquidation, dissolution or winding up of the
corporation, and the relative rights of priority, if any, of
payment of shares of that series; and
(8) Any other relative rights, preferences and limitations of that
series.
If upon any voluntary or involuntary liquidation, dissolution or winding up
of the corporation, the assets available for distribution to holders of shares
of Preferred Stock of all series shall be insufficient to pay such holders the
full preferential amount to which they are entitled, then such assets shall be
distributed ratably among the shares of all series of Preferred Stock in
accordance with the respective preferential amounts (including unpaid cumulative
dividends, if any) payable with respect thereto.
ARTICLE V
The Board of Directors of the Corporation may alter, amend or repeal the
Bylaws of the Corporation.
2
ARTICLE VI
No action may be taken by stockholders of this Corporation other than at an
annual or special meeting of stockholders and the ability of stockholders to act
by written consent is specifically denied.
ARTICLE VII
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
3
of any act or omission occurring prior to the time of such amendment,
modification or repeal.
ARTICLE VIII
A. The number of directors constituting the entire Board of Directors of
the Corporation shall be not less than ______ nor more than ______ 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 eleven until otherwise fixed by a
majority of the entire Board of Directors.
B. The Board of Directors, other than those who may be elected by the
holders of any class or series of stock having a preference over the Common
Stock as to dividend or upon liquidation, shall be divided into three classes,
as nearly equal in number as the then total number of directors constituting the
entire Board of Directors permits with the term of office of one class expiring
each year. At the annual meeting of stockholders in 1997, directors of the first
class shall be elected to hold office for a term expiring at the next succeeding
annual meeting, directors of the second class shall be elected to hold office
for a term expiring at the second succeeding annual meeting and directors of the
third class shall be elected to hold office for a term expiring at the third
succeeding annual meeting. Any vacancies in the Board of Directors for any
reason, and any directorships resulting from any increase in the number of
directors, may be filled by the Board of Directors, acting by a majority of the
directors then in office, although less than a quorum, and any directors so
chosen shall hold office until the next election of the class for which such
directors shall have been chosen and until their successors shall be elected and
qualified. Subject to the foregoing, at each annual meeting of stockholders the
successors to the class of directors whose term shall then expire shall be
elected to hold office for a term expiring at the third succeeding annual
meeting. Despite the expiration of a director's term, the director shall
continue to serve until the director's successor is elected and qualified or the
number of directors is decreased. Directors need not be residents of the State
of Delaware or stockholders of the Corporation.
C. Notwithstanding any other provisions of this Certificate of
Incorporation or the Bylaws of the Corporation (and notwithstanding the fact
that some lesser percentage may be specified by law, this Certificate of
Incorporation or the Bylaws of the Corporation), any director or the entire
Board of Directors of the Corporation may be removed at any time, but only for
cause and only by the affirmative vote of the holders of 75% or more of the
voting power of the outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors (considered for this
purpose as one class) cast at a meeting of the stockholders called for that
purpose.
D. Notwithstanding any other provisions of this Certificate of
Incorporation or the Bylaws of the Corporation (and notwithstanding the fact
that some lesser percentage may be
4
specified by law, this Certificate of Incorporation or the Bylaws of the
Corporation), the provisions set forth in this Article VIII may not be amended,
altered, changed or repealed in any respect, nor may any provision be adopted
which is inconsistent with this Article VIII, unless such action is approved by
the affirmative vote of the holders of not less than 75% of the voting power of
the outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as one
class) cast at a meeting of the stockholders called for that purpose.
E. Notwithstanding any other provisions of this Certificate of
Incorporation or the Bylaws of the Corporation (and notwithstanding the fact
that some lesser percentage may be specified by law, this Certificate of
Incorporation or the Bylaws of the Corporation), the provisions set forth in
Section 1.11 of the Bylaws of the Corporation may not be amended, altered,
changed or repealed in any respect, nor may any provision be adopted which is
inconsistent with Section 1.11 of the Bylaws, unless such action is approved by
the Board of Directors or by the affirmative vote of the holders of not less
than 75% of the voting power of the outstanding shares of capital stock of the
Corporation entitled to vote generally at an annual or special meeting of
stockholders (considered for this purpose as one class) cast at a meeting of the
stockholders called for that purpose.
ARTICLE IX
The incorporator of the Corporation is __________________________________,
whose mailing address is _______________________.
The undersigned incorporator hereby acknowledges that the foregoing
Certificate of Incorporation is his or her act and deed on this _____ day of
_______________, 1997.
------------------------------------
[ Incorporator ]
5
EXHIBIT B
FORM OF
BYLAWS
OF
MEYER-SMITH HOLDCO, INC.
ARTICLE I
STOCKHOLDERS
1.1 Annual Meeting. The annual meeting of the stockholders shall be held at
a date and time fixed by the Board of Directors and stated in the notice of the
meeting. Failure to hold an annual meeting an the designated date shall not
affect the validity of any corporate action.
1.2 Special Meetings. Special meetings of the stockholders, for any
purposes, unless otherwise prescribed by statute, may be called by the Chairman
of the Board or the President and shall be called by the Chairman of the Board,
the President or the Secretary upon direction by the Board of Directors.
1.3 Place of Meetings. Meetings of the stockholders shall be hold at any
place in or out of the State of Delaware designated by the Board of Directors.
If a meeting place is not designated by the Board of Directors, the meeting
shall be held at the Corporation's principal office.
1.4 Notice of Meetings. Written or printed notice stating the date, time
and place of the meeting of the stockholders and, in the case of a special
meeting or a meeting for which special notice is required by law, the purposes
for which the meeting is called shall be given by the corporation to each
stockholder entitled to vote at the meeting and, if required by law, to any
other stockholders entitled to receive notice, not more than 60 days nor less
than 10 days before the meeting date. If mailed, the notice shall be deemed
given when deposited in the United States mail, postage prepaid, directed to
each stockholder at the stockholder's address shown in the Corporation's record
of stockholders. Any previously scheduled meeting of the shareholders may be
postponed and any special meeting of the shareholders may be canceled by
resolution of the Board of Directors upon public announcement given prior to the
date previously scheduled for such meeting of shareholders.
1.5 Waiver of Notice. A stockholder may at any time waive any notice
required by law, these Bylaws or the Certificate of Incorporation. The waiver
shall be in writing, be signed by the stockholder entitled to the notice and be
delivered to the Corporation for inclusion in the minutes for filing with the
corporate records. A stockholder's attendance at a meeting constitutes a waiver
of notice of such meeting, except when the person attends for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
1.6 Fixing of Record Date.
(1) In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of the stockholders or any
adjournment thereof, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be (i) more than 60 nor less than 10 days before the date of
such meeting nor (ii) more than 10 days after the date upon which the resolution
fixing the record date is adopted by the Board of Directors nor (iii) more than
60 days prior to any other action.
(2) If no record date is fixed:
(i) The record date for determining stockholders entitled to
notice of or to vote at a meeting of the stockholders shall be at the close of
business on the day next preceding the day on which notice is given or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is hold.
(ii) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
(3) A determination of stockholders of record entitled to notice of or
to vote at a meeting of the stockholders shall apply to any adjournment of the
meeting, provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
1.7 List of Stockholders for Meeting. After a record date for a meeting of
the stockholders is fixed and at least 10 days before any such meeting, the
Corporation shall prepare an alphabetical list of all stockholders entitled to
vote at the meeting of the stockholders showing the address of each stockholder
and the number of shares registered in the name of each stockholder. The list of
stockholders shall be available for inspection by any stockholder, upon proper
demand as may be required by law, for any purpose germane to the meeting, during
ordinary business hours for a period of at least 10 days prior to the meeting,
at the Corporation's principal office or at a place identified in the meeting
notice in the city where the meeting will be held. The Corporation shall make
the list of stockholders available at the meeting, and any stockholder or the
stockholder's agent or attorney shall be entitled to inspect the list at any
time during the meeting or any adjournment. Refusal or failure to prepare or
make available the list of stockholders does not affect the validity of action
taken at the meeting except that upon the willful neglect or refusal of the
directors to produce such a list at any meeting for the election of directors
they shall be ineligible for election to any office at such meeting.
2
1.8 Quorum; Adjournment.
(1) A majority of the voting power present in person or represented by
proxy, shall constitute a quorum at a meeting of stockholders.
(2) The chair of the meeting or a majority of voting power represented
at the meeting, may adjourn the meeting from time to time to a different time
and place without further notice to any stockholder of any adjournment, except
that notice is required if a new record date is or must be set for the adjourned
meeting or if the adjournment is for more than 30 days. At an adjourned meeting
at which a quorum is present, any business may be transacted that might have
been transacted at the meeting originally hold.
(3) Once a share is represented for any purpose at a meeting, it shall
be present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is or must be set for the
adjourned meeting.
1.9 Voting Requirements. If a quorum exists, action on a matter, other than
the election of directors, is approved by the affirmative vote of a majority of
the shares present in person or represented by proxy at the meeting and entitled
to vote on the matter. Unless otherwise provided in the Certificate of
Incorporation, directors are elected by a plurality of the votes cast by the
shares entitled to vote in the election at a meeting at which a quorum is
present.
1.10 Proxies. A stockholder may vote shares in person or by proxy. A
stockholder may appoint a proxy either by personally executing an appointment
form or by causing the stockholder's agent or attorney-in-fact to execute such
form, or by such other means as is specifically authorized by law. An
appointment of a proxy is effective when received by the Secretary or other
officer of the Corporation authorized to tabulate votes, but no proxy shall be
voted or acted upon after three years from its date, unless the proxy provides
for a longer period. An appointment is revocable by the stockholder unless the
appointment form conspicuously states that it is irrevocable and the appointment
is coupled with an interest sufficient in law to support an irrevocable power.
1.11 Notice of Stockholder Business and Nominations.
(1) Annual Meetings of Stockholders.
(a) Nominations of persons for election to the Board of Directors
of the Corporation and the proposal of business to be considered by the
stockholders may be made at an annual meeting of stockholders (i) pursuant to
the Corporation's notice of meeting, (b) by or at the direction of the Board of
Directors or (ii) by any stockholder of the Corporation who was a stockholder of
record at the time of giving of notice as provided for in this Section 1.11 and
on the date of the annual meeting, who is entitled to vote at the meeting and
who complies with the notice procedures set forth in this Section 1.11.
3
(b) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to this Section 1.11, the
stockholder must have given timely notice thereof in writing to the Secretary of
the Corporation and such other business must otherwise be a proper matter for
stockholder action. To be timely, a stockholder's notice shall be delivered to
the Secretary at the principal executive offices of the Corporation not later
than the close of business on the 60th day nor earlier than the close of
business on the 90th day prior to the first anniversary of the preceding year's
annual meeting; provided, however, that in the event that the date of the annual
meeting is more than 30 days before or more than 60 days after such anniversary
date, notice by the stockholder to be timely must be so delivered not earlier
than the close of business on the 90th day prior to such annual meeting and not
later than the close of business on the later of the 60th day prior to such
annual meeting or the 10th day following the day on which public announcement of
the date of such meeting is first made by the Corporation. In no event shall the
public announcement of an adjournment of an annual meeting commence a new time
period for the giving of a stockholder's notice as described above. Such
stockholder's notice shall set forth (i) as to each person whom the stockholder
proposes to nominate for election or reelection as a director all information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors in an election contest, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") (including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected); (ii) as to any other business that the stockholder
proposes to bring before the meeting, a brief description of the business
desired to be brought before the meeting, the reasons for conducting such
business at the meeting and any material interest in such business of such
stockholder and the beneficial owner, if any, on whose behalf the proposal is
made; and (iii) as to the stockholder giving the notice and the beneficial
owner, if any, on whose behalf the nomination or proposal is made (a) the name
and address of such stockholder, as they appear on the Corporation's books, and
of such beneficial owner and (b) the class and number of shares of the
Corporation which are owned beneficially and of record by such stockholder and
such beneficial owner.
(c) Notwithstanding anything in this Section 1.11 to the
contrary, in the event that the number of directors to be elected to the Board
of Directors of the Corporation is increased and there is no public announcement
by the Corporation naming all of the nominees for director or specifying the
size of the increased Board of Directors at least 70 days prior to the first
anniversary of the preceding year's annual meeting, a stockholder's notice
required by this Section 1.11 shall also be considered timely, but only with
respect to nominees for any new positions created by such increase, if it shall
be delivered to the secretary at the principal executive offices of the
Corporation not later than the close of business on the 10th day following the
day on which such public announcement is first made by the Corporation.
(2) Special Meetings of Stockholders. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the Corporation's notice of meeting. Nominations of
persons for election to the Board of Directors may be made at a special meeting
of stockholders at which directors are to
4
be elected pursuant to the Corporation's notice of meeting (a) by or at the
direction of the Board of Directors or (b) provided that the Board of Directors
has determined that directors shall be elected at such meeting, by any
stockholder of the Corporation who is a stockholder of record at the time of
giving of notice provided for in this Section 1.11, who shall be entitled to
vote at the meeting and who complies with the notice procedures set forth in
this Section 1.11. In the event the Corporation calls a special meeting of
stockholders for the purpose of electing one or more directors to the Board of
Directors, any such stockholder may nominate a person or persons (as the case
may be), for election to such position(s) as specified in the Corporation's
notice of meeting, if the stockholder's notice required by this Section 1.11
shall be delivered to the Secretary at the principal executive offices of the
Corporation not earlier than the close of business on the 90th day prior to such
special meeting and not later than the close of business on the later of the
60th day prior to such special meeting or the 10th day following the day on
which public announcement is first made of the date of the special meeting and
of the nominees proposed by the Board of Directors to be elected at such
meeting. In no event shall the public announcement of an adjournment of a
special meeting commence a new time period for the giving of a stockholder's
notice as described above.
(3) General.
(a) Only such persons who are nominated in accordance with the
procedures set forth in this Section 1.11 shall be eligible to serve as
directors and only such business shall be conducted at a meeting of stockholders
as shall have been brought before the meeting in accordance with the procedures
set forth in this Section 1.11. Except as otherwise provided by law, the
Certificate of Incorporation or these Bylaws, the Chairman of the meeting shall
have the power and duty to determine whether a nomination or any business
proposed to be brought before the meeting was made or proposed, as the case may
be, in accordance with the procedures set forth in this Section 1.11, and, if
any proposed nomination or business is not in compliance with this Section 1.11,
to declare that such defective proposal or nomination shall be disregarded.
(b) For the purposes of these Bylaws, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the Corporation with the Securities and Exchange Commission.
(c) Notwithstanding the foregoing provisions of Section 1.11, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in Section 1.11. Nothing in Section 1.11 shall be deemed to affect any
rights of stockholders to request inclusion of proposals in the Corporation's
proxy statement pursuant to Rule 14a-8 under the Exchange Act.
5
ARTICLE II
BOARD OF DIRECTORS
2.1 Duties of Board of Directors. All corporate powers of the Corporation
shall be exercised by or under the authority of its Board of Directors; the
business and affairs of the Corporation shall be managed under the direction of
its Board of Directors. The Board of Directors shall appoint a Chairman, who
shall preside at meetings of the Board of Directors and of the stockholders and
who shall exercise the usual powers pertaining to that office. The Chairman of
the Board shall not be an officer of the Corporation.
2.2 Number, Term, Qualification and Classification. The number, term,
qualification and classification of the directors of the Board of Directors
shall be as set forth in the Corporation's Certificate of Incorporation.
2.3 Regular Meetings. A regular meeting of the Board of Directors may be
held without notice other than this Bylaw immediately after, and at the same
place as, the annual meeting of the stockholders. Regular meetings of the Board
of Directors shall be held at such times and places as may be from time to time
fixed by the Board of Directors or as may be specified in a notice of meeting.
Notice need not be given of regular meetings of the Board of Directors.
2.4 Special Meetings. Special meetings of the Board of Directors may be
called at any time by the Chairman of the Board, the President or a majority of
the directors then serving and shall be called by the Chairman of the Board, the
President or the Secretary upon direction by the Board of Directors.
2.5 Notice. Notice of the date, time and place of any special meeting of
the Board of Directors shall be given at least 24 hours prior to the meeting by
notice communicated in person, by telephone, telegraph, teletype, facsimile
transmission, other form of wire or wireless communication, mail or courier
service sent to director's business or home address. If mailed, notice shall be
effective at the earliest of (a) when received, (b) five days after its deposit
in the United States mail, as evidenced by the postmark, if mailed postpaid and
correctly addressed, (c) on the date shown on the return receipt, if sent by
registered or certified mail, return receipt requested and the receipt is signed
by or on behalf of the addresses, (d) if given by teletype or facsimile, upon
transmission of the message, or (e) if given by overnight mail or courier, one
day after delivery to the overnight mail or courier service company. Notice by
all other means shall be deemed effective when received by or on behalf of the
director. Notice or waiver of notice of any regular or special meeting need not
describe the purposes of, or the business to be transacted at, the meeting
unless required by law or the Certificate of Incorporation.
2.6 Waiver of Notice. A director may at any time waive any notice required
by law, these Bylaws or the Certificate of Incorporation. Except as set forth
below, the waiver
6
must be in writing, be signed by the director entitled to the notice, specify
the meeting for which notice is waived and be filed with the minutes or
corporate records. A director's attendance at or participation in a meeting
waives any required notice to the director of the meeting unless the director at
the beginning of the meeting, or promptly upon the director's arrival, objects
to holding the meeting or transacting business at the meeting and does not
thereafter vote for or assent to action taken at the meeting.
2.7 Quorum. One-third of the total number of directors fixed in accordance
with the Certificate of Incorporation shall constitute a quorum for the
transaction of business at any meeting of the Board of Directors, except that,
if the total number of directors fixed in accordance with the provisions of the
Certificate of Incorporation is one, then one director shall constitute a
quorum. If less than a quorum is present at a meeting, a majority of the
directors present may adjourn the meeting from time to time without further
notice.
2.8 Manner of Acting. The act of the majority of the directors present at a
meeting at which a quorum is present shall be the act of the Board of Directors,
unless a different number is provided by law, the Certificate of Incorporation
or these Bylaws.
2.9 Meeting by Telephone Conference; Action Without Meeting.
(1) Directors may participate in a regular or special meeting by, or
conduct the meeting through, use of any means of communications by which all
directors participating may simultaneously hear each other during the meeting.
Participation in a meeting by this means shall constitute presence in person at
the meeting.
