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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
JITNEY-JUNGLE STORES OF AMERICA, INC.,
DELTA ACQUISITION CORPORATION
and
DELCHAMPS, INC.
July 8, 1997
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TABLE OF CONTENTS
Page
ARTICLE I
THE OFFER.................................................................1
1.1 The Offer............................................................1
1.2 Company Action.......................................................3
1.3 Directors............................................................5
ARTICLE II
THE MERGER................................................................6
2.1 The Merger...........................................................6
2.2 Effect of the Merger.................................................6
2.3 Closing; Consummation of the Merger..................................6
2.4 Articles of Incorporation; Bylaws; Directors and Officers............6
2.5 Conversion of Securities.............................................7
2.6 Exchange of Certificates.............................................8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............................9
3.1 Organization and Qualification; Subsidiaries.........................9
3.2 Capitalization......................................................10
3.3 Authority Relative to this Agreement................................11
3.4 Non-Contravention; Approvals and Consents...........................11
3.5 Brokers and Finders.................................................12
3.6 SEC Filings.........................................................12
3.7 Absence of Certain Changes or Events................................13
3.8 Legal Proceedings...................................................13
3.9 Compliance with Law.................................................13
3.10 Taxes...............................................................13
3.11 ERISA and Related Matters...........................................15
3.12 Environmental Matters...............................................16
3.13 Information Supplied................................................18
3.14 Real Property.......................................................18
3.15 Labor Matters.......................................................19
3.16 Contracts; Certain Agreements.......................................20
3.17 Absence of Certain Liabilities......................................21
3.18 Opinion of Financial Advisor........................................21
3.19 Takeover Statute....................................................21
3.20 Insurance...........................................................21
3.21 Intellectual Property...............................................21
3.22 Certain Agreements..................................................22
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3.23 Indemnification Claims..............................................22
3.24 Prior Negotiations..................................................22
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB.........................23
4.1 Organization of Parent and Sub......................................23
4.2 Authority Relative to this Agreement................................23
4.3 Non-Contravention; Approvals and Consents...........................23
4.4 Legal Proceedings...................................................24
4.5 Financing...........................................................24
4.6 Information Supplied................................................25
ARTICLE V
COVENANTS OF THE COMPANY.................................................25
5.1 Conduct of Business by the Company Pending the Merger...............25
5.2 No Solicitation.....................................................27
5.3 Company Stock Plans.................................................29
ARTICLE VI
ADDITIONAL COVENANTS.....................................................29
6.1 Proxy Statement and Special Meeting.................................29
6.2 HSR Matters.........................................................30
6.3 Publicity...........................................................31
6.4 Investigation; Confidentiality......................................32
6.5 Directors' and Officers' Indemnification and Insurance..............32
6.6 Change of Control Agreements........................................34
6.7 Fees and Expenses...................................................34
6.8 Conduct of Business of Sub..........................................34
6.9 Cooperation.........................................................34
6.10 Post-Offer Action...................................................34
6.11 Transaction Litigation..............................................35
ARTICLE VII
CONDITIONS TO THE MERGER.................................................35
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER .......................................35
8.1 Termination.........................................................35
8.2 Effect of Termination...............................................37
8.3 Termination Payment.................................................37
8.4 Amendment...........................................................39
8.5 Waiver..............................................................39
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ARTICLE IX
GENERAL PROVISIONS.......................................................39
9.1 Non-Survival of Representations, Warranties and Agreements..........39
9.2 Certain Definitions.................................................39
9.3 Notices.............................................................40
9.4 Headings............................................................41
9.5 Applicable Law......................................................41
9.6 No Assignment; Binding Effect.......................................41
9.7 Counterparts........................................................41
9.8 Third Party Beneficiaries...........................................41
9.9 Invalid Provisions..................................................41
9.10 Specific Performance................................................41
9.11 Entire Agreement....................................................42
9.12 Days................................................................42
9.13 Jurisdiction........................................................42
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Agreement"), dated as of July 8,
1997, is by and among Jitney-Jungle Stores of America, Inc., a Mississippi
corporation ("Parent"), Delta Acquisition Corporation, an Alabama corporation
and a wholly-owned subsidiary of Parent ("Sub"), and Delchamps, Inc., an Alabama
corporation (the "Company").
WHEREAS, the respective Boards of Directors of Parent, Sub and the Company
have each determined that it is advisable and in the best interests of their
respective shareholders, on the terms and subject to the conditions in this
Agreement (i) for Sub to make a cash tender offer to purchase all issued and
outstanding shares of the Company's common stock, $.01 par value per share (the
"Common Stock") and associated preferred share purchase rights (the "Rights")
issued pursuant to the Rights Agreement (defined in Section 1.2) (such shares of
Common Stock and associated Rights, the "Shares"), and (ii) following the
consummation of the cash tender offer, for Sub to merge with and into the
Company, with the result that the Company will become a wholly-owned subsidiary
of Parent (the "Merger").
NOW THEREFORE, the parties hereto agree as follows:
ARTICLE I
THE OFFER
1.1 The Offer.
(a) Provided that this Agreement shall not have been terminated in
accordance with Section 8.1 and none of the events set forth in paragraph (c) of
Annex A hereto shall have occurred and be existing, and subject to the
provisions of this Agreement, no later than five business days after the date
hereof, Parent shall cause Sub to, and Sub shall, commence (within the meaning
of Rule 14d-2 under the Securities Exchange Act of 1934 (the "Exchange Act")) a
tender offer (the "Offer") to purchase all of the issued and outstanding Shares,
at a price per Share of $30.00 (such amount, or any greater amount per Share
paid pursuant to the Offer, the "Per Share Price") net to each seller in cash.
Subject to the provisions of this Agreement, Sub shall, and Parent shall cause
Sub to, accept for payment and pay the Per Share Price for any Shares validly
tendered and not withdrawn pursuant to the Offer as soon as practicable after
the expiration of the Offer.
(b) The obligation of Parent and Sub to consummate the Offer, and to
accept for payment and pay for Shares tendered pursuant to the Offer, shall be
subject to only those conditions set forth in Annex A. Parent and Sub may waive
any such condition other than (i) the Minimum Condition (defined in Annex A),
provided that Parent and Sub may reduce the Minimum Condition to a majority of
the outstanding Shares on a fully diluted basis, or (ii) the condition relating
to the expiration of the waiting period under the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act"). Parent and Sub expressly
reserve the right (but have no obligation) to increase the consideration per
share payable in the Offer or amend, modify or make any changes in the terms and
conditions of the Offer except that neither Parent nor Sub shall, without the
prior
written consent of the Company's Board of Directors, (i) impose conditions
to the Offer in addition to those set forth in Annex A, (ii) decrease the Per
Share Price, (iii) change the form of consideration, (iv) reduce the number of
Shares sought to be purchased in the Offer, (v) extend the expiration date of
the Offer (except as provided below in this paragraph), or (vi) otherwise change
any term of the Offer in any manner adverse to the holders of Shares. The Offer
shall expire on the twentieth business day after its commencement, except as
provided below. The parties acknowledge their intention to consummate the
transactions contemplated hereby as soon as reasonably practicable. To that end
(provided that the conditions set forth in paragraphs (c)(iii) through (c)(ix)
and (e) of Annex A have been met), Parent and Sub shall use commercially
reasonable best efforts, subject to the terms of this Agreement (including
Section 6.2 and Annex A), to consummate the Offer within 30 business days
following commencement of the Offer, including the obtaining of requisite
financing, the receipt of the consent of the holders of its 12% Senior Notes due
2006 as contemplated by Annex A and receipt of requisite governmental approvals
(including in respect of the HSR Act) as contemplated by Annex A. If the
conditions set forth in paragraphs (c)(iii) through (c)(ix) and (e) of Annex A
have been met but the conditions set forth in either or both of paragraphs (b)
or (d) of Annex A are not met within 30 business days following commencement of
the Offer, Parent and Sub shall use commercially reasonable best efforts,
subject to the terms of this Agreement (including Section 6.2 and Annex A), to
consummate the Offer on or prior to the sixtieth calendar day following
commencement of the Offer. Notwithstanding the foregoing, the parties
acknowledge Parent's and Sub's right, without the consent of the Company, to
extend the Offer on one or more occasions as follows: (i) extend the Offer, if
at the then-scheduled expiration date of the Offer, any of the conditions to
Sub's obligations to accept for payment and pay for Shares shall not be
satisfied or waived, until such time as such conditions are satisfied or waived,
(ii) extend the Offer for any period required by any rule, regulation,
interpretation or position of the Securities and Exchange Commission ("SEC") or
the staff thereof applicable to the Offer, (iii) extend the Offer on one or more
occasions for an aggregate period of not more than 5 business days if the
Minimum Condition has been satisfied but less than 80% of the outstanding Shares
(on a fully diluted basis) have been validly tendered and not withdrawn, (iv)
extend the Offer for any reason on one or more occasions for an aggregate period
of not more than 10 business days beyond the initial expiration date or the
latest expiration date that would otherwise be permitted under clause (i), (ii)
or (iii) of this sentence, and (v) extend the Offer on one or more occasions for
an aggregate period of not more than 60 calendar days after the date of the
commencement of the Offer in order for Parent to obtain financing on terms
acceptable to it; provided, however, that without the written consent of the
Company, Parent and Sub may not extend the Offer (A) for any period that would
end more than 60 calendar days after the date of the commencement of the Offer,
unless on such sixtieth day any of the conditions on Annex A are not satisfied,
or (B) for any period that would end more than 90 calendar days after the date
of the commencement of the Offer; provided further that if on the initial
expiration date of the Offer, or any extension thereof, the conditions set forth
in paragraphs (c)(iii) through (c)(ix) and (e) of Annex A have been satisfied or
waived but any of the conditions set forth in paragraphs (b), (c)(i), (c)(ii) or
(d) in Annex A shall not have been satisfied or waived, Parent and Sub agree to
extend the Offer one or more times (for such periods as Parent and Sub shall
determine in their sole discretion) until 60 calendar days after the date of the
commencement of the Offer; provided, further, that Parent and Sub may extend the
Offer beyond such 90 calendar day period if
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the conditions set forth in Annex A shall not have been satisfied as a result
of a breach by the Company of its obligations under this Agreement.
(c) On the date of commencement of the Offer, Parent and Sub shall file
with the Securities and Exchange Commission (the "SEC") with respect to the
Offer a Tender Offer Statement on Schedule 14D-1 (together with all amendments
and supplements thereto, the "Schedule 14D-1"), and shall take such steps as are
reasonably necessary to cause the Offer to Purchase (defined below) to be
disseminated to the holders of Shares as and to the extent required by
applicable federal securities laws. The Schedule 14D-1 shall contain an offer
to purchase (the "Offer to Purchase") and forms of the related letter of
transmittal and summary advertisement (the Offer to Purchase and such other
documents, together with any amendments or supplements thereto, collectively,
the "Offer Documents"). The Company and its counsel shall be given a reasonable
opportunity to review and comment on the Schedule 14D-1 and the Offer Documents
prior to their being filed with the SEC or disseminated to the Company's
shareholders. Parent and Sub shall provide the Company and its counsel with a
copy of any written comments that Parent or Sub receives from the SEC or its
staff with respect to the Schedule 14D-1 and the Offer Documents promptly after
receipt of any such comments.
(d) Parent shall provide or cause to be provided to Sub on a timely basis
the funds necessary to accept for payment, and pay for, any Shares that Sub
becomes obligated to accept for payment, and pay for, pursuant to the Offer.
(e) The parties understand and agree that the Per Share Price has been
calculated based upon the accuracy of the representation and warranty set forth
in Section 3.2(a) and that, in the event the number of outstanding Shares or
Shares issuable upon the exercise of, or subject to, options or other agreements
exceeds the amounts specifically set forth in Section 3.2(a) by more than 10,000
Shares (including without limitation as a result of any stock split, reverse
stock split, stock dividend, including any dividend or distribution of
securities convertible into Shares, recapitalization, or other like change
occurring after the date of this Agreement), the Per Share Price shall be
appropriately adjusted downward. The provisions of this paragraph (e) shall
not, however, affect the representation set forth in Section 3.2(a).
1.2 Company Action.
(a) The Company represents that (i) the Board of Directors of the Company
(the "Board of Directors") has by unanimous vote of those present at the meeting
at which the Offer and the Merger were considered duly approved the Offer and
the Merger and this Agreement and has resolved to recommend acceptance of the
Offer and approval of the Merger by the Company's shareholders; (ii) the
affirmative vote of the holders of record of at least two-thirds of the Shares
outstanding on the record date for the Special Meeting (defined below) and
entitled to vote (the "Requisite Shareholder Approval") is the only vote of the
holders of any class or series of the capital stock of the Company required to
approve the Merger; and (iii) the Company has taken all necessary actions so
that the provisions of Article Eleven of the Company's Articles of Incorporation
will not
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apply to this Agreement, the Offer, the Merger, or the acquisition of Shares
by Parent or Sub pursuant to this Agreement. In addition, the Company
represents that it has adopted Amendment No. 2 to the Rights Agreement dated
as of October 14, 1988 by and between the Company and First Alabama Bank as
Rights Agent, as amended by the Amendment to Rights Agreement dated as of
October 16, 1992 by and between the Company and the Rights Agent (as so
amended, the "Rights Agreement") and that a copy of such Amendment No. 2 has
been delivered by the Company to Parent; that as of the date hereof and after
giving effect to the execution and delivery of this Agreement, each Right is
represented by the certificate representing the associated Share and is not
exercisable or transferable apart from the associated Share; that there has
not been a "Distribution Date" or "Shares Acquisition Date," and that the
Company has taken all necessary actions so that the execution and delivery of
this Agreement and the consummation of the Offer and the Merger will not
result in the triggering of the provisions of Section 11 or Section 13 of the
Rights Agreement or the occurrence of a "Distribution Date" or "Shares
Acquisition Date" and will not result in Parent, Sub or any of their
affiliates or associates becoming an "Acquiring Person" (as such terms are
defined in the Rights Agreement) and that upon consummation of the Offer the
Rights will no longer be outstanding and the former holders of the Rights
will not have any claims or rights thereunder (without any necessity to
redeem the Rights to effectuate the foregoing). The Company has been advised
that all of its directors intend either to tender their Shares pursuant to
the Offer or (solely in the case of directors who would as a result of the
tender incur liability under Section 16(b) of the Exchange Act) to vote in
favor of the Merger.
(b) On the date the Schedule 14D-1 is filed with the SEC, the Company
shall file with the SEC a Solicitation/Recommendation Statement on Schedule
14D-9 (together with all amendments and supplements thereto, the "Schedule
14D-9") and shall take such steps as are reasonably necessary to cause the
Schedule 14D-9 to be disseminated to the holders of the Shares as and to the
extent required by applicable federal securities laws. Subject to the
provisions of Sections 5.2 and 8.3, the Offer Documents and the Schedule 14D-9
shall contain the recommendation of the Board of Directors that the Company's
shareholders accept the Offer and vote to approve the Merger. Parent and its
counsel shall be given a reasonable opportunity to review and comment on the
Schedule 14D-9 prior to its being filed with the SEC or disseminated to the
Company's shareholders. The Company shall provide Parent and its counsel with a
copy of any written comments that the Company receives from the SEC or its staff
with respect to the Schedule 14D-9 promptly after receipt of any such comments.
(c) The Company shall promptly furnish Sub with mailing labels containing
the names and addresses of the record holders of Shares and with lists of
securities positions of Shares held in stock depositories, each as of a recent
date, and shall furnish Sub with such additional information, including updated
lists of shareholders, mailing labels and lists of securities positions, as Sub
may reasonably request for the purpose of communicating the Offer to the holders
of Shares. Except as and to the extent required by law and except for such
steps as are necessary to disseminate the Offer Documents and any other
documents necessary to consummate the Offer or the Merger, Parent and Sub shall
hold in confidence the information contained in such labels and listings, and
any other information relating to the holders of Shares received from the
Company or its transfer agent, shall
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use such information only in connection with the Offer and the Merger, and,
if this Agreement is terminated in accordance with Section 8.1, shall deliver
to the Company all such information, including all copies of and extracts or
summaries from such information, then in their possession or control.
1.3 Directors.
(a) Promptly upon payment by Sub for the Shares pursuant to the Offer, Sub
shall be entitled to designate such number of directors, rounded up to the next
whole number, as will give Sub representation on the Board of Directors equal to
at least that number of directors equal to the product of (i) the total number
of directors on the Board of Directors and (ii) the percentage that the number
of Shares so purchased bears to the number of Shares outstanding, and the
Company shall, at such time, use its best efforts to cause the appropriate
number of directors who are members of the Board of Directors as of the date
hereof to resign and Sub's designees to be appointed or elected; provided,
however, that notwithstanding the foregoing, until the Effective Time (defined
in Section 2.3), there shall be, to the extent they are willing to continue to
serve, at least three directors on the Board of Directors who are directors on
the date hereof and who are not designees nor officers, directors, employees or
affiliates of Parent or Sub nor are employees of the Company or any of its
Subsidiaries (the "Independent Directors"); provided, further, that if the
number of Independent Directors shall be reduced below three for any reason, the
Board of Directors shall, subject to the approval of the remaining Independent
Directors, if any, designate a person or persons to fill the vacancy or
vacancies who are directors on the date hereof and not an officer, director,
employee or affiliate of Parent or Sub nor an employee of the Company. Any
vacancies that cannot be filled in the foregoing manner shall be filled by the
Board of Directors at its discretion.
