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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________
FORM 10-K
__________
(Mark One)
[X] Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
(Fee Required) for the fiscal year ended December 25, 1999 or
[_] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
(No Fee Required) for the transition period from _____ to _____
Commission File Number
1-6814
BIG V SUPERMARKETS, INC.
(Exact name of registrant as specified in its charter)
New York 14-1459448
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
176 North Main Street
Florida, New York 10921
(914) 651-4411
(Address, including zip code, and telephone number,
including area code, of principal executive offices)
__________
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No ______
---
Aggregate market value of voting stock held by non-affiliates
as of April 6, 2000: $0
Common stock outstanding as of April 6, 2000: 1,000 shares
Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of the registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
This Annual Report on Form 10-K is being filed voluntarily and shall not be
deemed to be subject to Section 18 of the Securities Exchange Act of 1934.
A list of Exhibits to this Annual Report on Form 10-K is located on page II-1.
_________________________
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BIG V SUPERMARKETS, INC.
FORM 10-K FOR THE YEAR ENDED DECEMBER 25, 1999
INDEX
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Page
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PART I
ITEM 1. Business 3
ITEM 2. Properties 10
ITEM 3. Legal Proceedings 10
ITEM 4. Submission of Matters to a Vote of Security Holders 10
PART II
ITEM 5. Market for the Registrant's Common Equity and Related
Stockholder Matters 11
ITEM 6. Selected Consolidated Financial Information 11
ITEM 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 12
ITEM 8. Financial Statements and Supplementary Data 19
ITEM 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 19
PART III
ITEM 10. Directors and Executive Officers of the Registrant 20
ITEM 11. Executive Compensation 22
ITEM 12. Security Ownership of Certain Beneficial Owners and Management 27
ITEM 13. Certain Relationships and Related Transactions 29
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K. 31
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ITEM 1. Business
FORWARD-LOOKING STATEMENTS
Other than statements of historical fact, all statements included in this
Form 10-K, including the statements under Item 2, "Management's Discussion and
Analysis of Financial Condition and Results of Operations", are, or may be
considered forward-looking information, as defined in the Private Securities
Litigation Reform Act of 1995. Examples of such statements in this report
include those concerning the Year 2000 issue, projected cash outlays for
interest, principal payments, and capital expenditures. The Company cautions
the reader there is no assurance actual results or business conditions will not
differ materially from those forward-looking statements whether expressed,
suggested or implied as a result of various factors. Such factors include, but
are not limited to, increased competitive pressures from existing competitors
and new entrants, general or regional economic conditions, interest rate
environment and its affect on the Company's cost of capital, the liquidity of
the Company on a cash flow basis (including the Company's ability to comply with
the financial covenants of all applicable credit agreements), the success of
operating initiatives including the ability to control various expense
categories, and other risk factors detailed herein and in other filings of the
Company.
General
Big V Supermarkets, Inc. ("Big V" or the "Company") is a leading regional
supermarket company which operates 37 supermarkets, principally under the
ShopRite(R) name, in the Hudson River Valley region and Westchester County, New
York, northeastern Pennsylvania, central and northwestern, New Jersey. Big V's
30 New York supermarkets are located in the eight counties of Westchester,
Orange, Dutchess, Ulster, Columbia, Sullivan, Putnam and Greene. The Company's
primary market consists of the seven counties north of Westchester County, where
23 of its 30 New York stores are located. Big V has the leading market share in
its primary market, with an estimated market share of 28%, which is
approximately double that of its next largest competitor. The Company's market
share in Westchester County approximates 10%, or second in this market.
As the largest member of the Wakefern Food Corp., ("Wakefern") the largest
cooperative food wholesaler in the United States, the Company benefits from over
$5.5 billion in purchasing power, an industry leading private label program,
extensive advertising and promotion connected with the ShopRite(R) trademark and
one of the most popular and recognized supermarket names in the region. Big V
began operations in 1942 and listed its stock on the American Stock Exchange in
1971. The Company was taken private in a management-led buyout sponsored by CS
First Boston in 1987 and was acquired in December 1990 in a management-led
buyout sponsored by Thomas H. Lee Company ("THL").
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Store Summary
Selected statistics on Big V's stores are presented below:
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Fiscal Year Ended
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December 25, December 26, December 27, December 28, December 30,
1999 1998 1997 1996 1995
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Average annual sales per store (in
millions) $ 26.5 $ 25.5 $ 24.6 $ 23.7 $ 24.0
Same store sales increase
(decrease) from prior year 4.0% 3.1% 2.9% 0.1% (0.8)%
Total store area in square feet (in
thousands) 1,722 1,497 1,429 1,358 1,439
Total store selling area in square feet
(in thousands) 1,239 1,097 1,054 999 1,054
Average total square feet per store
(in thousands) 46.5 46.8 46.1 43.8 45.0
Average square feet of selling area per
store (in thousands) 33.5 34.3 34.0 32.2 33.0
Annual sales per square foot of selling
area $ 769 $ 743 $ 724 $ 737 $ 729
Number of stores:
Stores remodeled (over $500,000) 2 1 -- 4 5
New stores opened/acquired 5 1 -- 1 --
Stores replaced/expanded 1 -- 3 -- --
Stores closed/divested -- -- 2 2 --
Number of stores by size
(total store area):
30,000 to 39,999 sq. ft. 12 10 10 13 12
40,000 to 49,999 sq. ft. 10 10 10 10 10
Greater than 50,000 sq. ft. 15 12 11 8 10
Total stores open at period end 37 32 31 31 32
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By industry standards, Big V stores are large and productive, averaging
46,500 square feet in size and generating average sales volume of $26.5 million
per store ($769 per selling square foot) for the fifty-two weeks ended December
25, 1999. Big V's average store square footage approximates the industry
average for super stores and its sales volume per store and selling square foot
is greater than industry averages by 8% and 67%, respectively. Big V's 37
operating stores at December 25, 1999 ranged from 30,000 to 68,000 total square
feet in size and included 25 supermarkets in excess of 40,000 total square feet.
Big V's supermarkets offer a broad selection of grocery, meat, poultry,
seafood, dairy, fresh fruits, vegetables and frozen food products, including an
extensive variety of ShopRite(R) private label products. The stores also offer
an extended line of non-food products, health and beauty care products,
housewares, general merchandise and twelve in-store pharmacies. All Big V
stores offer service delicatessen departments and most stores offer floral,
bakery, prepared foods/meal solutions, and service fish departments.
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Wakefern Food Corp.
The Company is the largest member of Wakefern, owning approximately 19% of
Wakefern's outstanding stock. Wakefern is the nation's largest cooperative food
wholesaler. There are presently 43 individual member companies and 204
supermarkets which comprise the Wakefern cooperative. Only Wakefern and member
companies are entitled to use the ShopRite(R) name and trademark. Member
companies purchase their primary product requirements from Wakefern and
participate in ShopRite(R) advertising and promotional programs and its
computerized purchasing, warehousing and distribution services. The principal
benefits to the Company from its relationship with Wakefern are the use of the
ShopRite(R) name and trademark, volume purchasing, ShopRite(R) private label
products, distribution and warehousing on a cooperative basis, ShopRite(R)
advertising and promotional programs and state of the art systems and
technology. The ShopRite(R) name is widely recognized by its customers and
favorably influences the customers' decision to shop in its stores. These
benefits are important to the Company's success.
Wakefern pays a patronage dividend to each member a share of the
earnings of each product department of Wakefern in proportion to the dollar
volume of business done by the member with that product department during each
fiscal year. Big V's aggregate patronage dividend was $9.4 million in fiscal
1999, $9.3 million in fiscal 1998 and $8.8 million in fiscal 1997.
Wakefern operates principally as a member cooperative. Senior executives
of the Company spend significant time working on various Wakefern committees
which oversee and direct Wakefern purchasing and other programs. Each member's
Wakefern stock (including the Company's) is pledged to Wakefern to secure all
the member's obligations to Wakefern. Wakefern does not own any securities of
the Company or its subsidiaries. Each Wakefern member is required to make
capital contributions to Wakefern based on the number of stores operated by that
member and sales volume generated by those stores. As additional stores are
opened or acquired by a member (including the Company), additional capital must
be contributed to Wakefern. On occasion, Wakefern has increased the per-store
capital contributions. Wakefern permits the increased capital to be paid in
installments. At present, the maximum capital contribution per store is
$500,000, payable over seven years.
Purchasing and Distribution
As a Wakefern member, Big V benefits from economies of scale in purchasing
and distribution associated with chains of greater size and geographic reach.
The Company believes the regional nature of its business has permitted Big V to
operate with greater flexibility and increased responsiveness to the demographic
characteristics of the communities served by its stores than those of larger
chains. Under an agreement among Wakefern and all of its members, each member
is obligated to purchase from Wakefern or Wakefern approved vendors a minimum of
85% of product needs. While fulfilling this minimum purchase requirement, Big
V purchased approximately 80% of its total purchases during fiscal 1999 from
Wakefern. The remaining 20% of Big V's purchases were delivered directly by
vendors to Big V's stores. Wakefern operates five warehouse and distribution
facilities in Elizabeth, Dayton, Secaucus and South Brunswick, New Jersey and
Wallkill, New York. The proximity of these facilities to Big V's stores,
combined with Big V's efficient product acquisition system, shortens the lead
time between the placement of a merchandise order and receipt.
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Business Strategy
Big V's strategy is designed to maximize operating profitability, increase
market share, improve customer service and satisfaction and pursue new store
opportunities in existing trade areas and in contiguous new markets. Three
principal components of this strategy are price and value leadership, "one-stop
shopping" convenience and the capital investment program, which includes the
conversion of most of the existing stores to the highly successful "Fresh
Market" format.
Price and Value Leadership
High Value Image: Big V consistently ranks as number one in value among
its competitors in independent consumer surveys. Management believes this high
value image results from Big V's low price reputation, the ShopRite(R) private
label program, superior service departments, quality perishables, courteous and
efficient customer service, wide product assortment and extensive advertising
and promotional campaigns. Each week the Company offers in excess of 2,500 sale
items, many of which are manufacturer-funded promotions. The sustained and
consistent nature of the Company's promotions allows customers to find many of
their preferred brands on sale week to week, which develops greater customer
loyalty. The Company's reputation for value enables it to increase market share
and respond aggressively to competitor expansion.
"One-Stop Shopping" Convenience
Variety and Services Big V's extensive selection of food products, seasonal
and basic categories of general merchandise, health and beauty care products,
and high quality service departments such as full service delicatessens, custom
butchers, in-store bakeries and prepared foods offer customers convenience and
choice. A typical Big V store offers 35,000 stockkeeping units versus an
industry average of approximately 25,000. This extensive assortment covers
seasonal and basic categories of general merchandise, food products, and health
and beauty care products. The stores provide a full range of high quality
service departments such as full-service delicatessens, custom butchers, and in-
store bakeries. Other convenience services include in-store full service
banks, in-store pharmacies and one-hour film development. These departments
increase customer traffic and further enhance the Company's reputation for
convenience.
During 2000, Big V intends to significantly increase it's general
merchandise offerings and provide a lawn and garden selection of live and hard
goods and an expanded electronics selection to further enhance the Company's
"one-stop shopping" image.
Capital Investment and Expansion Program
The Company believes a high level of capital investment in the Company's
core stores and the opening or acquisition of new stores in contiguous markets
is a critical component of its operating strategy. The Company increased its
total retail space approximately 15% during 1999 to 1.7 million square feet with
the acquisition of a Wakefern member, ShopRite of Pennington, Inc., and the
expansion of our store in Warwick, New York. In the past five years, Big V
expanded or remodeled nearly all of its existing stores, replaced four stores
with new facilities, opened two new stores, and acquired a five-store chain.
Although Big V typically remodels its stores every 7 to 10 years and
replaces them every 15 to 20 years, the Company continually renovates stores and
equipment to maintain modern state-of-the-art facilities. Management believes
the Company's pre-emptive capital investment in its existing store base will
preserve the competitive advantage provided by Big V's prime retail locations
and continue to
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expand the Company's market share. Although Wakefern does not prescribe
geographical franchise areas to its members, the specific locations at which the
Company, other members of Wakefern or Wakefern itself may open new stores under
the ShopRite(R) name are subject to the approval of Wakefern's Site Development
Committee. This committee is composed of persons who are not current or past
employees or members of Wakefern and whose decision to deny a site application
may be appealed to the Wakefern Board of Directors. Wakefern assists its members
in their site selection by providing appropriate site analysis, demographic
information, volume projections and projections of the developmental impact on
existing member supermarkets in the area.
The Company's growth plan anticipates several new supermarkets over the
next four years ranging in size from 50,000 to 79,000 square feet. The new
supermarkets will incorporate a new prototype that includes an expanded
perishables and general merchandise presentation. The Company plans to open
five new stores in 2000, six in 2001, eight in 2002 and nine in 2003.
Management estimates the total cost of equipment, fixtures and leasehold
improvements associated with opening the planned 28 supermarkets will
approximate $3.4 million per store. For a new store, the Company typically
purchases approximately $1.2 million of start-up inventory. The Company
generally finances its initial inventory requirements through accounts payable
with terms which are often longer than the Company's inventory turnover. The
Company opens new supermarkets under the name ShopRite(R) that are subject to
the approval of Wakefern's Site Development Committee. Rejection of sites by
the Wakefern Site Development Committee could impact the Company's expansion
strategy.
Advertising and Promotion
High Profile ShopRite(R) Name: The Company participates in Wakefern's
advertising programs that emphasize the well recognized ShopRite(R) name. The
Company benefits from the wide presence across all media Wakefern provides,
particularly New York Metropolitan region television and radio. The Company
produces weekly circulars, which are distributed efficiently and economically
due to its high market concentration. Advertising expense ranged from 1.5% to
2.0% of sales during the last three years.
Big V's advertising strategy emphasizes price, variety, high quality
perishables, broad selection of nationally advertised brand name products and an
extensive selection of ShopRite(R) private label merchandise. Most of the
Company's advertising is developed and placed by Wakefern and tailored to the
Company's specific needs. Big V has several programs designed to inspire
customer loyalty including the "Can-Can" and "Half-Price" promotions which
instill price and value leadership in customers' minds. "Can-Can" is a three-
week promotion having occurred every January for the last 27 years, offering
customers the opportunity to buy a wide variety of deeply discounted cases of
canned goods. The "Half-Price" promotion is held periodically throughout the
year and covers a wide range of categories and items.
Targeted Marketing Programs: The Company has effectively used targeted
marketing programs based on the Wakefern supported "Price Plus" frequent shopper
card. This three-in-one card has the option to be a co-branded MasterCard(TM)
offering check cashing capabilities, a rebate equal to 1.0% of all ShopRite(R)
purchases and a 0.5% rebate on all other purchases. The benefits offered by the
"Price Plus" card inspire customer loyalty that Management believes is a
significant component of the Company's success. Approximately 85% of total
transactions at the Company's stores are made with the "Price Plus" card.
During 1999, the Company offered internet shopping capability through Wakefern's
affiliation with Priceline.com.
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Technology
The Company considers information distribution, process automation and
computerization important to its operations and competitive position. The
Company uses in-store minicomputers linked to Wakefern's data center. All
Company stores have recently upgraded scanning checkout systems to improve
pricing accuracy, enhance productivity and improve transaction time for
customers. In addition, all stores utilize computer generated order systems and
on-line payment systems located in every register lane. The Company also
actively utilizes electronic marketing data. All Big V stores use state-of-
the-art IBM 4690 point of sale systems along with a computerized time and
attendance, labor-scheduling systems and computerized energy management systems.
All Company stores use satellite communications. During 1999, the Company began
communicating electronically with store locations via the Internet. All field
merchandising and operations supervision communicates with the organization
remotely. Future plans include Intranet application development to further
improve information distribution among Company headquarters, stores and
vendors. The Intranet application will provide an infrastructure for
additional Company initiatives.
Year 2000
The Company's and Wakefern's facilities and major systems were performing
as anticipated on January 1, 2000. Subsequently, the Company and Wakefern did
not experience any Y2K related problems. The period and capital costs
associated with the Company's Y2K readiness were in-line with expectations.
Accordingly, such costs did not have a material effect on the Company's results
of operations, financial condition or cash flows in 1999 and 1998.
Competition
The Company is in direct competition with national, regional and local
chains as well as independent supermarkets, convenience stores and club stores.
The Company's principal competitors are Grand Union and A&P. In certain
markets, the Company competes with Pathmark, Price Chopper, Stop & Shop,
Hannaford Brothers, Wal-Mart Supercenters, and various independent operators,
convenience stores and warehouse clubs. In order to compete effectively, Big V
maintains low prices, courteous and quick service, quality products and
consistent availability of a wide variety of merchandise, including non-food
items. The combination of these factors has led to the Company's higher than
industry average sale per customer ($27.00 vs $22.00). The Company's regional
focus and the marketing information provided by Wakefern's extensive Price Plus
card database give the Company greater flexibility to tailor products offered in
each store to the demographics of the communities it serves as compared to
national and larger regional chains. The Company is further responding to known
and proposed competitive intrusions by making significant capital investments
in its primary market over the next four years.
Employees and Labor Relations
As of December 25, 1999, approximately 91% of Big V's 5,700 employees were
covered by collective bargaining agreements negotiated with seven unions. Four
unions represent nearly 77% of the Company's employees or 4,379 retail clerks
(Local 1262 - 1,717 employees; Local 1500 - 1,814 employees; Local 1776 - 286
employees; and Local 1360 - 562 employees). Three unions represent
approximately 900 meat, seafood and service deli department employees (Local 464
- - 755 employees; Local 1 - 25 employees; and Local 56 - 120 employees). The
Local 1262 contract expires in April 2001; the Local 1500 contract expires in
September 2002; the Local 464 contract expires in April 2003; the Local 1776
contract expires March 2003; the Local 1360 contract expires June 2001; the
Local 56 contract expires November 2001; and the Local 1 contract expires May
2002. The Company believes
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labor relations are good and does not anticipate any work stoppages related to
upcoming contract negotiations.