(2) Any action that is required or permitted to be taken at a meeting
of the Board of Directors may be taken without a meeting if one or more written
consents describing the action taken are signed by all of the directors entitled
to vote on the matter and included in the minutes of proceedings of the Board of
Directors. The action shall be effective when the last director signs the
consent, unless the consent specifies an earlier or liter effective date.
2.10 Vacancies. Any vacancy on the Board of Directors may be filled by the
Board of Directors as set forth in the Corporation's Certificate of
Incorporation. Any vacancy not filled by the directors shall be filled by
election at an annual meeting or at a special meeting of stockholders called for
that purpose. A vacancy that will occur at a specified later date, by reason of
a resignation or otherwise, may be filled before the vacancy occurs, but the new
director may not take office until the vacancy occurs.
2.11 Compensation. By resolution of the Board of Directors, the directors
may be paid reasonable compensation for services as directors and their expenses
of attending meetings of the Board of Directors.
2.12 Presumption of Assent. A director who is present at a meeting of the
Board of Directors or a committee of the Board of Directors shall be deemed to
have assented to the
7
action taken at the meeting unless (a) the director's dissent or abstention from
the action is entered in the minutes of the meeting, (b) the director delivers a
written notice of dissent or abstention to the action to the presiding officer
of the meeting before any adjournment or to the Corporation immediately after
the adjournment of the meeting or (c) the director objects at the beginning of
the meeting or promptly upon the director's arrival to the holding of the
meeting or transacting business at the meeting. The right to dissent or abstain
is not available to a director who voted in favor of the action.
2.13 Resignation. Any director may resign by delivering written notice to
the Board of Directors, the Chairman of the Board or the Corporation. Unless the
notice specifies a later effective date, a resignation notice shall be effective
upon the earlier of (a) receipt, (b) five days after its deposit in the United
States mail, if mailed postpaid and correctly addressed, or (c) on the date
shown on the return receipt, if sent by registered or certified mail, return
receipt requested, and the receipt is signed by addressee. once delivered, a
resignation notice is irrevocable unless revocation is permitted by the Board of
Directors.
ARTICLE III
COMMITTEES OF THE BOARD
3.1 Committees. The Board of Directors may, by resolution passed by a
majority of the whole Board, create one or more committees and appoint members
of the Board of Directors to serve on them. Each committee shall have one or
more members. The creation of a committee and appointment of members to it must
be approved by a majority of all directors in office when the action is taken.
Subject to any limitation imposed by the Board of Directors or by law, each
committee may exercise all the authority of the Board of Directors in the
management of the Corporation. A committee may not take any action that a
committee is prohibited from taking by the General Corporation Law of Delaware.
3.2 Changes of Size and Function. Subject to the provisions of the General
Corporation Law of Delaware, the Board of Directors shall have the power at any
time to change the number of committee members, fill committee vacancies, change
any committee members and change the functions and terminate the existence of a
committee.
3.3 Conduct of Meetings. Each committee shall conduct its meetings in
accordance with the applicable provisions of these Bylaws relating to meetings
and action without meetings of the Board of Directors. Each committee shall
adopt any further rules regarding its conduct, keep minutes and other records
and appoint subcommittees and assistants as it deems appropriate.
3.4 Compensation. By resolution of the Board of Directors, Committee
members may be paid reasonable compensation for services on committees and their
expenses of attending committee meetings.
8
ARTICLE IV
OFFICERS
4.1 Appointment. The Board of Directors shall appoint a President and Chief
Executive Officer, such Vice Presidents as the Board of Directors may determine,
a Secretary and a Treasurer. The Board of Directors may appoint such other
officers, assistant officers and agents as the Board of Directors may determine.
Any two or more offices may be held by the same person.
4.2 Term. The term of office of all officers commences upon their
appointment and continues until their successors are appointed or until their
resignation or removal.
4.3 Removal. Any officer or agent appointed by the Board of Directors may
be removed by the Board of Directors at any time with or without cause.
4.4 President. The President shall be the Chief Executive Officer and
exercise the usual powers pertaining to that office. Subject to the control of
the Board of Directors, the President shall be in general charge of the
Corporation's business and affairs. The President shall report to and consult
with the Board of Directors. Unless otherwise determined by the Board of
Directors, the President shall have authority to vote any shares of stock of
another corporation owned by the Corporation and to delegate this authority to
any other officer. The President shall have such other powers and duties as the
Board of Directors may from time to time prescribe. In the absence of the
Chairman of the Board, the President shall preside at meetings of the Board of
Directors and the stockholders.
4.5 Vice Presidents. Each Vice President shall perform the duties and
responsibilities prescribed by the Board of Directors or as may be assigned from
time to time by the President. The Board of Directors may confer a special title
upon a Vice President.
4.6 Secretary.
(1) The Secretary shall record and keep the minutes of all meetings of
the directors and the stockholders in one or more books provided for that
purpose and perform any other duties prescribed by the Board of Directors.
(2) Any assistant secretary shall have the duties prescribed from time
to time by the Board of Directors or the secretary. In the absence or disability
of the Secretary, the Secretary's duties shall be performed by an assistant
secretary.
4.7 Treasurer. The Treasurer shall be responsible for such financial
matters of the Corporation and shall have such other duties as are prescribed
from time to time by the Board of Directors.
9
ARTICLE V
INDEMNIFICATION
The Corporation shall indemnify any current or former director or officer
and may indemnify any current or former employee or agent of the Corporation to
the fullest extent not prohibited by law who is made, or threatened to be made,
a party to an action, suit or proceeding, whether civil, criminal,
administrative, investigative or other (including an action, suit or proceeding
by or in the right of the Corporation), by reason of the fact that such person
is or was a director, officer, employee or agent of the Corporation, or serves
or served at the request of the Corporation as a director, officer, employee or
agent of another corporation partnership, joint venture, trust or other
enterprise. To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
such action, suit or proceeding, or in defense of any claim, issue or matter
therein, such person shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith. The
corporation shall pay for or reimburse the reasonable expenses incurred by any
such current or former director or officer and may pay for or reimburse the
reasonable expenses of any such current or former employee or agent in any such
proceeding in advance of the final disposition of the proceeding if such person
sets forth in writing (i) the person's good faith belief that the person is
entitled to indemnification under this Article and (ii) the person's agreement
to repay all advances if it is ultimately determined that the person is not
entitled to indemnification under this Article. No amendment to these Bylaws
that limits the corporation's obligation to indemnify any person shall have any
effect on such obligation for any act or omission that occurs prior to the later
to occur of the effective date of the amendment or the date notice of the
amendment is given to the person. This Article shall not be deemed exclusive of
any other provisions for indemnification or advancement of expenses of
directors, officers, employees, agents and fiduciaries that may be included in
the Certificate of incorporation or any statute, Bylaw, agreement, general or
specific action of the Board of Directors, vote of stockholders or other
document or arrangement. 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.
ARTICLE VI
ISSUANCE OF SHARES
6.1 Adequacy of Consideration. Before the Corporation issues shares, the
Board of Directors shall determine that the consideration received or to be
received for the shares to be issued is adequate. The authorization by the Board
of Directors of the issuance of shares for stated consideration shall evidence a
determination by the Board that such consideration is adequate.
10
6.2 Certificates for Shares.
(1) Certificates representing shares of the Corporation shall be in
any form determined by the Board of Directors consistent with the requirements
of the General Corporation Law of Delaware and these Bylaws. The certificates
shall be signed, either manually or in facsimile, by two officers of the
corporation, who shall be the Chairman of the Board, the President or a Vice
President and the Treasurer, an Assistant Treasurer, the Secretary or an
Assistant Secretary, and may be sealed with the seal of the Corporation, if any,
or a facsimile thereof. All certificates for shares shall be consecutively
numbered or otherwise identified. Any or all of the signatures upon a
certificate may be facsimiles.
(2) Every certificate for shares of stock that are subject to any
restriction on transfer or registration of transfer pursuant to the Certificate
of Incorporation, the Bylaws, securities laws, a stockholders' agreement or any
agreement to which the Corporation is a party shall have conspicuously noted on
the face or back of the certificate either the full text of the restriction or a
statement of the existence of the restriction and that the corporation retains a
copy of the full text. Every certificate issued when the corporation is
authorized to issue more than one class or series within a class of shares shall
set forth on its face or back either (a) a summary of the designations, relative
rights, preferences and limitations of the shares of each class and the
variations in rights, preferences and limitations for each series authorized to
be issued and the authority of the Board of Directors to determine variations
for future series or (b) a statement of the existence of those designations,
relative rights, preferences and limitations and a statement that the
Corporation will furnish a copy thereof to the holder of the certificate upon
written request and without charge.
(3) All certificates surrendered to the Corporation for transfer shall
be canceled. The Corporation shall not issue a new certificate for previously
issued shares until the former certificate or certificates for those shares are
surrendered and canceled, except that in case of a lost, destroyed or mutilated
certificate a new certificate may be issued upon receipt by the Corporation of
security against loss (by bond, indemnity or otherwise) to the extent deemed
necessary by the Board of Directors.
6.3 Transfer of Shares. Transfer of shares of the Corporation shall be made
only on the stock transfer books of the Corporation by the holder of record
thereof or by the holder's legal representative, who shall furnish proper
evidence of authority to transfer, or by the holder's attorney thereunto
authorized by power of attorney duly executed and filed with the Secretary of
the Corporation. The person in whose name shares stand on the books of the
Corporation shall be deemed by the corporation to the owner thereof for all
purposes.
6.4 Transfer Agent and Registrar. The Board of Directors may from time to
time appoint one or more transfer agents and one or more registrars for the
shares of the Corporation, with powers and duties determined by the Board of
Directors.
11
6.5 Officer Ceasing to Act. If the person who signed a share certificate,
either manually or in facsimile, no longer holds office when the certificate is
issued, the certificate is nevertheless valid.
6.6 Fractional Shares. The Corporation shall not issue certificates for
fractional shares.
ARTICLE VII
CONTRACTS, CHECKS AND OTHER INSTRUMENTS
7.1 Contracts. Except as otherwise provided by law, the Board of Directors
may authorize any officers or agents to execute and deliver any contract or
other instrument in the name of and on behalf of the Corporation, and this
authority may be general or confined to specific instances.
7.2 Checks, Drafts, Etc. All checks, drafts or other orders for the payment
of money and notes or other evidences of indebtedness issued in the name of the
Corporation shall be signed in the manner and by the officers or agents of the
Corporation designated by the Board of Directors, the Chairman of the Board or
the President.
7.3 Deposits. All funds of the Corporation not otherwise employed shall be
deposited to the credit of the Corporation in those banks, trust companies or
other depositories as the Board of Directors or officers of the Corporation
designated by the Board of Directors select, or be invested as authorized by the
Board of Directors.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.1 Severability. A determination that any provision of these Bylaws is for
any reason inapplicable, invalid, illegal or otherwise ineffective shall not
affect or invalidate any other provision of these Bylaws.
8.2 Amendments. Subject to the provisions of the Certificate of
Incorporation, these Bylaws may be amended or repealed and new Bylaws may be
adopted by the Board of Directors or the stockholders of the Corporation.
Adopted: __________________________, 1997
12
EXHIBIT C
FORM OF
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
entered into as of ______________ ___, 1997 by and among Fred Meyer, Inc.,
formerly known as Meyer-Smith Holdco, Inc., a Delaware corporation (the
"Company"), The Yucaipa Companies, a California general partnership ("Yucaipa")
and each of the holders of the Company Common Stock (as hereinafter defined)
executing this Agreement (each a "Holder" and collectively, the "Holders").
WHEREAS, this Agreement is made pursuant to that certain Agreement and
Plan of Reorganization and Merger dated as of May 11, 1997 (the "Reorganization
Agreement") by and between Smith's Food & Drug Centers, Inc., a Delaware
corporation ("Smith") and Fred Meyer, Inc., a Delaware corporation ("Fred
Meyer"), under which the execution and delivery of this Agreement is a condition
to the closing of the transactions contemplated thereby.
NOW THEREFORE, in consideration of the mutual covenants herein
contained and for other good and valuable consideration, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
DEFINITIONS. Capitalized terms used herein and not otherwise defined
herein have the meanings ascribed to them in the Reorganization Agreement. In
addition, the following capitalized terms shall have the meanings ascribed to
them below:
"Affiliate," as applied to any specified Person, shall mean any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person and, in the case of a Person
who is an individual, shall include (i) members of such specified Person's
immediate family (as defined in Instruction 2 of Item 404(a) of Regulation S-K
under the Securities Act) and (ii) trusts, the trustee and all beneficiaries of
which are such specified Person or members of such Person's immediate family as
determined in accordance with the foregoing clause (i). For the purposes of this
definition, "control," when used with respect to any Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Business Day" means any day that is not a Saturday, Sunday or a day
on which banking institutions in New York, New York or Los Angeles, California
are not required to be open.
"Company Common Stock" means the common stock, par value $.01 per
share, of the Company.
"Deferral Period" is defined in Section 2.1.
"Demand Notice" is defined in Section 2.1.
"Demand Registration" is defined in Section 2.1.
"Demanding Holder" means any Holder initiating a registration request
in compliance with Section 2.1(a); provided that any action required or
permitted to be taken under this Agreement by any Demanding Holders shall be
taken by action of the holders of a majority of the Registrable Securities held
by such Demanding Holders.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Holders" means the holders of Company Common Stock and of the
Warrants who have executed this Agreement, and the transferees of each of them.
"Person" means an individual, partnership, corporation, limited
liability company, trust or unincorporated organization, or a government or
agency or political subdivision thereof.
"Piggyback Registration" is defined in Section 2.2.
"Piggyback Holder" is defined in Section 2.2.
"Prospectus" means the prospectus included in a Registration
Statement, as amended or supplemented by any prospectus supplement and by all
other amendments thereto, including post-effective amendments, and all material
incorporated by reference into such Prospectus.
"Public Distribution" shall mean any bona fide underwritten public
distribution of Stock pursuant to an effective registration statement under the
Securities Act or any other applicable law, or any bona fide public sale in an
open market transaction under Rule 144 of the Securities Act (or any successor
rule) if such sale is in compliance with the requirements of paragraphs (c),
(d), (e), (f) and (g) of such Rule (notwithstanding the provisions of paragraph
(k) of such Rule).
"Public Offering" shall mean any bona fide underwritten public
distribution of Stock pursuant to an effective registration statement under the
Securities Act or any other applicable law.
"Registrable Securities" means each share of Stock held by the
Holders, or acquired by the Holders after the date hereof, until (i) it has been
effectively registered under the Securities Act and disposed of by such Holders
pursuant to an effective registration statement, or (ii) it is sold by such
Holders pursuant to Rule 144 (or any similar provisions then in force) under
2
the Securities Act. "Registrable Securities" shall include all shares of Company
Common Stock issued or issuable upon exercise of the Warrants.
"Registration Statement" means any registration statement of the
Company relating to a Demand Registration pursuant to Section 2.1, a Piggyback
Registration pursuant to Section 2.2, or a Shelf Registration pursuant to
Section 2.3, in each case, including the Prospectus included therein, all
amendments and supplements thereto (including post-effective amendments) and all
exhibits and material incorporated by reference therein.
"Restricted Registration" means any public offering of Registrable
Securities pursuant to a Registration Statement in which the aggregate number of
shares proposed to be offered by the Smith Group and the Yucaipa Group is
restricted by the managing underwriter(s) as contemplated by Sections 2.1(e) and
2.2(b) hereof.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Selling Holder" means a Holder who sells or proposes to sell
Registrable Securities pursuant to a Registration Statement under the Securities
Act.
"Shelf Registration" or "Shelf Registration Statement" is defined in
Section 2.3.
"Smith Group" is defined in Section 2.1(a).
"Stock" means the following securities: (i) the Company Common Stock
or (ii) any security or other instrument (a) received as a dividend on, or other
payment made to the holders of, the Company Common Stock (or any other security
or instrument referred to in this definition) or (b) issued in connection with a
split of the Company Common Stock (or any other security or instrument referred
to in this definition) or as a result of any exchange or reclassification of the
Company Common Stock (or any other security or instrument referred to in this
definition), reorganization, consolidation, merger or recapitalization.
"Underwritten Registration" or "Underwritten Offering" means a
registration in which Stock of the Company is sold to an underwriter for
re-offering to the public.
"Warrants" means the Smith's Warrants as modified pursuant to Section
2.1(e) of the Reorganization Agreement.
"Yucaipa Group" is defined in Section 2.1(a).
3
ARTICLE II
REGISTRATION RIGHTS
SECTION 2.1 DEMAND REGISTRATIONS.
(a) Request for Registration. At any time and from time to time on or
after the Effective Time (as defined in the Reorganization Agreement), each of
(i) the holders of a majority of the Registrable Securities held by Yucaipa and
its Affiliates and transferees of any of the foregoing, as a group (the "Yucaipa
Group"), and (ii) the holders of a majority of the Registrable Securities held
by Jeffrey P. Smith, Richard D. Smith and Fred L. Smith or members of their
respective families, or any trust of which any of the foregoing are
beneficiaries, as a group (the "Smith Group"), may make two written requests of
the Company for registration with the SEC, under and in accordance with the
provisions of the Securities Act, of all or part (but not less than one million
(1,000,000) shares of Registrable Securities) of their Registrable Securities (a
"Demand Registration") by giving written notice to the Company of such demand (a
"Demand Notice"), provided that the Company shall be required to effect only one
Demand Registration during any six-month period. Each such Demand Notice will
specify the number of Registrable Securities proposed to be sold pursuant to
such Demand Registration and will also specify the intended method of
disposition thereof.
Promptly after receipt of any Demand Notice, but in no event later
than 60 days after receipt of such Demand Notice, the Company shall file a
Registration Statement with the SEC with respect to the Registrable Securities
included in the Demand Notice and shall use its best efforts to have such
Registration Statement declared effective as promptly as practicable; provided,
however, that the Company may postpone the filing of such Registration Statement
for a period of up to 90 days (the "Deferral Period") if the Board of Directors
reasonably determines that (i) such a filing would adversely affect any proposed
financing, acquisition, divestiture or other material transaction by the Company
or (ii) such a filing would otherwise represent an undue hardship for the
Company. The Company shall not be entitled to request more than one such
deferral with respect to any group of Holders requesting a Demand Registration
within any 365-day period. If the Company does elect to defer any such Demand
Registration, the Holders requesting such Demand Registration may, at their
election by written notice to the Company, (i) confirm their request to proceed
with such Demand Registration upon the expiration of the Deferral Period or (ii)
withdraw their request for such Demand Registration in which case no such
request for a Demand Registration shall be deemed to have occurred for purposes
of this Agreement.