(b) The Company's obligations to appoint Sub's designees to the Board of
Directors shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1
thereunder. Parent and Sub shall supply and shall be solely responsible for all
information with respect to themselves, their officers, directors and
affiliates, and Sub's designees required by Section 14(f) and Rule 14f-1.
(c) Following the election of Sub's designees pursuant to this Section and
until the Effective Time, any amendment of this Agreement or the Articles of
Incorporation or Bylaws of the Company, any termination of this Agreement by the
Company, any extension by the Company of the time for the performance of any of
the obligations or other acts of Parent or Sub, any waiver of any of the
Company's rights hereunder, or any transaction between Parent (or any affiliate
or associate thereof) and the Company shall require the concurrence of a
majority of the Independent Directors. The Independent Directors shall have the
authority to retain such counsel and other advisors at the expense of the
Company as are reasonably appropriate to assist them in the exercise of their
duties in connection with this Agreement. In addition, the Independent
Directors shall have the authority to institute any action on behalf of the
Company to enforce performance of this Agreement.
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ARTICLE II
THE MERGER
2.1 The Merger. At the Effective Time (defined in Section 2.3), in
accordance with this Agreement and the provisions of the ABCA, Sub shall be
merged with and into the Company, the separate existence of Sub shall cease, and
the Company shall continue as the surviving corporation under the corporate name
it possesses immediately prior to the Effective Time. The Company hereinafter
sometimes is referred to as the "Surviving Corporation." Notwithstanding the
foregoing, Parent may elect at any time after consummation of the Offer (or
prior to the consummation of the Offer and with the written consent of the
Company, which shall not be withheld unreasonably) and prior to the fifth
business day immediately preceding the date of the notice of the meeting of
shareholders of the Company to consider approval of the Merger and this
Agreement that instead of merging Sub into the Company as hereinabove provided,
to merge the Company with and into Parent, Sub or another direct or indirect
wholly-owned subsidiary of Parent; provided however that each representation,
warranty, covenant and agreement of Parent and Sub contained herein and relating
to Sub shall thereupon be deemed to be made by Parent and such subsidiary and to
relate to such subsidiary, and provided further that the Company shall not be
deemed to have breached any of its representations, warranties or covenants
herein solely by reason of such election. In such event the parties shall
execute an appropriate amendment to this Agreement in order to reflect the
foregoing and to provide that Parent, Sub or such other subsidiary of Parent
shall be in all respects substituted for Sub and shall be the Surviving
Corporation.
2.2 Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided in the applicable provisions of the ABCA.
2.3 Closing; Consummation of the Merger.
(a) The closing of the Merger (the "Closing") shall take place at 10:00
a.m. local time at the New York or Philadelphia offices of Dechert Price &
Xxxxxx, or at such other location as specified by Sub and on a date to be
specified by Sub, which date shall be as promptly as practicable after the
satisfaction or waiver of the conditions to the Merger set forth herein (the
"Closing Date").
(b) As soon as practicable after the satisfaction or waiver of the
conditions to the Merger set forth herein, the parties shall cause the Merger to
be consummated by delivering to the Secretary of State of the State of Alabama
for filing articles of merger and any other documents in such form as required
by the relevant provisions of the ABCA and shall cause the Merger to take effect
on the date of such filing (the time at which the Merger takes effect, the
"Effective Time").
2.4 Articles of Incorporation; Bylaws; Directors and Officers. The
Articles of Incorporation of the Surviving Corporation shall be the Articles of
Incorporation of the Company, as in effect immediately prior to the Effective
Time, until thereafter amended as provided therein and
6
under the ABCA. The Bylaws of the Surviving Corporation shall be the Bylaws
of the Company, as in effect immediately prior to the Effective Time, until
thereafter amended as provided therein and under the ABCA. The directors of
Sub immediately prior to the Effective Time will be the initial directors of
the Surviving Corporation, and the officers of the Company immediately prior
to the Effective Time (unless any directors or officers of Parent or Sub are
so designated in writing by Parent prior to the Effective Time) will be the
initial officers of the Surviving Corporation, in each case until their
successors are elected or appointed.
2.5 Conversion of Securities. At the Effective Time, by virtue of the
Merger and without any action on the part of Parent, Sub, the Company or the
holder of any of the securities of the Company or Sub:
(a) Each Share issued and outstanding immediately prior to the Effective
Time (other than Shares to be canceled pursuant to Section 2.5(b) and Dissenting
Shares as defined in Section 2.5(d)), together with associated Rights, shall be
converted into and become the right to receive the Per Share Price. All such
Shares and associated Rights shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of a certificate representing any such Shares and associated Rights shall cease
to have any rights with respect thereto, except the right to receive the Per
Share Price, less any required withholding taxes, upon the surrender of such
certificate in accordance with Section 2.6, without interest.
(b) All Shares, together with associated Rights, that are owned by the
Company as treasury stock and all Shares, together with associated Rights, owned
by Parent, Sub or any other wholly-owned Subsidiary of Parent shall be canceled
and retired and shall cease to exist and no consideration shall be delivered in
exchange therefor.
(c) Each share of common stock, par value $.01 per share, of Sub issued
and outstanding immediately prior to the Effective Time shall be converted into
and become one validly issued, fully paid and nonassessable share of common
stock, par value $.01 per share, of the Surviving Corporation. Each certificate
representing outstanding shares of the common stock of Sub at the Effective
Time shall thereafter represent an equal number of shares of the common stock of
the Surviving Corporation.
(d) (i) Notwithstanding any provision of this Agreement to the contrary,
each outstanding Share the holder of which has perfected such holder's right to
demand payment for such holder's Shares in accordance with Article 13 of the
ABCA and has not effectively withdrawn or lost such right (a "Dissenting
Share"), shall not be converted into or represent the right to receive the Per
Share Price, but the holder thereof shall be entitled only to such rights as are
granted by Article 13 of the ABCA; provided, however, that any Dissenting Share
held by a person at the Effective Time who shall, after the Effective Time and
in accordance with the ABCA, withdraw such person's demand for payment or lose
such person's dissenters' rights, shall be deemed to be converted as of the
Effective Time into the right to receive the Per Share Price pursuant to Section
2.5(a).
(ii) The Company shall give Parent (A) prompt notice and a copy of any
written notice of a shareholder's intent to demand payment, of any request to
withdraw a demand for
7
payment and of any other instruments delivered to it pursuant to Article 13
of the ABCA and (B) the opportunity to direct all negotiations and
proceedings with respect to demands for payment under Article 13 of the ABCA.
The Company shall not voluntarily make any payment with respect to any
demand for payment and shall not, except with the prior written consent of
Parent, settle or offer to settle any such demands.
2.6 Exchange of Certificates.
(a) At such times as shall be necessary to make the payments pursuant to
Section 2.5 to holders of Shares, Parent shall make available to the Surviving
Corporation, and the Surviving Corporation shall deposit with a bank or trust
company designated by Parent before the Closing Date and reasonably acceptable
to the Company (the "Payment Agent") an amount in cash equal to the aggregate
Per Share Price to which holders of Shares shall be entitled upon consummation
of the Merger, to be held for the benefit of and distributed to such holders in
accordance with this Section. The Payment Agent shall agree to hold such funds
(such funds, together with earnings thereon, being referred to herein as the
"Payment Fund") for delivery as contemplated by this Section and upon such
additional terms as may be agreed upon by the Payment Agent, the Company and
Parent. If for any reason (including losses) the Payment Fund is inadequate to
pay the cash amounts to which holders of Shares shall be entitled, Parent and
the Surviving Corporation shall in any event remain liable, and Parent shall
make available to the Surviving Corporation additional funds for the payment
thereof. The payment Agent shall invest portions of the Payment Fund as Parent
directs. All interest and other income earned in respect of the Payment Fund
shall inure to the benefit of, and shall be paid to, the Surviving Corporation.
The Payment Fund shall not be used for any purpose except as expressly provided
in this Agreement.
(b) As soon as practicable after the Effective Time, Parent and the
Surviving Corporation shall cause the Payment Agent to mail to each record
holder of one or more certificates (the "Certificates") that immediately prior
to the Effective Time represented outstanding Shares and associated Rights that
have been converted pursuant to Section 2.5(a) into the right to receive the Per
Share Price (i) a letter of transmittal (which shall specify that delivery shall
be effected, and risk of loss and title to the Certificates shall pass, only
upon receipt of the Certificates by the Payment Agent and shall be in such form
and have such other provisions as the Surviving Corporation may reasonably
specify) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for the Per Share Price. Upon surrender of a
Certificate to the Payment Agent for cancellation, together with such letter of
transmittal duly executed and completed in accordance with its terms, the holder
of such Certificate shall be entitled to receive in exchange therefor a check
representing the Per Share Price for each Share represented thereby, and the
Certificate so surrendered shall forthwith be canceled. In no event shall the
holder of any Certificate be entitled to receive interest on any funds to be
received by reason of the Merger, including any interest earned by the Payment
Fund. In the event of a transfer of ownership of Shares that is not registered
in the transfer records of the Company, the Per Share Price may be paid to a
transferee if the Certificate representing such Shares is presented to the
Payment Agent accompanied by all documents required to evidence and effect such
transfer and by evidence that any applicable stock transfer taxes have
8
been paid. Until surrendered as contemplated by this Section, each
Certificate shall be deemed after the Effective Time to represent only the
right to receive upon such surrender the Per Share Price for each Share
represented thereby as contemplated by this Article II.
(c) All cash paid upon the surrender for exchange of Certificates in
accordance with the terms hereof shall be deemed to have been paid in full
satisfaction of all rights pertaining to the Shares and the Rights represented
thereby. From and after the Effective Time, the stock transfer books of the
Company shall be closed and there shall be no further registration of transfers
on the stock transfer books of the Surviving Corporation of the Shares that were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Section, subject in the
case of Dissenting Shares, to applicable law and the provisions of this
Agreement.
(d) Any portion of the Payment Fund that remains unclaimed by the
Company's shareholders six months after the Effective Time shall be delivered to
the Surviving Corporation upon demand, and any of the Company's shareholders who
have not theretofore complied with this Section shall thereafter look only to
the Surviving Corporation (subject to abandoned property, escheat and other
similar laws) as general creditors for payment of their claim for the Per Share
Price. Neither Parent nor the Surviving Corporation shall be liable to any
holder of Shares for cash representing the Per Share Price delivered to a public
official in accordance with any applicable abandoned property, escheat or
similar law.
(e) The Surviving Corporation shall be entitled to deduct and withhold
from the Per Share Price or any payment made in respect of Dissenting Shares
such amounts as the Surviving Corporation is required to deduct and withhold
with respect to the making of such payment under the Internal Revenue Code of
1986, as amended (the "Code"), or any provision of state, local or foreign tax
law. Such withheld amounts shall be treated for all purposes of this Agreement
as having been paid to the holder of the Shares in respect of which such
deduction and withholding was made.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the Disclosure Schedule attached as Annex B (the
"Disclosure Schedule") in a manner that makes reasonably apparent that such
matter relates to the particular representation or warranty below, the Company
represents and warrants to each of Parent and Sub as follows:
3.1 Organization and Qualification; Subsidiaries.
(a) The Company has one Significant Subsidiary (defined in Section 9.2),
Supermarket Cigarette Sales, Inc., a Louisiana corporation. The Company and its
Significant Subsidiary are corporations duly incorporated, validly existing and
in good standing under the laws of their respective jurisdictions of
incorporation and have all requisite corporate power and authority to own
9
their respective properties and carry on their respective businesses as now
being conducted. The Company and its Significant Subsidiary are duly
qualified as foreign corporations to do business, and are in good standing,
in each jurisdiction where the character of their properties owned or held
under lease or the nature of their activities makes such qualification
necessary, except to the extent that any failure to so qualify or be in good
standing would not have a Material Adverse Effect or adversely affect the
ability of the Company to perform its obligations hereunder or to consummate
the Merger. As used herein, "Material Adverse Effect" means any change or
effect that is materially adverse to the condition (financial or otherwise),
total assets, total liabilities, business, results of operations or prospects
of the Company and its Subsidiaries taken as a whole, including without
limitation any such change or effect that prevents Parent and Sub from
obtaining their contemplated financing for the Offer and the Merger. The
Company has made available to Parent correct and complete copies of the
articles of incorporation and bylaws of the Company and the Significant
Subsidiary.
(b) The only Subsidiaries of the Company are those set forth in Section
3.1 of the Disclosure Schedule. Except as set forth in Section 3.19 of the
Disclosure Schedule, neither the Company nor any of its 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 the Company's Subsidiaries).
3.2 Capitalization.
(a) The authorized capital stock of the Company consists of (i) 25,000,000
shares of Common Stock, of which as of the date hereof, 7,127,743 shares were
issued and outstanding (including 10,800 shares that were issued and outstanding
under the 1987 Restricted Stock Plan and remained subject to a repurchase option
thereunder) and no shares were held as treasury shares and (ii) 5,000,000 shares
of Preferred Stock, no par value, of which, as of the date hereof, no shares
were issued and outstanding and 80,000 shares were reserved for issuance
pursuant to the Rights Agreement. Except as provided in the Rights Agreement
and except for Shares issuable upon the exercise of outstanding options to
purchase an aggregate of 455,050 Shares (the "Options") pursuant to the 1993
Stock Incentive Plan and the Directors' Stock Option Plan, there are no options,
warrants or other rights, agreements or commitments obligating the Company to
issue any shares of its capital stock or any securities convertible into its
capital stock or to repurchase or redeem any shares of its capital stock. All
Shares outstanding are, and all Shares subject to issuance as aforesaid, when
issued on the terms and conditions specified in the instruments pursuant to
which they are issuable, will be, duly authorized, validly issued, fully paid,
non-assessable and free of preemptive rights. There are no shareholder, voting
trust, or other agreements or understandings to which the Company or any of its
Subsidiaries is a party or to which any of them are bound relating to the voting
of any shares of the capital stock of the Company or any of its Subsidiaries.
(b) All of the outstanding capital stock of the Significant Subsidiary is
duly authorized, validly issued, fully paid and non-assessable and free of
preemptive rights and is owned by the Company free and clear of any claim, lien
or encumbrance. There are no outstanding options, calls
10
or commitments of any kind relating to the issued or unissued capital stock
or other securities of the Significant Subsidiary.
3.3 Authority Relative to this Agreement. The Company has all requisite
corporate power and authority to enter into this Agreement and, subject to the
receipt of the Requisite Shareholder Approval of the Merger, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution, delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby have been
duly authorized by all necessary corporate (including shareholder) action on the
part of the Company, except for the Requisite Shareholder Approval of the
Merger. This Agreement has been duly and validly executed and delivered by the
Company. Subject to receipt of the Requisite Shareholder Approval of the
Merger, and assuming the due authorization, execution and delivery of this
Agreement by Parent and Sub, this Agreement constitutes the legal, valid and
binding agreement of the Company enforceable in accordance with its terms.
3.4 Non-Contravention; Approvals and Consents.
(a) The execution and delivery of this Agreement by the Company do not,
and the performance by the Company of its obligations hereunder and the
consummation of the transactions contemplated hereby will not, conflict with,
result in a violation or breach of, constitute (with or without notice or lapse
of time or both) a default under, 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, or result in the creation or imposition of
any lien upon any of the assets or properties of the Company or any of its
Subsidiaries under, any of the terms, conditions or provisions of (i) the
articles of incorporation or bylaws of the Company or any of its Subsidiaries,
or (ii) subject to receipt of the Requisite Shareholder Approval and the taking
of the actions described in paragraph (b) of this Section, (x) any statute, law,
rule, regulation or ordinance (together, "Laws"), or any judgment, decree,
order, writ, permit or license (together, "Orders"), of any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
the United States or any state, county, city or other political subdivision in
the United States, or of any foreign country (a "Governmental or Regulatory
Authority") applicable to the Company or any of its Subsidiaries or any of their
respective assets or properties, or (y) any note, bond, mortgage, security
agreement, indenture, license, franchise, contract, lease or other instrument,
obligation or agreement of any kind (together, "Contracts") to which the Company
or any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries or any of their respective assets or properties is bound, or (z)
any Employee Plan or Benefit Arrangement (defined in Section 3.11); except, with
respect to the foregoing clauses (ii) (x), (y) and (z) those which, individually
or in the aggregate, (I) could not reasonably be expected to have a Material
Adverse Effect or adversely affect the ability of the Company to perform its
obligations hereunder or to consummate the Merger or (II) occur as a result of
the regulatory status of Parent, Sub or their Subsidiaries.
(b) Except for (i) the premerger notification requirements of the HSR Act,
(ii) the requirements of the Exchange Act and the Nasdaq Stock Market, (iii) the
filing of appropriate
11
documents relating to the Merger required by the ABCA, and (iv) requirements
of Law necessary to transfer liquor licenses and pharmacy licenses, WIC
permits and Food Stamp permits, no consent, approval or action of, filing
with or notice to any Governmental or Regulatory Authority or other person is
required, under any Law or Order or any Contract to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries or any of their respective assets or properties is bound, for
the execution and delivery of this Agreement by the Company, the performance
by the Company of its obligations hereunder or the consummation of the
transactions contemplated hereby, except those that the failure to make or
obtain, individually or in the aggregate, (I) could not reasonably be
expected to have a Material Adverse Effect or adversely affect the ability of
the Company to perform its obligations hereunder or to consummate the Merger
or (II) occur as a result of the regulatory status of Parent, Sub or their
Subsidiaries.