Regulatory and Environmental Matters
General
The Company must secure a variety of local, state and federal health and
food distribution permits for the conduct of its business. Such regulation does
not have a material impact on its operations. The Company's twelve pharmacy
departments are subject to state and federal regulation, including licensed
pharmacists on duty at all times.
Baldwin Place Shopping Center, Somers, NY
Soil and ground-water contamination was detected at one planned new store
site, the Baldwin Place Shopping Center, located in Somers, New York in the late
1980's. Baldwin Place Shopping Center, a presently non-operating center, is
owned by a wholly-owned subsidiary of Big V. The New York State Department of
Environmental Conservation ("DEC") placed the Baldwin Place Shopping Center on
the DEC List of Inactive Hazardous Waste Disposal Sites in 1989 because of the
suspected release of hazardous materials and petroleum products.
Certain on-site residential and public water supply wells in the vicinity
of the Baldwin Place Shopping Center were found to be contaminated with
trichloroethene and tetrachloroethene and the contamination appeared to
originate from a previous dry cleaning operation in the shopping center. The
DEC entered into an Order of Consent in July 1992, with Big V and its
subsidiary, Somers Development Corporation, for the development and
implementation of a Remedial Investigation/Feasibility Study and implementation
of interim remedial measures at the Baldwin Place Shopping Center.
In December 1995, the Company received a Record of Decision (ROD) from the
New York State Department of Environmental Conservation with respect to the
environmental status of the Baldwin Place Shopping Center. The ROD defined the
environmental status of the site and outlined the remedial actions to be
performed. The Company has capitalized approximately $2.3 million of total
costs related to this remediation. At December 25, 1999, the Company is in
compliance with the ROD and required remedial actions are complete. During 2000
the Company plans to obtain site plan approval, sell the property to recover its
costs and begin store development. The Company anticipates the present value of
future monitoring costs associated with the property will approximate $1.2
million. Such costs will be funded from the proceeds of the property's sale.
Trade Names, Service Marks and Trademarks
Big V uses a variety of trade names, service marks and trademarks. Except
for ShopRite(R), which is owned by Wakefern and licensed to Big V and the other
Wakefern members, Big V does not believe any such trade names, service marks or
trademarks are material to its business.
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ITEM 2: Properties
The Company leases all supermarkets (containing approximately 1.7 million
square feet of total space), with initial terms generally ranging from 10 to 25
years, with renewal options. Twenty-nine of these leased stores are located in
strip shopping centers and eight are free-standing stores. The total annual
rent paid for all of the Company's leased facilities for fiscal 1999 was $16.1
million, including payments under capitalized leases. Lease payments per square
foot during fiscal 1999 ranged from $2 to $19, averaging $9, significantly lower
than current rates in the Company's markets. The Company is obligated to pay
for utilities and liability insurance on all properties and real estate,
maintenance and insurance on certain properties.
A wholly-owned subsidiary of the Company owns the Baldwin Place Shopping
Center located in Somers, New York. This property currently is held for sale.
See Item 1--"Regulatory and Environmental Matters."
ITEM 3: Legal Proceedings
The Company is a party to a number of legal proceedings in the ordinary
course of business. Management believes these proceedings will not, in the
aggregate, have a material adverse impact on the financial condition, results of
operations, liquidity or business of the Company. See Item 1--"Regulatory and
Environmental Matters."
ITEM 4: Submission of Matters to a Vote of Security Holders
There were no matters submitted during the fourth quarter of the fiscal
year covered by this report to a vote of security holders through solicitation
of proxies or otherwise.
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PART II
ITEM 5: Market for the Registrant's Common Equity and Related Stockholder
Matters
BV Holdings Corporation, a Delaware corporation ("BVH"), is the sole
stockholder of Big V. Big V Holding Corp., a Delaware corporation ("Holding"),
is the sole stockholder of BV Holdings Corporation. There is no established
trading market for the equity of Big V, BV Holdings Corporation or Big V Holding
Corp.
ITEM 6: Selected Consolidated Financial Information
The selected consolidated financial information of the Company for the 52
weeks ended December 30, 1995, December 28, 1996, December 27, 1997, December
26, 1998, and December 25, 1999, presented below should be read in conjunction
with the historical consolidated financial statements of the Company, including
the notes thereto, included elsewhere herein.
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52 Weeks Ended
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Dec. 25, Dec. 26, Dec. 27, Dec. 28, Dec. 30,
1999 1998 1997 1996 1995
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Income Statement Data:
Sales $856,872 $814,404 $762,880 $735,976 $768,682
Gross Profit 226,428 214,029 198,984 190,125 200,383
Selling, general and administrative 182,772 172,952 161,786 151,825 161,746
Special charges -- -- -- 3,004 --
Restructuring charge (1) 8,500 -- -- -- --
Depreciation and amortization 17,351 15,454 16,979 17,381 18,548
Operating income 17,805 25,623 20,219 17,915 20,089
Interest expense, net 23,236 23,651 24,586 24,382 27,277
(Loss) income before income taxes (5,431) 1,972 (4,367) (6,467) (7,188)
Income tax (benefit) expense (3,300) 1,860 (1,625) (2,509) (2,110)
Extraordinary charge, net of tax benefit of $301 492 -- -- -- --
Cumulative effect of change in accounting
principle, net of tax benefit of $332 543 -- -- -- --
Net Income/(Loss) (3,166) 112 (2,742) (3,958) (5,078)
<CAPTION>
Dec. 25, Dec. 26, Dec. 27, Dec. 28, Dec. 30,
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Balance Sheet Data (at end of period):
Working (deficiency) capital $ (8,003) $ (9,665) $(17,609) $(10,683) $(11,196)
Total assets 312,454 247,664 255,145 264,617 284,956
Total debt 238,595 191,877 200,153 213,610 226,952
Stockholder's deficit (30,836) (27,199) (27,186) (24,310) (20,213)
</TABLE>
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(1) See discussion of restructuring charge contained within the Management's
Discussion and Analysis of Financial Condition and Results of Operations.
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ITEM 7: Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
The following discussion of the Company's consolidated results of
operations and financial position should be read in conjunction with the
Consolidated Financial Statements and notes thereto included in this Form 10-K.
References in the following discussion are to the fiscal years ended December
25, 1999 ("fiscal 1999"), December 26, 1998 ("fiscal 1998"), December 27, 1997
("fiscal 1997").
The Company is the largest supermarket chain in its primary trading area of
the Hudson River Valley region of New York. A combination of price and value
leadership, one-stop shopping convenience, and a focused capital investment
program has enabled the Company to sustain its leading market share. Earnings
Before Interest Expense, Depreciation and Amortization, Income taxes and LIFO
provision (EBITDA) was $44.8 million in 1999, $42.0 million in 1998 and $37.6
million in 1997.
The Company operates 23 of its 37 stores in the Hudson River Valley of New
York and 7 stores in Westchester County, New York. The Hudson River Valley's
population grew 5.2% for the period 1990 through 1999 and compares very
favorably to New York State's 1.0% growth rate for the same period. This market
area has rebounded from the early 1990's IBM downsizing and there continues to
be a growing migration of families from New York City. Westchester County's 3.5%
growth rate between 1990 and 1999, significantly exceeds the statewide growth
rate.
The Company opened six stores, five by acquisition, replaced/expanded four
stores, completed three extensive remodels during the three years ended December
25, 1999. Management believes this capital investment lessened the impact of
competitive openings and contributed to the same store sales growth of 4.0% in
1999.
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Basis of Presentation
The following discussion of the Company's financial condition and results
of operations should be read in conjunction with the financial statements and
notes thereto included elsewhere in this Form 10-K.
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Fiscal Year Ended
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December 25, December 26, December 27,
1999 1998 1997
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Income Statement Data (percentage of sales)
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Sales 100.0% 100.0% 100.0%
Gross margin 26.4 26.3 26.1
Selling, general and administrative 21.3 21.2 21.2
Restructuring charges 1.0 -- --
EBITDA (1) 5.2 5.2 4.9
Depreciation and amortization 2.0 1.9 2.2
Interest, net 2.7 2.9 3.2
Income/(Loss) before income taxes (.6) 0.2 (0.6)
Income tax expense (benefit) (.4) 0.2 (0.2)
Extraordinary charge .1 -- --
Cumulative effect of change in accounting .1 -- --
- ----------------------------------------- ------ ------ ------
Net Income/(Loss) (.4)% 0.0% (0.4)%
====== ====== ======
Other Data (in millions):
EBITDA $ 44.8 $ 42.0 $ 37.6
====== ====== ======
Net cash provided by operating activities $ 13.0 $ 21.5 $ 16.9
====== ====== ======
Net cash used in investing activities $(46.1) $ (8.9) $(10.2)
====== ====== ======
Net cash provided by (used in)
financing activities $ 39.1 $(10.4) $ (3.8)
====== ====== ======
</TABLE>
(1) EBITDA represents earnings before interest expense, depreciation and
amortization, including noncash losses on the sale of property, plant and
equipment, income taxes and LIFO provision/credit. EBITDA is a widely accepted
financial indicator of a company's ability to service and/or incur debt, and
also represents a primary debt covenant of the Company. Noncompliance with this
covenant would represent a default under the Company's debt agreements which
could subject the Company to debt acceleration if not waived or amended. EBITDA
should not be construed as an alternative to, or a better indicator of,
operating income (as determined in accordance with generally accepted accounting
principles) or to cash flows from operating activities (as determined in
accordance with generally accepted accounting principles) and should not be
construed as an indication of the Company's operating performance or as a
measure of liquidity. Additional information regarding the Company's long term
debt and covenant compliance is contained in the Liquidity and Capital Resources
heading of this section.
13
<PAGE>
Results of Operations
Fiscal Year Ended December 25, 1999 Compared to Fiscal Year Ended December 26,
1998
Sales
Sales for 1999 were $856.9 million compared to $814.4 million in 1998
representing a 5.2% increase (4.0% for same store sales). The increase in total
sales was attributable to growth in existing stores supplemented by the November
1999 acquisition of a five-store chain. Management estimates that inflation was
generally flat for the year. Total square footage grew to 1.7 million
including the acquisition.
Gross Margin
Gross margin was 26.4% in 1999 compared to 26.3% in 1998. The .1% increase
was primarily due to an increased share of business in the higher margin
nonfoods department partially offset by planned margin reductions in other
departments initiated to stimulate sales.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were 21.3% in 1999 compared to
21.2% in 1998. Increased advertising, workers' compensation insurance and
occupancy related expenses were partially offset by savings in utility costs due
to deregulation and lower store payroll costs due mainly to the efficient use of
the Company's work force.
Restructuring Charge
During the third quarter of fiscal 1999, the Company formalized its plans
to reduce the escalating cost of its union labor force, streamline the functions
of its corporate offices and reduce its overall cost structure ("Restructuring
Plan"). The major initiatives of the Restructuring Plan included the following:
(1) a Board of Director approved Big V Supermarkets, Inc. Early Retirement
Buyout Program, which provided eligible store associates various combinations of
cash and health coverage in consideration of the employee severing their
employment with the Company; and (2) the realignment of corporate strategic
business functions, internal processes, and the elimination of functional
redundancies between the Company and Wakefern.
In connection with the implementation of the Restructuring Plan, the
Company recorded a pre-tax restructuring charge of $8.5 million. As of December
25, 1999, the restructuring liability was $5.7 million. During the first quarter
of 2000, the Company completed the initiatives set forth in the Restructuring
Plan including the payment of severance and termination benefits. As of March
18, 2000, the end of the Company's first quarter, approximately $0.6 million of
the original charge remains. The balance will be used to provide health and
welfare benefits to Restructuring Plan's participants over the remainder of
fiscal 2000.
EBITDA
Fiscal 1999 EBITDA was $44.8 million, excluding the effects of the $8.5
million restructuring charge, and represents an increase of $2.8 million or 6.7%
compared to the prior year. The increase was due to increased sales and gross
margin levels compared to 1998. EBITDA margin remained at 5.2% as increased
selling, general and administrative expenses offset the favorable gross margin
results.
14
<PAGE>
Depreciation and Amortization
Depreciation and amortization was 2.0% of sales in 1999 compared to 1.9% in
1998. The increase was due primarily to a full year's depreciation of the
Company's IBM front-end system as well as increased depreciation and
amortization expense associated with the acquisition of ShopRite of Pennington,
Inc.
Interest, net
Interest, net decreased to $23.2 million in 1999 from $23.7 million in
1998. The decrease resulted from lower outstanding equipment loan balances and
increased interest income derived from cash escrowed for the payment of the
Company's junior subordinated notes payable. Higher variable interest rates and
interest associated with acquisition financing partially offset the interest
savings.
Extraordinary charge
On January 14, 1999 the Company refinanced its then existing Credit
Agreement ("Agreement") by entering into a new Bank Credit Agreement with
different lenders. The Company repaid amounts due under the Agreement prior to
their scheduled maturity dates and recognized an extraordinary after-tax charge
of $.5 million as a result of writing-off unamortized deferred financing costs
associated with the Agreement.
Cumulative Effect of Change in Accounting Principle
During 1999, the Company adopted, the American Institute of Certified
Public Accountants Statement of Position 97-3 ("SOP 97-3"), Accounting by
Insurance and Other Enterprises for Insurance-Related Assessments, which
requires a liability to be recognized for insurance-related assessments. The
adoption of SOP 97-3 resulted in a charge of $875,000, net of income tax benefit
of $332,000, which is presented as a cumulative effect of a change in accounting
principle in the accompanying consolidated statements of income (loss).
Assuming SOP 97-3 was applied retroactively, pro forma 1997 loss before
extraordinary item and net loss would have been $3.0 million and $2.8 million,
respectively. The adoption of SOP 97-3 did not have a material effect on the
1998 income before extraordinary item and net income.
Net Income (Loss)
Net loss was $3.2 million in 1999 compared to net income of $.1 million in
1998. The decrease in net income was attributable to the $8.5 million
restructuring charge. Excluding the effects of the restructuring charge, net
income would have approximated $2.1 million, using a 37.9% effective tax rate.
15
<PAGE>
Results of Operations
Fiscal Year Ended December 26, 1998 Compared to Fiscal Year Ended December 27,
1997
Sales
Sales for 1998 were $814.4 million compared to $762.9 million in 1997
representing a 6.8% increase (3.1% for same store sales). The increase in total
sales was attributable to the opening of one new store and growth in existing
stores supplemented by the incremental impact of replacement/expanded stores in
late 1997. Management estimates that inflation was generally flat for the year.
Total square footage grew to 1.5 million with the addition of one new store.
Gross Margin
Gross Margin was 26.3% in 1998 compared to 26.1% in 1997. The .2% increase
was primarily due to improved selling margins in many of the Company's operating
departments supplemented by a shift in share of business toward the higher
margin perishable departments. The margin improvements were partially offset by
increased LIFO expense.
Selling, General and Administrative Expenses
Selling, general and administrative expenses remained level at 21.2% of
sales in fiscal 1998 compared to the prior year. Increased occupancy and store
payroll costs were offset by savings in advertising and the absence of any
retrospective general liability premium calls in 1998.
EBITDA
Fiscal 1998 EBITDA was $42.0 million, an increase of $4.4 million or 11.7%
compared to the prior year. The increase was due to higher sales and gross
margin levels compared to 1997. EBITDA margin increased to 5.2% from 4.9% in
1997 primarily as a result of the improvements in selling margins.
Depreciation and Amortization
Depreciation and amortization was 1.9% of sales in 1998 compared to 2.2% in
1997. The reduction was primarily due to the full amortization of several
leasehold assets in late 1997, the termination of a capital lease in 1997, and
the loss associated with the disposal of NCR front-end equipment replaced with
leased IBM front-end equipment in the latter half of the prior year.
Interest, net
Interest, net decreased to $23.7 million in 1998 from $24.6 million in
1997. The decrease was primarily due to lower capital lease interest, scheduled
principal payments on equipment and senior bank term loans. Partially
offsetting the decrease were interest on increased revolver borrowings and
negotiated fee and interest rate increases to the A Term Loans and Revolving
Credit Facility related to extending the loans' maturity dates.
Net Income
Net income was $0.1 million in 1998 compared to a net loss of $2.7 million
in 1997. In absolute terms, the improvement was $2.8 million compared to 1997.
The improvement was due to improved
16
<PAGE>
gross margin, decreased depreciation and amortization, and decreased interest
expenses partially offset by increased income tax expense related to non-
deductible goodwill amortization.
Liquidity and Capital Resources
The Company's long-term debt (including current maturities and capital
lease obligations) as of December 25, 1999 was $238.6 million. All scheduled
principal and interest payments required by the various debt agreements were
made during the year ended December 25, 1999.
The Company had a working capital ratio of approximately .93:1 at December
25, 1999 and .88:1 at December 26, 1998. The Company typically requires small
amounts of working capital since inventory is generally sold before payment is
made to Wakefern and other suppliers.
Net cash provided by operating activities was $13.0 million in fiscal 1999
and $21.5 million in fiscal 1998. The decrease in net cash provided by
operating activities during fiscal 1999 was principally due to the restructuring
charge.
Net cash used in investing activities was $46.1 million for fiscal 1999
compared to $8.9 million for fiscal 1998. The increase in net cash used in
investing activities was due to the acquisition of ShopRite of Pennington, Inc.,
a five-store supermarket chain, supplemented by increased capital spending on
existing Company stores.
Net cash provided by financing activities was $39.1 million in 1999
compared to net cash used in financing activities of $10.4 million in 1998. The
increase in cash provided by financing activities was a result of the
refinancing of the Company's bank credit agreement supplemented by additional
bank term debt used to finance the ShopRite of Pennington, Inc. acquisition.
The Company's major uses of cash for the year ended December 25, 1999 were
as follows: (i) cash interest payments (including capitalized leases) of $22.3
million; (ii) acquisition and other capital expenditures of $46.1 million; and
scheduled debt payments of $8.4 million, excluding the refinancing of the
Company's bank credit agreement.