The Company shall give written notice of any Demand Notice by any
Holder, which request complies with this Section 2.1(a), within 5 days after the
receipt thereof, to each Holder who did not initially join in such request.
Within 10 days after receipt of such notice, any such Holder may request in
writing that its Registrable Securities be included in such registration, and
the Company shall include in the Demand Registration the Registrable Securities
of each such Holder requested to be so included, subject to the provisions of
Section
4
2.1(e). Each such request shall specify the number of shares of Registrable
Securities proposed to be sold and the intended method of disposition thereof.
(b) Effective Registration. Except as provided in subsection (c)
below, a registration will not be deemed to have been effected as a Demand
Registration unless it has been declared effective by the SEC; provided that if,
after it has become effective, the offering of Registrable Securities pursuant
to such registration is or becomes the subject of any stop order, injunction or
other order or requirement of the SEC or any other governmental or
administrative agency, or if any court prevents or otherwise limits the sale of
Registrable Securities pursuant to the registration (for any reason other than
the acts or omissions of the Holders), such registration will be deemed not to
have been effected. If (i) a registration requested pursuant to this Section 2.1
is deemed not to have been effected in accordance with the provisions of the
preceding sentence or (ii) the registration requested pursuant to this Section
2.1 does not remain continuously effective for a period of at least 90 days
beyond the effective date thereof or until the consummation of the distribution
by the Holders of the Registrable Securities included in such registration
statement (the "Demand Registration Statement"), then such Demand Registration
Statement shall not count as a Demand Registration that may be requested by the
Demanding Holder(s) in question and the Company shall continue to be obligated
to effect a registration pursuant to this Section 2.1.
(c) Withdrawal. The Demanding Holders may withdraw all or any part of
the Registrable Securities from a Demand Registration at any time (whether
before or after the filing or effective date of the Demand Registration
Statement), and if all such Registrable Securities are withdrawn, to withdraw
the demand related thereto. If at any time a registration statement is filed
pursuant to a Demand Registration, and subsequently a sufficient number of
Registrable Securities are withdrawn from the Demand Registration so that such
Demand Registration Statement does not cover at least the required amounts
specified by Section 2.1(a), and an additional number of Registrable Securities
is not so included, the Company may (or shall, if requested by the Demanding
Holders) withdraw such Demand Registration Statement; provided that such
withdrawn registration statement will count as a Demand Registration unless the
Demanding Holders elect to bear the expenses associated with such withdrawn
registration statement. If the Demanding Holders elect to bear such expenses,
such expenses shall be borne by the Demanding Holder(s) whose withdrawal of
Registrable Securities resulted in such Demand Registration Statement not
covering the specified required amounts.
(d) Selection of Underwriter. If the Demanding Holders so elect, the
offering of Registrable Securities pursuant to a Demand Registration shall be in
the form of an Underwritten Offering. The Demanding Holders shall select one or
more nationally recognized firms of investment bankers to act as the managing
Underwriter or Underwriters in connection with such offering and shall select
any additional investment bankers and managers to be used in connection with
such offering; provided that such investment bankers and managers must be
reasonably satisfactory to the Company. The Company shall (together with all
Holders of Registrable Securities proposing to distribute such Registrable
Securities through such underwriting) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting in the manner set forth above.
5
(e) Priority on Demand Registrations. If, in any Demand Registration
involving an Underwritten Offering the managing underwriter or underwriters
thereof advise the Demanding Holders or the Company in writing that in its or
their reasonable opinion the number of Registrable Securities proposed to be
sold in such Demand Registration exceeds the number that can be sold in such
offering or will adversely affect the success of such offering (including,
without limitation, an impact on the selling price or the number of Registrable
Securities that any participant may sell), the Company shall include in such
registration only the number of Registrable Securities, if any, which in the
opinion of such underwriter or underwriters can be sold without having an
adverse effect on the success of the offering and in accordance with the
following priority: (i) first, Registrable Securities held by Demanding Holders
in the group initially requesting such registration, allocated pro rata among
such group (based upon the number of Registrable Securities requested to be
included in such Demand Registration) and (ii) second, pro rata (based upon the
number of Registrable Securities requested to be included in such registration
by such Holders) among the other Holders of Registrable Securities who have
requested to include Registrable Securities in such registration. If all
Registrable Securities requested to be sold in the Underwritten Offering are
included therein, the Company may include other shares of Stock in such offering
in accordance with the following priority, but not to exceed the number
recommended by the managing underwriter or underwriters: (x) first, pro rata
among any other stockholders of the Company having piggyback or other similar
registration rights and (y) second, shares of Stock proposed to be sold by or
for the account of the Company. Notwithstanding the foregoing, if prior to the
filing of any Demand Registration Statement, the Company has received Demand
Notices from both the Smith Group and the Yucaipa Group, then the Smith Group
and the Yucaipa Group shall be permitted to include their Registrable Securities
in any such Demand Registration on an equal basis (i.e. each group will be
entitled to 50% of the remaining share allocation, or such greater percentage as
may be available if the other group elects not to fill its entire 50%
allocation).
SECTION 2.2 PIGGYBACK REGISTRATIONS.
(a) Right to Participate in Registration. If at any time the Company
proposes to file a registration statement under the Securities Act with respect
to an offering by the Company for its own account or for the account of any
holders of any class of common equity securities (other than (i) a registration
statement on Form S-4 or S-8 (or any substitute form that may be adopted by the
SEC) or (ii) a registration statement filed in connection with a Demand
Registration or a Shelf Registration or (iii) a registration statement filed in
connection with an offering of securities solely to the Company's existing
securityholders), then the Company shall give written notice of such proposed
filing to the Holders as soon as practicable (but in no event less than 20 days
before the anticipated filing date), and such notice shall offer such Holder the
opportunity to register such number of shares of Registrable Securities as each
such Holder may request, which request shall specify the Registrable Securities
intended to be disposed of by such Holder and the intended method of
distribution thereof (or, if the offering is a proposed Underwritten Offering,
that such Holder elects to have the number of Registrable Securities so
specified included in such Underwritten Offering) (a "Piggyback Registration").
6
The Company shall use its best efforts to cause the managing
Underwriter or Underwriters of a proposed Underwritten Offering to permit the
Registrable Securities requested by the Holders thereof to be included in a
Piggyback Registration (the "Piggyback Holders") to be included on the same
terms and conditions as any similar securities of the Company or any other
securityholder included therein and to permit the sale or other disposition of
such Registrable Securities in accordance with the intended method of
distribution thereof.
No registration effected under this Section 2.2 and no failure to
effect a registration under this Section 2.2(a), shall relieve the Company of
its obligations pursuant to Section 2.1, and no failure to effect a registration
under this Section 2.2(a) and complete the sale of shares in connection
therewith shall relieve the Company of any other obligation under this Agreement
(including, without limitation, the Company's obligations under Sections 3.2 and
4.1).
(b) Priority on Piggyback Registrations. Unless the registration
statement is being filed pursuant to a Demand Registration (in which case the
priority of piggyback rights shall be as provided in Section 2.1(e) above), if
the managing underwriter or underwriters advise the Company in writing that in
its or their reasonable opinion the number of equity securities of the Company
proposed to be sold in such registration (including Registrable Securities to be
included pursuant to subsection (a) above) will adversely affect the success of
such offering (including, without limitation, an impact on the selling price or
the number of equity securities of the Company that any participant may sell),
the Company shall include in such registration the number of equity securities
of the Company, if any, which in the opinion of such underwriter or underwriters
can be sold without having an adverse effect on the offering and in accordance
with the following priority: (i) first, the securities the Company proposes to
sell for its own account, (ii) second, any Registrable Securities of the Smith
Group and any Registrable Securities of the Yucaipa Group, on an equal basis (as
specified in Section 2.1(e) above), and (iii) third, pro rata based on the
number of Registrable Securities that each Holder or other Person having similar
rights shall have requested to be included therein.
(c) Withdrawal. The Piggyback Holders may withdraw all or any part of
the Registrable Securities from a Piggyback Registration at any time (before but
not after the effective date of such registration statement), by delivering
written notice of such withdrawal request to the Company, unless such Piggyback
Registration is underwritten, in which case Registrable Securities may not be
withdrawn after the effective date of the Registration Statement.
(d) Termination of Registration by the Company. If the Company shall
determine for any reason (x) not to register or (y) to delay a registration
which includes Registrable Securities pursuant to this Section 2.2, the Company
may, at its election, give written notice of such determination to the Holders
of the Registrable Securities and, thereupon (i) in the case of a determination
not to register, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from its obligation to
pay the Registration Expenses (as defined below) in connection therewith),
without prejudice, however, to the rights, if any, of any Holder or Holders of
Registrable Securities to request that such
7
registration be effected as a Demand Registration under Section 2.1, and (ii) in
the case of a delay in registering, shall be permitted to delay registering any
Registrable Securities for the same period as the delay in registering such
other shares.
SECTION 2.3 SHELF REGISTRATION.
(a) Filing and Effectiveness. Upon the request of the Demanding
Holders in the Yucaipa Group at any time, the Company shall cause to be filed
with the SEC as promptly as practicable after such request, but in no event
later than 60 days thereafter, a shelf registration statement pursuant to Rule
415 under the Securities Act (a "Shelf Registration" or a "Shelf Registration
Statement"), which Shelf Registration Statement shall provide for resales of all
Registrable Securities held by members of the Yucaipa Group who shall have
provided the information required pursuant to Section 3.1(b). The Smith Group
shall be afforded the opportunity to include any Registrable Securities held by
the Smith Group in such Shelf Registration. The Company shall use its best
efforts to have such Shelf Registration declared effective and to keep such
Shelf Registration Statement continuously effective, supplemented and amended to
the extent necessary to ensure that it is available for resales of Registrable
Securities by such Holders, and to ensure that it conforms with the requirements
of this Agreement, the Securities Act and the policies, rules and regulations of
the SEC as announced from time to time, for a period of at least one (1) year
following the date on which such Shelf Registration Statement becomes effective
under the Securities Act; provided, however, that, notwithstanding any other
provisions of this Agreement, with respect to any Registrable Securities, the
Company shall not be obligated to effect any Shelf Registration Statement, or
keep any Shelf Registration Statement effective, at any time or for any period
after the fifth anniversary of the Effective Time. A request of the Demanding
Holders in the Yucaipa Group under this Section 2.3(a) shall be deemed to be a
request for a Demand Registration under Section 2.1 above.
(b) Effective Registration. A registration will not be deemed to have
been effected as a Shelf Registration unless it has been declared effective by
the SEC and the Company has complied in all material respects with its
obligations under this Agreement with respect thereto; provided that if, after
it has become effective, the offering of Registrable Securities pursuant to such
registration is or becomes the subject of any stop order, injunction or other
order or requirement of the SEC or any other governmental or administrative
agency, or if any court prevents or otherwise limits the sale of Registrable
Securities pursuant to the registration (for any reason other than the acts or
omissions of the Holders), such registration will be deemed not to have been
effected. If (i) the Shelf Registration is deemed not to have been effected in
accordance with the provisions of the preceding sentence or (ii) the Shelf
Registration does not remain continuously effective for the period described in
subsection (a) above, then such Shelf Registration Statement shall not count as
a Shelf Registration and the Company shall continue to be obligated to effect a
registration pursuant to this Section 2.3.
(c) Suspension. With respect to any Shelf Registration that has been
declared effective (i) the Company may suspend use of such Shelf Registration at
any time if the continued effectiveness thereof would require the Company to
disclose a material financing,
8
acquisition or other corporate transaction, which disclosure the Board of
Directors of the Company shall have determined in good faith is not in the best
interests of the Company and its stockholders, and (ii) the Company may suspend
use of such Shelf Registration during any period if each of the Company and the
holders of a majority of the Registrable Securities included in such Self
Registration consents in writing to such suspension for such period.
ARTICLE III
REGISTRATION PROCEDURES
SECTION 3.1 REGISTRATION PROCEDURES.
(a) General Provisions. In connection with any Registration Statement
and any related Prospectus required by this Agreement to permit the sale or
resale of Registrable Securities, the Company shall:
(1) prepare and file with the SEC a registration statement with
respect to such Registrable Securities within the time periods specified herein,
make all required filings with the NASD and use its best efforts to cause such
registration statement to become effective as promptly as practicable (subject
to the Company's right to withdraw the registration statement under the
circumstances described in Sections 2.1(c) or 2.2(d));
(2) promptly prepare and file with the SEC such amendments and
post-effective amendments to the Registration Statement as may be necessary to
keep the Registration Statement effective for the applicable period set forth in
Sections 2.1, 2.2 or 2.3, as applicable, or such shorter period as will
terminate when all Registrable Securities covered by such Registration Statement
have been sold (subject to Section 2.3(c)); cause the Prospectus to be
supplemented by a required Prospectus supplement, and as so supplemented to be
filed pursuant to Rule 424 under the Securities Act, and to comply fully with
the applicable provision of Rules 424 and 430A under the Securities Act in a
timely manner; and comply with the provisions of the Securities Act with respect
to the disposition of all securities covered by such Registration Statement
during the applicable period in accordance with the intended method or methods
of distribution by the sellers thereof set forth in such Registration Statement
or supplement to the Prospectus;
(3) use its best efforts to keep such Registration Statement
continuously effective and provide all requisite financial statements for the
period specified in Sections 2.1, 2.2 or 2.3, as applicable (subject to Section
2.3(c)); upon the occurrence of any event that would cause any such Registration
Statement or the Prospectus contained therein (A) to contain a material
misstatement or omission or (B) not to be effective and usable for resale of
Registrable Securities during the period required by this Agreement, the Company
shall file promptly an appropriate amendment to such Registration Statement, in
the case of clause (A), correcting any such misstatement or omission, and, in
the case of either clause (A) or (B), use its best efforts to cause such
amendment to declared effective and such Registration Statement and related
Prospectus to become usable for their intended purposes(s) as soon as
practicable thereafter;
9
(4) provide (A) the Holders of Registrable Securities participating in
the registration, (B) the underwriters (which term, for purposes of this
Agreement, shall include a Person deemed to be an underwriter within the meaning
of Section 2(11) of the Securities Act), if any, of the Registrable Securities
to be registered, (C) the sale or placement agent therefor, if any, (D) counsel
for such underwriters or agent, and (E) counsel for the Holders thereof, as
selected by Holders of a majority of the Registrable Securities covered by such
registration statement, the opportunity to participate in the preparation of
such registration statement, each prospectus included therein or filed with the
SEC, and each amendment or supplement thereto, and for a reasonable period prior
to the filing of such registration statement, and throughout the period
specified in Section 3.4(b) hereof, make available for inspection by the parties
referred to in (A) through (E) above such financial and other information and
books and records of the Company, provide access to properties of the Company
and cause the officers, directors, employees, counsel and independent certified
public accountants of the Company to respond to such inquiries as shall be
reasonably necessary to conduct a reasonable investigation within the meaning of
Section 11 of the Securities Act;
(5) advise the underwriters, if any, and Selling Holders promptly and,
if requested by such Persons, to confirm such advice in writing, (A) when the
Prospectus or any Prospectus supplement or post-effective amendment has been
filed, and, with respect to any Registration Statement or any post-effective
amendment thereto, when the same has become effective, (B) of any request by the
SEC for amendments to the Registration Statement or amendments or supplements to
the Prospectus or for additional information relating thereto, (C) of the
issuance by the SEC of any stop order suspending the effectiveness of the
Registration Statement under the Securities Act or of the suspension by any
state securities commission of the qualification of the Registrable Securities
for offering or sale in any jurisdiction, or the initiation of any proceeding
for any of the preceding purposes, (D) of the existence of any fact or the
happening of any event that makes any statement of a material fact made in the
registration Statement, the Prospectus, any amendment or supplement thereto, or
any document incorporated by reference therein untrue, or that requires the
making of any additions to or changes in the Registration Statement or the
Prospectus in order to make the statements therein not misleading. If at any
time the SEC shall issue any stop order suspending the effectiveness of the
Registration Statement, or any state securities commission or other regulatory
authority shall issue an order suspending the qualification or exemption from
qualification of the Registrable Securities under state securities or Blue Sky
laws, the Company shall use its best efforts to obtain the withdrawal or lifting
of such order at the earliest possible time;
(6) furnish to each Selling Holder named in any Registration Statement
or Prospectus and each of the underwriter(s) in connection with such sale, if
any, such number of copies of any Registration Statement or Prospectus included
therein or any amendments or supplements to any such Registration Statement or
Prospectus (including all documents incorporated by reference after the initial
filing of such Registration Statement and all exhibits filed therewith),
reasonably requested by such Person;
10
(7) if requested by any selling Holders or the underwriter(s) in
connection with such sale, if any, promptly include in any Registration
Statement or Prospectus, pursuant to a supplement or post-effective amendment if
necessary, such information as such selling Holders and such underwriter(s), if
any, may reasonably request to have included therein, including, without
limitation, information relating to the "Plan of Distribution" of the
Registrable Securities, information with respect to the principal amount of
Registrable Securities being sold to such underwriter(s), the purchase price
being paid therefor and any other terms of the offering of the Registrable
Securities to be sold in such offering, and make all required filing of such
Prospectus supplement or post-effective amendment as soon as practicable after
the Company is notified of the matters to be included in such Prospectus
supplement or post-effective amendment;
(8) deliver to each Selling Holder and each of the underwriter(s), if
any, without charge, as many copies of the Prospectus (including each
preliminary prospectus) and any amendment or supplement thereto as such Persons
reasonably may request; the Company hereby consents to the use of the Prospectus
and any amendment or supplement thereto by each of the Selling Holders and each
of the underwriter(s), if any, in connection with the offering and the sale of
the Registrable Securities covered by the Prospectus or any amendment or
supplement thereto;
(9) in connection with any Underwritten Offering pursuant to a Demand
Registration, enter into an underwriting agreement with one or more underwriter
designated in accordance with this Agreement, such agreement to be of the form,
scope and substance as is customary in underwritten offerings, and take all such
other actions as are reasonably requested by the managing underwriter(s) in
order to expedite or facilitate the disposition of such Registrable Securities
and in such connections (i) make such representations and warranties to the
underwriters in form, scope and substance as are customarily made by issuers to
underwriters in underwritten offerings with respect to the business of the
Company; (ii) obtain opinions of counsel to the Company and updates thereof
(which counsel and opinions (in form, scope and substance) shall be reasonably
satisfactory to the managing underwriter(s)) addressed to the managing
underwriter(s) covering the matters customarily covered in opinions requested in
underwritten offerings and such other matters as may be reasonably requested by
the underwriters; (iii) obtain "comfort" letters and updates thereof from the
Company's independent certified public accountants addressed to the
underwriters, such "comfort" letters to be in customary form and covering
matters of the type customarily covered in "comfort" letters in connection with
underwritten offerings; (iv) deliver such documents and certificates as may be
reasonably requested by the managing underwriter(s) to evidence compliance with
any customary conditions contained in the underwriting agreement or other
agreement entered into by the Company. The above shall be done at each closing
under such underwriting or similar agreement;
(10) prior to any public offering of Registrable Securities, cooperate
with the Selling Holders, the underwriter(s), if any, and their respective
counsel in connection with the registration and qualification of the Registrable
Securities under the securities or
11
Blue Sky laws of such jurisdictions as the Selling Holders or underwriter(s), if
any, may request and do any and all other acts or things necessary or advisable
to enable the disposition in such jurisdictions or the Registrable Securities
covered by the applicable Registration Statement; provided, however, that the
Company shall not be required to register or qualify as a foreign corporation
where it is not now so qualified or to take any action that would subject it to
the service of process in suits or to taxation, except as is required as a
result of the Registration Statement, in any jurisdiction where it is not now so
subject;
(11) in connection with any sale of Registrable Securities that will
result in such securities no longer being Registrable Securities, cooperate with
the Selling Holders and the underwriter(s), if any, to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be sold and not bearing any restrictive legends; and to register such
Registrable Securities in such denominations and such names as the Selling
Holders or the underwriter(s), if any, may request at least two Business Days
prior to such sale of Registrable Securities;
(12) if requested by the Selling Holders, provide a CUSIP number for
all Registrable Securities not later than the effective date of the Registration
Statement covering such Registrable Securities and provide the Company's
transfer agent(s) and registrar(s) for the Registrable Securities with printed
certificates for the Registrable Securities;
(13) cooperate and assist in any filings required to be made with the
NASD and in the performance of any due diligence investigation by any
underwriter (including any "qualified independent underwriter") that is required
to be retained in accordance with the rules and regulations of the NASD), and
use their best efforts to cause such Registration Statement to become effective
and approved by such governmental agencies or authorities as may be necessary to
enable the Selling Holders or underwriters, if any, to consummate the
disposition of such Registrable Securities;
(14) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC, and make generally available to its security
holders, as soon as practicable, a consolidated earnings statement meeting the
requirements of Rule 158 under the Securities Act (which need not be audited)
covering a period of at least twelve month periods, but not more than eighteen
months, beginning with the first month of the Company's first quarter commencing
after the effective date of the Registration Statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act; and
(15) cause all Registrable Securities covered by the Registration
Statement to be listed on each securities exchange on which securities of the
same class issued by the Company are then listed if requested by the Selling
Holders holding a majority of the Registered Securities or the managing
underwriter(s), if any.