3.5 Brokers and Finders. The Company has not employed any broker or finder
to act on its behalf and has not incurred and will not incur any liability for
any brokerage fees or finders' fees in connection with the transactions
contemplated hereby, other than pursuant to the letter agreement between the
Company and Credit Suisse First Boston Corporation ("CSFBC") dated as of
February 12, 1997, a copy of which has previously been delivered to Parent.
3.6 SEC Filings. The Company has heretofore made available to Parent and
Sub its (i) Annual Report on Form 10-K for the year ended June 29, 1996, (ii)
Quarterly Reports on Form 10-Q for the quarters ended September 28, 1996,
December 28, 1996 and Xxxxx 00, 0000, (xxx) proxy statements relating to all of
the Company's meetings of shareholders (whether annual or special) held or
scheduled to be held since June 29, 1996 and (iv) each other registration
statement, proxy or information statement, form, report and other document filed
by the Company with the SEC since June 29, 1996 (collectively, the "SEC
Filings"). At the time it was filed, each SEC Filing (including all exhibits and
schedules thereto and documents incorporated by reference therein) and, at the
time it is filed, any SEC Filing filed by the Company with the SEC after the
date of this Agreement (i) complied, or with respect to those not yet filed will
comply, in all material respects with the requirements of 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 in order to make the statements made, in light of
the circumstances under which they were made, not misleading. The audited
consolidated financial statements and unaudited consolidated interim financial
statements of the Company and its consolidated Subsidiaries included in the SEC
Filings (including, in each case, the notes and schedules, if any, thereto) (the
"Company Financial Statements"), were and will be prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except as may be indicated therein or in the notes thereto
or, in the case of the unaudited statements, as permitted by Form 10-Q of the
SEC), complied as of their respective dates in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, and fairly presented and will present fairly in
all material respects the consolidated financial position of the Company and its
consolidated Subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended (subject, in the
case of any unaudited interim financial statements, to normal recurring year-end
adjustments (which are not expected to
12
be, individually or in the aggregate, materially adverse to the Company and
its Subsidiaries taken as a whole)).
3.7 Absence of Certain Changes or Events. Since June 29, 1996, except as
reflected in subsequent SEC Filings filed prior to the date of this Agreement,
(i) there has not been any change, event or development having, or that could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect or adversely affect the ability of the Company to perform its
obligations hereunder or to consummate the Merger, (ii) the Company and its
Subsidiaries have conducted their respective businesses only in the ordinary
course consistent with past practices; and, since March 29, 1997, neither the
Company nor any of its Subsidiaries has taken any action that, if taken after
the date hereof, would constitute a breach of any provision of Section 5.1.
3.8 Legal Proceedings. (i) There are no actions, suits, arbitrations,
proceedings or investigations pending or, to the knowledge of the Company,
threatened, against the Company or any of its Subsidiaries or any of their
respective assets and properties that, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect or adversely affect the
ability of the Company to perform its obligations hereunder or to consummate the
Merger, and (ii) neither the Company nor any of its Subsidiaries is subject to
any Order that, individually or in the aggregate, is having or could reasonably
be expected to have a Material Adverse Effect or adversely affect the ability of
the Company to perform its obligations hereunder or to consummate the Merger.
3.9 Compliance with Law. Neither the Company nor any of its Subsidiaries
has violated or failed to comply with, or has received any notice from any
Governmental or Regulatory Authority asserting a failure to comply with, any Law
or Order, except where a violation or failure to comply would not have a
Material Adverse Effect or adversely affect the ability of the Company to
perform its obligations hereunder or to consummate the Merger. The Company and
its Subsidiaries have and are in compliance with all permits, licenses and
franchises from Governmental or Regulatory Authorities required to conduct their
businesses as now being conducted, except to the extent that the failure to have
or comply with such permits, licenses and franchises would not have a Material
Adverse Effect or adversely affect the ability of the Company to perform its
obligations hereunder or to consummate the Merger.
3.10 Taxes.
(a) As used herein, "Taxes" means all taxes of any kind, including those
on, measured by or referred to as income, gross receipts, sales, use, ad
valorem, franchise, profits, license, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, value added, property or windfall profits
taxes, and all customs, duties and similar fees, assessments and charges of any
kind whatsoever, together with any interest thereon and any penalties, additions
to tax and additional amounts imposed with respect thereto by any Governmental
or Regulatory Authority. As used herein, "Tax Return" means any return, report,
declaration, information statement and other document with respect to Taxes
required to be filed by the Company or any of its Subsidiaries with
13
the Internal Revenue Service or any other Governmental or Regulatory
Authority, including all accompanying schedules.
(b) The Company and its Subsidiaries have timely filed all federal and
state income Tax Returns and all other material Tax Returns required to be filed
by them and have paid all Taxes shown thereon to be due and all other Taxes for
which a notice of assessment or demand for payment has been received by the
Company or its Subsidiaries, except for such Taxes as to which the failure to
pay, individually or in the aggregate, would not be material. There are no
other material Taxes that would be due if asserted by a Governmental or
Regulatory Authority. Neither the Company nor any of its Subsidiaries has
granted any waiver of any statute of limitations with respect to, or any
extension of a period for the assessment of, any Tax. True, correct and
complete copies of the federal and state income Tax Returns of the Company and
its consolidated Subsidiaries for the fiscal years ended June 29, 1996, July 1,
1995, July 2, 1994 and July 3, 1993 have been made available to Parent.
(c) (i) No material claim for unpaid Taxes has become a lien against the
property of the Company or any of its Subsidiaries or is being asserted against
the Company or any of its Subsidiaries nor, to the Company's knowledge, are
there pending any material proposed adjustments to the manner in which any Tax
of a Company or a Subsidiary is determined; (ii) to the knowledge of the
Company, no audit of any Tax Return of the Company or any of its Subsidiaries is
being conducted by a Governmental or Regulatory Authority; (iii) except with
respect to the Change of Control Agreements listed in the Disclosure Schedule
(the "Change of Control Agreements"), the 1993 Stock Incentive Plan, the
Directors' Stock Option Plan and the 1987 Restricted Stock Plan, neither the
Company nor any of its Subsidiaries is a party to any agreement or arrangement
that would result, individually or in the aggregate, in the actual or deemed
payment by the Company or a Subsidiary of any "excess parachute payments" within
the meaning of Section 280G of the Code; and (iv) except with respect to the
1993 Stock Incentive Plan, the Directors' Stock Option Plan and the 1987
Restricted Stock Plan, no acceleration of the vesting schedule for any property
that is substantially unvested within the meaning of the regulations under
Section 83 of the Code will occur in connection with the transactions
contemplated by this Agreement. No claim has been made by a Governmental or
Regulatory Authority in a jurisdiction where the Company or a Subsidiary does
not file Tax Returns that the Company or such Subsidiary is or may be subject to
taxation by that jurisdiction.
(d) Neither the Company nor any Subsidiary has ever (i) joined in or been
required to join in the filing of a consolidated or combined federal, state or
local income Tax Return with respect to which the Company or a Subsidiary could
be liable for the Taxes of a person other than the Company or the Subsidiaries
or (ii) been the subject of a Tax ruling or a closing agreement with respect to
Taxes with any Governmental or Regulatory Authority that has continuing effect.
Neither the Company nor any Subsidiary is a party to any tax sharing or tax
allocation agreement or arrangement pursuant to which it could be liable for
Taxes of a person other than the Company or the Subsidiaries. Neither the
Company nor any Subsidiary has agreed to make nor is it required to
14
make any adjustment under Section 481 of the Code by reason of a change in
accounting method or otherwise.
3.11 ERISA and Related Matters.
(a) Each Employee Plan (defined below) has been maintained and
administered in compliance with its terms and with the requirements of
applicable Laws, including the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") and the Code, except where the failure to comply would not
have a Material Adverse Effect. There is no litigation, administrative or
arbitration proceeding, or other dispute pending or, to the Company's knowledge,
threatened that involves any Employee Plan or Benefit Arrangement (defined
below) that could reasonably be expected to have a Material Adverse Effect or a
material adverse effect on any employee or director of the Company or its
Subsidiaries or on any fiduciary (as defined in ERISA Section 3(21)) of such
Employee Plan or Benefit Arrangement.
(b) The Company and its Subsidiaries do not maintain and have never
maintained nor been required to contribute to an "employee benefit plan" as
defined in Section 3 of ERISA that is or was (i) a plan subject to Title IV of
ERISA or (ii) a "multiemployer plan" as defined in Section 3(37) of ERISA.
(c) Neither the Company, its Subsidiaries nor any of their shareholders,
directors, officers or employees has engaged in any transaction with respect to
an Employee Plan that could subject the Company or any of its Subsidiaries to a
tax, penalty or liability for a prohibited transaction, as defined in Section
406 of ERISA or Section 4975 of the Code, except for such taxes, penalties or
liabilities that would not have a Material Adverse Effect.
(d) As used herein:
(i) "Benefit Arrangement" means any employment, severance or similar
contract, or any other contract, plan, policy or arrangement (whether or not
written) providing for compensation, bonus, profit-sharing, stock option or
other stock related rights or other forms of incentive or deferred compensation,
vacation benefits, insurance coverage (including any self-insured arrangement),
health or medical benefits, cafeteria plan benefits, disability benefits,
severance benefits and post-employment or retirement benefits (including
compensation, pension, health, medical and life insurance benefits), other than
an Employee Plan, that is maintained, administered or contributed to by the
Company or any of its Subsidiaries and covers any employee or former employee of
the Company or any of its Subsidiaries.
(ii) "Employee Plan" means a plan or arrangement as defined in Section
3(3) of ERISA that (A) is subject to any provision of ERISA, (B) is maintained,
administered or contributed to by the Company or any of its Subsidiaries and (C)
covers any employee or former employee of the Company or any of its
Subsidiaries.
15
3.12 Environmental Matters.
(a) Each of the Company and its Subsidiaries has obtained all material
licenses, permits, authorizations, approvals and consents from all Governmental
or Regulatory Authorities ("Environmental Permits") that are required in respect
of its business or operations under any applicable Environmental Law (defined
below), and each of such Environmental Permits is in full force and effect.
(b) Each of the Company and its Subsidiaries is in compliance with the
terms and conditions of all such Environmental Permits and with all applicable
Environmental Laws, except for such failures that, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect or
adversely affect the ability of the Company to perform its obligations hereunder
or to consummate the Merger.
(c) (i) No site or facility now or previously owned, operated or leased
by the Company or any of its Subsidiaries is listed or proposed for listing on
the National Priorities List or CERCLIS, promulgated pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA"), and the rules and regulations thereunder or on any similar
state or local list of sites requiring investigation or remediation.
(ii) Neither the Company nor any of its Subsidiaries has received any
written notice of any actual or alleged violation of any Environmental Law with
respect to any of its facilities, except a violation or violations that,
individually, or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect or adversely affect the ability of the Company to
perform its obligations hereunder or to consummate the Merger.
(iii) The Company and its Subsidiaries are not subject to any
material outstanding agreements or orders with any Governmental or Regulatory
Authority or other person respecting (A) Environmental Laws, (B) Remedial Action
or (C) any Release of a Hazardous Material.
(iv) Neither the Company nor any of its Subsidiaries has received any
written notice or request for information pertaining to a response action (as
defined by CERCLA), with respect to any of its sites or facilities now or
previously owned, operated or leased by them, except for notices or requests
that individually or in the aggregate could not reasonably be expected to have a
Material Adverse Effect or adversely affect the ability of the Company to
perform its obligations hereunder or to consummate the Merger.
(v) No Hazardous Material is present (except in quantities for retail
sale to consumers or for store maintenance) or has been Released (defined below)
at, on, about, under, or from any of the Company or any of its Subsidiaries'
sites or facilities, now or previously owned, operated or leased by them, except
in compliance with Environmental Law (defined below), and except for the
presence of Hazardous Material or such Release(s) which individually or in the
16
aggregate could not reasonably be expected to have a Material Adverse Effect or
adversely affect the ability of the Company to perform its obligations hereunder
or to consummate the Merger.
(d) No liens have arisen under or pursuant to any Environmental Law on any
site or facility owned, operated or leased by the Company or any of its
Subsidiaries, other than liens that individually or in the aggregate could not
reasonably be expected to have a Material Adverse Effect or adversely affect the
ability of the Company to perform its obligations hereunder or to consummate the
Merger.
(e) There have been no material environmental investigations, studies,
audits, tests, reviews or other analyses conducted by, or which are in the
possession of, the Company or any of its Subsidiaries in relation to any site or
facility owned, operated or leased by the Company or any of its Subsidiaries,
except for those the reports of which have been made available to Parent prior
to the execution of this Agreement.
(f) No sites or facilities, now or previously owned, operated or leased by
the Company or any of its Subsidiaries, have or had at the time of ownership,
operation, or leasing, any (i) underground storage tanks, (ii) friable asbestos,
(iii) polychlorinated biphenyls ("PCBs"), or (iv) chlorofluorocarbons ("CFCs"),
except in circumstances which could not reasonably be expected to have
individually or in the aggregate a Material Adverse Effect or adversely affect
the ability of the Company to perform its obligations hereunder or to consummate
the Merger.
(g) As used herein:
(i) "Environmental Law" means any Law or Order relating to the
environment or to emissions, discharges or Releases of pollutants, contaminants,
or chemicals, or industrial, toxic or hazardous substances or wastes, into the
environment (including structures, ambient air, soil, surface water, ground
water, wetlands, land or subsurface strata), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals or industrial,
toxic or hazardous substances or wastes.
(ii) "Hazardous Material" means (A) any chemicals or other materials
or substances that are defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely hazardous
wastes," "restricted hazardous wastes," "toxic substances," "pollutants,"
"contaminants," or words of similar import under any Environmental Law,
including petroleum, friable asbestos, PCBs, and CFCs; and (B) any other
chemical, material or substance, the presence of or exposure to which is
prohibited, limited or regulated by any Governmental or Regulatory Authority
under any Environmental Law.
(iii) "Release" means any actual or threatened (as defined under
CERCLA) release, spill, effluent, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the
environment or any structure.
17
(iv) "Remedial Action" means all actions, including any capital
expenditures, required by a Governmental or Regulatory Authority, required under
any Environmental Law or voluntarily undertaken to (A) clean up, remediate,
remove, treat, or in any other way ameliorate or address any Hazardous Materials
Released into the environment; (B) prevent the Release, or minimize the further
Release of any Hazardous Material so it does not endanger or threaten to
endanger public health or the environment; (C) perform pre-remedial studies and
investigations or post-remedial monitoring and care relating to a Release; or
(D) bring the applicable party into compliance with any Environmental Law.
3.13 Information Supplied.
(a) The Schedule 14D-9 will not, on the date of its filing with the SEC
and the date it is first published, sent or given to shareholders, 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, except
that no representation is made by the Company with respect to information
supplied in writing by or on behalf of Parent or Sub expressly for inclusion
therein and information incorporated by reference therein from documents filed
by Parent or any of its Subsidiaries with the SEC. The Schedule 14D-9 will
comply as to form in all material respects with the requirements of the Exchange
Act and the rules and regulations thereunder.
(b) Neither the information supplied or to be supplied in writing by or on
behalf of the Company for inclusion in, nor the information incorporated by
reference from documents filed by the Company or any of its Subsidiaries with
the SEC into, the Schedule 14D-1 and the Offer Documents will, on the date the
Schedule 14D-1 and the Offer Documents are filed with the SEC or on the date
they are first published, sent or given to shareholders, 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.
(c) The Company (and Parent and Sub, with respect to written information
supplied by either of them specifically for use in the Schedule 14D-9) shall
promptly correct the Schedule 14D-9 if and to the extent that it shall have
become false or misleading in any material respect and the Company shall take
all steps necessary to cause such document as so corrected to be filed with the
SEC and disseminated to the Company's shareholders to the extent required by
applicable federal securities laws.
3.14 Real Property.
(a) Section 3.14(a) of the Disclosure Schedule contains a list of all real
property or interests in real property owned or leased by the Company and its
Subsidiaries. Copies of all leases so listed, including all modifications,
amendments and supplements thereto, have heretofore been
18
made available to Parent and all such leases are in full force and effect in
accordance with their respective terms.
(b) There are no existing defaults or events that, with notice or lapse of
time or both, would constitute defaults, under any such leases, except for
defaults that individually or in the aggregate could not reasonably be expected
to have a material adverse effect on the Company's ability to continue to
operate the relevant properties as currently operated. Neither the consummation
of the Offer nor the Merger shall cause the termination of any such leases, or
have a material adverse effect on the rights thereunder of the Company or its
Subsidiaries.
(c) The Company and its Subsidiaries enjoy peaceful and undisturbed
possession of the leased properties. The Company or its relevant Subsidiary has
good and valid title to the leasehold estate in each property leased by it,
except for (i) mortgages and encumbrances that secure indebtedness that are
properly reflected on the Company Financial Statements; (ii) liens for taxes
accrued but not yet payable; (iii) liens arising as a matter of Law in the
ordinary course of business with respect to obligations incurred after the date
of the Company Financial Statements, provided that the obligations secured by
such liens are not delinquent or are being contested in good faith; and (iv)
such imperfections of title and encumbrances, if any, as do not, individually or
in the aggregate, materially detract from the value or materially interfere with
the present use of such property.