The Credit Agreement provides for a $25.0 million revolving credit
facility. There was an additional $.8 million outstanding under the revolving
credit facility as of December 25, 1999, and $6.3 million was used for letters
of credit and bonding purposes. The Credit Agreement requires that the Company
maintain minimum levels of consolidated net worth, EBITDA and fixed charge
coverages, and maximum levels of capital expenditures (each as defined in the
Credit Agreement).
A First Amendment to the Credit Agreement dated as of November 12, 1999
among Big V Holding Corp., BV Holdings Corporation, Big V Supermarkets, Inc.,
and the financial institutions party to the Credit Agreement provided a $36.0
million incremental bank term loan to be used for the ShopRite of Pennington,
Inc. acquisition along with a $5.0 million delayed draw facility which the
Company exercised in December 1999.
A Second Amendment to the Credit Agreement dated March 2, 2000 among Big V
Holding Corp., BV Holdings Corporation, Big V Supermarkets, Inc., and the
financial institutions party to the Credit Agreement provided an additional $3.0
million of bank term loans in consideration of the permanent reduction of $3.0
million of the participating lenders total revolving loan commitment. Prior to
the Second Amendment, the Company had the ability to ask participating lenders
to increase their revolving loan commitments by $5.0 million.
17
<PAGE>
Major uses of cash in fiscal 2000 are expected to be: (i) interest payments
(including capitalized leases) of $25.8 million; (ii) capital expenditures of
$30.0 million; and (iii) scheduled debt and capital lease payments of $20.0
million (including the non-recourse demand note payable solely from the sale
proceeds of the Company's Baldwin Place Shopping Center located in Somers, New
York).
All of the Company's facilities are subject to long-term leases. The costs
to develop new stores consist of approximately $3 million for fixtures,
equipment and leasehold improvements and approximately $1.2 million for
beginning inventory. Fixtures, equipment and leasehold improvements are
generally funded using a combination of financing and operating cash
flow/revolver availability. Inventory requirements are generally financed
through accounts payable with terms that usually exceed the Company's inventory
turnover.
The Company received a Record of Decision (ROD) from the New York State
Department of Environmental Conservation (DEC) in December,1995 with respect to
the environmental status of the Baldwin Place Shopping Center located in Somers,
New York. The ROD defined the environmental status of the site, outlined the
remedial actions to be performed, which allows the Company to proceed with the
site plan approval process. The costs incurred by the Company to obtain and
satisfy the requirements of the ROD, net of any and all reimbursements
approximates $2.3 million at December 25, 1999. The Company has capitalized such
costs in accordance with Generally Accepted Accounting Principles as the
property is currently held for sale. Future monitoring costs required by the ROD
approximate $1.2 million and are the Company's responsibility through and
subsequent to the sale process. These costs will be funded through the sale of
the property once site plan approval has been obtained. The Company anticipates
selling the property when site plan approval is obtained at a price in excess of
total capitalized costs and future monitoring costs. Management further believes
costs capitalized in connection with the Baldwin Place Shopping Center will be
fully recoverable and the majority of the Company's $2.5 million note payable
secured by this property will be paid. Such note is payable solely from the net
proceeds of the sale of the property based upon a formula provided in the note.
The recoverability of goodwill is assessed by comparing the Company's
forecasts of cash flow from future operating results, on an undiscounted basis,
to the unamortized balance of goodwill at each balance sheet date. The Company
will recognize a charge to operations at any time this comparison indicates that
an impairment may be likely. Management continues to believe in the validity of
the carrying value of goodwill and the estimated useful lives assigned to its
components.
18
<PAGE>
ITEM 8: Financial Statements and Supplementary Data
Information called for by this item is set forth in the Company's financial
statements and supplementary data contained in this report. Specific financial
data can be found at the pages listed in the following index.
BIG V SUPERMARKETS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Fiscal Years 1997, 1998 and 1999
<TABLE>
<S> <C>
Independent Auditors' Report ........................................ F-2
Consolidated Statements of Income (Loss)............................. F-3
Consolidated Balance Sheets ......................................... F-4
Consolidated Statements of Stockholder's Deficit..................... F-5
Consolidated Statements of Cash Flows ............................... F-6 - F-7
Notes to Consolidated Financial Statements .......................... F-8 - F-26
</TABLE>
ITEM 9: Changes in and Disagreements with Accountant's on Accounting and
Financial Disclosure
Not Applicable.
19
<PAGE>
PART III
ITEM 10: Directors and Executive Officers of the Registrant
The names, ages and present principal occupations of the directors and
executive officers of each of Big V and Holding are set forth below:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
David G. Bronstein............... 70 Chairman of the Board of Directors
Mark S. Schwartz................. 39 Director, President and Chief Executive Officer
James A. Toopes, Jr.............. 52 Director, Vice Chairman, Chief Financial and Administrative Officer, and Corporate Secretary
John W. Childs................... 58 Director
C. Hunter Boll................... 44 Director
Charles A. Brizius............... 31 Director
Joseph S. Frelinghuysen, Jr...... 58 Director
Leo J. Kahn...................... 83 Director
Steven G. Segal.................. 39 Director
</TABLE>
Mr. Bronstein served as President of the Company from December 1986 to July
1993, as the Company's Chief Executive Officer from October 1987 to December
1995, as a Director since December 1986 and as Chairman of the Board since
December 1990. Mr. Bronstein served as Interim President and Chief Executive
Officer from November 1998 through March 1999. Mr. Bronstein joined the Company
in 1985 as Executive Vice President and Chief Operating Officer. From 1979 to
1985, he served as Executive Vice President of Golub Corporation. From 1972 to
1979, Mr. Bronstein worked for P&C Supermarkets, where he rose to the position
of Senior Vice President and General Manager.
Mr. Schwartz has served as President, Chief Executive Officer and Director
of the Company since March 1999. Prior to joining Big V, Mr. Schwartz served as
Chief Executive Officer and President of Hechingers, Inc. (a home improvement
specialty store chain) from March 1998 to March 1999. Mr. Schwartz worked for
Wal-Mart from 1982 to 1998 in various management positions, including Senior
Vice President-Supercenter Stores and President and Director General, Mexico
Wal-Mart Supercenters, Aurrera Stores.
Mr. Toopes has served as Vice Chairman, Chief Financial and Administrative
Officer of the Company since November 1998; and in addition, as Director and
Executive Vice President-Finance, Administration and Corporate Development since
April 1996. He has also served as Corporate Secretary, Treasurer and Director
since April 1996. Prior to joining Big V, Mr. Toopes worked for Bi-Lo, Inc., a
subsidiary of Royal Ahold, as Executive Vice President-Finance and
Administration from 1989 to 1996. Mr. Toopes worked for Lucky Stores, Inc. from
1976 to 1989, serving as Vice President-Controller.
20
<PAGE>
Mr. Childs has served as a Director of the Company since December 1990. He
is President of J.W. Childs Associates. Until June 1995, Mr. Childs was Senior
Managing Director of Thomas H. Lee Company where he was employed since 1987.
Prior to joining THL, Mr. Childs was with the Prudential Insurance Company of
America where he held various executive positions in the investment area,
ultimately serving as Senior Managing Director in charge of the Capital Markets
Group. Mr. Childs also is a director of Quality Farm and Country, Inc., Chevys,
Inc., Beltone Electronics Corporation, Desa Holdings Corporation, Pan Am
International Flight Academy, Inc., and the Edison Project.
Mr. Boll has served as a Director of the Company since December 1990. Mr.
Boll is a Managing Director of THL and has been employed by THL since 1986. Mr.
Boll also is a Vice President of Thomas H. Lee Advisors I, and T.H. Lee
Mezzanine II, affiliates of ML-Lee Acquisition fund, L.P., and the ML-Lee
Acquisition Fund II, L.P., respectively. From 1984 to 1986, Mr. Boll worked as a
consultant with The Boston Consulting Group. From 1977 to 1982, Mr. Boll worked
as a corporate lending officer in the Energy & Minerals Group of Chemical Bank.
Mr. Boll also serves as a Director of Freedom Securities, Inc., TransWestern
Publishing, L.P., the Smith-Wollensky Restaurant Group, Inc., Cott Corporation,
United Industries Corporation and Metris Companies, Inc..
Mr. Brizius became a Director of the Company in January 1999 in connection
with the Recapitalization. Mr. Brizius worked at THL from 1993 to 1995,
rejoined in 1997 and currently serves as an Associate. From 1991 to 1993, Mr.
Brizius worked at Morgan Stanley & Co. Incorporated in the Corporate Finance
Department. He is also a Director of Eye Care Centers of America, Inc. and
United Industries Corporation.
Mr. Frelinghuysen has served as a Director of the Company and Chairman of
its Audit and Compensation Committees since December, 1990. He is President of
J.S. Frelinghuysen & Co., Inc., an independent investment firm organized in
1989. Mr. Frelinghuysen was previously a Managing Director of the First Boston
Corporation where he was employed as a member of the Investment Banking
Department from 1969-1988. He also serves as a Director of MGI Pharma, Inc., a
NASDAQ-listed pharmaceutical company and as a Trustee of the Community
Foundation of New Jersey.
Mr. Kahn has been a Director of the Company since December 1990. Mr. Kahn
founded Purity Supreme, Inc., an operator of supermarkets, warehouse food
stores, drug stores, convenience stores and warehouse drug stores, which was
sold to Supermarkets General Corporation in 1984. Following the sale of Purity
Supreme, Inc., Mr. Kahn was a co founder of Staples, Inc. and is active in
Health Development Corporation, a fitness club chain.
Mr. Segal has served as a Director of the Company since December 1994. Mr.
Segal serves as Senior Managing Director of J.W. Childs Associates, L.P.. Prior
to July 1995, Mr. Segal was a Managing Director of THL, being employed by THL
from 1987 to 1995. Mr. Segal also serves as a Director of Quality Farm &
Country, Inc., International Diverse Foods, Inc., Jillians Entertainment, Inc.,
Universal Hospital Services, Inc., National Nephrology Associates, Inc., and is
the Chairman of Empire Kosher Poultry, Inc.
Mr. Childs and Mr. Toopes are the Directors of BVH. The Officers of BVH
are Mr. Boll and Mr. Childs.
Executive officers of each of Holding, BVH and Big V are appointed and
serve at the discretion of their respective Boards of Directors. Each director
of Holding, BVH and Big V is elected for a period of one year and serves until
his successor is duly elected and qualified.
21
<PAGE>
ITEM 11: Executive Compensation
The following table sets forth the compensation paid or accrued by Big V to
the Chief Executive Officer of the Company during the year ended December 25,
1999 and the most highly-compensated executive officers/senior management of the
Company who served in such capacities on or during the year ended December 25,
1999 for services rendered to the Company in all capacities during the fiscal
years ended December 27, 1997, December 26, 1998 and December 25, 1999. Officers
of Holding and BVH are not compensated for their services as such.
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term
Compensation
Annual Compensation Awards
-----------------------------------------------------------------------------------------
Other
Annual Option All Other
Fiscal Compen- Shares Compensa-
Name and Principal Position Year Salary($) Bonus($) sation($)(1) Granted tion($)(2)
- --------------------------- ---- -------- ------- ------------ ------- -----------
<S> <C> <C> <C> <C> <C> <C>
David G. Bronstein 1999 236,447 115,823 15,409 -- 1,539
Chairman of the Board 1998 113,462 15,389 7,298 -- --
1997 152,885 -- 11,770 -- 5,045
Mark S. Schwartz 1999 387,146 141,391 123,814 19,000 --
Chief Executive Officer 1998 -- -- -- -- --
and President 1997 -- -- -- -- --
(as of March 22, 1999)
James A. Toopes, Jr. 1999 282,080 120,000 6,556 -- 1,724
Vice Chairman, Chief Financial 1998 245,231 -- 39,529 -- --
and Administrative Officer and 1997 244,616 -- 39,430 -- 2,427
Corporate Secretary
David W. Montoya 1999 19,231 30,000 -- -- --
Chief Merchandising Officer- 1998 -- -- -- -- --
Senior Vice President 1997 -- -- -- -- --
(as of November 22, 1999)
Wayne T. Marshall 1999 155,765 15,000 432 -- 1,724
Senior Vice President - 1998 115,739 7,425 926 -- 1,427
Merchandising 1997 102,715 5,600 5,810 -- 3,261
Stephen E. Hastings 1999 66,981 -- 418 -- --
Senior Vice President - Store 1998 -- -- -- -- --
Operations 1997 -- -- -- -- --
(as of July 19, 1999)
Stephen L. Hittman 1999 144,479 7,500 428 -- 1,724
Vice President-Real Estate 1998 124,904 10,000 2,893 -- 1,594
and Assistant Secretary 1997 123,962 25,000 2,263 2,600 4,574
</TABLE>
___________
(1) This represents the taxable portion of the personal use of a company
automobile, life insurance and relocation expenses.
(2) This represents the annual Company profit-sharing contribution and 401(k)
matching funds.
22
<PAGE>
Employment Agreements
On February 23, 1999, the Company and BVH entered into an employment and
non-competition agreement with Mr. Schwartz, which agreement is scheduled to
expire on December 31, 2003, subject to annual renewals thereafter. Pursuant to
this agreement, the Company has agreed to pay an annual base salary to Mr.
Schwartz of $500,000. In addition to such base salary, Mr. Schwartz is entitled
to receive certain other employment benefits, including cash bonuses based upon
the Company's attaining or surpassing profit targets established by the
Company's Board of Directors.
Pursuant to the employment agreement with Mr. Schwartz, the Company and BVH
caused Holding to sell 20,000 shares of Holding's Class A Common Stock to Mr.
Schwartz for an aggregate purchase price of $700,000 in exchange for promissory
notes payable totaling $700,000. See this Item 11 -"Loans to Management." Also
pursuant to such employment agreement, the Company and BVH caused Holding to
grant Mr. Schwartz options to purchase 19,000 shares of Holding's Class A Common
Stock under the Stock Option Plan. See this Item 11 - "Management Stock Option
Plan." In the event Mr. Schwartz's employment is terminated without cause, or
upon his death or disability, his salary (including an increase in base salary
for at least a portion of the period after termination without cause, death or
disability) and other employment benefits will, subject to certain adjustments
and limitations, continue until the end of his term of employment. In addition,
the employment agreement places certain restrictions upon the ability of Mr.
Schwartz to communicate confidential information concerning the Company to third
parties. Pursuant to the non-competition provisions of this employment
agreement, Mr. Schwartz will not, for one year following termination of his
employment, engage in certain specified activities relating to the Company or
the Company's business.
On May 1, 1996, the Company and BVH entered into an employment and non-
competition agreement with Mr. Toopes, which agreement was scheduled to expire
on April 30, 1999, subject to annual renewals thereafter. Pursuant to this
agreement, the Company agreed to pay an annual base salary to Mr. Toopes of
$240,000. In consideration of Mr. Toopes additional responsibilities as Vice
Chairman his annual base salary was increased to $280,000 in 1999. In addition
to such base salary, Mr. Toopes is entitled to receive certain other employment
benefits, including cash bonuses based upon the Company's attaining or
surpassing profit targets established by the Company's Board of Directors.
Pursuant to the employment agreement with Mr. Toopes, the Company and BVH
caused Holding to sell 8,000 shares of Holding's Class A Common Stock to Mr.
Toopes for an aggregate purchase price of $280,000 in exchange for promissory
notes payable totaling $280,000. See this Item 11--"Loans to Management." Also
pursuant to such employment agreement, the Company and BVH caused Holding to
grant Mr. Toopes options to purchase 12,000 shares of Holding's Class A Common
Stock under the Stock Option Plan. See this Item 11-- "Management Stock Option
Plan." In the event Mr. Toopes' employment is terminated without cause, or upon
his death or disability, his salary (including an increase in base salary for at
least a portion of the period after termination without cause, death or
disability) and other employment benefits will, subject to certain adjustments
and limitations, continue until the end of his term of employment. In addition,
the employment agreement places certain restrictions upon the ability of Mr.
Toopes to communicate confidential information concerning the Company to third
parties. Pursuant to the non-competition provisions of this employment
agreement, Mr. Toopes will not, for one year following termination of his
employment, engage in certain specified activities relating to the Company or
the Company's business.
23
<PAGE>
Compensation Pursuant to 401(k) Plan
The Company has a discretionary profit-sharing retirement plan for officers
and non-union employees which includes a qualified cash or deferred arrangement
pursuant to Section 401(k) of the Internal Revenue Code. Under this arrangement,
officers and non-union employees may elect to forego the current receipt of up
to 10% of their cash compensation and have such amounts contributed to the plan
on their behalf. The Company matches 25% of such elected amounts up to 5% of
each individual employee's income. The Company may also elect to make
additional, discretionary contributions to the plan. The amounts contributed
for the benefit of executive officers in 1999 with respect to such plan are
included in this Item 11 under the heading "All Other Compensation."
Management Stock Option Plan
Holding's Time Accelerated Restricted Stock Plan (the "Stock Option Plan"),
adopted effective as of December 28, 1990, and as amended effective as of
February 1, 1995, provides for the granting of non-qualified stock options, each
in such amounts, on such terms and to such officers and other key employees of
the Company as the administrators of the Stock Option Plan, in accordance with
the terms of the Stock Option Plan, may select. The Stock Option Plan is
administered by the Compensation Committee of the Board of Directors of Holding,
subject to the supervision and control of the entire Board. A total of 160,000
shares of Common Stock are reserved for issuance pursuant to the Stock Option
Plan. As of March 31, 2000, options to purchase 123,538 shares were granted and
outstanding, options to purchase 14,438 shares had vested and no options had
been exercised.
Pursuant to the Stock Option Plan, as amended, all performance based
options shall have a per share exercise price not less than the per share fair
market value of the Common Stock as of the date of the grant of such options.
All options granted through March 31, 2000 have 9 1/2 year vesting schedules,
subject to acceleration during the first four years following the date of grant
upon the attainment of certain performance criteria.