12
Each Selling Holder, upon receipt of any notice from the Company of
the happening of any event described in subsection (5)(B), (C), or (D) of
Section 3.1(a) or in Section 2.3(c) (a "Suspension Notice"), shall forthwith
discontinue disposition of the Registrable Securities pursuant to the
Registration Statement relating thereto until such Selling Holder receives
copies of the supplemented or amended Prospectus contemplated hereby or until it
is advised in writing (the "Advice") by the Company that the use of the
Prospectus may be resumed, and has received copies of any additional or
supplemented filings that are incorporated by reference in the Prospectus, and,
if so directed by the Company, such Selling Holder will, or will request the
managing underwriter or underwriters, if any, to deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
Selling Holder's possession, of the Prospectus covering such Registrable
Securities current at the time of receipt of such notice. The period from the
date on which any Holder receives a Suspension Notice to the date on which any
Holder receives either the Advice or copies of the supplemented or amended
Prospectus contemplated hereby relating to such notice shall hereinafter be
referred to as the "Suspension Period." If the Company shall give any Suspension
Notice, (i) the Company shall use its best efforts and take such actions as are
reasonably necessary to render Advice and end the Suspension Period as promptly
as practicable and (ii) the time periods for which a Registration Statement is
required to be kept effective pursuant to Sections 2.1, 2.2 or 2.3, as the case
may be, shall be extended by the number of days during the period from and
including the date of the giving of such Suspension Notice to and including the
date when each Selling Holder shall have received (A) the copies of the
supplemented or amended Prospectus contemplated by Section 3.1(a) or (B) the
Advice.
(b) Provision by Holders of Certain Information. No Holder of
Registrable Securities may include any of its Registrable Securities in any
Registration Statement pursuant to this Agreement unless and until such Holder
furnishes to the Company in writing, within 20 days after receipt of a request
therefor, such information as the Company may reasonably request specified in
item 507 of Regulation S-K under the Securities Act for use in connection with
any Registration Statement or Prospectus or preliminary Prospectus included
therein. Each Holder as to which any Registration Statement is being effected
agrees to furnish promptly to the Company all information required to be
disclosed in order to make the information previously furnished to the Company
by such Holder not materially misleading.
SECTION 3.2 REGISTRATION EXPENSES.
(a) All expenses incident to the Company's performance of or
compliance with this Section 3.2 will be paid by the Company, regardless of
whether any registration statement required hereunder becomes effective,
including, without limitation:
(1) all registration and filing fees;
(2) fees and expenses of compliance with securities or blue sky laws
(including, without limitation, reasonable fees and disbursements of counsel in
connection with blue sky qualifications of the Registrable Securities and
determination of their eligibility for
13
investment under the laws of such jurisdictions as the managing underwriters or
Holders of Registrable Securities being sold may designate);
(3) printing (including, without limitation, expenses of printing or
engraving certificates for the Registrable Securities in a form eligible for
trading on the New York Stock Exchange or for deposit with the Depository Trust
Company and of printing prospectuses), messenger, telephone and delivery
expenses;
(4) reasonable fees and disbursements of counsel for the Company;
(5) reasonable fees and disbursements of all independent certified
public accountants of the Company (including, without limitation, the expenses
of any special audit and "cold comfort" letters required by or incident to such
performance);
(6) fees and expenses of other Persons retained by the Company; and
(7) fees and expenses associated with any NASD filing required to be
made in connection with the registration of the Registrable Securities,
including, if applicable, the reasonable fees and expenses of any "qualified
independent underwriter" (and its counsel) that is required to be retained in
accordance with the rules and regulations of the NASD (all such expenses being
herein called "Registration Expenses").
(b) The Company will, in any event, pay its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual
audit, the fees and expenses incurred in connection with the listing of the
Registrable Securities to be registered on Nasdaq or on each national securities
exchange on which similar securities issued by the Company are then listed,
rating agency fees and the fees and expenses of any Person, including special
experts, retained by the Company.
SECTION 3.3 PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Holder may
participate in any Underwritten Registration hereunder unless such Holder (i)
agrees to sell its Registrable Securities on the basis provided in any
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements and (b) completes and executes all reasonable questionnaires,
powers of attorney, underwriting agreements, hold-back agreements letters and
other documents customarily required under the terms of such underwriting
arrangements. Notwithstanding the foregoing, (x) no Selling Holder shall be
required to make any representations or warranties except those which relate
solely to such Holder and its intended method of distribution, and (y) the
liability of each such Holder to any underwriter under such underwriting
agreement will be limited to liability arising from misstatements or omissions
regarding such Holder and its intended method of distribution and any such
liability shall not exceed an amount equal to the amount of net proceeds such
Holder derives from such registration; provided, however, that in an offering by
the Company in which any Holder requests to be included in a Piggyback
Registration, the Company shall use its best efforts to arrange the terms of the
offering such that the provisions set forth in clauses (x) and (y) of this
Section 3.3 are true. Nothing in this Section 3.3 shall be construed to create
any
14
additional rights regarding the registration of Registrable Securities in any
Person otherwise than as set forth herein.
SECTION 3.4 HOLD-BACK AGREEMENTS.
(a) Restrictions on Public Distribution by Holder of Registrable
Securities. Upon the written request of the managing underwriter or underwriters
of a Public Offering, each Holder of Registrable Securities shall not effect any
Public Distribution of such securities, or any securities convertible into or
exchangeable or exercisable for such securities, including a sale pursuant to
Rule 144 under the Securities Act (except as part of such Public Offering),
during the 14-day period prior to, and during the 90-day period following, the
offering date for each Public Offering made pursuant to such registration
statement (as identified by such underwriter or underwriters or the Company in
good faith). The foregoing provisions shall not apply to any Holder that is
prevented by applicable statute or regulation from entering into any such
agreement; provided, however, that any such Holder shall undertake not to effect
any Public Distribution of the class of securities covered by such registration
statement (except as part of such Underwritten Offering) during such period
unless it has provided 60 days' prior written notice of such Public Distribution
to the managing underwriter.
(b) Restrictions on Public Distribution by the Company and Others. The
Company agrees and it shall use its best efforts to cause its Affiliates (other
than Persons who are Holders hereunder) to agree: (1) not to effect any Public
Distribution of any securities being registered in accordance with Article II
hereof, or any securities convertible into or exchangeable or exercisable for
such securities, during the 14-day period prior to, and during the 90-day period
following, the offering date for each Public Offering made pursuant to a
registration statement filed under Article II hereof, if requested in writing by
the managing underwriters (except as part of such Public Offering or pursuant to
registrations in connection with mergers, acquisitions, exchange offers,
subscription offers, dividend reinvestment plans or stock options or other
employee benefit plans); and (2) to use its best efforts to cause each Holder of
its privately placed Registrable Securities that are issued by the Company at
any time on or after the date of this Agreement to agree not to effect any
Public Distribution, including a sale pursuant to Rule 144 under the Securities
Act, of any Registrable Securities during the period set forth in clause (1)
above (except as part of such Public Offering, if and to the extent permitted).
ARTICLE IV
INDEMNIFICATION AND CONTRIBUTION
SECTION 4.1 INDEMNIFICATION BY THE COMPANY. The Company agrees to
indemnify and hold harmless each Selling Holder, each person, if any, who
controls such Holder (within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act) (hereinafter referred to as a "controlling
person"), the respective officers, directors, partners, employees,
representatives and agents of any Holder or any controlling person (each an
"Indemnified Holder"), to the fullest extent lawful, from and against any and
all losses, claims, damages, liabilities, judgments, actions and expenses
(including without limitation and as incurred, reimbursement of all reasonable
costs of investigating, preparing,
15
pursuing or defending any claim or action, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, including the
reasonable fees and expenses of counsel to any Indemnified Holder) directly or
indirectly caused by, related to, based upon, arising out of or in connection
with any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement or Prospectus (or any amendment or
supplement thereto), or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as such losses, claims, damages,
liabilities or expenses are caused by an untrue statement or omission or alleged
untrue statement or omission that is made in reliance upon and in conformity
with information relating to any of the Holders furnished in writing to the
Company by any of the Holders expressly for use therein.
SECTION 4.2 INDEMNIFICATION BY HOLDERS OF REGISTRABLE SECURITIES. Each
Selling Holder agrees, severally and not jointly, to indemnify and hold harmless
the Company and its directors, officers and any person controlling (within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act)
the Company and its respective officers, directors, partners, employees,
representatives and agents of each such person, to the same extent as the
foregoing indemnity from the Company to each of the Indemnified Holders, but
only with respect to losses, claims, damages, liabilities, judgments, actions
and expenses (including without limitation and as incurred, reimbursement of all
reasonable costs of investigating, preparing, pursuing or defending any claim or
action, or any investigation or proceeding by any governmental agency or body,
commenced or threatened, including the reasonable fees and expenses of counsel
to the Company) directly or indirectly caused by, related to, based upon,
arising out of or in connection with any untrue statement or alleged untrue
statement of a material fact contained in any Registration Statement or
Prospectus (or any amendment or supplement thereto), or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, to the extent, but only
to the extent, that such untrue statement or omission is contained in any
information relating to such Holder furnished in writing by such Holder
expressly for use in any Registration Statement or Prospectus. In case any
action or proceeding shall be brought against the Company or its directors or
officers or any such controlling person in respect of which indemnity may be
sought against a Holder of Registrable Securities, such Holder shall have the
rights and duties given the Company, and the Company or its directors or
officers or such controlling person shall have the rights and duties given to
each Holder by the preceding paragraph. Each Selling Holder also agrees to
indemnify and hold harmless each other Selling Holder or underwriters
participating in the distribution on substantially the same basis as that of the
indemnification of the Company provided in this section 4.2. In no event shall
the liability of any selling Holder hereunder be greater in amount than the
dollar amount of the proceeds received by such Holder upon the sale of the
Registrable Securities giving rise to such indemnification obligation. The
Company shall be entitled to receive indemnities from underwriters, selling
brokers, dealer managers and similar securities industry professionals
participating in the distribution, to the same extent as provided above with
respect to information so furnished in writing by such Persons specifically for
inclusion in any Registration Statement or Prospectus.
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SECTION 4.3 CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any Person
entitled to indemnification hereunder (an "Indemnified Party") will (i) promptly
give notice of any claim, action or proceeding (including any governmental or
regulatory investigation or proceeding) or the commencement of any such action
or proceeding to the Person against whom such indemnity may be sought (an
"Indemnifying Party"); provided that the failure to give such notice shall not
relieve the Indemnifying Party of its obligations pursuant to this Agreement
except to the extent that such Indemnifying Party has been prejudiced in any
material respect by such failure, and (ii) permit the Indemnifying Party to
assume the defense of such claim with counsel reasonably satisfactory to such
Indemnified Party; provided that the Indemnified Party shall have the right to
employ separate counsel and participate in the defense of such claim, but the
fees and expenses of such counsel shall be at the expense of such Indemnified
Party unless (a) the Indemnifying Party has agreed to pay for such fees and
expenses, or (b) the Indemnifying Party shall have failed to assume the defense
of such claim and employ counsel reasonably satisfactory to such Indemnified
Party or (c) in the reasonable judgment of such Indemnified Party, based upon
advice of its counsel, a conflict of interest may exist between such Indemnified
Party and the Indemnifying Party with respect to such claims. If such defense is
not assumed by the Indemnifying Party, the Indemnifying Party will not be
subject to any liability for any settlement of any such claim effected without
the Indemnifying Party's prior written consent, which consent shall not be
unreasonably withheld. The Indemnifying Party shall not be liable for any
settlement of any proceeding effected without its written consent, but if
settled with such consent or if there be a final judgment for the plaintiff, the
Indemnifying Party agrees to indemnify and hold harmless any Indemnified Party
from and against any loss, claim damage, liability or expense by reason of any
settlement of any such claim or action. No Indemnifying Party shall, without the
prior written consent of each Indemnified Party, settle or compromise or consent
to the entry of judgment in or otherwise seek to terminate any pending or
threatened action, claim, litigation or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not any
Indemnified Party is a party thereto), unless such settlement, compromise,
consent or termination includes an unconditional release of each Indemnified
Party from all liability arising out of such action, claim, litigation or
proceeding. An Indemnifying Party who is not entitled to, or elects not to,
assume the defense of the claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
Indemnifying Party with respect to such claim, unless in the reasonable judgment
of any Indemnified Party a conflict of interest may exist between such
Indemnified Party and any other such Indemnified Parties with respect to such
Claim, in which event the Indemnifying Party shall be obligated to pay the fees
and expenses of such additional counsel or counsels.
SECTION 4.4 CONTRIBUTION. If the indemnification provided for in this
Article IV is unavailable to an Indemnified Party (other than by reason of
exceptions provided in those Sections) in respect of any losses, claims,
damages, liabilities or expenses referred to therein, then each applicable
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall have a
joint and severable obligation to contribute to the amount paid or payable by
such Indemnified Party as a result of such losses, claims, damages, liabilities
or expenses in such proportion as is appropriate to reflect the relative fault
of the Indemnifying Party, on the one hand, and of the Indemnified Party, on the
other, in connection with the statements or omissions
17
which resulted in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative fault of the
Indemnifying Party, on the one hand, and of the Indemnified Party, on the other,
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission to state a material
fact relates to information supplied by the Indemnifying Party or by the
Indemnified Party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to include,
subject to the limitations set forth in the second paragraph of Section 4.1, any
legal or other fees or expenses reasonably incurred by such party in connection
with investigating or defending any action or claim.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 4.4 were determined by pro rata allocation
(even if the Holders were treated as one entity for such purpose) or by any
other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, liabilities or expenses referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 4.4, none of the Indemnified
Holders shall be required to contribute, in the aggregate, any amount in excess
of the amount by which the net proceeds received by such Holder with respect to
the Registrable Securities exceeds the greater of (A) the amount paid by such
Holder for its Registrable Securities and (B) the amount of any damages which
such Holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Holders' obligation to
contribute pursuant to this Section 4.4 are several in proportion to the
respective number of Registrable Securities held by each of the Holders
hereunder and not joint.
For purposes of this Article IV, each controlling person of a Holder
shall have the same rights to contribution as such Holder, and each officer,
director, and person, if any, who controls the Company within the meaning of
Section 15 of the Securities Act or Section 20(a) of the Exchange Act shall have
the same rights to contribution as the Company, subject in each case to the
limitations set forth in the immediately preceding paragraph. Any party entitled
to contribution will, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect of which a claim for
contribution may be made against another party or parties under this Article IV,
notify such party or parties from whom contribution may be sought, but the
omission to so notify such party or parties shall not relieve the party or
parties from who contribution may be sought from any obligation it or they may
have under this Article IV or otherwise except to the extent that it has been
prejudiced in any material respect by such failure. No party shall be liable for
contribution with respect to any action or claim settled without its written
consent; provided, however, that such written consent was not unreasonably
withheld.
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SECTION 4.5 ADDITIONAL INDEMNITY. The indemnity, contribution and
expense reimbursement obligations under this Article IV shall be in addition to
any liability each Indemnifying Party may otherwise have; provided, however,
that any payment made by the Company which results in an Indemnified Party
receiving from any source(s) indemnification, contribution or reimbursement for
an amount in excess of the actual loss, liability or expense incurred by such
Indemnified Party, shall be refunded to the Company by the Indemnified Party
receiving such excess payment.