(d) The Company has good and marketable fee title to the real property
interests owned by it, except for (i) mortgages and encumbrances that secure
indebtedness that are properly reflected on the Company Financial Statements;
(ii) liens for taxes accrued but not yet payable; (iii) liens arising as a
matter of Law in the ordinary course of business with respect to obligations
incurred after the date of the Company Financial Statements, provided that the
obligations secured by such liens are not delinquent or are being contested in
good faith; and (iv) such imperfections of title and encumbrances, if any, as do
not, individually or in the aggregate, materially detract from the value or
materially interfere with the present use of such property.
(e) The Company or its Subsidiaries are not in material violation of any
zoning, building or safety ordinance, regulation or requirement or other Law
applicable to the operation of the owned real properties or leased properties
likely to impede the normal operation of the business of the Company or its
Subsidiaries, and the Company or its Subsidiaries have not received any written
notice of any such violation with which such recipient has not complied.
(f) There are no pending, or, to the knowledge of the Company, threatened
condemnation or similar proceedings relating to any of the owned real properties
or leased properties of the Company or its Subsidiaries.
3.15 Labor Matters. Except as set forth in Section 3.15 of the Disclosure
Schedule, (a) there is no unfair labor practice complaint against the Company or
any Subsidiary pending or to the knowledge of the Company threatened before the
National Labor Relations Board; (b) there is no labor strike, dispute, slow down
or stoppage actually pending or, to the knowledge of the Company,
19
threatened against or involving the Company or any Subsidiary; and (c) no
private agreement restricts the Company or any Subsidiary from relocating,
closing or terminating any of their operations or facilities. There are no
controversies pending or, to the knowledge of the Company, threatened between
the Company or any of its Subsidiaries and any representatives of its
employees, and, to the knowledge of the Company, there are no organizational
efforts underway involving employees of the Company or any of its
Subsidiaries, except in each case activities that would not, individually or
in the aggregate, have a Material Adverse Effect or adversely affect the
ability of the Company to perform its obligations hereunder or to consummate
the Merger.
3.16 Contracts; Certain Agreements.
(a) Except (i) as disclosed in the SEC Filings, (ii) documents identified
in Section 3.16(a) of the Disclosure Schedule, (iii) the leases identified in
Exhibit 3.14 to the Disclosure Schedule and (iv) purchase orders issued for
inventory and supplies in the ordinary course of business, there is no contract
or agreement that is material to the business, financial condition or results of
operations of the Company and its Subsidiaries taken as a whole. Neither the
Company nor any of its Subsidiaries nor, to the knowledge of the Company, any
other party thereto is in breach or violation of, or in default in the
performance or observance of any term or provision of, and no event has occurred
that, with notice or lapse of time or both, could reasonably be expected to
result in a default under, any Contract to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries or
any of their respective assets or properties is bound, except for breaches,
violations and defaults that individually or in the aggregate, are not having
and could not reasonably be expected to have a Material Adverse Effect or
adversely affect the ability of the Company to perform its obligations hereunder
or to consummate the Merger.
(b) Neither the Company nor any of its Subsidiaries is a party to any oral
or written (i) union or collective bargaining agreement, (ii) agreement with any
executive officer or other key employee of the Company or any of its
Subsidiaries the benefits of which are contingent or vest, or the terms of which
are materially altered, upon the occurrence of a transaction involving the
Company or any of its Subsidiaries of the nature contemplated by this Agreement,
except for the Change of Control Agreements and agreements pursuant to the
Directors' Stock Option Plan, the 1993 Stock Incentive Plan and the 1987
Restricted Stock Plan, (iii) employment agreement with respect to any executive
officer or other key employee of the Company or any of its Subsidiaries, except
for the Company's employment agreement with Xxxxx X. Xxxxxx dated as of
January 1, 1997, or (iv) agreement or plan, including any stock option, stock
appreciation right, restricted stock, stock purchase plan or Benefit
Arrangement, any of the benefits of which will be increased, or the vesting of
the benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement, or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement, except for those listed in clause (ii) above. Each of the
Agreement among Shareholders dated October 8, 1987 and the Agreement among
Shareholders dated October 14, 1988, each by and among the Company and the
shareholders named therein, as amended, are terminated in their entirety and
have no further force or effect.
20
(c) Except as set forth in Section 3.16(c) of the Disclosure Schedule, the
consummation of the Offer, the Merger and the other transactions contemplated by
this Agreement will not result in payments (including any gross-up payments in
respect of any "excess parachute payments" within the meaning of Section 280G of
the Code) under the agreements referred to in Section 3.16(b)(ii).
3.17 Absence of Certain Liabilities. Except for matters reflected or
reserved against in the balance sheet for the period March 29, 1997 included in
the Company Financial Statements, neither the Company nor any of its
Subsidiaries had at that date, or has incurred since that date, any liabilities
or obligations (whether absolute, accrued, contingent, fixed or otherwise, or
whether due or to become due) of any nature, whether or not required by
generally accepted accounting principles to be reflected in a consolidated
balance sheet of the Company and its consolidated Subsidiaries (including the
notes thereto), except liabilities or obligations that (i) were incurred in the
ordinary course of business consistent with past practices and (ii) have not
had, and could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect or adversely affect the ability of the
Company to perform its obligations hereunder or to consummate the Merger.
3.18 Opinion of Financial Advisor. The Company has received a written
opinion dated July 7, 1997 from its financial advisor, CSFBC that, as of such
date, and on the basis of and subject to the matters set forth therein, the Per
Share Price was fair from a financial point of view to the Company's
shareholders and such opinion shall not have been (i) withdrawn or (ii) modified
or amended in a manner that is adverse to Parent, Sub or the Offer, it being
understood by the Company, Parent and Sub that CSFBC has not been, and is not
expected to be, asked to update its opinion and shall have no express or implied
obligation to do so, and provided that any advice of CSFBC contemplated by
Section 5.2(a) shall not be deemed to be such a withdrawal, modification or
amendment. A copy of such opinion has been provided to Parent.
3.19 Takeover Statute. The execution, delivery and performance of this
Agreement and consummation of the transactions contemplated hereby will not
cause to be applicable to the Company any "fair price," "moratorium," "control
share acquisition" or other similar anti-takeover statute or regulation enacted
under Alabama law.
3.20 Insurance. There are no material retroactive premium adjustments
under any of the Company's insurance policies or other insurance arrangements
with third parties.
3.21 Intellectual Property.
(a) The Company, directly or indirectly, owns, licenses or otherwise
possesses (or has applied for), legally enforceable rights to use as they are
currently used in the conduct of the Company's business all trademarks, trade
names, service marks, trade dress, logos and designs and any and all
registrations and applications therefor (and all goodwill associated therewith),
all copyrights, whether or not registered, all patents and any applications
therefor, computer software and tangible or intangible proprietary information
or material (the "Company Intellectual Property
21
Rights"), except where the failure to so own, be licensed or otherwise
possess legally enforceable rights to use could not reasonably be expected to
have a Material Adverse Effect.
(b) Section 3.21 (b) of the Disclosure Schedule sets forth a complete and
accurate list of the Company's (i) registered trademarks, trade names, service
marks and copyrights, and (ii) patent applications or issued patents. Except as
set forth in Section 3.21(b) of the Disclosure Schedule, no claims with respect
to the Company Intellectual Property Rights have been asserted or, to the
knowledge of the Company, are threatened by any person, (i) that the
manufacture, use, sale or licensing by the Company or any of its Subsidiaries
infringes on any copyright, patent, trademark, trade secret, service xxxx, or
other proprietary right of any person, (ii) against the use by the Company or
any of its Subsidiaries of any material trademarks, service marks, trade names,
trade secrets, copyrights, patents, technology, know-how or computer software
programs and applications used in the business of the Company and its
Subsidiaries as currently conducted, or (iii) challenging the ownership,
validity or effectiveness of any of the Company Intellectual Property Rights.
All registered trademarks, service marks, patents, and copyrights owned or held
by the Company are valid and subsisting and not subject to cancellation or
abandonment proceedings. No claims or actions have been asserted or are
threatened by the Company against any person with regard to the Company
Intellectual Property Rights and, to the knowledge of the Company, there is no
unauthorized use, infringement or misappropriation of any of the Company
Intellectual Property Rights by any third party, including any employee or
former employee of the Company or any of its subsidiaries, that could reasonably
be expected to have a Material Adverse Effect or adversely affect the ability of
the Company to perform its obligations hereunder or to consummate the Merger.
No Company Intellectual Property Right or product of the Company or any of its
Subsidiaries is subject to any outstanding decree, order, judgment, or
stipulation restricting in any manner the licensing thereof by the Company or
any of its Subsidiaries.
3.22 Certain Agreements. Neither the Company nor any of its Subsidiaries
is a party to, or bound by, any contract or agreement that materially limits the
ability of the Company directly or through any of its Subsidiaries to compete in
any line of business or with any person in any geographic area during any period
of time.
3.23 Indemnification Claims. The Company is not aware of any
indemnification, breach of contract or similar claim by or against the Company
or any of its Subsidiaries that is pending or threatened (or that could be
reasonably expected to be made in the future), in each case in excess of
$250,000 in amount, with respect to any acquisition by the Company after
January 1, 1992.
3.24 Prior Negotiations. The Company, CSFBC and the Company's other
advisors and representatives have not been involved in substantive discussions
with any group or person (or any of their respective affiliates or associates)
or their representatives, or furnished material confidential information
(including the offering memorandum prepared by the Company) to any such group or
person (or any of their respective affiliates or associates) or their
representatives, in connection with a possible takeover proposal except for such
groups or persons which have executed and delivered to the Company a customary
confidentiality agreement (containing "standstill" provisions that are
22
substantially similar to the analogous provisions in the Confidentiality
Agreement (as defined in Section 9.11)).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Each of Parent and Sub represents and warrants to the Company as follows:
4.1 Organization of Parent and Sub. Parent and Sub are corporations duly
incorporated, validly existing and in good standing under the laws of their
respective jurisdictions of incorporation and have all requisite corporate power
and authority to own their respective properties and carry on their respective
businesses as now being conducted. Parent and Sub are duly qualified as foreign
corporations to do business, and are in good standing, in each jurisdiction
where the character of their properties owned or held under lease or the nature
of their activities makes such qualification necessary, except to the extent
that any failure to so qualify or be in good standing would not have a material
adverse effect on Parent or Sub. Parent has delivered to the Company correct
and complete copies of the certificates of incorporation and bylaws of Parent
and Sub. Sub was formed solely for the purpose of engaging in the transactions
contemplated by this Agreement, has engaged in no other business activities and
has conducted only such operations as are required for the execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby.
4.2 Authority Relative to this Agreement. Each of Parent and Sub has all
requisite corporate power and authority to enter into this Agreement, to perform
its obligations under this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
by each of Parent and Sub and the consummation by each of Parent and Sub of the
transactions contemplated hereby have been duly authorized by all necessary
corporate (including shareholder) action on the part of Parent and Sub. This
Agreement has been duly and validly executed and delivered by each of Parent and
Sub, and, assuming the due authorization, execution and delivery of this
Agreement by the Company, constitutes the legal, valid and binding agreement of
Parent and Sub enforceable in accordance with its terms.
4.3 Non-Contravention; Approvals and Consents.
(a) The execution and delivery of this Agreement by each of Parent and Sub
do not, and the performance by Parent and Sub of its obligations hereunder and
the consummation of the transactions contemplated hereby will not, conflict
with, result in a violation or breach of, constitute (with or without notice or
lapse of time or both) a default under, 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, or result in the creation or imposition of
any lien upon any of the assets or properties of the Parent or any of its
Subsidiaries under, any of the terms, conditions or provisions of (i) the
certificates of incorporation or bylaws (or other comparable charter documents)
of the Parent or any of its Subsidiaries, or (ii) subject to the taking of the
actions described in paragraph
23
(b) of this Section, (x) any Law or Order applicable to Parent or any of its
Subsidiaries or any of their respective assets or properties, (y) any
Contract to which Parent or any of its Subsidiaries is a party or by which
Parent or any of its Subsidiaries or any of their respective assets or
properties is bound, or (z) any employee benefit plan of Parent or any
Subsidiaries; except, with respect to the foregoing clauses (x), (y) and (z)
those that, individually or in the aggregate, (I) could not reasonably be
expected to adversely affect the ability of Parent and Sub to consummate the
transactions contemplated hereby or (II) occur as a result of the regulatory
status of the Company or its Subsidiaries, and except for the consent of the
holders of a majority in principal amount outstanding of its 12% Senior Notes
due 2006 issued pursuant to the Indenture dated as of March 5, 1996 described
on Annex A.
(b) Except for (i) the premerger notification requirements of the HSR Act,
(ii) the requirements of the Exchange Act, any relevant national securities
exchange and the Nasdaq Stock Market, (iii) the filing of appropriate documents
relating to the Merger required by the ABCA, and (iv) the consent of the holders
of a majority in principal amount outstanding of its 12% Senior Notes due 2006
issued pursuant to the Indenture dated as of March 5, 1996 described on Annex A,
no consent, approval or action of, filing with or notice to any Governmental or
Regulatory Authority or other person is necessary or required, under any of the
terms, conditions or provisions of any Law or Order or any Contract to which
Parent or any of its Subsidiaries is a party or by which Parent or any of its
Subsidiaries or any of their respective assets or properties is bound, for the
execution and delivery of this Agreement by each of Parent and Sub, the
performance by each of Parent and Sub of its obligations hereunder or the
consummation of the transactions contemplated hereby, except those that the
failure to make or obtain, individually or in the aggregate, (I) could not
reasonably be expected to adversely affect the ability of Parent and Sub to
consummate the transactions contemplated hereby or (II) occur as a result of the
regulatory status of the Company or its Subsidiaries.
4.4 Legal Proceedings. (i) There are no actions, suits, arbitrations,
proceedings or investigations pending or, to the knowledge of Parent,
threatened, against Parent or any of its Subsidiaries or any of their respective
assets and properties that, individually or in the aggregate, could reasonably
be expected to adversely affect the ability of Parent and Sub to consummate the
transactions contemplated hereby, and (ii) neither Parent nor any of its
Subsidiaries is subject to any Orders that, individually or in the aggregate,
could reasonably be expected to adversely affect the ability of Parent and Sub
to consummate the transactions contemplated hereby.
4.5 Financing. Parent has received bridge financing commitments
aggregating at least $350 million, which is sufficient to pay the aggregate
amount payable in respect of the Shares upon the consummation of the Offer and
the Merger.
24
4.6 Information Supplied.
(a) The Schedule 14D-1 and the Offer Documents will not, on the date filed
with the SEC and first published, sent or given to shareholders of the Company,
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, except that no representation is made by Parent or Sub with respect
to information supplied in writing by or on behalf of the Company expressly for
inclusion therein and information incorporated by reference therein from
documents filed by the Company or any of its Subsidiaries with the SEC. The
Schedule 14D-1 and the Offer Documents will comply as to form in all material
respects with the requirements of the Exchange Act.
(b) Neither the information supplied or to be supplied in writing by or on
behalf of Parent or Sub for inclusion in, nor the information incorporated by
reference from documents filed by Parent or any of its Subsidiaries with the SEC
into, the Schedule 14D-9 will, on the date the Schedule 14D-9 is filed with the
SEC and first published, sent or given to shareholders of the Company, 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.
(c) Parent and Sub (and the Company, with respect to written information
supplied specifically for use in the Schedule 14D-1 and the Offer Documents)
shall promptly correct the Schedule 14D-1 and the Offer Documents if and to the
extent that they shall have become false or misleading in any material respect
and Parent and Sub shall take all steps necessary to cause such documents as so
corrected to be filed with the SEC and disseminated to the Company's
shareholders to the extent required by applicable federal securities laws.
ARTICLE V
COVENANTS OF THE COMPANY
5.1 Conduct of Business by the Company Pending the Merger. Except as
described on the Disclosure Schedule or as otherwise contemplated by this
Agreement, prior to the Effective Time, unless Sub shall otherwise agree in
writing (provided, however, that following the appointment of Sub's designees to
the Company's Board of Directors pursuant to Section 1.3, Sub shall be deemed to
have consented to all actions taken by the Company thereafter, except actions,
if any, directed or caused by those directors who were not so designated by the
Sub or by the Board of Directors of the Company prior to the appointment of such
designees):
(a) The business of the Company and its Subsidiaries shall be conducted
only in the ordinary course consistent with past practices.
(b) The Company shall use all commercially reasonable efforts to preserve
intact in all material respects the business organization of the Company and its
Subsidiaries, to keep available
25
the services of its and their present officers and employees and to preserve
the goodwill of those having business relationships with it and its
Subsidiaries.
(c) Except as permitted in Section 5.3, the Company shall not, and shall
not permit any of its Subsidiaries to (i) amend its articles of incorporation or
bylaws (or comparable charter documents); (ii) split, combine, reclassify or
take similar action with respect to any of its capital stock; (iii) issue or
agree to issue any additional shares of, or rights of any kind to acquire any
shares of, its capital stock of any class, other than, in the case of the
Company, shares of capital stock and Rights issuable pursuant to the Rights
Agreement and Shares issuable upon the exercise of outstanding options to
purchase an aggregate of 455,050 Shares pursuant to the 1993 Stock Incentive
Plan and the Directors' Stock Option Plan; (iv) purchase, redeem or otherwise
acquire any Shares or any other shares of its capital stock of any class; or (v)
declare, set aside or pay any dividend payable in cash, stock or property or
make any other distributions with respect to Shares or any other shares of its
capital stock of any class; or (vi) make any commitment to do any of the
foregoing, except for (A) the declaration and payment of dividends by a
wholly-owned Subsidiary of the Company solely to the Company and (B) the
declaration and payment of regular quarterly cash dividends by the Company
consistent with past practices (including as to declaration, record and payment
dates) in no event to exceed $0.11 per Share per fiscal quarter.