With the exception of an option granted to Frelinghuysen, all options
granted through March 31, 2000 are non-transferable other than by will or the
laws of descent and distribution, and all options are exercisable only while the
optionee remains in the employ of the Company or for a short period of time
thereafter. If an optionee dies or becomes disabled while in the employ of the
Company, the option is exercisable prior to the 365th day following the date of
termination of employment. If an optionee's employment is terminated without
cause, the option is exercisable for 90 days following the date of termination
of employment. If an optionee leaves the employ of the Company for any other
reason, the option is exercisable for only five days following the date of
termination of employment. Options which are exercisable following termination
of employment are exercisable only to the extent that the optionee was entitled
to exercise such options on the date of such termination.
The right to exercise the option granted to Frelinghuysen is not
transferable, but such option may be assigned to any person or entity which
acquires all of the outstanding capital stock or substantially all of the assets
of Frelinghuysen. Such option may be assigned to any person or entity which is
controlled by, controlling or under common control with Frelinghuysen.
Compensation of Directors
The Company does not pay an annual retainer or meeting attendance fee to
any Director other than Mr. Kahn who is paid $4,000 for each meeting he attends;
however, expenses incurred attending each Board meeting and committee meeting
are paid by the Company.
24
<PAGE>
Incentive Compensation Plan
The Company maintains an incentive compensation plan for all non-union
management associates, pursuant to which the Company makes cash incentive awards
to such members of management in varying amounts based upon the achievement of
various budgeted operating targets established on an annual basis by the Board
of Directors.
Option Grants
During the fiscal year ended December 25, 1999, there were 74,600 options
granted to purchase shares of Holding's Class A Common Stock while forfeitures
of same amounted to 7,040.
Aggregated Option Values at Fiscal Year-End
The following information is furnished for the fiscal year ended December
25, 1999 with respect to the stock options held by the Company's Chief Executive
Officer and each of the other individuals named in the Summary Compensation
Table. No stock options were exercised during the fiscal year ended December 25,
1999.
Aggregated Option Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Value of Unexercised
Options at In-the-Money Options at
December 25, 1999 December 25, 1999(1)
--------------------------- ---------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
David G. Bronstein 5,435 -0- -0- -0-
Mark S. Schwartz -0- -0- -0- -0-
James A. Toopes, Jr. 4,000 8,000 -0- -0-
David W. Montoya -0- 6,000 -0- -0-
Wayne T. Marshall -0- 6,000 -0- -0-
Stephen E. Hastings -0- 6,000 -0- -0-
Stephen L. Hittman 2,000 4,000 -0- -0-
</TABLE>
______________
(1) None of the options are in-the-money.
Loans to Management
Mr. Schwartz borrowed from Holding the purchase price for shares of
Holding's Class A Common Stock purchased by him as of April 22, 1999. The
principal amount of his note was $700,000. The payment of this note is secured
by 20,000 shares of Class A Common Stock purchased by Mr. Schwartz. Mr.
Schwartz's note matures on December 31, 2003 and bears interest of 5.24% per
annum.
Mr. Madera borrowed $100,000 from Holding on May 25, 1994. The principal
amount of this note is secured by the shares of Class A Common Stock owned by
Mr. Madera, is payable on demand and bears interest at a rate equal to the prime
rate plus 1.5% per annum.
In 1996, Mr. Toopes borrowed from Holding a portion of the purchase price
for shares of Holding's Class A Common Stock purchased by him as of December 14,
1996. The principal amount of this note was $205,000. In 1998, Mr. Toopes
borrowed from Holding the remainder of the purchase price with a new note whose
principal amount was $75,000. The payment of both notes are secured by the
25
<PAGE>
8,000 shares of Class A Common Stock purchased by Mr. Toopes. Mr. Toopes' notes
mature on December 31, 2005 and bear interest at the rate in effect on the
Company's senior credit facility.
Mr. Hittman borrowed from Holding a portion of the purchase price for
shares of Holding's Class A Common Stock purchased by him as of April 18, 1997.
The principal amount of his note was $67,000. The payment of this note is
secured by 2,200 shares of Class A Common Stock purchased by Mr. Hittman. Mr.
Hittman's note matures on December 31, 2005 and bears interest at the rate in
effect on the Company's senior credit facility. .
Mr. Onufer borrowed from Holding a portion of the purchase price for shares
of Holding's Class A Common Stock purchased by him as of April 24, 1997. The
principal amount of his note was $71,402.50. The payment of this note is
secured by 2,200 shares of Class A Common Stock purchased by Mr. Onufer. Mr.
Onufer's note matures on December 31, 2005 and bears interest at the rate in
effect on the Company's senior credit facility.
Mr. Trella borrowed from Holding the purchase price for shares of Holding's
Class A Common Stock purchased by him as of August 29, 1997. The principal
amount of his notes was $110,250. The payment of this note is secured by 3,150
shares of Class A Common Stock purchased by Mr. Trella. Mr. Trella's note
matures on December 31, 2005 and bears interest at the rate in effect on the
Company's senior credit facility.
Compensation Committee Interlocks and Insider Participation
Messrs. Frelinghuysen, Bronstein, and Childs served on the Compensation
Committee during fiscal 1999. Mr. Bronstein serves as the Company's Chairman of
the Board. None of the other members of the Compensation Committee served as
officers or employees of the Company or any of its subsidiaries during fiscal
1999.
In connection with the Acquisition, THL, Thomas H. Lee Equity Partners,
L.P. (the "Lee Fund"), ML-Lee Acquisition Fund II, L.P., ML-Lee Acquisition Fund
(Retirement Accounts) II, L.P. (collectively, the "ML-Lee Funds") and their
respective affiliates (together with THL, the Lee Fund and the ML-Lee Funds, the
"THL" Companies"), Frelinghuysen, certain members of the Company's senior
management and Prudential made investments in Holding and the Company. See
"Certain Relationships and Related Transactions."
Also in connection with the Acquisition, the Company entered into five-year
management agreements with each of THL and Frelinghuysen. The agreements call
for payment to them of $150,000 and $100,000 per year, respectively, for five
years beginning January 1, 1991, for management and other consulting services
rendered to the Company, with annual renewals following the scheduled expiration
date of December 31, 1995. See Item 13.
26
<PAGE>
ITEM 12: Security Ownership of Certain Beneficial Owners and Management
There are 1,000 shares of Common Stock, $1.00 par value per share, of Big V
outstanding, all of which outstanding shares of Common Stock are beneficially
owned by BVH and 100 shares of common stock, $.01 par value per share, of BVH
all of which are beneficially owned by Holding. Holding has sole voting and
investment power with respect to all shares of common stock of BVH and BVH has
sole voting and investment power with respect to all shares of common stock of
Big V.
Security Ownership of Big V Holding Corp.
As of December 25, 1999, there were outstanding 707,702 shares of Holding
Class A Common Stock, par value $.01 per share. The information in the table
below presents the beneficial ownership of (i) each person known to Holding to
own beneficially more than five percent of the outstanding voting common stock
of Holding, (ii) each director and each executive officer of Holding named in
the Summary Compensation Table, and (iii) all directors and executive officers
of Holding, BVH and Big V, respectively as a group.
<TABLE>
<CAPTION>
Number of Shares Percent of
of Class A Common Outstanding
Stock Beneficially Shares of Class A
Beneficial Owner Owned (1)(2) Common Stock (1)
- ---------------- ------------ -------------------
<S> <C> <C>
Thomas H. Lee Equity Partners, L.P. (3) 296,808 40.61
ML-Lee Acquisition Fund II, L.P. (4) 117,333 16.05
ML-Lee Acquisition Fund (Retirement Accounts) II, L.P. (4) 62,667 8.57
Thomas H. Lee (5) 36,513 5.00
David G. Bronstein (6) 35,335 4.84
Gary S. Koppele (7) 32,973 4.51
Cornelius J. J. Madera, Jr. (7) 26,973 3.69
Mark S. Schwartz 20,000 2.74
James A. Toopes, Jr. 12,000 1.64
John W. Childs (10) (11) 11,883 1.63
Joseph S. Frelinghuysen, Jr. (8) 10,543 1.44
C. Hunter Boll (9) 3,146 **
Leo J. Kahn 5,317 **
Steven G. Segal (12) 1,258 **
Stephen L. Hittman 4,200 **
All directors and executive officers of Holding
as a group (7 persons) (13) 99,482 13.61
</TABLE>
_________
** Represents less than 1%
(1) For purposes of the computation of percentages of Holding presented in this
table, a holder is deemed to beneficially own all shares which may be
acquired by such holder upon exercise of options held by such holder, which
options are exercisable within 60 days. Such shares which may be acquired
by such holder (but no shares which may be acquired by any other holder
upon exercise of options held by such other holder) are deemed to be
outstanding.
(2) Share amounts are rounded to the nearest whole number.
27
<PAGE>
(3) Each of (i) THL Equity Advisors Limited Partnership, (ii) THL Equity Trust,
(iii) Thomas H. Lee, as Trustee of THL Equity Trust, (iv) John W. Childs,
as Trustee of THL Equity Trust, (v) C. Hunter Boll, as an officer of THL
Equity Trust, and (vi) Steven G. Segal, as an officer of THL Equity Trust,
may be deemed to be the beneficial owner of 296,808 shares held by the Lee
Fund. Such entities and Messrs. Lee, Boll, Childs and Segal disclaim
beneficial ownership of such shares. The foregoing entities and Messrs. Lee
and Boll maintain their principal business address c/o Thomas H. Lee
Company, 75 State Street, Boston, MA 02109. Messrs. Childs and Segal
maintain their principal business address c/o J.W. Childs Associates, L.P.,
One Federal Street, Boston, MA 02110.
(4) Each of (i) Thomas H. Lee Advisors II, L.P. ("Advisors II"), the Investment
Advisor of each of the ML-Lee Funds, (ii) T.H. Lee Mezzanine II ("Mezzanine
II"), a general partner of Advisors II, (iii) Thomas H. Lee, as Trustee of
Mezzanine II and an Individual General Partner of each of the ML-Lee Funds,
(iv) John W. Childs, as Trustee of Mezzanine II, (v) C. Hunter Boll, as an
officer of Mezzanine II, and (vi) Steven G. Segal, as an officer of
Mezzanine II, may be deemed to be the beneficial owners of 180,000 shares
held, in the aggregate, by the ML-Lee Funds. Each of Advisors II, Mezzanine
II, Mr. Lee, Mr. Childs, Mr. Boll and Mr. Segal disclaim ownership of such
shares. Each of Advisors II and Mezzanine II maintains their principal
business address c/o Thomas H. Lee Company, 75 State Street, Boston, MA
02109. The ML-Lee Funds maintain principal business addresses c/o Merrill
Lynch, 225 Liberty Street, World Financial Center, South Tower--23rd Floor,
New York, New York 10080-6123.
(5) Represents 36,513 shares which may be deemed to be beneficially owned by
State Street Bank and Trust Company of Connecticut, N.A., as trustee of the
1989 Thomas H. Lee Nominee Trust (the "Lee Trust"). State Street Bank and
Trust Company of Connecticut, N.A. disclaims beneficial ownership of such
shares. Does not include 476,808 shares which may be deemed to be
beneficially owned by Mr. Lee as a result of his relationships with the Lee
Fund and the ML-Lee Funds. Mr. Lee disclaims beneficial ownership of such
shares. Mr. Lee maintains his principal business address c/o Thomas H. Lee
Company, 75 State Street, Boston, MA 02109.
(6) Includes options to purchase 5,435 shares.
(7) Includes options to purchase 380 shares. Also includes, solely with respect
to Mr. Koppele, 32,593 shares held of record by GSK, Inc., a Delaware
corporation wholly owned by Mr. Koppele. Mr. Koppele may be deemed to
beneficially own these shares as a result of his relationship with GSK,
Inc.
(8) Includes options to purchase 543 shares.
(9) Includes options to purchase 1,581 shares from Mr. Lee which are currently
exercisable. Does not include 476,808 shares which may be deemed to be
beneficially owned by Mr. Boll as a result of his relationship with the Lee
Fund and the ML-Lee Funds. Mr. Boll disclaims beneficial ownership of such
shares.(10) Includes options to purchase 6,211 shares from Mr. Lee which
are currently exercisable. Does not include 476,808 shares which may be
deemed to be beneficially owned by Mr. Childs as a result of his
relationship with the Lee Fund and the ML-Lee Funds. Mr. Childs disclaims
beneficial ownership of such shares.
(11) Does not include 426 shares which Mr. Childs may be deemed to own by virtue
of proxies he holds with respect to shares owned by his siblings. Mr.
Childs disclaims beneficial ownership of such shares.
28
<PAGE>
(12) Includes options to purchase 632 shares from Mr. Lee which are currently
exercisable. Does not include 476,808 shares which may be deemed to be
beneficially owned by Mr. Segal as a result of his relationship with the
Lee Fund and the ML-Lee Funds. Mr. Segal disclaims beneficial ownership
of such shares.
(13) Does not include 513,320 shares which may be deemed to be beneficially
owned by certain directors as a result of their relationships with the Lee
Fund, the ML-Lee Funds and the Lee Trust, as beneficial ownership of such
shares is disclaimed. Includes options to purchase 14,402 shares.
ITEM 13: Certain Relationships and Related Transactions
The Company and THL entered into an agreement dated December 28, 1990,
pursuant to which THL received a financial advisory fee of $1,250,000 from the
Company at the closing of the Acquisition and a strategic planning fee of
$250,000 on January 15, 1991. In addition, pursuant to such agreement, THL
received $150,000 per year for five years beginning January 1, 1991 for
management and other consulting services rendered to the Company. After the
initial five-year term, the management agreement with THL automatically renews
on an annual basis unless either party serves notice of termination at least 90
days prior to the renewal date. The Company believes that the terms of this
agreement are comparable to those that would have been obtainable from
unaffiliated sources.
The Company and Frelinghuysen entered into an agreement dated December 28,
1990, pursuant to which Frelinghuysen received a financial advisory fee of
$1,250,000 from the Company at the closing of the Acquisition (which was
comprised of $875,000 in cash and 10,714.286 shares of Holding's Class A Common
Stock) and a strategic planning fee of $250,000 on January 15, 1991. In
addition, pursuant to such agreement, Frelinghuysen received $100,000 per year
for five years beginning January 1, 1991 for management and other consulting
services rendered to the Company. After the initial five year term, the
management agreement with Frelinghuysen automatically renews on an annual basis
unless either party serves notice of termination at least 90 days prior to the
renewal date. The Company believes that the terms of this agreement are
comparable to those that would have been obtained from unaffiliated sources.
Each of the management and consulting agreements between the Company and
THL and the Company and Frelinghuysen provides that the Company will indemnify
THL and Frelinghuysen respectively for any liability arising from the
performance of management or consulting services under such agreement, unless
such liability is the result of gross negligence or willful misconduct.
The existing shareholders of Holding (the "Existing Shareholders") have
entered into a shareholders' agreement, dated as of December 28, 1990, as
amended and restated on December 17, 1993 (the "Shareholders' Agreement"), which
sets forth certain rights and obligations of the parties with respect to the
Common Stock and corporate governance of Holding, including certain transfer
restrictions on shares of Common Stock, certain put and call rights and
obligations relating to the Common Stock, agreements relating to the composition
of the Board of Directors of Holding and registration rights.
29
<PAGE>
The Shareholders' Agreement provides that the Existing Shareholders must,
subject to certain conditions, vote their shares to elect a Board of Directors
of Holding consisting of not more than five directors, subject to increase
pursuant to the Shareholders' Agreement, one director to be nominated by THL and
certain of its officers, employees, consultants and affiliates (collectively
with their permitted transferees, the "Lee Holders"), one director to be
nominated by the ML-Lee Funds, one director to be nominated by the Lee Fund, one
director to be nominated by Frelinghuysen and one director to be nominated by
the Chief Executive Officer of Big V. Notwithstanding the foregoing, the right
of any of the foregoing shareholders to designate directors will be eliminated
at such time as such shareholder no longer owns any of the shares of Common
Stock then outstanding.
In addition, the Shareholders' Agreement provides that the Existing
Shareholders are (i) in certain instances, subject to "come along" rights
allowing them to participate in private sales of Common Stock by certain
Existing Shareholders and (ii) in certain instances, subject to "take along"
rights allowing certain Existing Shareholders who are selling all of their
shares to require the other Existing Shareholders to sell all of their shares of
Common Stock to the same purchaser in the same transaction. The Shareholders'
Agreement requires Holding's Existing Shareholders to vote together as a group
on certain matters, including the nomination and election of the Board of
Directors, establishing the number of directors in accordance with the
Shareholders' Agreement and certain sales or mergers relating to the "take
along" rights contained in the Shareholders' Agreement.
The Shareholders' Agreement also provides certain registration rights to
the Existing Shareholders. If Holding receives a written request from any of
the ML-Lee Funds, the Lee Fund, the Lee Holders or Frelinghuysen or any of their
permitted transferees (collectively, the "Institutional Investors") that Holding
file a registration statement under the Securities Act covering the registration
of at least 10% of the Registrable Securities (as defined therein), then Holding
is required, on no more than two occasions, to (a) promptly give written notice
to all other Existing Stockholders of such request and (b) with reasonable
promptness, and generally within 120 days after receipt by Holding of a written
request for a demand registration, file a registration statement with the
Securities and Exchange Commission (the "Commission") relating to such
Registrable Securities as to which such request for a demand registration
relates and Holding shall use its best efforts to cause all Registrable
Securities of the same class that holders have requested be registered to be
registered under the Securities Act, subject to customary proportional
reductions if necessary to accommodate market conditions.
The Shareholders' Agreement also provides that if Holding proposes to
register shares of Common Stock under the Securities Act, in connection with the
public offering of such securities solely for cash on a form that would also
permit the registration of any of the Registrable Securities, either for its own
account or for the account of others, then each Existing Shareholder has a
right, subject to certain restrictions, to request that Holding register its
shares of Common Stock.