ARTICLE V
MISCELLANEOUS
SECTION 5.1 RULE 144. The Company agrees it will file in a timely
manner all reports required to be filed by it pursuant to the Securities Act and
the Exchange Act and the rules and regulations adopted by the SEC thereunder and
will take such further action as any Holder of Registrable Securities may
reasonably request in order that such Holder may effect sales of Registrable
Securities without registration within the limitations of the exemptions
provided by Rule 144, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the SEC. At any reasonable time
and upon the request of a Holder of Registrable Securities, the Company will
furnish such Holder with such information as may be necessary to enable the
Holder to effect sales of Registrable Securities pursuant to Rule 144 under the
Securities Act and will deliver to such Holder a written statement as to whether
it has complied with such information and requirements.
SECTION 5.2 SPECIFIC PERFORMANCE. Each Holder, in addition to being
entitled to exercise all rights provided herein or granted by law, including
recovery of liquidated or other damages, will be entitled to specific
performance of its rights under this Agreement. The Company agrees that monetary
damages would not be adequate compensation for any loss incurred by reason of a
breach by it of the provisions of this Agreement and hereby agrees to waive the
defense in any action for specific performance that a remedy at law would be
adequate.
SECTION 5.3 OTHER AGREEMENTS. Notwithstanding any other provisions of
this Agreement, the Company shall have no obligation to effect a registration of
any of the Registrable Securities hereunder if and to the extent any such
registration would conflict with the provisions of, the Registration Rights
Agreement, dated December 11, 1981, by and among FMI Acquisition Corporation
(now Fred Meyer, Inc.), FMI Associates Limited Partnership and certain executive
officers of FMI Acquisition Corporation (now Fred Meyer, Inc.), and the
Assignment thereof dated January 27, 1997 (the "FMI Agreement"). By way of
example only and without limiting the foregoing, if, in connection with an
Underwritten Offering, the underwriters of such offering conclude that it would
be inadvisable to register and sell the total number of shares with respect to
which registration has been requested under this Agreement and the FMI
Agreement, any reduction in the total number of shares to be registered and sold
shall first reduce the number of shares to be registered and sold pursuant to
this Agreement before the number of shares to be registered and sold pursuant to
the FMI Agreement shall be reduced. The Company will not on or after the date of
this Agreement enter into any
19
agreement with respect to its securities that is inconsistent with the rights
granted to the Holders in this Agreement or otherwise conflicts with the
provisions hereof.
SECTION 5.4 CHARTER AMENDMENTS AFFECTING THE COMPANY'S COMMON STOCK.
The Company will not amend its Certificate of Incorporation in any respect that
would materially and adversely affect the rights of the Holders hereunder.
SECTION 5.5 AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to or departures from the provisions
hereof may not be given unless the Company has obtained the written consent of
Holders of a majority of the outstanding shares of Registrable Securities held
by each of the Smith Group and the Yucaipa Group, respectively.
SECTION 5.6 NOTICES. Unless otherwise provided herein, any notice,
request, instruction or other document to be given hereunder by any party to the
others shall be made in writing, by hand-delivery, telegraph, telex, telecopier,
registered first-class mail or air courier guaranteeing overnight delivery as
follows:
if to the Company, to:
Fred Meyer, Inc.
3800 SE 22nd Avenue
Portland, Oregon 97202
Attention: General Counsel
Fax: (503) 797-7138
if to any Holder:
to the address specified below such Holder's
name on the signature pages hereto;
or to such other place and with such other copies as any party hereto may
designate as to itself by written notice to the others. All such notices and
communications shall be deemed to have been duly given: at the time delivered by
hand, if personally delivered; five Business Days after being deposited in the
mail, postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied: and on the next Business Day if timely delivered to
an air courier guaranteeing overnight delivery.
SECTION 5.7 SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent holders of Registrable Securities or of the Warrants,
provided that the Company may not assign its rights or obligations under this
Agreement to any other person or entity without the written consent of a
majority of the outstanding shares of Registrable Securities held by each of the
Smith Group and the Yucaipa Group, respectively.
20
SECTION 5.8 COUNTERPARTS. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
SECTION 5.9 HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
SECTION 5.10 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to the choice of law provisions thereof.
SECTION 5.11 SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
SECTION 5.12 ENTIRE AGREEMENT. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein with respect to the registration rights granted by the Company with
respect to the Registrable Securities. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
SECTION 5.13 PRONOUNS. Whenever the context may require, any pronouns
used herein shall be deemed also to include the corresponding neuter, masculine
or feminine forms.
SECTION 5.14 ATTORNEY'S FEES. In any action or proceeding brought to
enforce any provision of this Agreement, the successful party shall be entitled
to recover reasonable attorney's fees in addition to its costs and expenses and
any other available remedy.
SECTION 5.15 SECURITIES HELD BY THE COMPANY OR ITS SUBSIDIARIES.
Whenever the consent or approval of Holders of a specified percentage or
Registrable Securities is required hereunder, Registrable Securities held by the
Company or its Subsidiaries shall not be counted in determining whether such
consent or approval was given by the Holders of such required percentage.
SECTION 5.16 FURTHER ASSURANCES. Each party shall cooperate and take
such action as may be reasonably requested by another party in order to carry
out the provisions and purposes of this Agreement and the transactions
contemplated hereby.
SECTION 5.17 TERMINATION. Unless sooner terminated in accordance with
its terms or as otherwise herein provided, including specifically in Section
2.3(a), this
21
Agreement shall terminate upon the earlier to occur of (i) the mutual agreement
by the parties hereto, (ii) with respect to any Holder, such Holder ceasing to
own any Registrable Securities, (iii) the fifteenth anniversary of the Effective
Time, or (iv) with respect to the Yucaipa Group or the Smith Group, the date on
which the aggregate number of shares of outstanding Registrable Securities held
by the Yucaipa Group or the Smith Group, as applicable, is less than 20% of the
Registrable Shares originally held by the Yucaipa Group or the Smith Group, as
applicable, following the consummation of the transactions contemplated by the
Reorganization Agreement; provided, that the foregoing clause (iv) shall not
apply as to any member of the Yucaipa Group or the Smith Group, as applicable,
if, as of such date, such member of the Yucaipa Group or the Smith Group, as
applicable, is an "affiliate" of the Company within the meaning of the
Securities Act.
(signature page follows)
22
IN WITNESS HEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
FRED MEYER, INC.
By:
-------------------------------------
Name: Robert G. Miller
Title: Chairman of the Board and
Chief Executive Officer
-----------------------------------------
JEFFREY P. SMITH
Address: 32 Burningtree Court
Las Vegas, Nevada 89117
-----------------------------------------
FRED L. SMITH
Address:
-----------------------------------------
RICHARD D. SMITH
Address:
S-1
TRUST FOR THE CHILDREN OF
JEFFREY P. SMITH
By:
-------------------------------------
Name: Jeffrey P. Smith
Title: Trustee
Address:
TRUST FOR THE CHILDREN OF FRED L. SMITH
By:
-------------------------------------
Name: Fred L. Smith
Title: Trustee
Address:
TRUST FOR THE CHILDREN OF
RICHARD D. SMITH
By:
-------------------------------------
Name: Richard D. Smith
Title: Trustee
Address:
S-2
THE YUCAIPA COMPANIES
By:
-------------------------------------
Name: Ronald W. Burkle
Title: General Partner
Address: 10000 Santa Monica Boulevard,
Fifth Floor
Los Angeles, California 90067
FAX: (310) 798-7201
YUCAIPA SSV PARTNERS, L.P.
By: The Yucaipa Companies
Its: General Partner
By:
-------------------------------------
Name: Ronald W. Burkle
Title: General Partner
Address: 10000 Santa Monica Boulevard,
Fifth Floor
Los Angeles, California 90067
FAX: (310) 798-7201
YUCAIPA SMITTY'S PARTNERS, L.P.
By: The Yucaipa Companies
Its: General Partner
By:
-------------------------------------
Name: Ronald W. Burkle
Title: General Partner
Address: 10000 Santa Monica Boulevard,
Fifth Floor
Los Angeles, California 90067
FAX: (310) 798-7201
S-3
YUCAIPA SMITTY'S PARTNERS II, L.P.
By: The Yucaipa Companies
Its: General Partner
By:
-------------------------------------
Name: Ronald W. Burkle
Title: General Partner
Address: 10000 Santa Monica Boulevard,
Fifth Floor
Los Angeles, California 90067
FAX: (310) 798-7201
YUCAIPA ARIZONA PARTNERS, L.P.
By: The Yucaipa Companies
Its: General Partner
By:
-------------------------------------
Name: Ronald W. Burkle
Title: General Partner
Address: 10000 Santa Monica Boulevard,
Fifth Floor
Los Angeles, California 90067
FAX: (310) 798-7201
S-4
EXHIBIT D
FORM OF
MANAGEMENT SERVICES AGREEMENT
THIS MANAGEMENT SERVICES AGREEMENT (this "Agreement") is made and
entered into as of __________, 1997 by and between THE YUCAIPA COMPANIES LLC, a
Delaware limited liability company ("Yucaipa"), and Fred Meyer, Inc. a Delaware
corporation (the "Company").
RECITALS
A. Fred Meyer, Inc. ("Fred Meyer") is in the business of operating
multidepartment stores and specialty stores and is a leading regional retailer
of a wide range of food, apparel, fine jewelry and products for the home;
B. Smith's Food & Drug Centers, Inc. ("Smith's") is in the business of
operating combination food and drug centers and is a leading regional
supermarket and drug store chain;
C. Fred Meyer and Smith's, pursuant to the Agreement and Plan of
Reorganization and Merger, dated as of May 11, 1997 (the "Merger Agreement"),
have combined their operations through the mergers contemplated therein (the
"Mergers"), and each of them have become wholly-owned subsidiaries of the
Company;
D. Yucaipa is experienced in the management of supermarket companies
and has been providing certain general business and financial advice and
management services to Smith's; and
E. The Company wishes to obtain the continuing benefits of Yucaipa's
advice and services following the consummation of the Mergers.
F. In connection with the Mergers, Ronald W. Burkle has been elected
to serve as the Chairman of the Board of Directors of the Company.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual
covenants of the parties hereto and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the undersigned
parties agree as follows:
1. Management Services.
(a) Subject to the provisions of this Agreement, and subject to the
supervision
of the Board of Directors of the Company (the "Board of Directors"),
Yucaipa, through its members, employees or other designated representatives or
agents, shall provide the Company with management consultation and advice
regarding strategic planning and development, budgeting, future financing plans,
selection and retention of management employees, general business management and
governmental affairs and such other similar management services, as may be
requested by the Board of Directors and/or the Chief Executive Officer from time
to time. As used herein, the Company refers to the Company and its subsidiaries,
as the context requires.
(b) Chairman of the Board of Directors. Ronald W. Burkle shall, if he
so elects, have the right to serve as Chairman of the Board of Directors of the
Company during his initial three year term as a director of the Company, and
shall have all rights and responsibilities customarily vested in a Chairman of
the Board of Directors, provided that he shall not receive any compensation for
serving in such capacity beyond the compensation paid to Yucaipa under this
Agreement.
(c) Best Practices. During the term of this Agreement the Company will
be afforded the opportunity to participate in the "Best Practices" program as
conducted by Yucaipa and certain of its affiliated businesses.
2. Management Fees.
Commencing on the date hereof (the "Effective Date"), the Company
shall pay to Yucaipa an annual management fee, in consideration of the services
rendered by Yucaipa pursuant to Section 1 above, equal to Five Hundred Thousand
Dollars ($500,000.00), one-twelfth (1/12th) of which shall be payable in advance
on the first day of each calendar month; provided that a prorated portion of
such fee will be payable in advance on the Effective Date for the partial month
beginning on the Effective Date and ending on the last day of the then current
month.
3. Reimbursement of Expenses.
The Company shall reimburse Yucaipa for all of its reasonable
out-of-pocket costs and expenses incurred in connection with the performance of
its obligations under this Agreement. Yucaipa shall bill the Company for the
amount of all such costs and expenses monthly, and shall provide the Company
with a reasonable itemization of such costs and expenses.
4. Additional Services.
In the event that, during the term of this Agreement, the Board of
Directors requests Yucaipa to provide (i) consulting services in connection with
any proposed acquisition or divestiture transaction or any debt or equity
financing or (ii) any other services not contemplated by Section 1 above,
Yucaipa shall be entitled to such additional compensation for such services as
may be agreed upon by Yucaipa and the Company (and approved by a majority of the
Company's disinterested directors).
2
5. Term of Agreement.
The term of this Agreement shall commence on the Effective Date and
continue for a period of five (5) years ending on the fifth anniversary of the
Effective Date.
6. Termination.
6.1 Termination by the Company. The Company may elect to terminate
this Agreement:
(a) at any time following a determination of the Board of Directors to
effect such a termination by giving Yucaipa at least ninety (90) days' written
notice of such termination;
(b) if Yucaipa shall fail to reasonably perform any material covenant,
agreement, term or provision of this Agreement to be kept, observed or performed
by it (other than any failure or alleged failure occasioned by or resulting from
force majeure, directly or indirectly) and such failure shall continue for a
period of sixty (60) days after written notice from the Company, which notice
shall describe the alleged failure with particularity; and
(c) at any time if, in connection with the performance of its duties
hereunder, Yucaipa or any of its members commits (or is grossly negligent in its
supervision or hiring of any employee or agent of Yucaipa who commits) any act
of fraud, dishonesty or gross negligence which is materially detrimental to the
business or reputation of the Company as reasonably determined by the Board of
Directors.
6.2 Termination by Yucaipa. Yucaipa may elect to terminate this
Agreement:
(a) if the Company shall fail to reasonably perform any material
covenant, agreement, term or provision of this Agreement to be kept, observed or
performed by it (other than any failure or alleged failure occasioned by or
resulting from force majeure, directly or indirectly) and such failure shall
continue for a period of sixty (60) days after written notice from Yucaipa,
which notice shall describe the alleged failure with particularity;
(b) if the Company shall fail to make any payment due to Yucaipa
hereunder, if such payment is not made in full within thirty (30) days after
written notice of such failure; or
(c) if Ronald W. Burkle ceases to be Chairman of the Board of
Directors, other than by reason of his death, disability, termination for Cause
or voluntary resignation. For purposes of the foregoing, "Cause" shall mean the
commission by Ronald W. Burkle of any act described in Section 6.1(c) or any
felony conviction.
6.3 Termination for Change of Control. This Agreement may be
terminated, at the election of either Yucaipa or the Company, if during the term
hereof there shall have been a change in control of the Company, which for
purposes of this Agreement shall be deemed to
3
have occurred upon any of the following events: (a) the acquisition after the
Effective Date, in one or more transactions, of "beneficial ownership" (within
the meaning of Rule 13d-3(a)(1) under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) by any person (other than Yucaipa or any of its
members or affiliates) or any group of persons (excluding any group which
includes Yucaipa or any of its members or affiliates) who constitute a group
(within the meaning of Section 13(d)(3) of the Exchange Act) of any securities
of the Company such that, as a result of such acquisition, such person or group
beneficially owns (within the meaning of Rule 13d-3(a)(1) under the Exchange
Act) 40% or more of the Company's then outstanding voting securities entitled to
vote on a regular basis for a majority of the Board of Directors; or (b) the
sale of all or substantially all of the assets or capital stock of the Company
(including, without limitation, by way of merger, consolidation, lease or
transfer) in a transaction or series of related transactions (excluding any sale
to Yucaipa or any of its members or affiliates). As used herein the term
"affiliate" refers to any person controlled by, or under common control with,
the specified person.
6.4 Payments upon Termination.
(a) In the event of any termination pursuant to Section 6.1(a),
Section 6.2 or Section 6.3, the Company shall pay, or cause to be paid, to
Yucaipa a cash termination payment in an amount equal to the greater of (i) Two
Million Five Hundred Thousand Dollars ($2,500,000) and (ii) twice the total
consulting fees that would have been earned by Yucaipa under Section 2 hereof
during the remaining term of this Agreement as if the Agreement had not been
terminated, without regard to any sums previously paid by the Company to Yucaipa
pursuant to Section 2 above.
(b) Such amount, if any, which shall be due Yucaipa pursuant to this
Section 6.4 in the event of any such termination shall be due and payable to
Yucaipa, in full, as of the date of such termination. The parties intend that
should the foregoing payments be determined to constitute liquidated damages,
such payments shall in all events be deemed reasonable.
6.5 Effect of Termination. Upon any such termination of this Agreement
the obligations of the parties hereunder shall also terminate, except (i) the
Company shall continue to be obligated to Yucaipa for any payments to be
received pursuant to Section 6.4(a), and for any unpaid fees or expenses
incurred prior to any such termination, (ii) the Company's obligations under
Section 7 hereof shall survive any such termination for the period of time
specified therein; and (iii) the provisions of Sections 8, 9 and 10 shall
survive any such termination.
4
7. Standstill.
Yucaipa agrees that during the term of this Agreement and for a period
of 90 days from the later of (i) the date on which this Agreement is terminated
or (ii) the date on which Ronald W. Burkle ceases to be the Chairman of the
Board of Directors, neither it nor any of its affiliates, alone or with others,
will in any manner, without the prior approval of the Company's Board of
Directors, (a) enter into or agree to enter into, singly or with any other
person, any form of business combination, acquisition, restructuring,
recapitalization, liquidation or other similar transaction relating to the
Company or any subsidiary of the Company, (b) hold, acquire, or offer or agree
to acquire, become the beneficial owner of or obtain any rights in respect of,
in each case by purchase or otherwise, any securities entitled to vote generally
in the election of directors of the Company, or any direct or indirect rights or
options to acquire any such securities or any securities convertible or
exercisable into or exchangeable for such securities ("Voting Securities") of
the Company, in excess of 15% of the Company's outstanding Voting Securities
(including for these purposes any shares of the Company Common Stock acquired
pursuant to the Mergers or upon the exercise of any currently exercisable option
or warrant), (c) make, or in any way participate in, any solicitation of proxies
with respect to any such Voting Securities (including by the execution of action
by written consent), become a participant in any election contest with respect
to the Company, seek to influence any person with respect to any such Voting
Securities, (d) participate in or encourage the formation of any partnership,
syndicate, voting trust or other group which owns or seeks or offers to acquire
beneficial ownership of any such Voting Securities or which seeks control of the
Company or has the purpose of circumventing any provision of this Agreement, (e)
otherwise act, alone or in concert with others (including, without limitation,
by providing financing for another Person), to seek or to offer to control or
influence, in any manner (except pursuant to its services under this Section 7
or through its representatives on the Board of Directors), the management, Board
of Directors or policies of the Company, (f) make any formal demand, request or
proposal to amend, waive or terminate any provision of this Section 7, (g) make
any proposal or other communication or take any other action that would compel
the Company to make a public announcement or disclosure thereof in respect of
any matter referred to in this Section 7 or (h) publicly propose or announce or
otherwise publicly disclose an intent to propose or that it is considering
proposing any of the matters referred to in this Section 7. Yucaipa shall be
released from its obligations hereunder in the event that the Company enters
into an agreement which would result in a Change of Control with any person
other than Yucaipa or its affiliates. As used herein the terms "beneficial
ownership," "person" and "group" shall have the meanings ascribed to such terms
pursuant to Regulation 13D-G adopted by the SEC under the Securities Exchange
Act of 1934, as amended, and as in effect on the date hereof; provided, however,
that for purposes of determining beneficial ownership under this Section 7 any
Voting Securities issuable upon the exercise of any option or warrant shall only
be included in such determination to the extent of the number of such Voting
Securities which would be issuable under such option or warrant on a "net" or
"cashless" basis at such time. In addition, Yucaipa agrees that it will exercise
any such option or warrant on a "net" or "cashless" basis if and to the extent
the exercise on any other basis would result in its aggregate beneficial
ownership of Voting Securities exceeding 15% of the Company's outstanding Voting
Securities.