(d) The Company shall not, and shall not permit any of its Subsidiaries to
(i) acquire (by merger, consolidation or acquisition of stock or assets) any
corporation, partnership or other business organization or division thereof or
make any investment in any other person, either by purchase of stock or
securities, contribution to capital (other than to wholly-owned Subsidiaries),
property transfer or purchase of any material amount of property or assets; (ii)
other than sales of inventory in the ordinary course of its business consistent
with past practices and other than the sale of surplus real estate, sell, lease,
grant any security interest in or otherwise dispose of or encumber any material
amount of its assets or properties; (iii) incur any indebtedness for borrowed
money other than borrowings in the ordinary course of business under existing
lines of credit (or under any refinancing of such existing lines of credit), or
issue any debt securities, or assume, guarantee, endorse or otherwise as an
accommodation become responsible for the obligations of any other person (other
than a wholly-owned Subsidiary); (iv) make any capital expenditure or commitment
for additions to plant, property or equipment constituting capital assets except
expenditures pursuant to commitments existing as of the date of this Agreement
and reflected in Section 5.1(d) of the Disclosure Schedule or included in the
Company's budgets for fiscal years 1997 and 1998 as described in Section 5.1(d)
of the Disclosure Schedule; (v) change any assumption underlying, or method of
calculating, any bad debt, contingency or other reserve (except changes that may
be necessary or appropriate in order to comply with a change in generally
accepted accounting principles that takes effect after the date of this
Agreement); (vi) pay, discharge or satisfy any material claims, liabilities or
obligations (absolute, accrued, contingent or otherwise) other than (A) the
payment, discharge or satisfaction of liabilities in the ordinary course
consistent with past practices and (B) costs relating to this Agreement and the
transactions contemplated hereby; (vii) waive, release, grant or transfer any
rights of material value or modify or change in any material respect any
existing material license, lease, contract or other document; or (viii) enter
into any
26
contract, agreement, commitment or arrangement with respect to any of the
foregoing; provided, however, that, notwithstanding the foregoing, nothing
herein shall prohibit the Company from financing, constructing, equipping,
supplying, staffing and opening new stores and remodeling existing stores for
which commitments have been entered into by the Company prior to the date
hereof and which commitments are reflected in Section 5.1(d) of the
Disclosure Schedule.
(e) Neither the Company nor any of its Subsidiaries shall (i) enter into
any new severance or change of control agreement, or any employment agreement;
(ii) amend any existing employment contract or change of control or severance
agreement; (iii) grant any increases in compensation or benefits other than
increases in the ordinary course consistent with past practices; (iv) adopt any
new Employee Plan or Benefit Arrangement; (v) make any change in or to any
existing Employee Plan or Benefit Arrangement, other than such changes as are
required by Law or that, in the opinion of its counsel, are necessary or
advisable to maintain the tax-qualified status of such Employee Plan or Benefit
Arrangement; (vi) make any grants, awards or distributions under any Employee
Plan or Benefit Arrangement, other than those grants, awards or distributions
required to be made under such Employee Plans or Benefit Arrangements as in
effect on the date of this Agreement; or (vii) make any amendment to any
provision of any outstanding grant or award.
(f) The Company shall not cause any of the Company's representations or
warranties that are subject to a materiality qualification to become untrue and
shall not cause any of the Company's representations and warranties that are not
so qualified to become untrue in any material respect.
5.2 No Solicitation
(a) The Company shall not, nor shall it permit any of its Subsidiaries to,
nor shall it authorize or permit any officer, director or employee of, or any
investment banker, attorney or other advisor or representative of, the Company
or any of its Subsidiaries to, directly or indirectly, (i) solicit, initiate or
encourage the submission of any takeover proposal, or (ii) participate in any
discussions or negotiations regarding, or furnish to any person or group (as
those terms are defined in Section 9.2) any information with respect to, or take
any other action to facilitate any inquiries or the making of any proposal that
constitutes or may reasonably be expected to lead to any takeover proposal,
provided, however, that prior to the expiration of the Offer, upon receipt by
the Company of a bona fide written unsolicited takeover proposal to purchase all
the Shares outstanding for (A) a cash amount per Share in excess of the Per
Share Price or (B) consideration which is not all cash that the Company has
determined reasonably and in good faith to be in excess of the Per Share Price
and that CSFBC has advised the Company in writing is in excess of the Per Share
Price (a copy of which advice has been furnished by the Company to Parent), in
either case by a group or person (or any of their respective affiliates or
associates) who (x) within the past 12 months has not executed and delivered to
the Company a confidentiality agreement and whose failure to execute a
confidentiality agreement does not constitute a breach of Section 3.24 hereof
(any such person or group a "New Bidder") and (y) in the good faith reasonable
judgment of the Board of Directors after consultation with CSFBC possesses the
financial wherewithal reasonably to be capable of consummating the takeover
proposal (a "superior proposal"), following notice to Parent as required
27
by Section 5.2(c), the Company may participate in negotiations with a New
Bidder regarding the superior proposal and furnish information with respect
to the Company pursuant to a customary confidentiality agreement (containing
"standstill" provisions no less onerous than in the Confidentiality Agreement
(as defined in Section 9.11)). Without limiting the foregoing, it is
understood that any violation of the restrictions set forth in the preceding
sentence by any officer, director or employee of the Company or any of its
subsidiaries or any investment banker, attorney or other advisor or
representative of the Company or any of its Subsidiaries, shall be deemed to
be a breach of this Section 5.2(a) by the Company. For purposes of this
Agreement, "takeover proposal" means any proposal for a tender offer, merger
or other transaction involving any Change in Control described in Section
8.3(b)(i) or (iii).
(b) Neither the Board of Directors nor any committee thereof shall (i)
withdraw or modify, in a manner adverse to Parent or Sub, the approval or
recommendation by the Board of Directors nor any such committee of this
Agreement, the Offer or the Merger, (ii) approve or recommend any takeover
proposal, (iii) enter into any agreement with respect to any takeover
proposal, (iv) amend the Rights Agreement, redeem the Rights or waive any
other anti-takeover provisions (including Article Eleven of the Company's
Articles of Incorporation) or otherwise facilitate any other takeover
proposal in any respect, or (v) terminate this Agreement in connection with
any takeover proposal. Notwithstanding the foregoing, in the event the Board
of Directors receives a superior proposal from a New Bidder or any other
group or person which the Board of Directors determines in its good faith
reasonable judgment (and based on the written advice of CSFBC) to be more
favorable to the Company's shareholders than the Offer and Merger, the Board
of Directors may (subject to the following sentence): (A) withdraw or modify
its approval or recommendation of this Agreement, the Offer and the Merger
taken together, (B) recommend any such superior proposal, or (C) solely with
respect to such a superior proposal submitted by a New Bidder, terminate this
Agreement in order to enter into an agreement with respect to such a superior
proposal or amend the Rights Agreement, redeem the Rights or waive any other
anti-takeover provisions in respect of such superior proposal and otherwise
facilitate such proposal, in each case (subject to Section 8.1(b)(iv)) at any
time following Parent's receipt of written notice of the Company's intent to
take the actions described in clauses (A), (B) and/or (C) above (a "Section
5.2(b) Notice") advising Parent that the Board of Directors has received a
superior proposal, specifying the material terms and conditions of such
superior proposal and identifying the person or group making such superior
proposal. The Company may deliver the Section 5.2(b) Notice and take any of
the foregoing actions described in clauses (A), (B) and/or (C) only if (i)
the Company is not otherwise in material breach of this Agreement and (ii)
the Company pays to Parent concurrent with the delivery of the Section 5.2(b)
Notice the Termination Fee and the Expense Fee (as defined in Section 8.3).
(c) In addition to the obligations of the Company set forth in paragraph
(b) above, the Company shall promptly advise Parent orally and in writing of
any takeover proposal, or any inquiry with respect to or which could
reasonably be expected to lead to any takeover proposal, the material terms
and conditions of such takeover proposal or inquiry, and the identity of the
person making any such takeover proposal or inquiry. The Company will keep
Parent fully informed of the status and
28
details of any such takeover proposal or inquiry and the Company's responses
and other actions with respect thereto. The parties understand and agree
that the Company shall be entitled to disclose to its shareholders any such
information which is required by applicable law (including without limitation
the Exchange Act) regarding any takeover proposal. The Company will not
amend, modify, waive, or terminate any of the provisions of any
confidentiality agreement or "standstill" agreement with any group or person
to which the Company or any of its Subsidiaries is a party and shall request
the return of any confidential information pursuant to the terms thereof.
The Company agrees that Parent shall be permitted to enforce such agreements
on the Company's behalf including seeking equitable relief to the extent
available.
(d) Notwithstanding anything to the contrary contained herein, during
the period commencing on the date hereof and ending 180 calendar days
following the date of this Agreement, the Company shall not permit any of the
actions described in Section 5.2(a) or Section 5.2(b) (except the actions
described in clauses (A) and (B) of Section 5.2(b)) involving any person or
group, together with their affiliates or associates, who is or should be
listed in or referred to in Section 3.24 of the Disclosure Schedule.
5.3 Company Stock Plans. Prior to the Effective Time, the Company may
elect to accelerate the exercisability of options granted and outstanding
prior to the date of this Agreement under the Directors' Stock Option Plan
and the 1993 Stock Incentive Plan and the vesting of restricted shares
granted and outstanding prior to the date of this Agreement under the 1987
Restricted Stock Plan and may waive the two-year holding period for stock
issued pursuant to the Director Compensation Plan. In addition, the Company
shall have the right prior to the Effective Time to pay to any holder of an
outstanding option to purchase Common Stock an amount equal to the difference
between the Per Share Price and the per Share exercise price of a stock
option held by such holder multiplied by the number of Shares then subject to
such option (whether or not then exercisable), less any amounts required to
be withheld under the Code or any provision of state, local or foreign tax
law, in exchange for the surrender and cancellation of such stock option.
The Company shall use its commercially reasonable best efforts to cause all
options to be exercised prior to the Effective Time. The Company has been
advised by its directors that they will exercise all options held by them
prior to the consummation of the Offer. Prior to the Effective Time, the
Company may adopt any amendments to its Directors' Stock Option Plan, 1993
Incentive Compensation Plan or 1987 Restricted Stock Plan or any agreements
thereunder as may be necessary or appropriate to effectuate the foregoing,
provided that no such amendment may reduce the per Share exercise price of
such options. In addition, the Company may terminate or amend the Director
Compensation Plan to eliminate future issuances of stock.
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ARTICLE VI
ADDITIONAL COVENANTS
6.1 Proxy Statement and Special Meeting.
(a) Promptly after consummation of the Offer, the Company shall prepare
and file with the SEC, if required by the rules of the SEC, a preliminary
proxy statement, together with a form of proxy, or information statement,
with respect to the special meeting of the Company's shareholders at which
the shareholders of the Company will be asked to approve the Merger (the
"Special Meeting"). The Company shall use its best efforts to have the proxy
statement or information statement cleared by the SEC and, as promptly as
practicable thereafter, subject to compliance with the rules and regulations
of the SEC, the Company shall mail a definitive proxy statement or
information statement to shareholders of the Company (such proxy or
information statement and all amendments or supplements thereto, if any, the
"Proxy Statement"). Parent, Sub and the Company shall cooperate with each
other in the preparation of the Proxy Statement. The Company shall notify
Parent of the receipt of any comments of the SEC with respect to the Proxy
Statement and of any requests by the SEC for additional information, and
promptly shall provide to Parent copies of all correspondence between the
Company or any representative of the Company and the SEC with respect to the
Proxy Statement. The Company shall give Parent and its counsel the
opportunity to review the Proxy Statement and all responses to SEC comments
and requests for additional information before they are sent to the SEC.
Each of the Company, Parent and Sub agrees to use its best efforts, after
consultation with the other parties hereto, to respond promptly to all such
comments of and requests for information from the SEC and to cause the Proxy
Statement to be mailed at the earliest practicable time to the Company's
shareholders entitled to vote at the Special Meeting.
(b) Promptly after consummation of the Offer, the Company shall take all
action necessary, in accordance with the ABCA and its Articles of
Incorporation and Bylaws, to convene the Special Meeting.
(c) Subject to the fiduciary obligations of the Board of Directors under
applicable law, (i) the Proxy Statement shall contain the recommendation of
the Board of Directors that the shareholders of the Company vote to approve
the Merger, and (ii) the Company shall, if proxies are solicited, use its
best efforts to solicit from its shareholders proxies in favor of such
approval and to take all other action reasonably necessary or helpful to
secure the vote or consent of shareholders required to effect the Merger.
(d) At the Special Meeting, Parent and its direct and indirect
Subsidiaries shall vote, or cause to be voted, all of the Shares then owned
by any of them in favor of the Merger.
6.2 HSR Matters.
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(a) No later than seven business days after the date of this Agreement,
Parent, Sub and the Company shall file (or cause their Ultimate Parent Entities
as defined in the HSR Act to file) with the Federal Trade Commission ("FTC") and
the Antitrust Division of the United States Department of Justice ("DOJ") the
appropriate notification and report forms under the HSR Act with respect to the
transactions contemplated by this Agreement. Parent, Sub and the Company shall
comply, and Parent and Sub shall cause their Ultimate Parent Entities to comply,
at the earliest practicable date with any request from the FTC or the DOJ for
additional information or documentation with respect to such filing. To the
extent permitted by law, Parent, Sub and the Company shall request, and Parent
and Sub shall cause their Ultimate Parent Entities to request, that the FTC and
DOJ treat as confidential the information so submitted.
(b) Subject to the terms and conditions of this Section 6.2, Parent and
Sub shall, and shall cause their Ultimate Parent Entities to, use their
commercially reasonable best efforts to (i) resolve diligently and expeditiously
any objections that may be asserted by the FTC or the DOJ with respect to the
transactions contemplated by this Agreement ("Objections"), and (ii) obtain the
termination of the waiting period under the HSR Act, in each case prior to the
initial expiration date of the Offer or, if not possible by such date, as soon
as practicable thereafter.
(c) Parent, Sub and the Company shall cooperate fully and in good faith in
connection with overcoming Objections, and (i) each of Parent, Sub and the
Company shall promptly inform the other of any material communication made by
such party to, or received by such party from, the FTC or the DOJ, and (ii)
Parent shall keep the Company informed of any material discussions between
Parent and/or Sub and the FTC and/or the DOJ regarding this Agreement. Parent
and Sub shall cause their Ultimate Parent Entities to cooperate fully in
connection with the foregoing matters in this Section.
(d) Notwithstanding the foregoing, nothing contained in this Agreement
will require or obligate Parent or Sub (i) to initiate or defend any litigation
to which any Governmental or Regulatory Authority (including the DOJ and the
FTC) is a party, (ii) to agree or otherwise become subject to any material
limitations on (A) the right of the Parent or Sub, or their affiliates
effectively to control or operate the business, assets, or operations of the
Company, (B) the right of Parent, Sub, or its affiliates to acquire or hold the
business, assets, or operations of the Company, (C) the right of Parent or Sub
to exercise full rights of ownership of the shares of Common Stock of the
Company acquired by Parent or Sub including, without limitation, the right to
vote any shares held by Parent or Sub on all matters properly presented to the
Company's shareholders, or (iii) to agree or otherwise be required to sell or
otherwise dispose of, hold separate (through the establishment of a trust or
otherwise), or divest itself of all or any portion of the business, assets, or
operations of the Company, Sub or the Parent, except, in connection with the
proposed resolution of any Objections, for the sale or disposal of such of the
Company's supermarkets (or, in lieu thereof, supermarkets of Parent) that did
not in the aggregate generate in excess of $2.7 million of net earnings before
interest, tax, depreciation and amortization for the fiscal year ended June 29,
1997 (based upon the Company's books and records for such supermarkets by
location) ("EBITDA"). (If Parent is required to divest
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a Parent store, the EBITDA of the closest Company store shall be used in
calculating the $2.7 million.)
6.3 Publicity. Neither Parent, Sub or their respective representatives nor
the Company or its representatives shall disclose to any person (including by
means of a press release) any information relating to this Agreement and the
transactions contemplated hereby, except as expressly permitted hereby or to the
extent reasonably appropriate to accomplish the purposes of this Agreement,
without obtaining the prior consent of Parent or the Company, as the case may
be, which shall not be unreasonably withheld; provided, however, that nothing in
this Section shall prohibit any party from making any disclosure that its
counsel deems necessary or advisable in order to fulfill such party's disclosure
obligations imposed by law or the applicable rules of the SEC, any state
securities authority, any securities exchange or the Nasdaq Stock Market, as
long as such party makes a good faith effort to consult with the other party
prior to such disclosure. This Section shall supersede the provisions of
paragraph 2 of the Confidentiality Agreement (defined in Section 9.11).
6.4 Investigation; Confidentiality.
(a) The Company shall give to Parent and Sub and their respective
representatives full access upon reasonable prior notice and during normal
business hours, to all officers, employees, agents, attorneys, accountants,
assets, properties, books and records of the Company and its Subsidiaries, and
shall cause its and its Subsidiaries' officers and independent auditors to
furnish to such persons such financial and operating data and other information,
including access to the working papers of its independent auditors, with respect
to its business and properties and the business and properties of its
Subsidiaries as such persons shall from time to time reasonably request;
provided, however, that in conducting their investigation, Parent and Sub and
such representatives may not interfere unreasonably with the business and
operations of the Company and its Subsidiaries. Information obtained pursuant
to the immediately preceding sentence shall constitute "Confidential
Information" under the Confidentiality Agreement, subject to paragraph 4 of such
Agreement. This Section shall supersede the first sentence of paragraph 6 of
the Confidentiality Agreement and the Company shall not be entitled to request
the return of Confidential Information pursuant to paragraph 3 of such Agreement
unless and until this Agreement terminates.