30
<PAGE>
PART IV
ITEM 14: Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) (1) Financial Statements
See Financial Statements Index included in Item 8 of Part II of this Form
10-K.
(2) Financial Statement Schedules:
Schedules have been omitted as they are not applicable or the required
information is presented in the financial statements or related notes.
(3) Exhibits
See Index to Exhibits on Page II-I. A copy of the exhibits listed herein
can be obtained by writing:
James A. Toopes, Jr.
Vice Chairman, Chief Financial and
Administrative Officer
Big V Supermarkets, Inc.
176 North Main Street
Florida, New York 10921
(b) Reports on Form 8-K
November 22, 1999 - Acquisition of ShopRite of Pennington, Inc.
31
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the Village of
Florida, State of New York, on April 7, 2000.
BIG V SUPERMARKETS, INC.
By: /s/ Mark S. Schwartz
---------------------------------
Mark S. Schwartz,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities and on the dates indicated.
Signatures Title Date
- ---------- ----- ----
/s/ David G. Bronstein Director, Chairman of April 7, 2000
- ---------------------------------
David G. Bronstein the Board
/s/ Mark S. Schwartz Director, Chief Executive April 7, 2000
- ---------------------------------
Mark S. Schwartz Officer and President
(principal executive officer)
/s/ James A. Toopes, Jr. Director, Vice Chairman, April 7, 2000
- ---------------------------------
James A. Toopes, Jr. Chief Financial and
Administrative Officer
Corporate Secretary
(principal financial officer)
/s/ Anthony J. Moccio Vice President-Controller April 7, 2000
- ---------------------------------
Anthony J. Moccio
/s/ C. Hunter Boll Director April 7, 2000
- ---------------------------------
C. Hunter Boll
<PAGE>
/s/ Charles A. Brizius Director April 7, 2000
- ---------------------------------
Charles A. Brizius
/s/ John W. Childs Director April 7, 2000
- ---------------------------------
John W. Childs
/s/ Joseph S. Frelinghuysen, Jr. Director April 7, 2000
- ---------------------------------
Joseph S. Frelinghuysen, Jr.
/s/ Leo J. Kahn Director April 7, 2000
- ---------------------------------
Leo J. Kahn
/s/ Steven G. Segal Director April 7, 2000
- ---------------------------------
Steven G. Segal
<PAGE>
INDEPENDENT AUDITORS' REPORT
Big V Supermarkets, Inc.
Florida, New York
We have audited the accompanying consolidated balance sheets of Big V
Supermarkets, Inc. and subsidiaries (the "Company") as of December 25, 1999 and
December 26, 1998, and the related consolidated statements of income (loss),
stockholder's deficit and cash flows for each of the three fiscal years in the
period ended December 25, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Big V Supermarkets, Inc. and
subsidiaries as of December 25, 1999 and December 26, 1998, and the results of
their operations and their cash flows for each of the three fiscal years in the
period ended December 25, 1999 in conformity with generally accepted accounting
principles.
As discussed in Note 2 to the consolidated financial statements, the Company
changed its method of accounting for insurance related assessments to conform
with Statement of Position 97-3.
/s/ Deloitte & Touche LLP
March 24, 2000
F-2
<PAGE>
BIG V SUPERMARKETS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
FOR THE YEARS ENDED DECEMBER 25, 1999, DECEMBER 26, 1998 AND
DECEMBER 27, 1997
(In Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
SALES $856,872 $814,404 $762,880
-------- -------- --------
COSTS AND EXPENSES:
Cost of sales (exclusive of depreciation and amortization
shown separately below) 630,444 600,375 563,896
Selling, general and administrative 182,772 172,952 161,786
Depreciation and amortization 17,351 15,454 16,979
Interest expense, net of interest income of $573 for 1999,
$260 for 1998 and $253 for 1997, respectively 23,236 23,651 24,586
Restructuring charge 8,500 - -
-------- -------- --------
Total costs and expenses 862,303 812,432 767,247
-------- -------- --------
(LOSS) INCOME BEFORE INCOME TAXES,
EXTRAORDINARY CHARGE AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE (5,431) 1,972 (4,367)
INCOME TAX (BENEFIT) EXPENSE (3,300) 1,860 (1,625)
-------- -------- --------
(LOSS) INCOME BEFORE EXTRAORDINARY CHARGE,
AND CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE (2,131) 112 (2,742)
EXTRAORDINARY CHARGE, NET OF TAX BENEFIT
OF $301 492 - -
-------- -------- --------
(LOSS) INCOME BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE (2,623) 112 (2,742)
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE, NET OF TAX
BENEFIT OF $332 543 - -
-------- -------- --------
NET (LOSS) INCOME $ (3,166) $ 112 $ (2,742)
======== ======== ========
See notes to consolidated financial statements.
</TABLE>
F-3
<PAGE>
BIG V SUPERMARKETS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 25, 1999 AND DECEMBER 26, 1998
(In Thousands, except share and per share data)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash ($6,400 restricted at December 25, 1999) $ 21,604 $ 15,674
Accounts receivable 18,748 11,941
Inventories 47,672 35,493
Refundable income taxes 1,995 630
Prepaid expenses and other current assets 4,303 2,282
Asset held for sale 4,713 4,482
-------- --------
Total current assets 99,035 70,502
PROPERTY AND EQUIPMENT - At cost, less accumulated
depreciation and amortization of $99,117 at December 25, 1999 and
$85,756 at December 26, 1998, respectively 69,336 57,521
GOODWILL - Less accumulated amortization of $17,041 at
December 25, 1999 and $14,938 at December 26, 1998, respectively 73,957 64,371
INVESTMENT IN WAKEFERN FOOD CORP. 15,625 13,173
WAKEFERN WAREHOUSE AGREEMENT - Less accumulated
amortization of $9,387 at December 25, 1999 and $8,273 40,781 33,095
at December 26, 1998, respectively
OTHER ASSETS 13,720 9,002
-------- --------
TOTAL ASSETS $312,454 $247,664
======== ========
LIABILITIES AND STOCKHOLDER'S DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 57,128 $ 44,954
Accrued expenses and taxes other than income taxes 22,584 15,693
Deferred income taxes 7,300 6,213
Current portion of long-term debt 18,723 12,499
Current portion of capitalized lease obligations 1,303 808
-------- --------
Total current liabilities 107,038 80,167
-------- --------
OTHER LONG-TERM LIABILITIES 15,038 10,056
-------- --------
LONG-TERM DEBT - Less current portion 193,904 153,342
-------- --------
CAPITALIZED LEASE OBLIGATIONS - Less current portion 24,665 25,228
-------- --------
DEFERRED INCOME TAXES 2,645 6,070
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S DEFICIT:
Common stock, par value, $1.00 per share; authorized, 1,000 shares;
issued, 1,000 shares 1 1
Paid-in capital 7,934 8,405
Accumulated deficit (38,771) (35,605)
-------- --------
Total stockholder's deficit (30,836) (27,199)
-------- --------
TOTAL LIABILITIES AND STOCKHOLDER'S DEFICIT $312,454 $247,664
======== ========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
BIG V SUPERMARKETS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S DEFICIT
YEARS ENDED DECEMBER 25, 1999, DECEMBER 26, 1998 AND
DECEMBER 27, 1997
(In Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock Total
--------------------- Paid-in Accumulated Stockholder's
Shares Amount Capital Deficit Deficit
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 28, 1996 1,000 $1 $8,664 $(32,975) $(24,310)
Return of capital to Holding - - (149) - (149)
Capital contribution from Holding - - 15 - 15
Net loss - - - (2,742) (2,742)
----- ----- ------ -------- --------
BALANCE, DECEMBER 27, 1997 1,000 1 8,530 (35,717) (27,186)
Return of capital to Holding - - (125) - (125)
Net income - - - 112 112
----- ----- ------ -------- --------
BALANCE, DECEMBER 26, 1998 1,000 1 8,405 (35,605) (27,199)
Return of capital to Holding - - (471) - (471)
Net loss - - - (3,166) (3,166)
----- ----- ------ -------- --------
BALANCE, DECEMBER 25, 1999 1,000 $1 $7,934 $(38,771) $(30,836)
===== ===== ====== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
BIG V SUPERMARKETS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 25, 1999, DECEMBER 26, 1998 AND
DECEMBER 27, 1997
(In Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997
CASH BALANCE, BEGINNING OF YEAR $ 15,674 $ 13,498 $ 10,595
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income (3,166) 112 (2,742)
Adjustments to reconcile net (loss) income to net
cash provided by operating activities:
Depreciation and amortization 17,351 15,454 15,904
Cumulative effect of accounting change 875 - -
Noncash loss on disposal of equipment and
leasehold interest - - 1,075
Amortization of deferred debt costs 1,055 1,178 1,157
Write-off of unamortized deferred financing costs 793 - -
Accretion of discount on debt 93 120 133
Deferred income taxes (2,342) 708 (2,712)
Noncash rent expense 1,128 1,273 1,100
Noncash gain from lease termination - - (1,170)
Loss on sale of equity investment - - 596
Changes in assets and liabilities:
(Increase) decrease in inventories (6,752) 1,358 (1,414)
(Increase) decrease in prepaid expenses and other
current assets (1,937) (39) 1,856
(Increase) decrease in accounts receivable (2,997) 2,728 (1,603)
(Increase) decrease refundable income taxes (1,365) 1,058 (1,569)
Increase in other assets (1,432) (394) (1,574)
Increase in asset held for sale (231) (846) (604)
Increase in accounts payable 7,700 1,697 4,336
Increase (decrease) in accrued expenses and
taxes other than income taxes 3,433 (1,679) 1,527
Decrease in income taxes payable - - (17)
Increase (decrease) in long-term liabilities 780 (1,191) 2,627
-------- -------- --------
Net cash provided by operating activities 12,986 21,537 16,906
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of property and equipment (13,486) (8,911) (10,242)
Acquisition of business, net of cash acquired (32,658) - -
Sale of property and equipment 7 8 26
Increase in investment in Wakefern Food Corp. - (40) -
-------- -------- --------
Net cash used in investing activities (46,137) (8,943) (10,216)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of long-term debt (8,230) (10,319) (8,939)
Payments of capital lease obligations (203) (619) (444)
Proceeds from revolver borrowings 800 500 -
Proceeds from long-term borrowings 101,000 145 5,730
Payments on old senior debt (49,667) - -
Financing fees in connection with new senior debt (4,148) - -
Return of capital to Holding (471) (125) (149)
Capital contribution from Holding - - 15
-------- -------- --------
Net cash provided by (used in) financing activities 39,081 (10,418) (3,787)
-------- -------- --------
NET INCREASE IN CASH 5,930 2,176 2,903
-------- -------- --------
CASH BALANCE, END OF YEAR $ 21,604 $ 15,674 $ 13,498
======== ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the year for:
Interest $ 22,324 $ 21,918 $ 23,687
======== ======== ========
Income taxes $ 131 $ 285 $ 2,671
======== ======== ========
</TABLE>
F-6
<PAGE>
BIG V SUPERMARKETS, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 25, 1999, DECEMBER 26, 1998 AND
DECEMBER 27, 1997
- --------------------------------------------------------------------------------
In 1999, the Company recorded a capital lease obligation incurred for the
purchase of new equipment in the amount of $937,000.
In November 1999, in connection with the acquisition as described in Note 3, the
Company assumed an additional note payable in the amount of $1.2 million.
During the year ended December 27, 1997, a note receivable for $1,100,000 was
recorded in conjunction with the sale of an equity investment. The note was
collected in full during February 1998.
During the year ended December 26, 1998, notes payable to Wakefern for
$2,033,000 were entered into which increased the investment in Wakefern.
(Concluded)
See notes to consolidated financial statements.
F-7
<PAGE>
BIG V SUPERMARKETS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 25, 1999, DECEMBER 26, 1998 AND
DECEMBER 27, 1997
- --------------------------------------------------------------------------------
1. BUSINESS
Organization and Basis of Presentation - On December 28, 1990, Big V
Supermarkets, Inc. was purchased by Big V Holding Corp. ("Holding") through
the merger of a wholly-owned subsidiary of Holding with and into BV Holdings
Corporation (the "Predecessor Company"), the owner of all voting stock of the
Company. The financial statements presented herein are those of Big V
Supermarkets, Inc. and its wholly-owned subsidiaries (the "Company")
subsequent to the purchase by Holding. The Company is a wholly-owned
indirect subsidiary of Holding, whose principal shareholders include Thomas
H. Lee Equity Partners, L.P., ML-Lee Acquisition Fund II, L.P., ML-Lee
Acquisition Fund (Retirement Accounts) II, L.P., Thomas H. Lee, and
management of the Company. The consideration paid by Holding to acquire the
Company was approximately $210.2 million.
The acquisition by Holding was accounted for as a purchase and, accordingly,
Holding recorded the assets and liabilities of the Company at their fair
value at the date of the acquisition. The accompanying consolidated
financial statements of the Company reflect Holding's basis.
The Company operates a chain of 34 modern supermarkets under the ShopRite
trade name located primarily in the Hudson River Valley Region of New York
State and the Trenton area of New Jersey. The Company also operates one
supermarket under the "Big V Market" trade name and two supermarkets under
the "CostRite" trade name. The Company is the largest member of the Wakefern
Food Corp. cooperative ("Wakefern") located in Elizabeth, New Jersey.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Fiscal Year - The Company's fiscal year ends on the last Saturday in
December. The fiscal years ended December 25, 1999, December 26, 1998 and
December 27, 1997 were 52-week periods.
Principles of Consolidation - The consolidated financial statements of the
Company include the accounts of Big V Supermarkets, Inc., its wholly-owned
operating subsidiary BVNJ Partnership, L.P. ("BVNJ") and its nonoperating
subsidiaries. BVNJ was established to consummate the acquisition described
in Note 3. All intercompany accounts and transactions have been eliminated
in consolidation. Since the Company is a wholly-owned subsidiary, earnings
per share information is not presented. The Company operates in one industry
segment, the operation of supermarkets.
Inventories - Inventories are valued using the last-in, first-out method.
At December 25, 1999 and December 26, 1998, inventories would have been
higher by $3,785,000 and $3,193,000, respectively, if the first-in, first-out
method of valuation had been used.
Property and Equipment - Property and equipment is stated at cost.
Depreciation and amortization, computed by the straight-line method for
financial statement purposes, are based on an estimated useful life of three
to eight years for equipment, ten years or lease term, whichever is less, for
leasehold
F-8
<PAGE>
improvements and the related lease term for leasehold interests and
capitalized leases and twenty years for building. Costs of major improvements
to existing facilities are capitalized. Costs of repairs, maintenance and
replacements which do not significantly improve or extend the life of the
respective assets are charged to expense as incurred. Leasehold interests
represent an intangible value assigned to leased properties resulting from a
fair market determination made by independent appraisers in connection with
the purchase of the net assets of the Company.
The Company reviewed the recoverability of its long-lived assets by comparing
the carrying amounts of the identifiable cash flow producing assets to their
gross projected operating cash flows. At December 25, 1999, no assets were
impaired.
Goodwill - Goodwill is being amortized on a straight-line basis using lives
of 15 to 40 years. Management assesses the recoverability of goodwill by
comparing the Company's forecasts of cash flows from future operating
results, on an undiscounted basis, to the unamortized balance of goodwill at
each balance sheet date. Cash flows from operating results represents net
income excluding depreciation and amortization expense. If the results of
such comparison indicate that an impairment may be likely, the Company will
recognize a charge to operations at that time based upon the difference
between the present value of the expected cash flows from future operating
results (utilizing a discount rate equal to the Company's average cost of
funds at the time), and the balance sheet value of goodwill as of such time.
The recoverability of goodwill is at risk to the extent the Company is unable
to achieve its forecast assumptions regarding cash flows from operating
results. Management believes goodwills' carrying values and useful lives are
appropriate.
Investment in Wakefern Food Corp. - Represents the Company's stock ownership
in Wakefern. Such stock has been valued at its redemption value, which
represents cost, in accordance with the Wakefern By-Laws and is obtained by
the Company upon payments made with respect to new store openings (see Note
13). The Wakefern By-Laws specify that, such stock can be sold to Wakefern
at the greater of $100 per share or Wakefern's then book value. Since this
stock can only be sold to Wakefern at a specified amount in accordance with
the Wakefern by-laws it is not practicable to estimate the fair value of such
stock.
Wakefern Warehouse Agreement - Represents the value assigned to the Company's
ability to participate in Wakefern as a member and its ability to share in
the annual patronage dividend (see Note 13). The value assigned resulted
from fair market determinations made by independent appraisers. The Wakefern
Warehouse Agreement contains an evergreen provision providing for a continual
10-year renewal period. The Company's obligation to purchase from Wakefern
may be terminated only 10 years following the approval of such termination by
the holders of at least 75% of the outstanding voting stock of Wakefern.
Accordingly, the cost of the Wakefern Warehouse Agreement is being amortized
on a straight-line basis using lives of 15 to 40 years.
Debt Issuance Costs - Debt issuance costs represent costs associated with
borrowings and are amortized using the straight-line method over the terms of
the related debt.
Income Taxes - The Company files a consolidated Federal income tax return
with its ultimate parent, Holding. Deferred taxes have been recorded for the
differences between the financial reporting basis and the tax basis of the
Company's assets and liabilities in accordance with Statement of Financial
Accounting Standard ("SFAS") No. 109, Accounting for Income Taxes.
Preopening Costs - For the fiscal year ended on December 26, 1998, the costs
associated with new store openings were amortized in the 12-month period
following such store opening. At December 26, 1998,
F-9
<PAGE>
all such deferred costs had been amortized in accordance with Company policy.
Effective December 27, 1998, the Company adopted Statement of Position
("SOP") No. 98-5, Reporting on the Costs of Start-Up Activities, which
requires the costs associated with start-up activities, such as opening a new
store, be expensed as incurred. There was no income statement effect related
to the adoption of this SOP.