5
8. Confidentiality.
8.1 Definitions. For purposes of this Section:
(a) The term "Confidential Material" means all information, whether
oral, written or otherwise (including any information furnished prior to the
execution of this Agreement), furnished or otherwise disclosed by the Company to
Yucaipa and its affiliates or any of the Representatives (as defined below), and
all notes, reports, analyses, compilations, studies and other materials prepared
by Yucaipa or any of the Representatives (in whatever form maintained, whether
documentary, computer storage or otherwise) containing or based upon, in whole
or in part, any such information. The term "Confidential Material" does not
include information which is or becomes generally available to the public other
than as a result of a disclosure by Yucaipa or any of the Representatives or
becomes available to Yucaipa or any of the Representatives on a non-confidential
basis from any source that is not known by Yucaipa or such Representative to be
bound by an obligation of confidentiality to the Company.
(b) The term "Representatives" shall mean any and all members,
partners, directors, officers, employees, agents, prospective financing sources,
affiliates or representatives (including representatives of advisors) of
Yucaipa.
8.2 Yucaipa and its affiliates and each of the Representatives shall
preserve the confidentiality of the Confidential Material and shall not disclose
any of the Confidential Material in any manner whatsoever; provided, however,
that (i) Yucaipa or its affiliates may make any disclosure of such information
to which the Company gives its prior written consent, (ii) Yucaipa and its
affiliates and the Representatives may make disclosures of such information
within the scope of their authority under this Agreement, and (iii) any of such
information may be disclosed to the Representatives who need to know, and who
are informed of the confidential nature of the Confidential Material and of the
terms of this Section and who agree to keep such information confidential. In
any event, Yucaipa and its affiliates shall inform each of their Representatives
which have, or will have, access to any or all of the Confidential Material, of
the existence and content of this Agreement and will take all reasonable action
necessary to cause such Representatives to observe the confidentiality
requirements of this Agreement. In any event, Yucaipa shall be responsible for
any breach of this Agreement by any of its Representatives.
8.3 If Yucaipa or its affiliates or any of the Representatives are
requested or required (by oral questions, interrogatories, requests for
information or documents, subpoena, civil investigative demand, any informal or
formal investigation by any government or governmental agency or authority or
otherwise) to disclose any Confidential Material or such person's opinion,
judgment, view or recommendation concerning the Company as developed from the
Confidential Material, Yucaipa agrees (i) to immediately notify the Company in
writing of the existence, terms and circumstances surrounding such a request,
(ii) to consult with the Company on the advisability of taking legally available
steps to resist or narrow such request and shall exercise its best efforts to
obtain reliable assurance that confidential treatment required hereby will be
accorded such Confidential Material, and (iii) if disclosure of such information
is required, to furnish only that portion of the Confidential Material which, in
the opinion of
6
counsel to Yucaipa, Yucaipa is legally compelled to disclose, and to cooperate
with any action by the Company to obtain an appropriate protective order or
other reliable assurance that confidential treatment will be accorded the
Confidential Material.
8.4 Yucaipa hereby acknowledges on behalf of itself and its affiliates
(and agrees to advise its affiliates and the Representatives who are informed in
accordance with the terms of this Section as to the matters which are the
subject of this Section), that the United States securities laws prohibit any
person who has received from an issuer material, non-public information,
including certain information that may be part of the Confidential Material,
while such information is non-public, from purchasing or selling securities of
such issuer or from communicating such information to any other person under
circumstances in which it is reasonably foreseeable that such person is likely
to purchase or sell such securities.
9. Indemnification.
(a) The Company (the "Indemnifying Party") agrees to indemnify and
hold harmless Yucaipa and each of its affiliates, members, partners, officers,
agents and the employees of each of them (each an "Indemnified Party" and
collectively, the "Indemnified Parties"), from and against all losses, claims,
damages or liabilities resulting from any claim, lawsuit or other proceeding by
any person to which any Indemnified Party may become subject which is related to
or arises out of the performance of the services to be provided hereunder (or
under the Merger Agreement), and will reimburse any Indemnified Party for all
reasonable out-of-pocket expenses (including reasonable counsel fees and
disbursements) incurred by such Indemnified Party in connection with
investigating or defending any such claim. Each Indemnifying Party further
agrees that the indemnification and reimbursement commitments herein shall apply
whether or not such Indemnified Party is a formal party to any such lawsuit,
claim or other proceedings. The foregoing provision is expressly intended to
cover reimbursement of reasonable legal and other expenses incurred in a
deposition or other discovery proceeding.
Notwithstanding the foregoing, the Indemnifying Party shall not be
liable to any Indemnified Party (a) in respect of any loss, claim, damage,
liability or expense to an Indemnified Party to the extent the same is
determined, in a final judgment by a court having jurisdiction, to have resulted
from the gross negligence or willful misconduct of such Indemnified Party or any
intentional, material breach by such Indemnified Party of its obligations under
this Agreement or (b) for any settlement effected by such Indemnified Party
without the written consent of such Indemnifying Party, which consent shall not
be unreasonably withheld.
In the event of the assertion against any Indemnified Party of any
such claim or the commencement of any such action or proceeding, each
Indemnifying Party shall be entitled to participate in such action or proceeding
and in the investigation of such claim and, after written notice from such
Indemnifying Party to such Indemnified Party, to assume the investigation or
defense of such claim, action or proceeding with counsel of the Indemnifying
Party's choice at the Indemnifying Party's expense; provided, however, that such
counsel shall be reasonably satisfactory to the Indemnified Party.
Notwithstanding anything to the contrary contained herein, the Indemnifying
Party may retain one firm of counsel to represent all Indemnified Parties in
7
such claim, action or proceeding; provided that the Indemnified Party shall have
the right to employ a single firm of separate counsel (and any necessary local
counsel) and to participate in the defense or investigation of such claim,
action or proceeding, and the Indemnifying Party shall bear the expense of such
separate counsel (and local counsel, if applicable), if (i) in the written
opinion of counsel to the Indemnified Party use of counsel of the Indemnifying
Party's choice could reasonably be expected to give rise to a conflict of
interest, (ii) the Indemnifying Party shall not have employed counsel reasonably
satisfactory to the Indemnified Party to represent the Indemnified Party within
a reasonable time after notice of the assertion of any such claim or institution
of any such action or proceeding or (iii) the Indemnifying Party shall authorize
the Indemnified Party to employ separate counsel at the Indemnifying Party's
expense.
(b) If for any reason (other than the gross negligence or willful
misconduct of an Indemnified Party referred to above) the foregoing
indemnification is unavailable to any Indemnified Party or insufficient to hold
it harmless as and to the extent contemplated by the preceding paragraph (a),
then the Indemnifying Party shall contribute to the amount paid or payable by
the Indemnified Party as a result of such loss, claim, damage or liability in
such proportion as is appropriate to reflect the relative benefits received by
the Indemnifying Party and its affiliates, on the one hand, and the Indemnified
Party, as the case may be, on the other hand, as well as any other relevant
equitable considerations.
(c) Notwithstanding anything contained in this Section 9, each
Indemnified Party who is also a director, officer or employee of the Company
shall not be entitled to any greater indemnification under clause (a) of this
Section 9 and contribution under clause (b) of this Section 9 than such
Indemnified Party would otherwise be entitled to under the charter and by-laws
of the Company or any other indemnification agreement to which such Indemnified
Party is a signatory.
10. Notices.
All notices, demands, requests, consents or approvals required or
permitted to be given hereunder or which are given with respect to this
Agreement shall be in writing and shall be personally served and mailed,
registered or certified, return receipt requested, postage prepaid (or by a
substantially similar method), or delivered by a reputable overnight courier
service with charges prepaid, or transmitted by hand delivery, telegram, telex
or facsimile, addressed as set forth below, or such other address as such party
shall have specified most recently by written notice. Notice shall be deemed
given or delivered on the date of service or transmission if personally served
or transmitted by telegram, telex or facsimile. Notice otherwise sent as
provided herein shall be deemed given or delivered on the third business day
following the date mailed or on the next business day following the delivery of
such notice to a reputable overnight courier service.
8
If to Yucaipa: The Yucaipa Companies LLC
10000 Santa Monica Boulevard
Fifth Floor
Los Angeles, California 90067
Attention: Ronald W. Burkle
If to the Company: Fred Meyer, Inc.
3800 S.E. 22nd Avenue
Portland, Oregon 97202
Attention: Robert G. Miller
with a copy to the General Counsel of the Company at the same address.
11. Miscellaneous.
11.1 Entire Agreement; Amendments. This Agreement contains all of the
terms and conditions agreed upon by the parties hereto in connection with the
subject matter hereof. This Agreement may not be amended, modified or changed
except by written instrument signed by all of the parties hereto.
11.2 Assignment; Successors. This Agreement shall not be assigned and
is not assignable by any party without the prior written consent of each of the
other parties hereto; provided, however, that Yucaipa may assign, without the
prior consent of the Company, its rights and obligations under this Agreement to
any partnership or limited liability company controlled by Ronald W. Burkle, and
provided further, that Yucaipa may assign the right to receive any payment
hereunder (but not its duties and obligations hereunder) to any other person or
entity. Subject to the preceding sentence, this Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective permitted
successors and assigns.
11.3 Governing Law. This Agreement shall be governed by and construed
in accordance with the internal domestic laws of the State of New York, without
regard to the choice of law provisions thereof.
11.4 Attorneys' Fees. If any legal action is brought concerning any
matter relating to this Agreement, or by reason of any breach of any covenant,
condition or agreement referred to herein, the prevailing party shall be
entitled to have and recover from the other party to the action all costs and
expenses of suit, including attorneys' fees.
11.5 Relationship. Nothing in this Agreement shall constitute or be
construed to be a partnership or joint venture between the Company and Yucaipa.
To the extent appropriate to the duties and obligations hereunder, Yucaipa shall
be an independent contractor and none of its employees shall be deemed employees
of the Company by reason of this Agreement or the performance of its duties
hereunder. This Agreement is for the benefit of the Company and Yucaipa and
shall not create third party beneficiary rights.
9
11.6 Construction and Interpretation. This Agreement shall not be
construed for or against either party by reason of the authorship or alleged
authorship of any provision hereof or by reason of the status of the respective
parties. This Agreement shall be construed reasonably to carry out its intent
without presumption against or in favor of either party. The natural persons
executing this Agreement on behalf of each party have the full right, power and
authority to do and affirm the foregoing warranty on behalf of each party and on
their own behalf. The captions on sections are provided for purposes of
convenience and are not intended to limit, define the scope of or aid in
interpretation of any of the provisions hereof. References to a party or parties
shall refer to the Company or Yucaipa, or both, as the context may require. All
pronouns and singular or plural references as used herein shall be deemed to
have interchangeably (where the sense of the sentence requires) a masculine,
feminine or neuter, and/or singular or plural meaning, as the case may be.
11.7 Severability. If any term, provision or condition of this
Agreement is determined by a court or other judicial or administrative tribunal
to be illegal, void or otherwise ineffective or not in accordance with public
policy, the remainder of this Agreement shall not be affected thereby and shall
remain in full force and effect and shall be construed in such manner so as to
preserve the validity hereof and the substance of the transactions herein
contemplated to the extent possible.
11.8 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Management
Services Agreement to be duly executed as of the date first above written.
THE YUCAIPA COMPANIES LLC
By:
-------------------------------------
Name: Ronald W. Burkle
Title: Managing Member
FRED MEYER, INC.
By:
-------------------------------------
Name:
Title:
10
Exhibit E
FORM OF SMITH'S AFFILIATE LETTER
__________, 1997
Meyer-Smith Holdco, Inc.
3800 S.E. 22nd Avenue
Portland, Oregon 97202
Attention: General Counsel
Ladies and Gentlemen:
The undersigned has been advised that as of the date of this letter
the undersigned may be deemed to be an "affiliate" of Smith's Food & Drug
Centers, Inc., a Delaware corporation (the "Company"), as the term "affiliate"
is (i) defined for purposes of paragraphs (c) and (d) of Rule 145 of the rules
and regulations (the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Act"), or (ii) used in and for purposes of Accounting Series, Releases 130 and
135, as amended, of the Commission. Pursuant to the terms of the Agreement and
Plan of Reorganization and Merger dated as of May 11, 1997 (the "Agreement"), by
and between the Company and Fred Meyer, Inc., a Delaware corporation ("Fred
Meyer"), Smith's Merger Sub, Inc., a Delaware corporation and wholly owned
subsidiary of Meyer-Smith Holdco, Inc., a Delaware holding company ("Holdings"),
will be merged with and into the Company (the "Merger").
As a result of the Merger, the undersigned may receive shares of
common stock, par value $0.01 per share, of Holdings (the "Holdings Common
Stock") in exchange for shares owned by [him] [her] [it] of common stock, par
value $0.01 per share, of the Company.
The undersigned represents, warrants and covenants to Holdings that in
the event the undersigned receives any Holdings Common Stock as a result of the
Merger:
A. The undersigned shall not make any sale, transfer or other
disposition of Holdings Common Stock in violation of the Act or the Rules and
Regulations.
B. The undersigned has carefully read this letter and the Agreement
and discussed the requirements of such documents and other applicable
limitations upon [his] [her] [its] ability to sell, transfer or otherwise
dispose of the Holdings Common Stock to the extent the undersigned felt
necessary, with [his] [her] [its]counsel or counsel for Holdings.
C. The undersigned has been advised that the issuance of Holdings
Common Stock to [him] [her] [it] pursuant to the Merger has been registered with
the Commission under the Act on a Registration Statement on Form S-4. However,
The undersigned has also been
advised that, since at the time the Merger was submitted for a vote of the
stockholders of the Company, the undersigned may be deemed to have been an
affiliate of the Company and the distribution by [him] [her] [it] of the
Holdings Common Stock has not been registered under the Act, the undersigned may
not sell, transfer or otherwise dispose of the Holdings Common Stock issued to
[him] [her] [it] in the Merger unless (i) such sale, transfer or other
disposition has been registered under the Act, (ii) such sale, transfer or other
disposition is made in conformity with Rule 145 promulgated by the Commission
under the Act, or (iii) in the opinion of counsel reasonably acceptable to
Holdings, or pursuant to a "no action" letter obtained by the undersigned from
the staff of the Commission, such sale, transfer or other disposition is
otherwise exempt from registration under the Act.
D. The undersigned understands that, except as may be provided in any
registration rights agreement entered into by Holdings and the undersigned,
Holdings is under no obligation to register the sale, transfer or other
disposition of the Holdings Common Stock by [him] [her] [it] or on [his] [her]
[its] behalf under the Act or to take any other action necessary in order to
make compliance with an exemption from such registration available.
E. The undersigned also understands that stop transfer instructions
will be given to Holdings' transfer agents with respect to the Holdings Common
Stock and that there will be placed on the certificates for the Holdings Common
Stock issued to [him] [her] [it], 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 APPLIES AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR IN
ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OF 1933."
F. The undersigned also understands that unless the transfer by [him]
[her] [it] of [his] [her] [its] Holdings Common Stock has been registered under
the Act or is a sale made in conformity with the provisions of Rule 145,
Holdings reserves the right to put the following legend on the certificates
issued to [his] [her] [its] transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO
RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933 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 AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR IN
2
ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OF 1933."
It is understood and agreed that the legends set forth in paragraphs E
and F above will be removed by delivery of substitute certificates without such
legend if such legend is not required for purposes of the Act or this letter
agreement. It is understood and agreed that such legends and the stop orders
referred to above will be removed if (i) one year shall have elapsed from the
date the undersigned acquired the Holdings Common Stock received in the Merger
and the provisions of Rule 145(d)(2) are then available to the undersigned, (ii)
two years shall have elapsed from the date the undersigned acquired the Holdings
Common Stock received in the Merger and the provisions of Rule 145(d)(3) are
then available to the undersigned, or (iii) Holdings has received either an
opinion of counsel, which opinion and counsel shall be reasonably satisfactory
to Holdings, or a "no action" letter obtained by the undersigned from the staff
of the Commission, to the effect that the restrictions imposed by Rule 145 under
the Act no longer apply to the undersigned.
Execution of this letter should not be considered an admission on my
part that the undersigned is an "affiliate" of the Company as described in the
first paragraph of this letter or as a waiver of any rights the undersigned may
have to object to any claim that the undersigned is such an affiliate on or
after the date of this letter.
Very truly yours,
_________________________________________
Agreed to and Accepted this
____ day of ___________,1997
MEYER-SMITH HOLDCO, INC.
By:_________________________________
Name: ___________________________
Title: __________________________
3
Exhibit E
FORM OF FRED MEYER AFFILIATE LETTER
__________, 1997
Meyer-Smith Holdco, Inc.