(b) Parent and Sub shall, upon request by the Company, provide the
Company, its counsel, accountants and other authorized representatives with such
information concerning Parent or Sub as may be reasonably necessary for the
Company to ascertain the accuracy and completeness of the information supplied
by or on behalf of Parent or Sub for inclusion in the Schedule 14D-1, Schedule
14D-9 and the Proxy Statement and to verify Parent's and Sub's performance of
and compliance with their respective representations, warranties and covenants
herein contained. Except as and to the extent required by law, the Company
shall keep confidential any information furnished to it pursuant to the
preceding sentence that is reasonably designated as confidential at the time of
delivery.
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6.5 Directors' and Officers' Indemnification and Insurance.
(a) The Company, and from and after the Effective Time, the Surviving
Corporation (each, an "Indemnifying Party"), shall indemnify, defend and hold
harmless each person who is now, or has been at any time prior to the date
hereof or who becomes prior to the Effective Time, a director or officer of
the Company or any of its Subsidiaries (the "Indemnified Parties") against
all losses, claims, damages, costs and expenses (including attorneys' fees),
liabilities, judgments and settlement amounts that are paid or incurred in
connection with any claim, action, suit, proceeding or investigation (whether
civil, criminal, administrative or investigative and whether asserted or
claimed prior to, at or after the Effective Time) that is based in whole or
in part on, or arises in whole or in part out of, the fact that such
Indemnified Party is or was a director or officer of the Company or any of
its Subsidiaries and (i) relates to or arises out of any action or omission
occurring or allegedly occurring at or prior to the Effective Time, or (ii)
is based in whole or in part on, arises in whole or in part out of, or
pertains in whole or in part to, this Agreement or the transactions
contemplated hereby, in each case to the full extent a corporation is
permitted under applicable law to indemnify its own directors or officers, as
the case may be; provided that no Indemnifying Party shall be liable for any
settlement of any claim effected without its written consent, which consent
shall not be unreasonably withheld. Without limiting the foregoing, in the
event that any such claim, action, suit, proceeding or investigation is
brought against any Indemnified Party (whether arising prior to or after the
Effective Time), the Indemnifying Parties will pay expenses in advance of the
final disposition of any such claim, action, suit, proceeding or
investigation to each Indemnified Party to the full extent permitted by
applicable law. To the extent that any indemnification is sought pursuant to
this Section 6.5(a), the Indemnified Party will promptly notify the Parent of
any claim, action, suit, proceeding, or investigation for which it may seek
indemnification under this Section 6.5; and in the event of any such claim,
action, suit, proceeding, or investigation (whether arising before or after
the Effective Time), (i) Parent or the Surviving Corporation will have the
right to assume the defense thereof, and neither Parent nor the Surviving
Corporation will be liable to such Indemnified Parties for any legal expenses
of other counsel subsequently incurred thereafter by such Indemnified Parties
in connection with the defense thereof, except that an Indemnified Party will
have the right to retain separate counsel, reasonably acceptable to the
Parent, at the expense of the Indemnifying Party if the named parties to any
such proceeding include both the Indemnified Party and the Company or Parent,
or their respective successors, and the representation of such parties by the
same counsel would be proscribed under applicable standards of professional
conduct; provided that, (i) neither the Parent nor the Surviving Corporation
will be responsible for the legal expenses of more than one law firm in
connection with any one matter, (ii) the Indemnified Parties will cooperate
in the defense of any such matter, and (iii) neither the Parent nor the
Surviving Corporation will be liable for any settlement effected without its
prior written consent; provided, however, that notwithstanding the foregoing,
neither the Parent nor the Surviving Corporation will have any obligation
under this Section 6.5 to indemnify an Indemnified Party when and if a court
of competent jurisdiction ultimately determines, and such determination
becomes final, that the indemnification of such Indemnified Party in the
manner contemplated hereby is prohibited by applicable law.
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(b) Except as required by applicable Law or legal process, Parent, Sub
and the Company will not take any action so as to amend, modify or repeal the
provisions for exculpation of directors or indemnification of directors or
officers contained in the articles of incorporation or bylaws (or other
comparable charter documents) of the Surviving Corporation and its
Subsidiaries in such a manner as would adversely affect in any material
respect the rights of any individual who shall have served as a director or
officer of the Company or any of its Subsidiaries prior to the Effective Time
to be exculpated or to be indemnified by such corporations in respect of
their serving in such capacities prior to the Effective Time. The Company
will honor in accordance with their respective terms each of the indemnity
agreements between the Company and each of its directors as in effect on the
date of this Agreement and shall not terminate such agreements prior to the
Effective Time.
(c) The Company shall, and after the consummation of the Offer, Parent
shall cause the Company to, until the sixth anniversary of the Effective Time
and for so long thereafter as any claim asserted prior to such date has not been
fully adjudicated by a court of competent jurisdiction, cause to be maintained
in effect the policies of directors' and officers' liability insurance
maintained by the Company and its Subsidiaries as of the date hereof (or
policies providing at least the same coverage amounts and containing terms that
are no less advantageous to the insured parties) with respect to claims arising
from facts or events that occurred or are alleged to have occurred at or prior
to the Effective Time; provided that the Company shall endeavor to obtain such
coverage at the lowest premium cost reasonably available and that the Company
shall not, and Parent shall not be obligated to cause the Surviving Corporation
to, pay an aggregate (whether over time or on a one-time basis) premium in
excess of $600,000.
(d) The provisions of this Section are intended to be for the benefit of,
and shall be enforceable by, each Indemnified Party and each party entitled to
insurance coverage under paragraph (c) above, respectively, and his or her heirs
and legal representatives, and shall be in addition to any other rights an
Indemnified Party may have under the ABCA, any indemnity agreement, the articles
of incorporation or bylaws of the Surviving Corporation or any of its
Subsidiaries, or otherwise.
6.6 Change of Control Agreements. The Company will, and after the
consummation of the Offer Parent shall cause the Company to, honor in accordance
with their respective terms each of the Change of Control Agreements (defined in
Section 3.10) as in effect on the date of this Agreement.
6.7 Fees and Expenses. Whether or not the Offer or the Merger is
consummated, all costs and expenses incurred in connection with this Agreement
shall be paid by the party incurring such cost or expense, subject to Sections
5.2, 8.1, 8.2 and 8.3.
6.8 Conduct of Business of Sub. Parent shall cause Sub to perform its
obligations under this Agreement in accordance with its terms.
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6.9 Cooperation. Subject to the terms and conditions of this Agreement
(including, without limitation, Sections 1.1 and 6.2 and Annex A) Parent, Sub
and the Company shall cooperate with each other and use their respective
commercially reasonable best efforts to cause the conditions to the Offer in
Annex A to be met as soon as reasonably practicable. The Company shall
cooperate with Parent's reasonable requests for assistance in connection with
Parent's transition planning and related activities prior to the Effective Time.
6.10 Post-Offer Action. As soon as practicable following consummation of
the Offer, Parent and Sub shall use their commercially reasonable best efforts
to cause the conditions to the Merger set forth in Article VII to be met and to
consummate the Merger, subject to the terms of this Agreement.
6.11 Transaction Litigation. The Company shall give Parent the opportunity
to participate in the defense or settlement of any litigation against the
Company and its directors directly relating to any of the transactions
contemplated by this Agreement until the purchase of Shares pursuant to the
Offer, and thereafter shall give Parent the opportunity to direct the defense of
such litigation and, if Parent so chooses to direct such litigation, Parent
shall give the Company and its directors an opportunity to participate in such
litigation; provided, however, that no such settlement shall be agreed to
without Parent's consent, which consent shall not be unreasonably withheld; and
provided further that no settlement requiring a payment by a director shall be
agreed to without such director's consent.
ARTICLE VII
CONDITIONS TO THE MERGER
The respective obligation of each party to effect the Merger is subject to
the fulfillment, at or prior to the Closing, of each of the following
conditions:
(i) Sub shall have purchased all Shares validly tendered pursuant to the
Offer;
(ii) This Agreement shall have been adopted by the requisite vote of the
shareholders of the Company under the ABCA;
(iii) No Governmental or Regulatory Authority shall have issued an
Order or ruling or taken any other action declaring illegal or otherwise
prohibiting the Merger; and
(iv) All governmental consents, orders and approvals legally required for
the consummation of the Merger and the transactions contemplated hereby shall
have been obtained and be in effect at the Effective Time.
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ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. Subject, in the case of the Company, to any approval of
Independent Directors required by Section 1.3(c), this Agreement may be
terminated at any time (upon written notice to the other parties hereto) prior
to the Effective Time, whether before or after approval by the shareholders of
the Company:
(a) by mutual written consent of the Boards of Directors of the Company,
Parent and Sub;
(b) by the Company,
(i) if the Offer has not been commenced timely in accordance with
Section 1.1, provided that such failure shall not have been corrected on the
next business day;
(ii) if any representation or warranty made by Parent and/or Sub in
this Agreement shall not be true and correct, which materially and adversely
affects the consummation of the Offer, and such breach is not capable of being
cured or is not cured by Parent and/or Sub prior to the expiration of the Offer;
(iii) if Parent or Sub shall not have performed and complied with,
in all material respects (without reference to any materiality qualifications
contained therein), each agreement and covenant required by this Agreement to be
performed or complied with by it, and such breach is not capable of being cured
by Parent and/or Sub or is not cured prior to the expiration of the Offer;
(iv) as provided in Section 5.2 in respect of a superior proposal,
provided that (x) the Company shall have paid Parent the Termination Fee and the
Expense Fee and (y) Parent or Sub does not make within three business days of
receipt of the Section 5.2(b) Notice an offer that the Company's Board of
Directors believes in good faith after consultation wih its legal counsel and
financial advisors, is at least as favorable, from a financial point of view, to
the Company's shareholders as such other other bidder's offer; provided,
however, that if subsequent to the payment of the Termination Fee and the
Expense Fee and prior to the termination of this Agreement, Parent or Sub makes
an offer that the Company's Board of Directors believes in good faith after
consultation with its legal counsel and financial advisors, is at least as
favorable, from a financial point of view, to the Company's shareholders as such
other bidder's offer, Parent and Sub shall, upon written request of the Company,
return the Termination Fee and the Expense Fee once the Company shall have
approved and recommended Parent's and Sub's amended offer and shall have
rescinded any actions taken with respect to such superior proposal pursuant to
clauses (A), (B) and (C) of Section 5.2(b);
(c) prior to the purchase of Shares by Sub pursuant to the Offer, by
Parent or Sub, if
36
(i) any representation or warranty made by the Company in this
Agreement that contains a materiality qualification shall not be true and
correct, or any representation or warranty made by the Company in this Agreement
that is not so qualified shall not be true and correct in any material respect,
and, in each case, such breach of the representation or warranty is not capable
of being cured by the Company or is not cured prior to the expiration of the
Offer;
(ii) the Company shall not have performed and complied with, in all
material respects (without reference to any materiality qualifications contained
therein), each agreement and covenant required by the Agreement to be performed
or complied with by it and such breach of the agreement or covenant is not
capable of being cured by the Company or is not cured prior to the expiration of
the Offer.
(d) by Parent, Sub or the Company, if
(i) (x) the Offer shall be terminated or expire in accordance with
its terms without the purchase of any Shares pursuant thereto or (y) Sub shall
not have accepted for payment any Shares pursuant to the Offer within 90
calendar days following the commencement of the Offer; provided, that Parent and
Sub shall not be entitled to terminate for such reason if the cause thereof is a
breach by Parent or Sub of any of their obligations under this Agreement and the
Company shall not be entitled to terminate for such reason if the cause thereof
is a breach by the Company of any of its obligations under this Agreement;
(ii) any Governmental or Regulatory Authority shall have issued an
Order or ruling or taken any other action declaring illegal or otherwise
prohibiting the consummation of the Offer or the Merger and such Order shall
have become final and nonappealable;
(iii) if, at the Special Meeting (including any adjournment or
postponement thereof), the Requisite Shareholder Approval is not obtained,
except that the right to terminate this Agreement under this Section 8.2(d)(iii)
will not be available to any party whose willful failure to perform any material
obligation or to perform any material condition under this Agreement has been
the proximate cause of, or resulted in, the failure to obtain the Requisite
Shareholder Approval.
8.2 Effect of Termination. If this Agreement is validly terminated by
either the Company or Parent or Sub pursuant to Article VIII, this Agreement
will forthwith become null and void and there will be no liability or obligation
on the part of either the Company or Parent or Sub (or any of their respective
representatives or affiliates), except that (i) the provisions of Sections 6.3
and 6.4 relating to confidentiality, and 6.7 relating to fees and expenses, and
Section 5.2, Section 8.3, Section 9.11, and, insofar as they relate to the other
provisions of this Agreement that survive termination, Sections 9.3 through 9.7,
Sections 9.9 and 9.10 and Sections 9.12 and 9.13, and this Section 8.2 will
continue to apply following any such termination and (ii) nothing contained
herein shall relieve any party hereto from liability for wilful breach of its
representations, warranties, covenants or agreements contained in this
Agreement.
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8.3 Termination Payment.
(a) If (i) Parent or Sub shall have provided the Company with an
irrevocable written notice of termination of this Agreement pursuant to Section
8.1 based upon a material wilful breach by the Company of this Agreement
(provided that such notice may state that it is subject to payment of the
Termination Fee and the Expense Fee by the Company and that, in the event the
Termination Fee and Expense Fee are not paid to Parent and Sub within five
business days, such termination notice shall be deemed not to have been given
and this Agreement shall not terminate as a result of such notice and the
Company shall continue to be subject to its obligations to pay the Termination
Fee and the Expense Fee as set forth in this Section 8.3) or (ii) any Change in
Control shall have occurred during the term of this Agreement, or within 180
days following termination of this Agreement (other than pursuant to (w) Section
8.1(a), (x) Section 8.1(b), (y) Section 8.1(d)(i) if the Offer has expired due
to the failure to satisfy any of the conditions in paragraphs (b), (c)(i),
(c)(ii), (c)(iii) or (d) of Annex A, unless in the case of the conditions set
forth in paragraphs (b), (c)(i), (c)(ii) or (c)(iii) of Annex A Parent and Sub
are diligently pursuing the satisfaction of such conditions and the Company
shall not have agreed to Parent's or Sub's written request to extend the Offer
beyond the periods prescribed by Section 1.1(b), or (z) Section 8.1(d)(ii), so
long as the Company shall not be in breach of this Agreement), then the Company
shall promptly, but in no event later than five business days after the first to
occur of any such event described in clauses (i) and (ii) above (the "Payment
Date"), pay Parent a fee of $7,000,000 (the "Termination Fee") and shall also
reimburse Parent and Sub for all out-of-pocket expenses and fees payable by them
or their affiliates up to an aggregate of $3,000,000 (including without
limitation fees and expenses of all counsel, printers, banks, investment banking
firms, and other financial institutions, and their respective agents directly
related to the transactions contemplated by this Agreement (including the
financing of the transactions contemplated by this Agreement by Parent and Sub
or obtaining the required consents of Parent's noteholders) (the "Expense Fee"),
such amounts to be paid on the Payment Date in cash in immediately available
funds (United States Dollars) by wire transfer to an account designated by
Parent in writing not less than one business day prior to the Payment Date. The
Termination Fee and the Expense Fee shall, in the alternative, be due under the
circumstances provided in Section 5.2. In no event shall the Company be
obligated to pay the Termination Fee and the Expense Fee more than once, unless
Parent and Sub have previously refunded such Termination Fee and Expense Fee
pursuant to Section 8.1(b)(iv) in which case the Termination Fee and Expense Fee
shall continue to be payable in the circumstances provided in Section 5.2 and
this Section 8.3.
(b) As used herein, "Change in Control" means any of the following:
(i) any person or group (other than Parent or Sub) acquires or
beneficially owns, or enters into an agreement with the Company or any of its
Subsidiaries to acquire, directly or indirectly, 25% or more of the outstanding
Shares or 25% or more of the assets, revenues or earning power of the Company
and its Subsidiaries, taken as a whole (it being understood that shares of
Subsidiaries constitute assets of the Company for purposes of this Section 8.3);
38
(ii) the Company distributes or transfers, or publicly announces its
intention to distribute or transfer, to its shareholders, by dividend or
otherwise, assets constituting 25% or more of the market value or earning power
of the Company on a consolidated basis; or
(iii) any person or group (other than Parent or Sub) enters into
an agreement with the Company or any of its Subsidiaries to consummate, or
consummates, directly or indirectly, a tender offer or exchange offer for any
Shares or involving a merger, consolidation or other business combination or
similar transaction with or involving the Company.
The Company agrees to notify Parent and Sub within five business days of the
occurrence of any Change in Control and Parent and Sub shall be entitled to
provide wire transfer instructions after receipt of such notice and the Payment
Date shall be the next business day after Parent or Sub delivers such wire
instructions to the Company.