Self-Insured Liabilities - The Company retains the risk and does not obtain
insurance for workers' compensation claims. Such liability has been recorded
at its present value utilizing a risk free discount rate based on the
projected payout of these claims. The Company determines the required
liability based upon various actuarial assumptions which include, but are not
limited to, the Company's historical loss experience, industry loss
standards, projected loss development factors, projected payroll, number of
employees and interest rates. Final resolution of some of the workers'
compensation claims may require significant expenditures by the Company in
excess of its existing reserves, over an extended period of time and in a
range of amounts that cannot be reasonably estimated. As of December 25, 1999
and December 26, 1998, the accompanying balance sheets include a liability of
approximately $6.9 million and $4.8 million, respectively.
Fair Value of Financial Instruments - The following methods and assumptions
were used by the Company in estimating its fair value disclosures for
financial instruments:
. Cash and Cash Equivalents - The carrying amounts for these items
approximate their fair value because of the short maturity of these items.
. Investments - The fair values of investments are based on quoted market
prices.
. Long-Term Debt - The fair value of the Company's long-term debt is based
upon the market price of the Company's publicly traded debt securities at
December 25, 1999 and December 26, 1998, and for the debt instruments
which are not publicly traded, current incremental borrowing rates for
similar types of borrowing arrangements are utilized as a basis to
determine fair value of such debt instruments.
Pensions and Postretirement Benefits - The Company has adopted SFAS No. 132,
Employers' Disclosure about Pensions and Other Postretirement Benefits, for
the period ended December 25, 1999. This statement revises employers'
disclosures about pension and other postretirement benefits for all periods
presented. It does not change the measurement or recognition of those plans.
It standardizes the disclosure requirements for pensions and other
postretirement benefits to the extent practicable, requires additional
information on changes in the benefit obligations and fair values of plan
assets that will facilitate financial analysis, and eliminates certain
disclosures that are no longer useful (see Note 12).
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Recent Accounting Pronouncements - In June 1998, the FASB issued SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities, which
requires entities to report all derivatives at fair value as assets or
liabilities in their statements of financial position. This statement is
effective for the
F-10
<PAGE>
Company's 2000 fiscal year. The Company does not currently have any
derivative instruments or hedging activities to report under this standard.
Change in Accounting Principle - During 1999, the Company adopted, the
American Institute of Certified Public Accountants Statement of Position 97-3
("SOP 97-3"), Accounting by Insurance and Other Enterprises for Insurance-
Related Assessments, which requires a liability to be recognized for
insurance-related assessments. The adoption of SOP 97-3 resulted in a charge
of $875,000, net of income tax benefit of $332,000, which is presented as a
cumulative effect of a change in accounting principle in the accompanying
consolidated statements of income (loss). Assuming SOP 97-3 was applied
retroactively, pro forma 1997 loss before extraordinary item and net loss
would have been $3.0 million and $2.8 million, respectively. The adoption of
SOP 97-3 did not have a material effect on the 1998 income before
extraordinary item and net income.
Reclassifications - Certain reclassifications have been made to the prior
years' consolidated financial statements to conform to the fiscal 1999
presentation.
3. ACQUISITION
On November 7, 1999, the Company acquired ShopRite of Pennington, Inc.
("SRP"), another Wakefern member. The five store chain, located in the
Trenton area of New Jersey, was purchased for $35.6 million, subject to
certain purchase price adjustments, which includes $0.7 million of
acquisition related costs and a $1.2 million note payable. The acquisition
was financed with variable rate debt including an initial funding of $36
million and a $5 million delayed draw facility.
The acquisition has been accounted for under the purchase method of
accounting and includes the results of operations of SRP from November 7,
1999 through December 25, 1999. The following pro forma information for the
years ended December 25, 1999 and December 26, 1998 have been prepared by
adjusting the historical data as set forth in the accompanying consolidated
statement of income (loss) to give effect to the SRP acquisition as if such
acquisition occurred on December 27, 1998 and December 28, 1997. Such pro
forma information is presented for comparative purposes and does not purport
to be indicative of the Company's actual results of operations had such
transaction actually been consummated on December 27, 1998 and December 28,
1997 or of the Company's future results of operations and are as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
December 25, December 26,
1999 1998
<S> <C> <C>
(In Thousands)
Sales $983,822 $950,335
Loss before extraordinary item and cumulative
effect of change in accounting (1,708) (3,629)
Net loss (2,743) (3,629)
</TABLE>
Pro forma adjustments include (i) the operations of SRP for the preacquisition
period from December 27, 1998 to November 6, 1999 and for the Company's 1998
fiscal year, (ii) the income statement effects of the allocation of purchase
price including the amortization of intangibles and goodwill, (iii) the
recognition of interest expense and amortization of deferred financing costs
related to $36 million of borrowings, and (iv) the income tax effects of the
above and to recognize income taxes on SRP's results of operations based upon
the Company's tax structure since SRP was an S-Corporation.
F-11
<PAGE>
Final purchase price allocation will occur upon the receipt of final appraisals
and after all purchase price adjustments, if any, are finalized with the seller.
The following table sets forth the preliminary allocation of the purchase price
(in thousands):
<TABLE>
<S> <C>
Current assets (including cash of $1,691) $11,233
Property and equipment 12,240
Investment in Wakefern Food Corp. (a) 2,452
Wakefern Warehouse Agreement (a) 8,800
Goodwill (a) 11,689
Other assets (b) 995
Current liabilities (8,568)
Other liabilities (3,253)
-------
$35,588
=======
</TABLE>
(a) Being amortized over 15 years.
(b) Includes a covenant not to compete which is being amortized over 3 years.
4. RESTRUCTURING CHARGE
During the third quarter of fiscal 1999, the Company formalized its plans
to reduce the escalating cost of its union labor force, streamline the
functions of its corporate offices and reduce its overall cost structure
("Restructuring Plan"). The major initiatives of the Restructuring Plan
included the following: (1) a Board of Director approved Big V
Supermarkets, Inc. Early Retirement Buyout Program, which provided eligible
store associates various combinations of cash and health coverage in
consideration of the employee severing their employment with the Company;
and (2) the realignment of corporate strategic business functions, internal
processes, and the elimination of functional redundancies between the
Company and Wakefern.
In connection with the implementation of the Restructuring Plan, the
Company recorded a pretax restructuring charge of $8.5 million relating
solely to severance and termination benefits. As of December 25, 1999, the
remaining restructuring liability was $5.7 million. During the first
quarter of 2000, the Company completed the initiatives set forth in the
Restructuring Plan including the payment of severance and termination
benefits. As of March 18, 2000, the end of the Company's first quarter,
approximately $0.6 million of the original liability remains unpaid. This
balance will be used to provide health and welfare benefits to
Restructuring Plan's participants over the remainder of fiscal 2000.
Total severance and termination benefits as a result of the Restructuring
Plan relate to approximately 230 employees, 168 of which have been
terminated through December 25, 1999. Total cash outlays related to the
Restructuring Plan are expected to approximate the restructuring charge.
F-12
<PAGE>
5. PROPERTY AND EQUIPMENT
Property and equipment is summarized as follows:
<TABLE>
<CAPTION>
1999 1998
(In Thousands)
<S> <C> <C>
Land $ 436 $ 834
Building 161 161
Equipment and fixtures 85,656 70,448
Leasehold improvements 45,616 39,602
Leasehold interests 8,205 4,275
Construction-in-progress 97 557
Property and equipment under capital leases (Note 10) 28,282 27,400
-------- --------
Property and equipment, at cost 168,453 143,277
Less accumulated depreciation and amortization, including
accumulated amortization of capitalized
leases of $12,924 and $11,352, respectively (99,117) (85,756)
-------- --------
Property and equipment, net $ 69,336 $ 57,521
======== ========
</TABLE>
6. ASSET HELD FOR SALE
A wholly-owned subsidiary of the Company, Somers Development Corporation,
owns the Baldwin Place Shopping Center located in Somers, N.Y. (Somers
location). In the late 1980s, soil and groundwater contamination was
detected at this presently nonoperating center. The Somers location is on
the Department of Environmental Conservation's ("DEC") New York State
Inactive Hazardous Water Disposal Site List.
A Record of Decision (ROD) with respect to the environmental status of this
site was issued by the DEC in December 1995. The Company is in compliance
with the ROD and required environmental actions to sell this location are
complete. The Company anticipates that the present value of future
monitoring costs will approximate $1.2 million. During 2000, the Company
plans to obtain site plan approval and sell the property to recover its
costs. Accordingly, Asset Held for Sale has been classified as a current
asset.
F-13
<PAGE>
7. OTHER ASSETS
Other assets consists of the following:
1999 1998
(In Thousands)
Wakefern mutual aid fund $ 2,768 $2,116
Amounts deposited in notes receivable 466 538
Deferred debt issuance costs 5,207 2,907
New store costs (A) 3,527 2,015
Insure-Rite deposits 816 684
Deposits 203 415
Noncompete agreement 229 -
Other 504 327
------- ------
Total other assets $13,720 $9,002
======= ======
(A) Such costs represent costs incurred in the planning and development
phases of proposed and approved new store sites. Such costs are third
party fees for such items as architectural, engineering and legal
services. Costs related to sites no longer under consideration for a
store are expensed. All costs at December 25, 1999 and December 26, 1998
are for stores under construction or in development.
F-14
<PAGE>
8. INDEBTEDNESS
Debt consists of the following:
<TABLE>
<CAPTION>
1999 1998
(In Thousands)
<S> <C> <C>
Notes payable, bearing interest at rates of 7.15% to
10.99%, payable in installments through
October 30, 2003 (A) $ 8,061 $ 9,712
Notes payable for Wakefern stock subscriptions,
face amount of $2,272 in 1999 and $2,803 in 1998
due in installments through December 2002 (less unamortized
discounts of $131 in 1999 and $223 in 1998
based on imputed interest rates of 9.25% to 12.5%) 2,141 2,580
Notes payable for deposit with Insure-Rite,
due in installments through December 1999 - 8
Mortgage bond payable for land, interest accruing at
11.24% and added to principal due February 28,
1999 in the amount of $1,400,000 - 1,374
Bank term loans (B) 99,125 46,667
Revolving loans (B) 800 3,000
Subordinated note due March 15, 2001 (C) 20,000 20,000
Secured nonrecourse note (D) 2,500 2,500
11% Series B Senior Subordinated Notes (E) 80,000 80,000
-------- --------
212,627 165,841
Less current portion 18,723 12,499
-------- --------
$193,904 $153,342
======== ========
</TABLE>
(A) The notes payable are collateralized by equipment with a net book
value of $5,294,000 at December 25, 1999 and $6,699,000 at December
26, 1998.
(B) Prior to January 1999, the Company had a Credit Agreement ("Prior
Agreement") with Bankers Trust Company as agent, and a syndicate of
five additional institutions.
The Prior Agreement included $30.0 million in aggregate principal
amount of A Term Loans, $40.0 million in aggregate principal amount of
B Term Loans (the "A Term Loans" and the "B Term Loans," hereinafter
referred to collectively as the "Prior Term Loans") and the Revolving
Credit Facility, which permitted the Company to borrow up to $26.0
million to finance working capital and letter of credit needs.
On January 14, 1999, the Company refinanced its Prior Agreement by
entering into a new Credit Agreement ("Agreement") with DLJ Capital
Funding, Inc., as syndication agent, Fleet National Bank, as
administrative agent, and Summit Bank, as documentation agent.
The Agreement includes $10.0 million in aggregate principal amount
of Tranche A Term Loans, $50.0 million in aggregate principal amount
of Tranche B Term Loans (the "Tranche A Term Loans" and "Tranche B
Term Loans," hereinafter referred to collectively as the
F-15
<PAGE>
"Term Loans") and the Revolving Credit Facility, which permits the
Company to borrow up to $25.0 million to finance working capital and
letter of credit needs.
In November 1999, the Company amended the Agreement to include an
additional $36.0 million in Tranche C Term Loans (the "Tranche C Term
Loans") to finance the costs associated with the acquisition of
ShopRite of Pennington, Inc. (see Note 3) along with $5.0 million
delayed draw facility which the Company exercised in December 1999.
The Tranche A Term Loans also include a $10.0 million commitment to
be used toward the repayment of the Company's subordinated note due in
installments beginning in June of 2000 (Note 8(C)). The Revolving
Credit Facility can be increased in increments of $1.0 million up to a
maximum Revolving Credit Facility of $30.0 million.
A Second Amendment to the Agreement dated March 2, 2000 provided an
additional $3.0 million of bank term loans in consideration of the
permanent reduction of $3.0 million revolving loan commitment. Prior
to the Second Amendment, the Company had the ability to increase their
revolving loan commitments by up to $5.0 million.
Indebtedness under the Agreement bears interest at a floating rate.
Indebtedness under the Term Loans bears interest at a rate based (at
the Company's option) upon: (i) the Base Rate (defined as the higher
of: (a) the applicable prime rate of Fleet National Bank or (b) the
Federal Funds Rate plus 1/2 of 1%) plus 2% in respect of the Tranche
A Term Loans and the loans under the Revolving Credit Facility, and 2
3/4% in respect of the B Term Loans, and 3% in respect of the C Term
Loans; or ii) the Eurodollar Rate (as defined) for one, two, three, or
six months, plus 3% in respect of Tranche A Term Loans and Revolving
Credit Facility loans, 3 3/4% in respect of Tranche B Term Loans and
4% in respect of Tranche C Term Loans. The interest rate margin
applicable to both the Base Rate and Eurodollar Rate loans is reduced
as the Company's leverage ratio (as defined) decreases.
The Tranche A Term Loans mature on February 10, 2003 while the
Tranche B and C Term Loans mature on August 10, 2003. All loans under
the Agreement, as amended, are subject to quarterly amortizations.
The Revolving Credit Facility matures on February 10, 2003. In
addition, the Agreement provides for mandatory repayments of the Term
Loans (and certain commitment reductions under the Tranche A Term
Loans and/or Revolving Credit Facility) based upon certain asset sales
outside the ordinary course of business of Holding and its
subsidiaries, the proceeds of certain debt and equity issuances and
75% of Excess Cash Flow (as defined in the Agreement) per annum.
Loans under the Revolving Credit Facility may be repaid and
reborrowed. The Company is required to pay to the lenders under the
Agreement in the aggregate a commitment fee equal to 1/2 of 1% per
annum, payable on a quarterly basis, on the average unused portion of
the Revolving Credit Facility. An additional commitment fee equal to
1 1/2% per annum on the unused Tranche A Term Loans commitment is also
payable quarterly. During 1999 and 1998, the Company paid $220,000
and $54,000, respectively in commitment fees associated with its
Agreements.
As a result of the refinancing, the Company paid $46.7 million of
outstanding Prior Term Loans under the Prior Agreement, $3.0 million
of revolving loans, $471,000 in accrued interest and fees, $2.5
million in Agreement transactions fees and expenses, and $10.3 million
was added to working capital of the Company. In addition, the Company
expensed $793,000 in
F-16
<PAGE>
unamortized deferred debt issuance costs related to the Prior
Agreement. Such amount is shown, net of its tax benefit, as an
extraordinary item on the statement of income (loss).
The Agreement requires the Company to meet certain financial
covenants, including maximum amounts of annual capital expenditures,
minimum fixed charge coverage ratios, maximum leverage ratios,
interest coverage ratios and minimum amounts of consolidated net
worth. At December 25, 1999, the Company was in compliance with all
terms and covenants of the Agreement.
(C) The Company has $20.0 million senior subordinated promissory notes due
March 15, 2001 held by certain principal shareholders. Interest
accrues at the annual rate of 14.14%, payable in quarterly
installments. The Note Agreement contains various restrictive
covenants similar to the covenants contained in the Agreement. The
first of two $10.0 million principal payments on this note is due in
June 2000. At December 25, 1999, the balance sheet includes $6.4
million of restricted cash held in escrow to be used for the June 2000
payment.
(D) The Company has a noninterest-bearing note due to certain shareholders
of the Predecessor Company. The note is payable solely out of the net
proceeds (as defined) of the sale of the land and buildings comprising
the Baldwin Place Shopping Center in Somers, NY (see Note 6).
(E) On December 17, 1993, the Company issued $80.0 million of 11% Series B
Senior Subordinated Notes (the "Series B Notes"). The Series B Notes
are unsecured obligations of the Company, ranking subordinated in
right of payment to all other outstanding debt of the Company. The
Series B Notes mature on February 15, 2004. Interest accrues at the
rate of 11% per annum and is payable semiannually on each February 15
and August 15, and commenced on February 15, 1994.
The Series B Notes are redeemable, at the Company's option, in whole
at any time or in part from time to time, after February 15, 1999 at
the following redemption prices (expressed as percentages of the
principal amount) if redeemed during the 12-month period commencing on
February 15 of the year set forth below, plus, in each case, accrued
and unpaid interest thereon to the date of redemption:
Year Percentage
2000 102.750 %
2001 101.375
2002 and thereafter 100.000
The Indenture (the "Indenture") that governs the Series B Notes
imposes certain limitations on the ability of the Company and its
subsidiaries to, among other things, pay dividends or make certain
other restricted payments, incur additional indebtedness, enter into
certain transactions with affiliates, incur liens, incur indebtedness
which is subordinate in right of payment to any senior debt and senior
in right of payment to the Series B Notes, impose restrictions on the
ability of a subsidiary to pay dividends or make certain payments to
the Company, issue preferred stock of the Company's subsidiaries,
merge or consolidate with any other person or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of the
assets of the Company, consummate certain asset sales, or adopt a
F-17
<PAGE>
plan of liquidation. At December 25, 1999, the Company was in
compliance with all the terms and covenants of the Indenture.