3800 S.E. 22nd Avenue
Portland, Oregon 97202
Attention: General Counsel
Ladies and Gentlemen:
The undersigned has been advised that as of the date of this letter
the undersigned may be deemed to be an "affiliate" of Fred Meyer, Inc., a
Delaware corporation (the "Company"), as the term "affiliate" is (i) defined for
purposes of paragraphs (c) and (d) of Rule 145 of the rules and regulations (the
"Rules and Regulations") of the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Act"), or (ii)
used in and for purposes of Accounting Series, Releases 130 and 135, as amended,
of the Commission. Pursuant to the terms of the Agreement and Plan of
Reorganization and Merger dated as of May 11, 1997 (the "Agreement"), by and
between the Company And Smith's Food & Drug Centers, Inc., a Delaware
corporation ("Smith's"), Fred Meyer Merger Sub, Inc., a Delaware corporation and
wholly owned subsidiary of Meyer-Smith Holdco, Inc., a Delaware holding company
("Holdings"), will be merged with and into the Company (the "Merger").
As a result of the Merger, the undersigned may receive shares of
common stock, par value $0.01 per share, of Holdings (the "Holdings Common
Stock") in exchange for shares owned by [him] [her] [it] of common stock, par
value $0.01 per share, of the Company.
The undersigned represents, warrants and covenants to Holdings that in
the event the undersigned receives any Holdings Common Stock as a result of the
Merger:
A. The undersigned shall not make any sale, transfer or other
disposition of Holdings Common Stock in violation of the Act or the Rules and
Regulations.
B. The undersigned has carefully read this letter and the Agreement
and discussed the requirements of such documents and other applicable
limitations upon [his] [her] [its] ability to sell, transfer or otherwise
dispose of the Holdings Common Stock to the extent The undersigned felt
necessary, with [his] [her] [its] counsel or counsel for Holdings.
C. The undersigned has been advised that the issuance of Holdings
Common Stock to [him] [her] [it] pursuant to the Merger has been registered with
the Commission under the Act on a Registration Statement on Form S-4. However,
The undersigned has also been advised that, since at the time the Merger was
submitted for a vote of the stockholders of the
4
Company, the undersigned may be deemed to have been an affiliate of the Company
and the distribution by [him] [her] [it] of the Holdings Common Stock has not
been registered under the Act, the undersigned may not sell, transfer or
otherwise dispose of the Holdings Common Stock issued to [him] [her] [it] in the
Merger unless (i) such sale, transfer or other disposition has been registered
under the Act, (ii) such sale, transfer or other disposition is made in
conformity with Rule 145 promulgated by the Commission under the Act, or (iii)
in the opinion of counsel reasonably acceptable to Holdings, or pursuant to a
"no action" letter obtained by the undersigned from the staff of the Commission,
such sale, transfer or other disposition is otherwise exempt from registration
under the Act.
D. The undersigned understands that, except as may be provided in any
registration rights agreement entered into by Holdings and the undersigned,
Holdings is under no obligation to register the sale, transfer or other
disposition of the Holdings Common Stock by [him] [her] [it] or on my behalf
under the Act or to take any other action necessary in order to make compliance
with an exemption from such registration available.
E. The undersigned also understands that stop transfer instructions
will be given to Holdings' transfer agents with respect to the Holdings Common
Stock and that there will be placed on the certificates for the Holdings Common
Stock issued to [him] [her] [it], 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 APPLIES AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR IN ACCORDANCE
WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT OF 1933."
F. The undersigned also understands that unless the transfer by [him]
[her] [it] of my Holdings Common Stock has been registered under the Act or is a
sale made in conformity with the provisions of Rule 145, Holdings reserves the
right to put the following legend on the certificates issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO
RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933 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
AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT OR IN ACCORDANCE WITH AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF
1933."
5
It is understood and agreed that the legends set forth in paragraphs E
and F above will be removed by delivery of substitute certificates without such
legend if such legend is not required for purposes of the Act or this letter
agreement. It is understood and agreed that such legends and the stop orders
referred to above will be removed if (i) one year shall have elapsed from the
date the undersigned acquired the Holdings Common Stock received in the Merger
and the provisions of Rule 145(d)(2) are then available to the undersigned, (ii)
two years shall have elapsed from the date the undersigned acquired the Holdings
Common Stock received in the Merger and the provisions of Rule 145(d)(3) are
then available to the undersigned, or (iii) Holdings has received either an
opinion of counsel, which opinion and counsel shall be reasonably satisfactory
to Holdings, or a "no action" letter obtained by the undersigned from the staff
of the Commission, to the effect that the restrictions imposed by Rule 145 under
the Act no longer apply to the undersigned.
Execution of this letter should not be considered an admission on my
part that the undersigned is an "affiliate" of the Company as described in the
first paragraph of this letter or as a waiver of any rights the undersigned may
have to object to any claim that the undersigned is such an affiliate on or
after the date of this letter.
Very truly yours,
_________________________________________
Agreed to and Accepted this
____ day of __,1997
MEYER-SMITH HOLDCO, INC.
By:_________________________________
Name: ___________________________
Title: __________________________
6
Exhibit F-1
Form of Meyer-Smith's Holdco, Inc. Tax Certificate
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, CA 90071-2007
Dear Sirs:
Reference is made to the Agreement and Plan of Merger dated as of May
___, 1997 (the "Agreement"), entered into between Smith's Food & Drug Centers,
Inc., a ___________ corporation ("Smith's Food & Drug Centers, Inc."), and Fred
Meyer, a ___________ corporation ("Fred Meyer, Inc.") and the transactions
contemplated thereby. Unless defined herein, all capitalized terms used but not
defined shall have the meanings provided for by the Agreement.
In connection with the opinions to be delivered by you pursuant to
Sections 6.2(f) and 6.3(h) of the Agreement and recognizing that each of you
will rely on this certificate in delivering said opinions pursuant to Section
5.22 of the Agreement, the undersigned officer of Meyer-Smith's Holdco, Inc.
does hereby certify, on behalf of Meyer-Smith's Holdco, Inc., as follows:
1. The shareholders of Smith's Food & Drug Centers, Inc. and Fred
Meyer, Inc. will not retain any rights in the stock of Smith's Food & Drug
Centers, Inc. and Fred Meyer, Inc. transferred to Meyer-Smith's Holdco, Inc.
pursuant to the Agreement.
2. Meyer-Smith's Holdco, Inc. will not assume any debt or liabilities
of Smith's Food & Drug Centers, Inc. or Fred Meyer, Inc. (whether or not related
to the stock of Smith's Food & Drug Centers, Inc. and Fred Meyer, Inc. being
transferred to Meyer-Smith's Holdco, Inc.) pursuant to the Agreement.
3. The transfers and exchanges contemplated by the Agreement will
occur on approximately the same date pursuant to the terms of the Agreement.
4. There is no plan or intention on the part of Meyer-Smith's Holdco,
Inc. to redeem or otherwise reacquire any stock to be issued by Meyer-Smith's
Holdco, Inc. pursuant to the Agreement.
5. Taking into account any issuance of additional shares of
Meyer-Smith's Holdco, Inc. stock; the exercise of any stock rights, warrants, or
subscriptions of Meyer-Smith's Holdco, Inc.; and any public offering of
Meyer-Smith's Holdco, Inc. stock, the
transferor(s) of stock of Smith's Food & Drug Centers, Inc. and Fred Meyer, Inc.
will be in "control" of Meyer-Smith's Holdco, Inc. within the meaning of Section
368(c) of the Code.
6. Each transferor of stock of Smith's Food & Drug Centers, Inc. or
Fred Meyer, Inc. will receive stock of Meyer-Smith's Holdco, Inc., or other
consideration approximately equal to the fair market value of the Smith's Food &
Drug Centers, Inc. or Fred Meyer, Inc. stock transferred to Meyer-Smith's
Holdco, Inc.
7. No Meyer-Smith's Holdco, Inc. stock will be issued for services
rendered to or for the benefit of Meyer-Smith's Holdco, Inc. in connection with
the transactions contemplated by the Agreement and no Meyer-Smith's Holdco, Inc.
stock will be issued for indebtedness of Meyer-Smith's Holdco, Inc. or for
interest on indebtedness of Meyer-Smith's Holdco, Inc.
8. No income items, such as accounts receivable or commissions due,
are being transferred to Meyer-Smith's Holdco, Inc. by the shareholders of
Smith's Food & Drug Centers, Inc. No liabilities of the shareholders of Smith's
Food & Drug Centers, Inc. will be assumed by Meyer-Smith's Holdco, Inc. in the
transactions contemplated by the Agreement and the shares of Smith's Food & Drug
Centers, Inc. stock transferred to Meyer-Smith's Holdco, Inc. will not be
subject to any liabilities.
9. The transfers contemplated by the Agreement are not the result of
the solicitation by a promoter, broker, or investment house.
10. Following the transactions contemplated by the Agreement,
Meyer-Smith's Holdco, Inc. plans and intends to remain in existence and retain
and use the property transferred to it in a trade or business.
11. Meyer-Smith's Holdco, Inc. has no plan or intention to liquidate
Smith's Food & Drug Centers, Inc. and Fred Meyer, Inc.; to merge Smith's Food &
Drug Centers, Inc. and Fred Meyer, Inc. with or into another corporation; to
sell or otherwise dispose of the stock of Smith's Food & Drug Centers, Inc. or
Fred Meyer, Inc. except for transfers of stock to corporations controlled by
Meyer-Smith's Holdco, Inc.; or to cause Smith's Food & Drug Centers, Inc. or
Fred Meyer, Inc. to sell or otherwise dispose of any of their assets or of any
of the assets acquired from Smith's Food & Drug Centers, Inc. Sub or Fred Meyer,
Inc. Sub, except for disposition made in the ordinary course of business or
transfers of assets to corporations controlled by Smith's Food & Drug Centers,
Inc. or Fred Meyer, Inc..
12. Each of the parties to the transactions contemplated by the
Agreement will pay its or his/her own expenses, if any, incurred in connection
with such transactions.
13. None of Meyer-Smith's Holdco, Inc., Smith's Food & Drug Centers,
Inc. Sub or Fred Meyer, Inc. Sub will be an investment company within the
meaning of Sections 351(e)(1) and 368(a)(2)(F) of the Code and Section
1.351-l(c)(1)(ii) of the regulations.
14. Meyer-Smith's Holdco, Inc. will not be a "personal service
corporation" within the meaning of Section 269A of the Code.
2
15. Following the transactions contemplated by the Agreement, Smith's
Food & Drug Centers, Inc. and Fred Meyer, Inc. will hold at least 90 percent of
the fair market value of their respective net assets and at least 70 percent of
the fair market value of their respective gross assets. For purposes of this
representation, amounts paid by Smith's Food & Drug Centers, Inc., Fred Meyer,
Inc., Smith's Food & Drug Centers, Inc. Sub or Fred Meyer, Inc. Sub to
dissenters or shareholders who receive cash or other property, amounts used by
Smith's Food & Drug Centers, Inc., Fred Meyer, Inc., Smith's Food & Drug
Centers, Inc. Sub or Fred Meyer, Inc. Sub to pay reorganization expenses, and
all redemptions and distributions (except for regular, normal dividends) made by
Smith's Food & Drug Centers, Inc. and Fred Meyer, Inc. will be included as
assets of Smith's Food & Drug Centers, Inc. and Fred Meyer, Inc., respectively,
immediately prior to the transactions contemplated by the Agreement.
16. Prior to the transactions contemplated by the Agreement,
Meyer-Smith's Holdco, Inc. will be in control of Smith's Food & Drug Centers,
Inc. Sub and Fred Meyer, Inc. Sub within the meaning of Section 368(c) of the
Internal Revenue Code.
17. Meyer-Smith's Holdco, Inc. has no plan or intention to cause
Smith's Food & Drug Centers, Inc. or Fred Meyer, Inc. to issue additional shares
of their stock that would result in Meyer-Smith's Holdco, Inc. losing control of
Smith's Food & Drug Centers, Inc. or Fred Meyer, Inc. within the meaning of
Section 368(c) of the Internal Revenue Code.
18. Following the transactions contemplated by the Agreement, Smith's
Food & Drug Centers, Inc. and Fred Meyer, Inc. will continue their historic
businesses or use a significant portion of their historic business assets in a
business.
19. There is no intercorporate indebtedness existing between
Meyer-Smith's Holdco, Inc. and Smith's Food & Drug Centers, Inc. and Fred Meyer,
Inc. or between Smith's Food & Drug Centers, Inc. Sub and Fred Meyer, Inc. Sub
and Smith's Food & Drug Centers, Inc. and Fred Meyer, Inc. that was issued,
acquired, or will be settled at a discount.
20. In the transactions contemplated by the Agreement, shares of Fred
Meyer, Inc. stock representing control of Fred Meyer, Inc., as defined in
Section 368(c) of the Code, will be exchanged solely for voting stock of
Meyer-Smith's Holdco, Inc.. For purposes of this representation, shares of Fred
Meyer, Inc. stock exchanged for cash or other property will be treated as
outstanding Fred Meyer, Inc. stock on the date of the transactions contemplated
by the Agreement.
21. Meyer-Smith's Holdco, Inc. has no reason to believe that the
certifications made by Smith's Food & Drug Centers, Inc. and Fred Meyer, Inc.
and the shareholders of Smith's Food & Drug Centers, Inc. and Fred Meyer, Inc.
owning more than 5 percent of their stock (in the certificates dated the date
hereof and in form and substance as attached to the Agreement as Exhibit I) are
not due, correct and complete in all material respects
IN WITNESS WHEREOF, we have signed this letter this ___ day of May,
1997.
3
Very truly yours,
MEYER-SMITH'S HOLDCO, INC.
By:
--------------------------------------
Name:
Title:
4
Exhibit F-2
Form of Smith's Food & Drug Centers, Inc. Tax Certificate
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, CA 90071-2007
Dear Sirs:
Reference is made to the Agreement and Plan of Merger dated as of May
__, 1997 (the "Agreement"), entered into between Smith's Food & Drug Centers,
Inc., a __________________ corporation ("Smith's Food & Drug Centers, Inc."),
and Fred Meyer, Inc., a ____________________ corporation ("Fred Meyer, Inc.")
and the transactions contemplated thereby. Unless defined herein, all
capitalized terms used but not defined shall have the meanings provided for by
the Agreement.
In connection with the opinions to be delivered by you pursuant to
Sections 6.2(f) and 6.3(h) of the Agreement and recognizing that at each of you
will rely on this certificate in delivering said opinions pursuant to Section
5.22 of the Agreement, the undersigned officer of Smith's Food & Drug Centers,
Inc. does hereby certify, on behalf of Smith's Food & Drug Centers, Inc., as
follows:
1. The shareholders of Smith's Food & Drug Centers, Inc. will not
retain any rights in the stock of Smith's Food & Drug Centers, Inc. transferred
to Meyer-Smith's Holdco, Inc. pursuant to the Agreement.
2. The transfers and exchanges contemplated by the Agreement will
occur on approximately the same date pursuant to the terms of the Agreement.
3. Taking into account any issuance of additional shares of
Meyer-Smith's Holdco, Inc. stock; the exercise of any stock rights, warrants, or
subscriptions of Meyer Smith's Holdco, Inc.; and any public offering of
Meyer-Smith's Holdco, Inc. stock, the transferor(s) of stock of Smith's Food &
Drug Centers, Inc. and Fred Meyer, Inc. will be in "control" of Meyer-Smith's
Holdco, Inc. within the meaning of Section 368(c) of the Code.
4. Each transferor of stock of Smith's Food & Drug Centers, Inc. will
receive stock of Meyer-Smith's Holdco, Inc., or other consideration
approximately equal to the fair market value of the Smith's Food & Drug Centers,
Inc. stock transferred to Meyer Smith's Holdco, Inc..
5. None of the Smith's Food & Drug Centers, Inc. stock to be
transferred to Meyer-Smith's Holdco, Inc. is "Section 306 stock" within the
meaning of Section 306(c) of the Code.
6. The transfers contemplated by this Agreement are not the result of
the solicitation by a promoter, broker, or investment house.
7. Each of the parties to the transactions contemplated by the
Agreement will pay its or his/her own expenses, if any, incurred in connection
with such transactions.
8. Smith's Food & Drug Centers, Inc. will not be an investment company
within the meaning of Section 351(e)(1) ant 368(a)(2)(F) of the Code and Section
1.351- 1(c)(1)(ii) of the regulations.
9. To the best of the knowledge of the management of Smith's Food &
Drug Centers, Inc. the transferors of stock of Smith's Food & Drug Centers, Inc.
are not under the jurisdiction of a court in a title 11 or similar case (within
the meaning of Section 368(a)(3)(A)) and the stock of Meyer-Smith's Holdco, Inc.
received in the exchange will not be used to satisfy the indebtedness of such
debtor.
10. There is no plan or intention by any owner of 5 percent or more of
the Smith's Food & Drug Centers, Inc. stock, and to the best of the knowledge of
the management of Smith's Food & Drug Centers, Inc., there is no plan or
intention on the part of the remaining shareholders of Smith's Food & Drug
Centers, Inc. to sell, exchange, or otherwise dispose of a number of shares of
Meyer-Smith's Holdco, Inc. stock received in the transactions contemplated by
the Agreement that would reduce the Smith's Food & Drug Centers, Inc.
shareholders' ownership of Meyer-Smith's Holdco, Inc. stock to a number of
shares having a value, as of the date of such transactions, of less than 50
percent of the value of all of the formerly outstanding stock of Smith's Food &
Drug Centers, Inc. as of the same date. For purposes of this representation,
shares of Smith's Food & Drug Centers, Inc. stock exchanged for cash or other
property, surrendered by dissenters or exchanged for cash in lieu of fractional
shares of Meyer-Smith's Holdco, Inc. stock will be treated as outstanding
Smith's Food & Drug Centers, Inc. stock on the date of the transactions
contemplated by the Agreement. Moreover, shares of Smith's Food & Drug Centers,
Inc. stock and shares of Meyer-Smith's Holdco, Inc. stock held by Smith's Food &
Drug Centers, Inc. shareholders and otherwise sold, redeemed, or disposed of
prior or subsequent to the transactions contemplated by the Agreement will be
considered in making this representation.
11. Following the transactions contemplated by the Agreement, Smith's
Food & Drug Centers, Inc. will hold at least 90 percent of the fair market value
of its net assets and at least 70 percent of the fair market value of its gross
assets. For purposes of this representation, amounts paid by Smith's Food & Drug
Centers, Inc. or Smith's Food & Drug Centers, Inc. Sub to dissenters, amounts
paid by Smith's Food & Drug Centers, Inc. or Smith's Food & Drug Centers, Inc.