(c) The Company acknowledges that the agreements contained in this Section
8.3 are an integral part of the transactions contemplated by this Agreement, and
that without these agreements Parent and Sub would not enter into this
Agreement. The parties understand and agree that payment of the Termination Fee
and Expense Fee are in addition to all other rights and remedies available to
Parent and Sub hereunder, at law or in equity, and that Parent and Sub shall
retain and apply the Termination Fee and Expense Fee against all direct and
indirect damages suffered by Parent and Sub, whether or not as a result of the
occurrence of the events described under Section 8.3(a) above.
8.4 Amendment. Subject in the case of the Company to Section 1.3(c),
this Agreement may be amended, supplemented or modified by action taken by the
respective Boards of Directors of the parties hereto at any time prior to the
Effective Time, whether prior to or after the Requisite Shareholder Approval
shall have been obtained, but after such approval only to the extent permitted
by applicable law. No such amendment, supplement or modification shall be
effective unless set forth in a written instrument duly executed by each party
hereto.
8.5 Waiver. Subject in the case of the Company to Section 1.3(c), at any
time prior to the Effective Time, any party hereto, by action taken by its Board
of Directors, may to the extent permitted by applicable law (i) extend the
time for the performance of any of the obligations or other acts of the other
parties hereto, (ii) waive any inaccuracies in the representations and
warranties of the other parties hereto contained herein or (iii) waive
compliance with any of the covenants, agreements or conditions of the other
parties hereto contained herein. No such extension or waiver shall be effective
unless set forth in a written instrument duly executed by the party extending
the time of performance or waiving any such inaccuracy or non-compliance. No
waiver by any party of any term or condition of this Agreement shall be deemed
to be or construed as a waiver of the same or any other term or condition of
this Agreement on any future occasion.
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ARTICLE IX
GENERAL PROVISIONS
9.1 Non-Survival of Representations, Warranties and Agreements. The
representations and warranties of the Company in this Agreement shall not
survive the consummation of the Offer, and the other representations and
warranties, and the covenants and agreements in this Agreement shall not survive
the Effective Time, except for the agreements contained in Article II and
Section 6.5 (relating to directors' and officers' indemnification and insurance)
and any other agreement contained herein that expressly contemplates performance
after the Effective Time.
9.2 Certain Definitions. For purposes of this Agreement, the following
terms have the following meanings:
(a) "affiliate" means a person that directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common control with
the first mentioned person;
(b) "associate" when used to indicate a relationship with any person, has
the meaning specified in Rule 405 promulgated under the Securities Act of 1933,
as amended;
(c) "group" includes the meaning specified in Section 13(d)(3) of the
Exchange Act;
(d) "person" includes an individual, corporation, partnership,
association, trust, other entity or any unincorporated organization;
(e) "Significant Subsidiary" means any Subsidiary of the Company that is a
"Significant Subsidiary" as such term is used in Regulation S-X or that
contributed in excess of $500,000 to the Company's consolidated earnings before
income taxes in any of the Company's fiscal years 1995, 1996 or 1997 or would be
reasonably likely to contribute such amount in the Company's fiscal year 1998;
and
(f) a "Subsidiary" of a person is any corporation or other incorporated or
unincorporated organization more than 50% of the equity interests of which are
beneficially owned directly or indirectly by such person or with respect to
which such person has the right to exercise control.
9.3 Notices. Any notices or other communications hereunder shall be in
writing and shall be deemed to have been duly given when delivered in person or
by a nationally recognized overnight delivery service, or transmitted by
facsimile transmission (with confirmation of receipt), or five days after
dispatch by registered or certified mail, postage prepaid, addressed to the
parties at the following addresses or facsimile numbers:
40
(a) If to the Company, to: Delchamps, Inc.
000 Xxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attention: Chief Executive Officer
Facsimile: (000) 000-0000
with a copy to: Jones, Walker, Waechter, Poitevent,
Carrere & Xxxxxxx, L.L.P.
000 Xx. Xxxxxxx Xxxxxx
Xxx Xxxxxxx, XX 00000
Attention: X. X. XxXxxxxx, XX
Facsimile: (000) 000-0000
(b) If to Parent or Sub, to: Jitney-Jungle Stores of America, Inc.
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xx. Xxxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
with a copy to: Dechert Price & Xxxxxx
4000 Xxxx Atlantic Tower
0000 Xxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx and
Xxxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
or such other address as shall be furnished in writing by any party.
9.4 Headings. The descriptive headings of the several Articles and
Sections of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
9.5 Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Alabama without giving effect to the
conflict of laws provisions thereof.
9.6 No Assignment; Binding Effect. Subject to Section 2.1, neither
this Agreement nor any right, interest or obligation hereunder may be assigned,
by operation of law or otherwise, by any party hereto without the prior written
consent of the other parties hereto, and any attempt to do so will be void.
Subject to the preceding sentence, this Agreement is binding upon, inures to the
benefit of and is enforceable by the parties hereto and their respective
successors and assigns.
9.7 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
41
9.8 Third Party Beneficiaries. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and except as otherwise expressly
provided for herein, it is not the intention of the parties to confer
third-party beneficiary rights upon any other person.
9.9 Invalid Provisions. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under any present or future Law or Order,
and if the rights or obligations of any party hereto under this Agreement will
not be materially and adversely affected thereby, (i) such provision will be
fully severable, (ii) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
and (iii) the remaining provisions of this Agreement will remain in full force
and effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom.
9.10 Specific Performance. Nothing in this Agreement shall preclude a
party from seeking specific performance, injunctive relief or any other remedies
not involving the payment of monetary damages in the event of any breach or
violation (or threatened breach or violation) of any provision of this Agreement
by the other party and each party acknowledges that, in light of the unique
benefit to it of its rights under this Agreement, such remedies shall be
available in respect of any such breach or violation by it in any suit properly
instituted in a court of competent jurisdiction and shall be in addition to any
other remedies available at law or in equity to such party.
9.11 Entire Agreement. The Confidentiality and Standstill Agreement dated
as of April 8, 1997 between Parent and the Company (the "Confidentiality
Agreement") shall remain in full force and effect except as expressly superseded
hereby; provided that if the Company has paid (or is obligated to pay) the
Termination Fee and the Expense Fee, the standstill provisions of the
Confidentiality Agreement shall terminate. This Agreement (including the
Annexes, exhibits, schedules, documents and instruments referred to herein) and
the Confidentiality Agreement constitute the entire agreement and supersede
(with prospective effect only) any other prior agreements and understandings,
both written and oral, between the parties with respect to the subject matter
hereof.
9.12 Days. As used herein "day" means calendar day unless business day is
expressly specified, and if the last day for timely performance falls on a day
that is not a business day, performance may be timely made on the first business
day following.
9.13 Jurisdiction. The parties to this Agreement, acting for themselves
and for their respective successors and assigns, hereby irrevocably and
unconditionally consent to submit to the non-exclusive jurisdiction of both the
courts of the States of Delaware and Alabama and of the United States of America
located in such States for any actions, suits or proceedings arising out of or
relating to this Agreement (and none of such persons shall commence any action,
suit or proceeding relating thereto except in such courts). Each such person
hereby irrevocably and unconditionally waives any objection to the laying of
venue of any action, suit or proceeding arising out of this Agreement, in either
the courts of the States of Delaware and Alabama or of the United States of
America located in such States.
42
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all as of
the date first written above.
JITNEY-JUNGLE STORES OF AMERICA, INC.
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President/CEO
DELTA ACQUISITION CORPORATION
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President/CEO
DELCHAMPS, INC.
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Chairman of the Board and
Chief Executive Officer
43
Annex A
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer, Sub shall not be
required to accept for payment or pay for any tendered Shares (subject to Rule
14e-1(c) under the Exchange Act) and may delay in accordance with Section 1.1(b)
the acceptance for payment of, or the payment for, any Shares, amend the Offer
in accordance with Section 1.1(b) or terminate the Offer (subject to Section
1.1(b)), if
(a) immediately prior to the expiration of the Offer (as it may be
extended in accordance with Article I of the Agreement), there shall not have
been validly tendered and not withdrawn pursuant to the Offer a number of Shares
such that, upon consummation of the Offer, Sub and its affiliates will
beneficially own in the aggregate not less than two-thirds of the Shares
outstanding on a fully diluted basis (the "Minimum Condition");
(b) any applicable (i) waiting period under the HSR Act or (ii)
period during which Parent shall have consented or otherwise be barred from
purchasing Shares pursuant to the Offer as part of any agreement or other
arrangement with any Governmental or Regulatory Authority involving the HSR Act
or any other applicable antitrust laws shall not have expired or terminated
prior to the expiration of the Offer (as it may be extended in accordance with
Article I of the Agreement);
(c) at any time on or after the date of this Agreement and before the
time of payment for any Shares, any of the following events shall have occurred
and be continuing:
(i) there shall be threatened or pending by any Governmental or
Regulatory Authority (or the staff of the Federal Trade Commission or the staff
of the Antitrust Division of the Department of Justice shall have recommended
the commencement of) any suit, action or proceeding, or there shall be pending
by any other person any suit, action or proceeding which has a reasonable
possibility of success, (A) challenging the acquisition by Parent or Sub of any
Shares, seeking to restrain or prohibit the making or consummation of the Offer
or the Merger or the performance of any of the other transactions contemplated
by this Agreement or seeking to obtain from the Company, Parent or Sub any
damages or otherwise imposing financial burdens, penalties or fines that are
material in relation to the Company and its Subsidiaries, or Parent and its
Subsidiaries, in each case taken as a whole, (B) seeking to prohibit or limit
the ownership or operation by the Company, Parent or any of their respective
Subsidiaries of a material portion of the business or assets of the Company or
its Subsidiaries, or Parent or its Subsidiaries, as a result of the Offer, the
Merger or any of the other transactions contemplated by this Agreement, (C)
seeking to impose limitations on the ability of Parent or Sub to acquire or
hold, or exercise full rights of ownership of, any Shares accepted for payment
pursuant to the Offer including, without limitation, the right to vote the
Shares accepted for payment by it on all matters properly presented to the
shareholders of the Company, (D) seeking to prohibit Parent or any of its
Subsidiaries from effectively controlling or operating in any material respect
the business or operations of the
Company or its Subsidiaries, or (E) which otherwise is reasonably likely to
have a Material Adverse Effect;
(ii) there shall be any statute, rule, regulation, judgment,
order or injunction enacted, entered, enforced, promulgated or deemed applicable
to the Offer or the Merger, or any other action shall be taken by any
Governmental or Regulatory Authority or court, other than the application to the
Offer or the Merger of applicable waiting periods under the HSR Act, that is
reasonably likely to result, directly or indirectly, in any of the consequences
referred to in clauses (A) through (E) of paragraph (i) above, or any
governmental consents, orders and approvals legally required for the
consummation of the Offer or the Merger shall not have been obtained, and such
failure is reasonably likely to result, directly or indirectly, in any of the
consequences referred to in clauses (A) through (E) of paragraph (i) above;
(iii) (A) a general suspension of trading in, or limitation
on prices for, securities on any national securities exchange or in the over the
counter market, (B) any change in general, financial, bank or capital market
conditions which materially affects the ability of financial institutions to
extend credit or syndicate loans, (C) a decline in the Standard & Poor's 500
Index by an amount in excess of 25%, measured from July 3, 1997, (D) a
declaration of a banking moratorium or any suspension of payments in respect of
banks in the United States or any material limitation (whether or not mandatory)
imposed by any Governmental or Regulatory Authority that is reasonably likely to
affect the extension of credit by lending institutions in general, or (E) a
commencement of a war or armed hostilities or other national or international
crisis directly or indirectly involving the United States which war, hostilities
or crisis is reasonably likely to have a Material Adverse Effect or adversely
affect the ability of the Company to perform its obligations hereunder or to
consummate the Merger or to materially affect Parent's ability to obtain the
consents referred to in paragraph (d) below; or in the case of any of the events
described in (A) through (E) above existing as of the date hereof, a material
acceleration or worsening thereof;
(iv) any of the representations and warranties made by the
Company in the Agreement that are subject to a materiality qualification shall
not be true and correct, or any of the representations and warranties made by
the Company in the Agreement that are not so qualified shall not be true and
correct in any material respect, in each case at any time prior to the
consummation of the Offer as though made on and as of such date or, in the case
of representations and warranties made as of a specific date earlier than the
date of the consummation of the Offer, on and as of such earlier date; provided,
however, that if the Company discovers such a breach of a representation or
warranty, the Company shall promptly notify Parent and Sub of the nature of such
breach and if Parent or Sub discovers such a breach of a representation or
warranty, Parent or Sub shall promptly notify the Company of the nature of such
breach and provided further that, in the case of breaches that are reasonably
capable of being cured prior to the expiration of the Offer, the Company shall
have failed to diligently proceed to effect a cure of such breach and, in any
event, to cure such breach prior to the expiration of the Offer (including any
extensions thereof);
2
(v) the Company shall not have performed and complied with, in
all material respects (without reference to any materiality qualifications
contained therein), each agreement and covenant required by the Agreement to be
performed or complied with by it; provided, however, that if the Company
discovers such a breach of an agreement or covenant, the Company shall promptly
notify Parent and Sub of the nature of such breach and if Parent or Sub
discovers such a breach of an agreement or covenant, Parent or Sub shall
promptly notify the Company of the nature of such breach and provided further
that, in the case of breaches that are reasonably likely to be cured prior to
the expiration of the Offer, the Company shall have failed to diligently proceed
to effect a cure of such breach and, in any event, to cure such breach prior to
the expiration of the Offer (including any extensions thereof);
(vi) there shall have occurred any change (or any development
that, insofar as reasonably can be foreseen, is reasonably likely to result in
any change) that is materially adverse to the condition (financial or
otherwise), total assets, total liabilities, business, results of operations or
prospects of the Company and its Subsidiaries taken as a whole, including
without limitation any such change that prevents Parent and Sub from obtaining
the contemplated financing for the Offer and the Merger;
(vii) the Company shall have delivered (or been obliged to
deliver) to Parent a Section 5.2 Notice or there shall have been a Change in
Control;
(viii) prior to the purchase of Shares pursuant to the Offer,
the Board of Directors (or any committee thereof) shall have withdrawn or
modified (including by amendment of its Schedule 14D-9) in a manner adverse to
Parent or Sub its approval or recommendation of the Offer, this Agreement or the
Merger or shall have recommended another takeover proposal, or shall have
adopted any resolution to effect any of the foregoing; or
(ix) the Agreement shall have been terminated in accordance with
its terms, or Parent or Sub have reached an agreement in writing with the
Company providing for termination of the Offer or delay in acceptance of, or
payment for, the Shares.
(d) Parent shall not have obtained prior to the expiration of the
Offer an amendment or supplement to the Indenture dated as of March 5, 1996
among Parent, Interstate Jitney Jungle Stores, Inc., an Alabama corporation and
successor by merger to JJ (Interstate), Inc., Southern Jitney Jungle Company, a
Mississippi corporation and successor by merger to JJ (Southern), Inc.,
XxXxxxx-Xxxxxx Co., Inc., a Mississippi corporation and successor by merger to
JJ (XxXxxxx-Xxxxxx), Inc., Pump and Save, Inc., a Mississippi corporation and
successor by merger to JJ (Pump and Save), Inc., Jitney-Jungle Bakery, Inc., a
Mississippi corporation and successor by merger to JJ (Bakery), Inc., and Marine
Midland Bank, as Trustee, (and, to the extent necessary, the Notes and
Guarantees referred to therein), all with the consent of the holders of such
Notes and in accordance with the terms of such Indenture, to increase the amount
of permitted indebtedness, restricted payments and investments permitted to be
incurred or made, as applicable, by Parent and its Subsidiaries under the
Indenture and to make such other changes thereto as are necessary to permit
3
Parent to consummate the Offer, the Merger and the other transactions
contemplated by this Agreement.
(e) Prior to the expiration of the Offer, all of the Company's
directors and substantially all of the holders of the Options who are employees
of the Company shall have exercised such Options or shall have entered into
agreements with the Company to exercise such Options prior to the Effective Time
(or such later time as may be specified by Parent) or otherwise permit the
Company to "cash-out" the Options as provided in the second sentence of
Section 5.3 of the Agreement.
which (in the case of each of paragraphs (a), (b), (c)(i) through (c)(viii), (d)
and (e) above) makes it inadvisable, as determined by Sub in its sole judgment,
to proceed with the Offer or with such acceptance for payment of, or payment
for, Shares.
The foregoing conditions are for the sole benefit of Sub and Parent
and may be asserted by Sub or Parent and may be waived by Sub or Parent, in
whole or in part, at any time and from time to time, in the sole discretion of
Sub or Parent; provided that, without the written consent of the Company, Parent
and Sub may not reduce the Minimum Condition to less than a majority of the
outstanding Shares on a fully diluted basis or waive the condition set forth in
(b) above. The failure by Sub or Parent at any time to exercise any of the
foregoing rights will not be deemed a waiver of any right and each right will be
deemed an ongoing right which may be asserted at any time and from time to time.
4
Annex B
DISCLOSURE SCHEDULE
3.1 The Company's only Subsidiary is Supermarket Cigarette Sales, Inc., a
Louisiana corporation. The Company has a 50% interest in a real estate
partnership in Mobile, Alabama. Pursuant to an Aircraft Joint Ownership
Agreement dated May 13, 1996, a Purchase Agreement dated April 12, 1996 and
an Agreement to Repurchase dated April 12, 1996, the Company purchased a
20% interest in a 1976 Cessna Citation 500 Airplane and agreed to certain
terms governing its operation. The Company has an interest in Topco
Associates, Inc., a cooperative purchasing organization of which the
Company is a shareholding member.