Aggregate maturities of long-term debt are as follows:
Year (in thousands)
2000 $ 18,723
2001 17,523
2002 6,505
2003 89,612
2004 80,169
Thereafter 95
--------
$212,627
========
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts and fair values of the Company's financial instruments
for which such amounts differ are as follows:
<TABLE>
<CAPTION>
December 25, 1999 December 26, 1998
-------------------------------- --------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Investments $ - $ 3 $ - $ 6
======== ======== ======== ========
Long-term debt (Note 8):
Bank term loans $ 99,125 $ 99,125 $ 46,667 $ 46,667
Revolving loan 800 800 3,000 3,000
11% Senior subordinated notes 80,000 78,400 80,000 80,800
Subordinated note due March 15, 2001 20,000 19,215 20,000 18,445
Notes payable secured by equipment 8,061 8,183 9,712 9,936
Notes payable for Wakefern stock
subscriptions 2,141 2,141 2,580 2,580
Notes payable, Insure-Rite - - 8 8
Mortgage bond payable for land - - 1,374 1,374
Secured nonrecourse note 2,500 2,500 2,500 2,500
-------- -------- -------- --------
$212,627 $210,364 $165,841 $165,310
======== ======== ======== ========
</TABLE>
The fair values of investments are based on quoted market prices at December
25, 1999 and December 26, 1998. Similarly, the fair value of long-term debt
is based on quoted market prices on December 25, 1999 and December 26, 1998
or in the absence of such quoted market prices the latest available quoted
market price is used. The fair values of the Bank Term Loans at December 25,
1999 and December 26, 1998 approximated their carrying value due to their
floating interest rates. The fair values of the Subordinated Note due March
15, 2001 and the Company's note payable secured by equipment are estimated
using discounted cash flow analyses, based on the Company's current
incremental borrowing rates for similar type borrowings. The fair values of
the remaining notes payable and mortgage bond payable were assumed to
reasonably approximate their carrying value since
F-18
<PAGE>
the interest rates associated with these borrowings approximate market and
the remaining maturities are relatively short-term. The fair value of the
secured nonrecourse note was assumed to reasonably approximate its carrying
value because it is payable solely out of the net proceeds of the sale,
exchange or development of the Somers, NY location (see Note 6).
10. COMMITMENTS AND CONTINGENCIES
Description of Leasing Arrangements - The Company currently conducts all of
its operations from leased facilities. Store leases generally are entered
into for terms ranging from 10 to 25 years. All of the Company's leases
expire over the next 25 years.
Most of the Company's leases contain renewal options of five or ten years
each. These options enable the Company to retain use of facilities in
desirable operating areas. Management expects, in the normal course of
business, leases will be renewed or replaced by other leases. The Company is
obligated on all leases to pay for utilities and liability insurance and, in
accordance with the terms of certain store leases, to pay additional sums
related to real estate taxes, maintenance, insurance and additional rent
based upon a percentage of sales in excess of stipulated amounts. The
Company is also obligated to pay scheduled rent increases for certain
stores.
Capital Leases - The following is a schedule, by year, of future minimum
lease payments under capital leases, together with the present value of the
net minimum lease payments, as of December 25, 1999:
<TABLE>
<CAPTION>
Year (In Thousands)
<S> <C>
2000 $ 5,037
2001 5,063
2002 4,824
2003 4,845
2004 4,929
2005 and thereafter 29,320
-------
Net minimum lease payments 54,018
Less amount representing interest 28,050
-------
$25,968
=======
</TABLE>
No contingent lease payments were made under capital leases for the years
ended December 25, 1999, December 26, 1998 and December 27, 1997.
Operating Leases - The following is a schedule, by year, of future minimum
rental payments required under operating leases that have initial or
remaining noncancelable lease terms in excess of one year as of December 25,
1999:
F-19
<PAGE>
<TABLE>
<CAPTION>
Year (In Thousands)
<S> <C>
2000 $ 16,686
2001 17,782
2002 17,650
2003 16,918
2004 16,854
2005 and thereafter 243,441
--------
Total minimum payments $329,331
========
</TABLE>
Rental Expense - The following schedule shows the composition of total
rental expense for all operating leases for the years ended December 25,
1999, December 26, 1998 and December 27, 1997:
<TABLE>
<CAPTION>
1999 1998 1997
(In Thousands)
<S> <C> <C> <C>
Minimum rentals $10,401 $10,537 $7,711
Contingent rentals 555 299 59
Noncash rent expense 1,128 1,273 1,100
------- ------- ------
Total rental expense $12,084 $12,109 $8,870
======= ======= ======
</TABLE>
Letter of Credit Obligation to Wakefern - In connection with the acquisition
of the Predecessor Company, the Company, the Predecessor Company and Holding
(collectively, the "Big V Companies") and certain members of the Company's
management entered into a letter agreement with Wakefern (the "Wakefern
Letter") as a condition to Wakefern's agreement not to deem the Big V
Companies to be an "Unqualified Successor" as defined in Wakefern's By-Laws
as a result of the consummation of the acquisition. In accordance with the
terms of the Wakefern Letter, the Big V Companies have agreed that if at any
time certain net worth tests are not met (a "Net Worth Event"), then the Big
V Companies are required to obtain an irrevocable letter of credit in favor
of Wakefern in an amount equal to two and one-half times the average weekly
purchases of the Company from Wakefern for the most recent calendar quarter
of Wakefern ended prior to such event. In addition, under the Wakefern
Letter the Big V Companies are required to obtain a letter of credit in
favor of Wakefern in the event the Company fails to pay any of its payables
to Wakefern within the time periods and in the manner prescribed by the
Wakefern By-Laws.
The Wakefern Letter further provides that if the Company defaults on its
obligations to Wakefern then due and payable and any letter of credit
required to be obtained pursuant to the Wakefern Letter is not obtained
within thirty days thereafter, then Wakefern has the right (the "Purchase
Right") to purchase all of the capital stock of Holding for an aggregate
purchase price equal to the fair value thereof. Upon the election to
exercise the Purchase Right, Wakefern has the right to assume control of the
management of the Big V Companies for a period of up to 120 days (the
"Management Period"), and to manage the Big V Companies for the account of
Holding. In the event that Wakefern assumes management of the Big V
Companies, Wakefern will have all and may exercise any of the rights,
powers, privileges and remedies of the existing shareholders in respect of
the management, operation or conduct of the business of the Big V Companies.
On or prior to the expiration of the Management Period, the existing
shareholders have the right to resume control of the management of the Big V
Companies by bringing current all obligations of the Big V Companies to
Wakefern. If the Big V Companies do not bring such obligations current at or
prior to the expiration of the Management Period,
F-20
<PAGE>
Wakefern is required, within 90 days thereafter, to effect the purchase of
Holding's capital stock from the existing shareholders and to pay such
shareholders the purchase price therefor as determined under the Wakefern
Letter.
Insure-Rite Premium Calls - During 1997, the Company's general liability
insurer, Insure-Rite, Ltd., made additional premium calls of $922,000 and
$806,000 relating to policy years 1993 and 1994, respectively. At December
26, 1998, the accompanying balance sheet includes the remaining amounts due
under the above mentioned call premium. The Company has no liability for
additional premium calls. During fiscal 1998, the Company made premium
payments of $615,000 and $269,000 for policy years 1993 and 1994,
respectively. During fiscal 1999, the Company made final premium payments of
$307,000 and $537,000 for policy years 1993 and 1994, respectively.
Wakefern, on behalf of its members, has entered into a long-term,
nonretrospectively rated general liability insurance policy from an
independent insurer. Wakefern and the Big V Companies have the ability to
use Insure-Rite, Ltd., in future years should premium based policies become
unfavorable.
The Company is a party to a number of legal proceedings in the ordinary
course of business. Management believes that the ultimate resolution of
these proceedings will not, in the aggregate, have a material adverse impact
on the financial condition, results of operations, liquidity or business of
the Company.
11. INCOME TAXES
The provision (benefit) for income taxes relating to continuing operations
at December 25, 1999, December 26, 1998 and December 27, 1997 is comprised
of the following:
<TABLE>
<CAPTION>
1999 1998 1997
(In Thousands)
<S> <C> <C> <C>
Provision (benefit) for Federal income taxes:
Current $(1,010) $1,117 $ 396
Deferred 570 368 (1,090)
------- ------ -------
Total provision (benefit) for Federal income taxes (440) 1,485 (694)
------- ------ -------
Provision (benefit) for state income taxes:
Current (537) 35 691
Deferred (2,323) 340 (1,622)
------- ------ -------
Total provision (benefit) for state income taxes (2,860) 375 (931)
------- ------ -------
Total income tax provision (benefit) $(3,300) $1,860 $(1,625)
======= ====== =======
</TABLE>
F-21
<PAGE>
The actual income tax provision (benefit) relating to continuing operations
differs from the statutory tax rate as follows:
<TABLE>
<CAPTION>
1999 1998 1997
(In Thousands)
<S> <C> <C> <C>
Federal statutory tax rate of 34% $(1,805) $ 670 $(1,485)
Goodwill amortization 674 674 674
State tax, net of Federal income tax benefit (1,888) 247 92
Refunds in excess of accrual (196) - (419)
Adjustments to deferred taxes - 389 (435)
Tax credits (192) - -
Other 107 (120) (52)
------- ------ -------
Total income tax provision (benefit) $(3,300) $1,860 $(1,625)
======= ====== =======
</TABLE>
The net deferred income tax liabilities/(assets) of the Company for the years
ended December 25, 1999 and December 26, 1998 consist of the following:
<TABLE>
<CAPTION>
1999 1998
(In Thousands)
Current deferred tax liabilities/(assets):
<S> <C> <C>
Prepaid expenses $ 291 $ 482
Receivables 2,686 2,223
Inventory 3,855 3,722
Accounts payable (356) (214)
State deferred taxes (383) -
Capital leases (142) -
Other 1,349 -
------- --------
Total current deferred tax liabilities 7,300 6,213
------- --------
Noncurrent deferred tax liabilities/(assets):
Property and equipment (including capital leases) 5,763 7,530
Wakefern Warehouse Agreement 12,315 13,552
Other long-term assets (2,413) 1,243
Other long-term liabilities 2,877 (1,086)
Capital leases (9,866) (10,662)
Alternative minimum tax credit carryforward (2,718) (2,873)
Federal tax credit carryforward (334) (275)
Net operating loss carryforward - state (1,328) (1,543)
Net operating loss carryforward - federal (1,759) -
Valuation allowance 108 184
------- --------
Total noncurrent deferred tax liabilities 2,645 6,070
------- --------
Net deferred income tax liability $ 9,945 $ 12,283
======= ========
</TABLE>
The Company records the consolidated Holding Federal and State provision or
benefit. If the Company were to file its own Federal and State returns, such
amounts would not be materially different from the consolidated Holding
returns.
F-22
<PAGE>
Realization of deferred tax assets associated with the Net Operating Loss
("NOL") and credit carryforwards is dependent upon generating sufficient
taxable income prior to their expiration. Management believes that there is
a risk that certain of these NOL and credit carryforwards may expire unused
and, accordingly, has established a valuation allowance against them.
The Company's net operating loss and credit carryforwards at December 25,
1999 expire as follows:
<TABLE>
<CAPTION>
Federal State
Operating Tax Operating Tax
Expiration Dates Losses Credits Losses Credits
(In Thousands)
<S> <C> <C> <C> <C>
2000 - 2001 $ - $ - $ 1,386 $ -
2002 - 2005 - - 418 128
2006 - 2008 - - 13,389 -
2009 - thereafter 5,172 334 7,376 -
No expiration - 2,718 - -
</TABLE>
In August 1993, the U.S. Congress enacted the Omnibus Budget Reconciliation
Act of 1993 (the "Act") which, among other things, increased the Federal
income tax rates to 35% from 34% for corporations with taxable income in
excess of $10.0 million. Since the Company has not attained such level of
taxable income, the Act has had no effect on the operating results and the
deferred income tax liability at December 25, 1999 and December 26, 1998 and
the Company continues to represent the tax effect of temporary differences
at a 34% rate.
12. EMPLOYEE BENEFIT PLANS
The Company has a noncontributory discretionary profit-sharing retirement
plan for officers and nonunion employees and incentive programs for certain
management personnel and officers. The Company has amended the profit
sharing retirement plan to include a qualified cash or deferred arrangement
pursuant to Section 401(k) of the Internal Revenue Code. Under this
arrangement, officers and nonunion employees may elect to forego the current
receipt of up to 10% of their cash compensation and have such amounts
contributed to the plan on their behalf. In addition, the Company matches
25% of such elected amounts up to 5% of each individual employee's income.
The Company is also obligated for pension and welfare payments for pension
plans covering substantially all employees whose terms of employment are
covered under collective bargaining agreements. For the years ended December
25, 1999, December 26, 1998 and December 27, 1997, provisions for these
plans were as follows:
<TABLE>
<CAPTION>
Company Profit-Sharing (Including Union Pension
401(k) Arrangement) and Incentive Plans and Welfare
(In Thousands) (In Thousands)
<S> <C> <C>
1999 $1,715 $8,184
1998 906 8,423
1997 1,247 7,198
</TABLE>
Additionally, pursuant to the acquisition as described in Note 3, the
Company has two noncontributory (union and non-union) defined benefit
pension plans covering all full-time employees who meet prescribed
eligibility requirements related to the acquisition. Plan assets were
invested primarily in
F-23
<PAGE>
cash equivalents, United States government agency obligations, corporate
bonds and retirement plan trusts.
The reconciliations of the funded status of both plans at December 25, 1999
are as follows:
<TABLE>
<CAPTION>
Union Non-Union
Plan Plan
(In Thousands)
<S> <C> <C>
Change in Projected Benefit Obligation (PBO)
during measurement period:
PBO, November 6, 1999 $2,132 $2,410
Service cost 14 19
Interest cost 25 32
------ ------
PBO, December 25, 1999 $2,171 $2,461
====== ======
Change in plan assets during the measurement period:
Plan assets at fair value, November 6, 1999 $2,136 $2,675
Actual return on plan assets 209 225
------ ------
Plan assets at fair value, December 25, 1999 $2,345 $2,900
====== ======
The reconciliation of the prepaid/(accrued) plan at
December 25, 1999 is as follows:
Funded status of the plan $ 174 $ 439
Unrecognized net gain (182) (190)
------ ------
Prepaid/(accrued) benefit cost $ (8) $ 249
------ ------
Net amount recognized $ (8) $ 249
====== ======
Components of net periodic benefit cost for the period:
Service cost $ 14 $ 19
Interest cost 25 32
Actual return of plan assets (209) (224)
Amortization of unrecognized net gain 182 190
------ ------
Net periodic pension cost $ 12 $ 17
====== ======
Prepaid/(accrued) benefit obligation, December 25, 1999 $ (8) $ 249
====== ======
</TABLE>
Assumptions used in accounting for the defined benefit pension plans are as
follows:
F-24
<PAGE>
<TABLE>
<CAPTION>
Union Non-Union
Plan Plan
<S> <C> <C>
Discount rate 8.0% 8.0%
Rate of increase in compensation levels 5.5% N/A
Expected long-term rate of return on assets 8.5% 8.5%
</TABLE>
Also, the Company maintains a postretirement medical plan which provides
coverage for certain full-time and part-time employees who are in active
service on or subsequent to January 1, 1991, the effective date of the plan.
Employees and their dependents who officially retire collect a pension by
attaining age sixty-two and having at least ten years of service with the
Company are covered until age sixty-five is attained. Under the plan, the
Company will pay for medical expenses after the employee has met the
deductible in accordance with the Schedule of Benefits in the Summary Plan
Description, up to maximum of $50,000. The unfunded liability at
December 25, 1999 and the charge to earnings each year are insignificant.
Except as stated above for continuations of coverage due to COBRA, coverage
will generally terminate with the employee's termination from active service
or when the employee ceases to be in a class eligible for coverage.
13. RELATED PARTY TRANSACTIONS
Investment in Wakefern Food Corp. - The Company is a stockholder of Wakefern
Food Corp. ("Wakefern"), a corporation operated on a cooperative basis for
its stockholder customers. The Company is restricted with regard to its
ability to dispose of its stock ownership of Wakefern. Such restrictions
include all sales, transfers, assignments, pledges, encumbrances or other
dispositions, except to Wakefern or as permitted by Wakefern or Wakefern's
By-Laws. The Company, along with other stockholder members, is obligated to
purchase at least 85% of its merchandise requirements from Wakefern under a
Warehouse Agreement which contains an evergreen provision providing for a
continual 10-year expiration date for all members. The Company purchased
product from Wakefern totaling $609 million, $562 million and $548 million
for the years ended December 25, 1999, December 26, 1998 and December 27,
1997, respectively. Additional net payments made to Wakefern approximate
$19.5 million and relate to supplies and services purchased from Wakefern,
repayment of notes payable, required contributions to fund reserves for
potential work stoppages, partially offset by credits received in the normal
course of business (excluding patronage dividend receipts.)
At December 25, 1999 and December 26, 1998, the Company was indebted to
Wakefern for approximately $42 million and $32 million, respectively,
representing current charges in the ordinary course of business, which have
been included in accounts payable. The Company was indebted to Wakefern for
various notes payable approximating $8,000 at December 26, 1998.
As required by Wakefern's By-Laws, all members of the cooperative are
required to make an investment in the common stock of Wakefern for each
supermarket owned, with the exact amount per store computed in accordance
with a formula based on the volume of each store's purchases from Wakefern.
The maximum required investment per store was $500,000 at December 25, 1999
and December 26, 1998 and $450,000 at December 27, 1997. The Company's
shares of stock in Wakefern are assigned to and held by Wakefern as
collateral security for any amounts owed. The Company has Subscription
Agreements to invest additional funds in Wakefern and has remaining unfunded
balances of $2,272,000 as of December 25, 1999 and $2,803,000 as of December
22, 1998 (see Note 8).
As a member of Wakefern, the Company is entitled to a share of an annual
Wakefern patronage dividend calculated after the close of Wakefern's fiscal
year ending the last Saturday in September, as the result of the
distribution of all operating profits to its members on a pro rata basis
based on the actual member purchases from each merchandising division. It is
the Company's policy to accrue
F-25
<PAGE>
monthly an estimate of the annual patronage dividend. The patronage dividend
was $9,361,000, $9,334,000 and $8,838,000 for fiscal years 1999, 1998 and
1997, respectively. The Company reflects this patronage dividend as a
reduction of cost of sales in the consolidated statements of income (loss).