Sub to shareholders who receive cash or other property, amounts used by Smith's
Food & Drug Centers, Inc. or Smith's Food & Drug Centers, Inc. Sub to pay
reorganization expenses, and all redemptions and distributions (except for
regular, normal dividends) made by Smith's Food & Drug Centers, Inc. will be
included as assets of
2
Smith's Food & Drug Centers, Inc. immediately prior to the transactions
contemplated by the Agreement.
12. Smith's Food & Drug Centers, Inc. has no plan or intention to
issue additional shares of its stock that would result in Meyer-Smith's Holdco,
Inc. losing control of Smith's Food & Drug Centers, Inc. within the meaning of
Section 368(c) of the Internal Revenue Code.
13. Smith's Food & Drug Centers, Inc. Sub will have no liabilities
assumed by Smith's Food & Drug Centers, Inc., and will not transfer to Smith's
Food & Drug Centers, Inc. any assets subject to liabilities, in the transactions
contemplated by the Agreement.
14. Following the transactions contemplated by the Agreement, Smith's
Food & Drug Centers, Inc. will continue its historic businesses or use a
significant portion of its historic business assets in a business.
15. There is no intercorporate indebtedness existing between
Meyer-Smith's Holdco, Inc. and Smith's Food & Drug Centers, Inc. or between
Smith's Food & Drug Centers, Inc. Sub and Smith's Food & Drug Centers, Inc. that
was issued, acquired, or will be settled by a discount.
16. On the date of the transactions contemplated by the Agreement, the
fair market value of the assets of Smith's Food & Drug Centers, Inc. will exceed
the sum of its liabilities, plus the amount of liabilities, if any, to which the
assets are subject.
17. Smith's Food & Drug Centers, Inc. has no reason to believe that
the certifications made by Meyer-Smith's Holdco, Inc., Fred Meyer, Inc. and the
shareholders of Smith's Food & Drug Centers, Inc. and Fred Meyer, Inc. owning
more than 5 percent of their stock (in the certificates dated the date hereof
and in form and substance as attached to the Agreement as Exhibit I-4) are not
true, correct and complete in all material respects.
IN WITNESS WHEREOF, we have signed this letter this ___ day of May,
1997.
Very truly yours,
SMITH'S FOOD & DRUG CENTERS, INC.
By:
-------------------------------------
Name:
Title:
3
Exhibit F-3
Form of Fred Meyer, Inc. Tax Certificate
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, CA 90071-2007
Dear Sirs:
Reference is made to the Agreement and Plan of Merger dated as of May
__, 1997 (the "Agreement"), entered into between Smith's Food & Drug Centers,
Inc., a __________ corporation ("Smith's Food & Drug Centers, Inc."), and Fred
Meyer, Inc., a ____________ corporation ("Fred Meyer, Inc.") and the
transactions contemplated thereby. Unless defined herein, all capitalized terms
used but not defined shall have the meanings provided for by the Agreement.
In connection with the opinions to be delivered by you pursuant to
Sections 6.2(f) and 6.3(h) of the Agreement and recognizing that each of you
will rely on this certificate in delivering said opinions pursuant to Section
5.22 of the Agreement, the undersigned officer of Fred Meyer, Inc. does hereby
certify, on behalf of Fred Meyer, Inc., as follows:
1. The shareholders of Fred Meyer, Inc. will not retain any rights in
the stock of Fred Meyer, Inc. transferred to Meyer-Smith's Holdco, Inc.'s
pursuant to the Agreement.
2. The transfers and exchanges contemplated by the Agreement will
occur on approximately the same date pursuant to the terms of the Agreement.
3. Taking into account any issuance of additional shares of
Meyer-Smith's Holdco, Inc.'s stock; the exercise of any stock rights, warrants,
or subscriptions of Meyer-Smith's Holdco, Inc.'s; and any public of offering of
Meyer-Smith's Holdco, Inc.'s stock, the transferor(s) of stock of Smith's Food &
Drug Centers, Inc. and Fred Meyer, Inc. will be in "control" of Meyer-Smith's
Holdco, Inc.'s within the meaning of Section 368(c) of the Code.
4. Each transferor of stock of Fred Meyer, Inc. will receive stock of
Meyer-Smith's Holdco, Inc.'s, or other consideration approximately equal to the
fair market value of the Fred Meyer, Inc. stock transferred to Meyer-Smith's
Holdco, Inc.'s.
5. None of the Fred Meyer, Inc. stock to be transferred to
Meyer-Smith's Holdco, Inc.'s is "Section 306 stock" within the meaning of
Section 306(c) of the Code.
6. The transfers contemplated by the Agreement are not the result of
the solicitation by a promoter, broker, or investment house.
7. Each of the parties to the transactions contemplated by the
Agreement will pay its or his/her own expenses, if any, incurred in connection
with such transactions.
8. Fred Meyer, Inc. will not be an investment company within the
meaning of Sections 351(e)(1) and 368(a)(2)(7) of the Code end Section
1.351-l(c)(l)(ii) of the regulations.
9. To the best of the knowledge of the management of Fred Meyer, Inc.
the transferors of stock of Fred Meyer, Inc. are not under the jurisdiction of a
court in a title 11 or similar case (within the meaning of Section 368(a)(3)(A))
and the stock of Meyer-Smith's Holdco, Inc.'s received in the exchange will not
be used to satisfy the indebtedness of such debtor.
10. There is no plan or intention by any owner of 5 percent or more of
the Fred Meyer, Inc. stock, and to the best of the knowledge of the management
of Fred Meyer, Inc., there is no plan or intention on the part of the remaining
shareholders of Fred Meyer, Inc. to sell, exchange, or otherwise dispose of a
number of shares of Meyer-Smith's Holdco, Inc.'s stock received in the
transactions contemplated by the Agreement that would reduce the Fred Meyer,
Inc. shareholders' ownership of Meyer-Smith's Holdco, Inc.'s stock to a number
of shares having a value, as of the date of such transactions, of less than 50
percent of the value of all of the formerly outstanding stock of Fred Meyer,
Inc. as of the same date. For purposes of this representation, shares of Fred
Meyer, Inc. stock exchanged for cash or other property, surrendered by
dissenters or exchanged for cash in lieu of fractional shares of Meyer-Smith's
Holdco, Inc.'s stock will be treated as outstanding Fred Meyer, Inc. stock on
the date of the transaction. Moreover, shares of Fred Meyer, Inc. stock and
shares of Meyer-Smith's Holdco, Inc.'s stock held by Fred Meyer, Inc.
shareholders and otherwise sold, redeemed, or disposed of prior or subsequent to
the transactions contemplated by the Agreement will be considered in making this
representation.
11. Following the transactions contemplated by the Agreement, Fred
Meyer, Inc. will hold at least 90 percent of the fair market value of its net
assets and at least 70 percent of the fair market value of its gross assets. For
purposes of this representation, amounts paid by Fred Meyer, Inc. or Fred Meyer,
Inc. Sub to dissenters, amounts paid by Fred Meyer, Inc. or Fred Meyer, Inc. Sub
to shareholders who receive cash or other property, amounts used by Fred Meyer,
Inc. or Fred Meyer, Inc. Sub to pay reorganization expenses, and all redemptions
and distributions (except for regular, normal dividends) made by Fred Meyer,
Inc. will be included as assets of Fred Meyer, Inc. immediately prior to such
transactions.
12. Fred Meyer, Inc. has no plan or intention to issue additional
shares of its stock that would result in Meyer-Smith's Holdco, Inc.'s losing
control of Fred Meyer, Inc. within the meaning of Section 368(c) of the Internal
Revenue Code.
2
13. Fred Meyer, Inc. Sub will have no liabilities assumed by Fred
Meyer, Inc., and will not transfer to Fred Meyer, Inc. any assets subject to
liabilities, in the transactions contemplated by the Agreement.
14. Following the transactions contemplated by the Agreement, Fred
Meyer, Inc. will continue its historic businesses or use a significant portion
of its historic business assets in a business.
15. There is no intercorporate indebtedness existing between
Meyer-Smith's Holdco, Inc.s and Fred Meyer, Inc. or between Fred Meyer, Inc. Sub
and Fred Meyer, Inc. that was issued, acquired, or will be settled at a
discount.
16. In the transactions contemplated by the Agreement, shares of Fred
Meyer, Inc. stock representing control of Fred Meyer, Inc., as defined in
Section 368(c) of the Code, will be exchanged solely for voting stock of
Meyer-Smith's Holdco, Inc.'s. For purposes of this representation, shares of
Fred Meyer, Inc. stock exchanged for cash or other property originating with
Meyer-Smith's Holdco, Inc.s will be treated as outstanding Fred Meyer, Inc.
stock on the date of the transactions contemplated by the Agreement
17. On the date of the transactions contemplated by the Agreement, the
fair market value of the assets of Fred Meyer, Inc. will exceed the sum of its
liabilities, plus the amount of liabilities, if any, to which the assets are
subject.
18. Fred Meyer, Inc. has no reason to believe that the certifications
made by Meyer-Smith's Holdco, Inc.s, Smith's Food & Drug Centers, Inc. and the
shareholders of Smith's Food & Drug Centers, Inc. and Fred Meyer, Inc. owning
more than 5 percent of their stock (in the certificates dated the date hereof
and in form and substance as attached to the Agreement as Exhibit I) are not
true, correct and complete in all material respects.
IN WITNESS WHEREOF, we have signed this letter this ___ day of May,
1997.
Very truly yours,
FRED MEYER, INC.
By:
--------------------------------------
Name:
Title:
3
Exhibit F-4
Form of Tax Certificate of 5% Shareholder of Smith's
Food & Drug Centers, Inc. or Fred Meyer, Inc.
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, CA 90071-2007
Dear Sirs:
Reference is made to the Agreement and Plan of Merger dated as of May
__, 1997 (the "Agreement"), entered into between Smith's Food & Drug Centers,
Inc., a ___________ corporation ("Smith's Food & Drug Centers, Inc."), and Fred
Meyer, Inc., a ____________ corporation ("Fred Meyer, Inc.") and the
transactions contemplated thereby. Unless defined herein, all capitalized terms
used but not defined shall have the meanings provided for in the Agreement.
In connection with the opinions to be delivered by you pursuant to
Sections 6.2(f) and 6.3(h) of the Agreement and recognizing that each of you
will rely on this certificate in delivering said opinions pursuant to Section
5.22 of the Agreement, the undersigned officer of 5% Shareholder of Smith's Food
& Drug Centers, Inc. or Fred Meyer, Inc., an owner of 5% or more of the
outstanding stock of Smith's Food & Drug Centers, Inc. or Fred Meyer, Inc. does
hereby certify, on behalf of 5% Shareholder of Smith's Food & Drug Centers, Inc.
or Fred Meyer, Inc., as follows:
1. 5% Shareholder of Smith's Food & Drug Centers, Inc. or Fred Meyer,
Inc. will not retain any right in its Smith's Food & Drug Centers, Inc. or Fred
Meyer, Inc. stock transferred to Meyer-Smith's Holdco, Inc. pursuant to the
Agreement.
2. 5% Shareholder of Smith's Food & Drug Centers, Inc. or Fred Meyer,
Inc. has no plan or intention and to the best of the knowledge of 5% Shareholder
of Smith's Food & Drug Centers, Inc. or Fred Meyer, Inc., there is no plan or
intention on the part of the remaining shareholders of Smith's Food & Drug
Centers, Inc. or Fred Meyer, Inc. to sell, exchange, or otherwise dispose of a
number of shares of Meyer-Smith's Holdco, Inc. stock received in the transaction
that would reduce the Smith's Food & Drug Centers, Inc. or Fred Meyer, Inc.
shareholders' ownership of Meyer-Smith's Holdco, Inc. stock to a number of
shares having a value, as of the date of the transactions, of less than 50
percent of the value of all of the formerly outstanding stock of Smith's Food &
Drug Centers, Inc. or Fred Meyer, Inc. as of the same date. For purposes of this
representation, shares of Smith's Food & Drug Centers, Inc. or Fred Meyer, Inc.
stock exchanged for cash or other property, surrendered by
dissenters or exchanged for cash in lieu of fractional shares of Meyer-Smith's
Holdco, Inc. stock will be treated as outstanding Smith's Food & Drug Centers,
Inc. or Fred Meyer, Inc. stock on the date of the transaction. Moreover, shares
of Smith's Food & Drug Centers, Inc. or Fred Meyer, Inc. stock and shares of
Meyer-Smith's Holdco, Inc. stock held by Smith's Food & Drug Centers, Inc. or
Fred Meyer, Inc. shareholders and otherwise sold, redeemed, or disposed of prior
or subsequent to the transaction will be considered in making this
representation.
2
3. 5% Shareholder of Smith's Food & Drug Centers, Inc. or Fred Meyer,
Inc. is not under the jurisdiction of a court in a title 11 or similar case
(within the meaning of Section 368(a)(3)(A)) and the stock of Meyer-Smith's
Holdco, Inc. received by 5% Shareholder of Smith's Food & Drug Centers, Inc. or
Fred Meyer, Inc. in the exchange will not be used to satisfy any indebtedness
related thereto.
IN WITNESS WHEREOF, we have signed this letter this ___ day of May,
1997.
Very truly yours,
5% Shareholder of Smith's Food & Drug
Centers, Inc. or Fred Meyer, Inc.
By:
--------------------------------------
Name:
Title:
3
EXHIBIT G
FORM OF SMITH'S LEGAL OPINION
1. Each of Smith's, Holdings and Smith's Sub (the "Parties") has been duly
incorporated and is validly existing and in good standing under the laws of the
state of its organization with the organizational power and authority to own its
respective property and assets and to conduct its businesses as presently owned
and conducted. Each of the Parties has the corporate power and authority to
execute and deliver the Merger Agreement, and all necessary corporate action has
been taken by each of the Parties to authorize the execution and delivery of the
Merger Agreement and the performance of its obligations thereunder.
2. Each of the Parties has been duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction where required to be
so qualified except where the failure of such Party to be so qualified would not
have a Material Adverse Effect on such Party and its Subsidiaries taken as a
whole.
3. Smith's authorized capital stock consists of _____ shares of Class A
Common Stock, par value $.01 per share, _____ shares of Class B Common Stock,
par value $.01 per share, _____ shares of Class C Common Stock, par value $.01
per share, and _____ shares of preferred stock, _____ shares of which have been
designated as Series I Preferred Stock, par value $.01 per share. All of Smith's
issued and outstanding shares of capital stock have been duly authorized and
validly issued and are fully paid and non-assessable.
4. The Merger Agreement has been duly executed and delivered by each of the
Parties and constitutes a legally valid and binding obligation of each of the
Parties, enforceable against each of the Parties in accordance with its terms.
5. Smith's Sub's authorized capital stock consists of _____ shares of
common stock, of which _____ shares are issued and outstanding as of the date
hereof. All of Smith's Sub's issued and outstanding shares of common stock are
validly issued, fully paid and non-assessable and are owned beneficially and of
record by Holdings.
6. The execution, delivery and filing of the Certificate of Merger with
respect to the Smith's Merger has been duly authorized by all necessary
corporate action on the part of Smith's and Smith's Sub. Such Certificate of
Merger has been duly and validly executed by Smith's and Smith's Sub, and upon
filing with the Secretary of State of the State of Delaware, will constitute a
legally valid and binding obligation of Smith's and Smith's Sub, enforceable
against each of them in accordance with its terms, and the Smith's Merger will
become effective in accordance with the Delaware General Corporation Law.
B-1
EXHIBIT H
FORM OF FRED MEYER LEGAL OPINION
1. Each of Fred Meyer, Holdings and Fred Meyer Sub (the "Parties") has been
duly incorporated and is validly existing and in good standing under the laws of
the state of its organization with the organizational power and authority to own
its respective property and assets and to conduct its businesses as presently
owned and conducted. Each of the Parties has the corporate power and authority
to execute and deliver the Merger Agreement, and all necessary corporate action
has been taken by each of the Parties to authorize the execution and delivery of
the Merger Agreement and the performance of its obligations thereunder.
2. Each of the Parties has been duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction where required to be
so qualified except where the failure of such Party to be so qualified would not
have a Material Adverse Effect on such Party and its Subsidiaries taken as a
whole.
3. The Merger Agreement has been duly executed and delivered by each of the
Parties and constitutes a legally valid and binding obligation of each of the
Parties, enforceable against Smith's in accordance with its terms.
4. Fred Meyer's authorized capital stock consists of _____ shares of Class
A Common Stock, par value $.01 per share. All of Fred Meyer's issued and
outstanding shares of capital stock have been duly authorized and validly issued
and are fully paid and non-assessable.
6. Fred Meyer's Sub's authorized capital stock consists of _____ shares of
common stock, of which _____ shares are issued and outstanding as of the date
hereof. All of Fred Meyer Sub's issued and outstanding shares of common stock
are validly issued, fully paid and non-assessable and are owned beneficially and
of record by Holdings.
7. The execution, delivery and filing of the Certificate of Merger with
respect to the Fred Meyer Merger has been duly authorized by all necessary
corporate action on the part of Fred Meyer and Fred Meyer Sub. Such Certificate
of Merger has been duly and validly executed by Smith's and Smith's Sub, and
upon filing with the Secretary of State of the State of Delaware, will
constitute a legally valid and binding obligation of Fred Meyer and Fred Meyer
Sub, enforceable against each of them in accordance with its terms, and the Fred
Meyer Merger will become effective in accordance with the Delaware General
Corporation Law.
8. Each of the Registration Rights Agreement and the New Management
Agreement has been duly authorized, executed and delivered by Holdings, and
constitutes a legally valid and binding obligation of Holdings, enforceable
against Holdings in accordance with its terms, and Holdings has the corporate
power and authority to enter into and perform its obligations thereunder.
9. The Option Agreement has been duly authorized, executed and delivered by
Fred Meyer, and constitutes a legally valid and binding obligation of Fred
Meyer, enforceable against Fred Meyer in accordance with its terms, and Holdings
has the corporate power and authority to enter into and perform its obligations
thereunder.
B-2
10. The shares of Holdings Common Stock to be issued in the Mergers have
been registered under the Securities Act of 1933, as amended.
11. Holding's authorized capital stock consists of _____ All of Holding's
issued and outstanding shares of capital stock, and the shares of Holdings
Common Stock to be issued in the Mergers, have been duly authorized and validly
issued and are fully paid and non-assessable.
B-3