3.2 The Company's Employee Stock Ownership Plan contains provisions relating to
the voting of shares of the Company's capital stock.
3.4 The Company makes no representation regarding the effect of the financing
transactions contemplated by Parent or Sub in connection with this
Agreement.
The transactions contemplated by this Agreement will breach a covenant in
the Loan Agreement dated June 29, 1995 between the Company and Hibernia
National Bank, as agent for itself and other banks. Compliance with such
covenant has been waived under the conditions described in a letter dated
July 2, 1997, a copy of which has been provided to Parent.
The Company must give the holders of its 5.51% Senior Notes notice of any
person becoming a 50% shareholder within 30 days.
The transactions contemplated by this Agreement will conflict with the
leases for Stores No. 24 and 94.
The transactions contemplated by this Agreement will constitute a "Change
of Control" pursuant to the Company's Change of Control Agreements, which
will give persons who are parties to such agreements certain rights as
provided therein.
The transactions contemplated by this Agreement will cause the restrictions
to lapse on 10,800 restricted Shares subject to the 1987 Restricted Stock
Plan and will accelerate the exercisability of options to purchase 101,250
Shares outstanding under the Directors' Stock Option Plan and the 1993
Stock Incentive Plan (not included in the 101,250 Shares are options for
31,333 Shares that will vest on July 29, 1997).
The Company makes no representation with respect to the effect of the
consummation of the Offer or the Merger on its insurance policies except
that, to the Company's knowledge, there are no material insurance policies
that will terminate or expire as a result of the
consummation of the Offer or the Merger that could not be replaced with
similar policies on customary commercial terms.
The Company owns a one-half interest in a partnership which owns and has
developed a site near Mobile consisting of 22 acres, more or less. The
transactions contemplated by this Agreement will give the other partner the
right to initiate a buy-sell process, pursuant to which the Company must
choose either to buy or sell the other partner's interest at the price
specified by the partner, and will terminate the Company's right to
initiate such a process. Alternatively, the partner may elect to offer to
buy the Company's interest at an appraised value. The Company shall not
initiate any such process without Parent's consent, which shall not be
unreasonably withheld.
Upon consummation of the Offer, Topco Associates, Inc. may require that the
Company withdraw.
3.7
From March 29, 1997 to the date of this Agreement, the Company has taken
the following actions that, if taken after the date of the Agreement, would
or may constitute a breach of Section 5.1:
o Issued Shares under the Directors Compensation Plan and upon option
exercises under the 1993 Stock Incentive Plan and Directors Stock
Option Plan.
o Paid a regular quarterly dividend.
o Entered into lease agreements with respect to Stores No. 36 and 91 and
an expansion agreement with respect to Store No. 3.
o Made capital expenditures reflected in the 1997 fiscal year capital
budget.
o Finalized the settlement agreement in the Xxxxxxxx case.
o Reduced Xxxxxxx Xxxx'x Change of Control Agreement to writing.
3.10 The federal income Tax Returns for the Company's fiscal years ended
July 3, 1993, July 2, 1994 and July 1, 1995 are currently being
audited.
List of Change of Control Agreements (1):
Change of control agreement between the Company and Xxxxx X. Xxxxxx dated
December 13, 1995.
Change of control agreement between the Company and Xxxxxxx X. La Trace dated
June 7, 1995.
Change of control agreement between the Company and Xxxxxxx X. Xxxxxxx dated
August 2, 1994.
Change of control agreement between the Company and Xxxxxx X. Xxxxxxx dated
October 8, 1995.
Change of control agreement between the Company and Xxxxx X. Xxxxxx dated June
29, 1995.
Change of control agreement between the Company and Xxxxx X. Xxxxxxx dated
September 11, 1989.
2
Change of control agreement between the Company and Xxxxxx X. Xxxxxxx dated June
8, 1993.
Change of control agreement between the Company and Xxxxxxx X. Xxxxx, Xx. dated
January 24, 1992.
Change of control agreement between the Company and Xxxxxx Xxxxx dated April 29,
1996.
Change of control agreement between the Company and Xxxx Xxxxx dated December 4,
1995.
Change of control agreement between the Company and Xxxx X. Xxxxxxx dated
September 11, 1989.
Change of control agreement between the Company and W. Xxxxx Xxxxxxx dated
September 11, 1989.
Change of control agreement between the Company and Xxxxxx Xxxxxxx dated
November 8, 1994.
Change of control agreement between the Company and Xxxxxxx Xxxx dated April 15,
1996.
Change of control agreement between the Company and Xxxxxxx Xxxxx dated January
22, 1997.
Change of control agreement between the Company and Xxxxx X. Xxxx dated October
10, 1994.
Change of control agreement between the Company and Xxxxxx X. Xxxx, Xx. dated
August 10, 1995.
Change of control agreement between the Company and Xxxxx X. Xxxxxxx dated
September 11, 1989.
Change of control agreement between the Company and Xxxxxx X. Xxxxxx dated
September 11, 1989.
Change of control agreement between the Company and Xxxxx X. Xxxxxxx dated
September 11, 1989.
Change of control agreement between the Company and Xxxxx X. Xxxxxxxx dated
November 23, 1994.
Change of control agreement between the Company and Xxxxxx Xxxxxxxx dated
September 11, 1989.
Change of control agreement between the Company and Xxxxxxx X. Xxxxxx dated
September 11, 1989.
Change of control agreement between the Company and Xxxxxxx X. Xxxxx dated
September 11, 1989.
Change of control agreement between the Company and Xxxxxx X. Xxxxxxx dated
September 11, 1989.
Change of control agreement between the Company and Xxxxxx X. Xxxxx dated
September 11, 1989.
Change of control agreement between the Company and Xxxx X. Xxxxx dated
September 11, 1989.
Change of control agreement between the Company and Xxxxxxx X. Xxxx dated
September 11, 1989.
Change of control agreement between the Company and Xxxxxxx X. Xxxxx dated
September 11, 1989.
Change of control agreement between the Company and Xxxxxx X. Xxxxxxxxx dated
January 3, 1995.
Change of control agreement between the Company and Xxxxx X. Xxxxxxxxx dated
November 23, 1994.
Change of control agreement between the Company and Xxxxx X. Xxxxxxxxx dated
November 23, 1994.
3
Change of control agreement between the Company and Xxxxxxx X. Xxxxxx dated
September 11, 1989.
Change of control agreement between the Company and Xxx X. Xxxxx dated September
11, 1989.
Change of control agreement between the Company and Xxxxxxx Xxxxxx dated
September 11, 1989.
Change of control agreement between the Company and Xxxx (Xxxxx) Xxxxxxx dated
November 23, 1994.
Change of control agreement between the Company and Xxxxx Xxxxxx dated September
11, 1989.
Change of control agreement between the Company and Xxxxx Xxxxxxx, XX dated
September 11, 1989.
Change of control agreement between the Company and Xxxxx XxXxxxxxx dated
September 11, 1989.
______________________
(1) One person who was terminated and rehired by the Company has claimed that
he has in effect a Change of Control Agreement. He did have a Change of
Control Agreement prior to his termination of employment. He claims that
the Company promised when it rehired him that he would be provided with the
same benefits he had prior to his termination of employment and that,
therefore, he is entitled to a Change of Control Agreement. The Company
has informed him that he does not have a Change of Control Agreement;
however, if he were entitled to such an agreement, the Company's payment
obligations thereunder would not exceed $200,000.
______________________
3.11 The Company shall not take action or fail to take any action that would
cause it to become a participant in a multiemployer plan.
See footnote (1) to the list of Change of Control Agreements in Section
3.10 relating to an employee who has asserted a right to a Change of
Control Agreement.
3.12(c)
Xxxxxxxx property, designated as Parcels C and D, Delchamps Commercial
Subdivision, Mobile County, Alabama, and also referred to as 000 Xxxxxxx
Xxxxx, is listed on the Alabama Department of Environmental Management's
inventory for reported leaking underground storage tanks. All tanks are
out of service. This property was sold to the Xxxxx Companies, Inc. in
June 1996, and it is subject to environmental indemnities by the Company.
The costs for monitoring the underground storage tank system are eligible
for reimbursement under the Alabama Tank Trust Fund Act of 1988.
The Hammond Distribution Center, located at 000 Xxxxx Xxx., and also
referred to as 0000 X. Xxxxxxx Xxxx, Xxxxxxx, Xxxxxxxxx, is listed on a
Resource Conservation Recovery Act Corrective Action Record. The Center
is separately undergoing a Phase II investigation by Delchamps, for
solvents and petroleum. No corrective action order is pending.
4
The Xxxxx Street property, designated as Xxx 0, Xxxxxxxxxxxx Xxxxxxxxxxx,
Xxxxxx, Xxxxxxx is listed on the Alabama Department of Environmental
Management's inventory for reported leaking underground storage tanks.
The ADEM in 1996 required no further action
Delchamps' stores 123 (200 West Willow, St., Lafayette, LA) and 302
(corner of Airport and XxXxxxxx, Mobile, ALA) are reported in the
emergency response notification system each for a diesel truck fuel
leak in 1993 and 1995, respectively.
3.12(e)
The Company has ordered Phase I Environmental Site Assessments on several
store locations, several owned parcels of raw land and the headquarters
site in Mobile, Alabama that have not yet been completed. The Company
will provide Parent with access to such assessments as soon as they are
received by the Company. The Company has materials relating to the 000
Xxxxxxx Xxxxx location sold by the Company, which shall be provided to
Parent.
3.12(f)
The Company represents that the stores listed on Exhibit 3.12(f) are the
only Company stores that have not been retrofitted with current
refrigerant.
To the Company's knowledge, the matters described in Sections 3.12(c),
(e) and (f) above are not material.
3.14(a)
List of real property owned or leased by the Company and its
Subsidiaries:
See the list of leased stores attached as Exhibit 3.14 hereto.
List of real property locations and approximate descriptions:
Louisiana
1. Hammond Property. A tract of land, together with improvements
thereon, situated in Hammond, Tangipahoa Parish, Louisiana, lying north
of U.S. Highway 190, in T-6-S, R-8-E, Sections 17 and 20, consisting of
272 acres, more or less.
2. Mandeville Property. A tract of land, together with improvements
thereon, situated in Mandeville, St. Tammany Parish, Louisiana, lying
south of U.S. Highway 190, in T-7-S, R-11-E, Section 38, consisting of
22 acres, more or less.
3. Xxxxx Creek Road Property. A tract of land, together with
improvements thereon, situated in Baton Rouge, East Baton Rouge Parish,
Louisiana, in T-7-S, R-2-E, Section 60,
5
designated as Lot X-0-X-0, Xxxxxxxx Xxxxxxx, 0xx Filing, consisting of
1.2 acres, more or less.
4. Bluebonnet Boulevard Property. Two tracts of land, together with
improvements thereon, situated in Baton Rouge, East Baton Rouge Parish,
Louisiana, in T-7-S, R-1-E, Sections 8 and 9, designated as Tracts B-1 and
X-0-X, Xxxxxxxxxx Xxxx District, consisting of 2.4 acres, more or less.
Mississippi
1. D'Iberville Property. Two tracts of land, together with improvements
thereon, situated in D'Iberville, Xxxxxxxx County, Mississippi, lying west
of Highway 69 and south of Xxxxx Ferry Road, in T-7-S, R-9-W, Sections 8
and 9.
2. Courthouse Road Property. A tract of land, together with improvements
thereon, situated in Gulfport, Xxxxxxxx County, Mississippi, lying east
Courthouse Road and south of Pass Christian Road, in T-7-S, R-11-W,
consisting of 5.67 acres, more or less.
NOTE: This tract is currently under option.
Alabama
1. Headquarters. A building of approximately 65,000 square feet in which
the corporate headquarters is located, situated at 000 Xxxxxxxxx Xxxxx,
Xxxxxx, Xxxxxxx and the land on which it is situated.
2. Xxxxx Street Property. A tract of land, together with improvements
thereon, situated in Mobile, Mobile County, Alabama, designated as Lot 2,
Distributors Subdivision, forming the corner of Delchamps Drive and Xxxxx
Street, consisting of 2.69 acres, more or less.
3. Xxxxxxxx Property. A tract of land, together with improvements
thereon, situated in Mobile, Mobile County, Alabama, designated as Parcels
C and D, Delchamps Commercial Subdivision, lying northeast of Xxxxxxx Road
and west of Western Drive, consisting of 24 acres, more or less.
NOTE: This tract is currently under option.
4. Broad and Elmira Streets Property. A tract of land, together with
improvements thereon, situated in Mobile, Mobile County, Alabama, forming
the corner of Broad and Elmira Streets, with an adjoining lot providing
frontage on Marine Street, consisting of 1.21 acres, more or less.
NOTE: A sale of this tract is pending.
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5. 000 Xxxxx Xxxxxx Property. A tract of land, together with
improvements thereon, situated in Mobile, Mobile County, Alabama, forming
the northeast corner of Broad and Church Streets. Improvements thereon
bear municipal number 000 Xxxxx Xxxxxx.
6. Store No. 39 Property. The Company owns the land on which Store No.
39 is situated; consisting of 3 acres, more or less.
7. Mobile Partnership. The Company owns a one-half interest in a
partnership which owns and has developed a site near Mobile consisting
of 22 acres, more or less and upon which Store No. 8 is situated. The
Company leases Store No. 8 from the partnership.
Florida
Panama City Property. A fifty percent (50%) interest as tenant-in-common
in a tract of land, together with improvements thereon, situated in
Panama City, Bay County, Florida, lying east of Xxxxxx Drive and north
of Magnolia Beach Road, in T-4-S, R-15-W, Section 9, consisting of 18.7
acres, more or less.
3.14(b)
The transactions contemplated by this Agreement will conflict with the
leases for Stores No. 24 and 94.
3.14(c)
The Company has subleased the locations indicated on Exhibit 3.14 hereto.
3.15
The Company is involved in a unionization effort at the Hammond
distribution center and has challenged the election that occurred in
December 1996.
Delchamps, Inc. and General Truck Drivers, Chauffeurs, Warehousemen &
Helpers Local No. 270 and Xxxxxxx Xxx Xxxxx, Xx. and Xxx X. Xxxx and
Xxxxx Xxxxxxxx (Before the National Labor Relations Board Region 15)
3.16(a)
The Company makes no representation regarding the effect of the financing
transactions contemplated by Parent or Sub in connection with this
Agreement.
The transactions contemplated by this Agreement will breach a covenant in
the Loan Agreement dated June 29, 1995 between the Company and Hibernia
National Bank, as agent for itself and other banks. Compliance with such
covenant has been waived under the conditions described in a letter dated
July 2, 1997, a copy of which has been provided to Parent.
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The Company must and will give the holders of its 5.51% Senior Notes
notice of any person becoming a 50% shareholder within 30 days.
The transactions contemplated by this Agreement will conflict with the
leases for Stores No. 24 and 94.
The Company owns a one-half interest in a partnership which owns and has
developed a site near Mobile consisting of 22 acres, more or less. The
transactions contemplated by this Agreement will give the other partner
the right to initiate a buy-sell process, pursuant to which the Company
must choose either to buy or sell the other partner's interest at the
price specified by the partner, and will terminate the Company's right to
initiate such a process. Alternatively, the partner may elect to offer
to buy the Company's interest at an appraised value.
Upon consummation of the Offer, Topco Associates, Inc. may require that
the Company withdraw.
The contracts and agreements listed on the Data Room Index dated July 5,
1997 are incorporated by reference herein.
3.16(c)
$12.2 million (not including amounts up to $200,000 described in footnote
(1) in Disclosure Schedule Section 3.10).
3.21(b)
None.
3.24 The standstill provisions of one of the agreements will not by its terms
apply to the transactions contemplated by this Agreement.
5.1(d)
The Company's fiscal year 1997 capital budget, as amended during the
fiscal year, covered nine store expansions, six minor store remodels,
three combo conversions, and various store equipment, warehouse equipment
and administrative equipment items, aggregating approximately $25.2
million, of which approximately $13.7 million had been spent at May 31,
1997. A portion of the remainder was spent in June 1997 and the rest
has been carried over to fiscal year 1998.
The Company's fiscal year 1998 capital budget includes three store
expansions, thirteen major store remodels, four combo conversions, and
various store equipment, warehouse equipment and administrative equipment
items aggregating approximately $48.5 million, including amounts carried
over from the fiscal year 1997 capital budget. The store
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expansion, remodel and conversion schedule for fiscal year 1998 was
previously submitted to Parent.
The Company will consult with Parent prior to making any such capital
expenditures in excess of $500,000.
The Company shall retain the right to make bonus payments pursuant to its
Cash Incentive Compensation Plan not to exceed $2.6 million.
The Company shall be entitled to make expenditures in connection with its
Frequent Shopper Program; provided, that the Company shall delay the
introduction of the program for four weeks from July 10, 1997 and shall
thereafter consult with Parent prior to such introduction.
5.1(e)
The Company shall retain the right to make bonus payments pursuant to its
Cash Incentive Compensation Plan not to exceed $2.6 million.
The Company shall be entitled to enter into new agreements or amend
existing agreements, including employment, severance and change of
control agreements, and to grant new awards or benefits, excluding
stock options and other long term incentive compensation arrangements,
to the extent reasonably necessary to provide equivalent compensation
to the replacement (including by way of internal promotion) of any
employee at the Vice President level or above who terminates employment
with the Company prior to the Effective Time; provided, that the Company
shall consult with Parent prior to taking any of the foregoing actions.
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