At December 25, 1999, December 26, 1998 and December 27, 1997, accounts
receivable includes approximately $6,715,000, $5,541,000 and $5,166,000,
respectively, for this aforementioned patronage dividend.
Other - Holding has agreements with certain of its stockholders which
require the annual payment of management consulting fees. Such fees
approximated $250,000 at December 25, 1999, December 26, 1998 and December
27, 1997.
At December 25, 1999 and December 26, 1998, certain executives and other key
employees of the Company held 123,538 and 55,978, respectively, stock
options to purchase Holding Class A common stock. The outstanding stock
options at December 25, 1999 have a weighted average contractual life of 4.7
years and an exercise price of $35. Exercisable options equaled 14,438 for
the fiscal years ended December 25, 1999 and December 26, 1998.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation ("SFAS
No. 123"), which requires either the recognition of compensation expense for
stock options and other stock-based compensation or supplemental disclosure
of the impact such expense recognition would have had on the Company's
results of operations. The Company has elected to continue to account for
stock-based compensation in accordance with Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees, and to provide the
supplemental information required by SFAS No. 123. Had compensation cost for
such options been determined in accordance with the fair value method, the
Company's 1999 net loss and 1998 net income would have been
increased/decreased by $95,000 and $24,000, respectively. The effect on the
Company's 1997 net loss was not material. The fair values of stock options
on the date of grant were estimated using the Black-Scholes option pricing
model with the following assumptions: (i) weighted average risk-free rate of
5.5%, (ii) expected option life of 9 1/2 years and (iii) no dividends. Since
the Company is not publicly traded, volatility was not applicable.
******
F-26
<PAGE>
BIG V SUPERMARKETS, INC.
INDEX TO EXHIBITS
Exhibits Incorporated by Reference. Except as otherwise noted, the
following is a list of exhibits incorporated herein by reference to the
Company's Registration Statement No. 33-74132, as amended, filed with the
Securities and Exchange Commission (exhibit numbers indicated below correspond
to those used for exhibits originally filed with such Registration No. 33-
74132).
Exhibit Exhibit
No. Description
- ----- -----------
3.1 Certificate of Incorporation of Big V Supermarkets, Inc., as amended
to date.
3.2 Amended and Restated By-Laws of Big V Supermarkets, Inc.
4.1 Indenture dated December 17, 1993 between Big V Supermarkets, Inc. and
United States Trust Company of New York, as Trustee, relating to the
Notes (including form of Note).
4.2 Registration Rights Agreement dated December 10, 1993 between Big V
Supermarkets, Inc., BT Securities Corporation and CS First Boston
Corporation.
4.3 Amended and Restated Bank Credit Agreement dated December 17, 1993
between Big V Holding Corp., BV Holdings Corporation, Big V
Supermarkets, Inc., various banks, Union Bank of Switzerland as co-
agent and Bankers Trust Company as agent.
4.4 Note and Stock Purchase Agreement dated December 28, 1990 between Big
V Holdings Corporation, Big V Supermarkets, Inc., The Prudential
Reinsurance Company, ML-Lee Acquisition Fund II, L.P., and ML-Lee
Acquisition (Fund Retirement Accounts) II, L.P.
4.5 Amendment to Note and Stock Purchase Agreement dated as of December
17, 1993 between Big V Holding Corp., BV Holdings Corporation, Big V
Supermarkets, Inc., ML-Lee Acquisition Fund II, L.P. and ML-Lee
Acquisition Fund (Retirement Accounts) II, L.P.
4.6 Stock Subscription Agreement and Promissory Note by Big V
Supermarkets, Inc. for stock of Wakefern Food Corp. dated March 8,
1988, including Schedule of Similar Documents not included in
Exhibits.
4.7 Loan and Security Agreement by and between Big V Supermarkets, Inc.
and The CIT /Group/Equipment Financing, Inc. dated as of July 20,
1993, as amended.
II-1
<PAGE>
4.8 Loan and Security Agreement by and between Big V Supermarkets, Inc.
and The CIT Group/Equipment Financing, Inc. dated as of August 12,
1991.
4.9 Loan and Security Agreement, dated as of December 28, 1992 between Big
V Supermarkets, Inc. and Pitney Bowes Credit Corporation.
4.10 Loan and Security Agreement dated December 31, 1992 between Big V
Supermarkets, Inc. and MetLife Capital Corporation.
4.11 Promissory Note dated November 12, 1993 from Big V Supermarkets, Inc.
to Insure-Rite, Ltd.
4.12 Consent and Amendment dated December 13, 1993 to Loan and Security
Agreement by and between Big V Supermarkets and The CIT
Group/Equipment Financing, Inc. dated as of August 12, 1991.
4.13 Bond Purchase Agreement among Orange County Industrial Development
Agency, Big V Supermarkets, Inc. and The CIT Group/Equipment
Financing, Inc. dated as of December 22, 1993.
4.14 Second Consent and Amendment dated March 23, 1994 to Loan and Security
Agreement by and between Big V Supermarkets, Inc. and The CIT
Group/Equipment Financing, Inc. dated as of August 12, 1991.
4.15 Third Consent and Amendment dated May 9, 1994 to Loan and Security
Agreement by and between Big V Supermarkets, Inc. and The CIT
Group/Equipment Financing, Inc. dated as of August 12, 1991.
4.16 Fourth Consent and Amendment dated February 27, 1995 to Loan and
Security Agreement by and between Big V Supermarkets, Inc. and The CIT
Group/Equipment Financing, Inc. dated as of August 12, 1991.
4.17 Orange County Industrial Development Agency taxable industrial
development revenue bond in the aggregate principal amount of $2
million dated June 3, 1994.
4.18 Orange County Industrial Development Agency taxable industrial
development revenue bond in the aggregate principal amount of $2
million dated December 5, 1994.
4.19 Note and Security Agreement dated as of August 9, 1995 between Big V
Supermarkets, Inc. and El Camino Resources, Ltd.
II-2
<PAGE>
4.20 Third Amendment dated as of January 9, 1996 to Amended and Restated
Bank Credit Agreement dated December 17, 1993 between Big V Holding
Corp., BV Holdings Corporation, Big V Supermarkets, Inc., various
banks, and Bankers Trust Company, as agent.
4.21 Consent dated as of January 23, 1996 to Amended and Restated Bank
Credit Agreement dated December 17, 1993 between Big V Holding Corp.,
BV Holdings Corporation, Big V Supermarkets, Inc., various banks, and
Bankers Trust Company, as agent.
4.22 Consent dated October 10, 1996 to Amended and Restated Bank Credit
Agreement dated December 17, 1993 between Big V Holding Corp., BV
Holdings Corporation, Big V Supermarkets, Inc., various banks, and
Bankers Trust Company, as agent, and MetLife Capital Corporation.
4.23 Consent and Waiver dated November 5, 1996 to Amended and Restated Bank
Credit Agreement dated December 17, 1993 between Big V Holding Corp.,
BV Holdings Corporation, Big V Supermarkets, Inc., various banks, and
Bankers Trust Company, as agent, and MetLife Capital Corporation.
4.24 Fourth Amendment and Consent dated January 22, 1997 to Amended and
Restated Bank Credit Agreement dated December 17, 1993 between Big V
Holding Corp., BV Holdings Corporation, Big V Supermarkets, Inc.,
various banks, and Bankers Trust Company, as agent.
4.25 Term Promissory Note and Loan and Security Agreement dated as of
October 30, 1996 between Big V Supermarkets, Inc. and MetLife Capital
Corporation.
4.26 UCC-3 Termination Statements on behalf of El Camino Resources, Ltd.
(reference to 4.19).
4.27 Partnership Interest Sale-Purchase Agreement between Big V
Supermarkets, Inc. and Columbia Hawkins Group.
4.28 Loan & Security Agreement, dated July 3, 1997 by and between Big V
Supermarkets, Inc. and FINOVA Capital Corporation.
4.29 Fifth Amendment and Consent dated October 1, 1997 to Amended and
Restated Bank Credit Agreement dated December 17, 1993 between Big V
Holding Corp., BV Holdings Corporation, Big V Supermarkets, Inc.,
various banks, and Bankers Trust Company, as agent.
4.30 Sixth Amendment and Waiver dated as of April 8, 1998 to Amended and
Restated Bank Credit Agreement dated December 17, 1993 between Big V
Holding Corp., BV Holdings Corporation, Big V Supermarkets, Inc.,
various banks, and Bankers Trust Company, as agent.
II-3
<PAGE>
4.31 Seventh Amendment dated as of October 2, 1998 to Amended and Restated
Bank Credit Agreement dated December 17, 1993 between Big V Holding
Corp., BV Holdings Corporation, Big V Supermarkets, Inc., various
banks, and Bankers Trust Company, as agent.
4.32 Eighth Amendment dated as of October 21, 1998 to Amended and Restated
Bank Credit Agreement dated December 17, 1993 between Big V Holding
Corp., BV Holdings Corporation, Big V Supermarkets, Inc., various
banks, and Bankers Trust Company, as agent.
4.33 Credit Agreement dated as of January 14, 1999 among Big V Holding
Corp., BV Holdings Corporation, Big V Supermarkets, Inc., Various
Lenders, DLJ Capital Funding, Inc., as Syndication Agent, Fleet
National Bank, as Administrative Agent, and Summit Bank, as
Documentation Agent.
4.34** First Amendment dated as of November 12, 1999, among Big V Holding
Corp., BV Holdings Corporation, Big V Supermarkets, Inc., Various
Lenders, DLJ Capital Funding, Inc., as Syndication Agent, Fleet
National Bank, as Administrative Agent, and Summit Bank, as
Documentation Agent.
4.35** Subordinated Promissory Note dated November 12, 1999 between Big V
Supermarkets, Inc. and Laurenti Marital Trust.
4.36** Second Amendment dated as of March 2, 2000, among Big V Holding Corp.,
BV Holdings Corporation, Big V Supermarkets, Inc., Various Lenders,
DLJ Capital Funding, Inc., as Syndication Agent, Fleet National Bank,
as Administrative Agent, and Summit Bank, as Documentation Agent.
10.1 Letter Agreement dated as of October 10, 1990 among Big V Holding
Corp., Big V Acquisition Corp., Thomas H. Lee Company, J. S.
Frelinghuysen & Company, Inc., BV Holdings Corporation and Big V
Supermarkets, Inc. regarding agreement with Wakefern Food Corporation.
10.2 Letter Agreement dated as of December 28, 1990 between Big V
Supermarkets, Inc., BV Holdings Corporation, Big V Holding Corp., Big
V Acquisition Corp., ML-Lee Acquisition Fund II, L.P., ML-Lee
Acquisition Fund (Retirement Accounts) II, L.P., Thomas H. Lee Equity
Partners, L.P., Thomas H. Lee Advisors II, L.P., THL Equity Advisors
Limited Partnership, ML Mezzanine Investments II, L.P., Frelinghuysen
Equity Corp., THL-EP Equity Corporation, Thomas H. Lee Company and
Wakefern Food Corporation.
10.3 Letter Agreement dated as of December 28, 1990 between Big V
Supermarkets, Inc., BV Holdings Corporation, Big V Holding Corp., Big
V Acquisition Corp., ML-Lee Acquisition Fund II, L.P., ML-Lee
Acquisition Fund (Retirement Accounts) II, L.P., Thomas H. Lee Equity
Partners, L.P., THL Equity Advisors Limited Partnership, Mezzanine
Investments II, L.P., J. E. Frelinghuysen Equity Corp., 1987 Merchant
II-4
<PAGE>
Investment Partnership, Merchant GP Inc., Merchant LBO, Inc. and
Metropolitan Life Insurance Company regarding obligations to Wakefern,
as amended by an amendment dated April 22, 1991.
10.4 Letter Agreement between Big V Supermarkets, Inc., BV Holdings
Corporation, Big V Holding Corp., Thomas H. Lee Equity Partners, L.P.,
Joseph S. Frelinghuysen, ML-Lee Acquisition Fund II, L.P., ML-Lee
Acquisition Fund (Retirement Accounts) II, L.P., David G. Bronstein,
Gary S. Koppele, Cornelius J. J. Madera, Jr. and Wakefern Food
Corporation dated November 22, 1993.
10.5 By-Laws of Wakefern Food Corporation.
10.6 Stockholders Agreement dated as of August 20, 1987 by and among
Wakefern Food Corp., and each of the Member-Stockholders of Wakefern.
10.7 Amendment to Stockholders Agreement dated as of January, 1992 by and
among Wakefern Food Corp. and each of the Member-Stockholders of
Wakefern.
10.8 Order on Consent between the DEC, Big V Supermarkets, Inc. and Somers
Development Corp. regarding Baldwin Place Shopping Center dated July
27, 1992.
10.9 Trademark License Agreement between Big V Supermarkets, Inc. and
Wakefern Food Corporation.
10.10 Big V Supermarkets, Inc. Profit-Sharing Plan and Trust.
10.11 Somers Agreement dated as of December 28, 1990, by and among BV
Holdings Corporation, Big V Investment Corp., Big V Supermarkets,
Inc., Somers Development Corp. and Merchant GP, Inc., as agent and
representative.
10.12 Employment and Non-Competition Agreement dated as of December 28, 1990
between David G. Bronstein, BV Holdings Corporation and Big V
Supermarkets, Inc.
10.13 Employment and Non-Competition Agreement between Cornelius J. J.
Madera, Jr., BV Holdings Corporation and Big V Supermarkets, Inc.
dated December 28, 1990.
10.14 Employment and Non-Competition Agreement dated December 28, 1990
between Gary S. Koppele, BV Holdings Corporation and Big V
Supermarkets, Inc.
10.15 Employment and Non-Competition Agreement dated December 19, 1995
between BV Holdings Corporation, Big V Supermarkets, Inc. and Joseph
Fisher.
10.16 Employment and Non-Competition Agreement dated August 6, 1993 between
BV Holdings Corporation, Big V Supermarkets, Inc. and Stuart
Rosenthal.
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<PAGE>
10.17 Management Agreement with BV Holdings Corporation dated December 28,
1990 between BV Holdings Corporation and Big V Supermarkets, Inc.
10.18 Management Agreement with Thomas H. Lee Company dated December 28,
1990 between Thomas H. Lee Company, Big V Holding Corp., Big V
Acquisition Corp., BV Holdings Corporation and Big V Supermarkets,
Inc.
10.19 Management Agreement dated December 28, 1990 between J. S.
Frelinghuysen/Company, Inc., Big V Holding Corp., BV Holdings
Corporation, and Big V Supermarkets, Inc.
10.20 Agreement for the allocation of Federal Income Tax Liability and
Benefits among members of Big V Holding Corp. Consolidated Group dated
December 28, 1990 between Big V Holding Corp., BV Holdings
Corporation, Big V Supermarkets, Inc., Somers Development Corp., Dixx
Mart, Inc. and Big V Investment Corp.
10.21 Big V Holding Corp. 1990 Time Accelerated Restricted Stock Option
Plan.
10.22 Employment and Non-Competition Agreement dated as of May 1, 1996
between James A. Toopes, Big V Holding Corp. and Big V Supermarkets,
Inc.
10.23 Employment Termination Agreement between Big V Supermarkets, Inc., Big
V Holding Corp. and Gary S. Koppele dated June 17, 1996.
10.24 Employment Termination Agreement between Big V Supermarkets, Inc., Big
V Holding Corp. and Cornelius J. J. Madera, Jr. dated June 17, 1996.
10.25 Management Stock Subscription Agreement between Big V Holding Corp.
and Stephen L. Hittman, dated April 18, 1997.
10.26 Stock Pledge Agreement between Big V Holding Corp., and Stephen L.
Hittman, dated April 18, 1997.
10.27 Secured Promissory Note between Big V Holding Corp. and Stephen L.
Hittman, dated April 18, 1997.
10.28 Management Stock Subscription Agreement between Big V Holding Corp.
and John Onufer, Jr., dated April 24, 1997.
10.29 Stock Pledge Agreement between Big V Holding Corp. and John Onufer,
Jr., dated April 24, 1997.
10.30 Secured Promissory Note between Big V Holding Corp. and John Onufer,
Jr., dated April 24, 1997.
10.31 Non-Qualified Time-Accelerated Restricted Stock Option Agreement with
John Onufer, Jr., dated April 24, 1997.
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<PAGE>
10.32 Management Stock Subscription Agreement between Big V Holding Corp.
and Donald J. Trella, dated August 29, 1997.
10.33 Stock Pledge Agreement between Big V Holding Corp. and Donald J.
Trella, dated August 29, 1997.
10.34 Secured Promissory Note between Big V Holding Corp. and Donald J.
Trella, dated August 29, 1997.
10.35 Secured Promissory Note between Big V Holding Corp. and Donald J.
Trella, dated August 29, 1997.
10.36 Non-Qualified Time Accelerated Restricted Stock Option Agreement with
Don Trella, dated October 8, 1997.
10.37 Non-Qualified Time Accelerated Restricted Stock Option Agreement with
Joseph V. Fisher, dated December 21, 1997.
10.38 Non-Qualified Time Accelerated Restricted Stock Option Agreement with
Stephen Hittman, dated December 21, 1997.
10.39 Secured Promissory Note between Big V Holding Corp. and James A.
Toopes, Jr. dated August 7, 1998
10.40 Addendum to Stock Pledge Agreement dated December 14, 1996 between Big
V Holding Corp. and James A. Toopes, Jr. dated August 7, 1998
10.41 Promissory Note between Big V Holding Corp. and James A. Toopes, Jr.,
dated December 28, 1998.
10.42 Employment and Non-Competition Agreement dated as of February 23, 1999
between Mark S. Schwartz, Big V Holding Corp. and Big V Supermarkets,
Inc.
10.43** Promissory Note between Big V Holding Corp. and Mark S. Schwartz dated
April 22, 1999.
10.44** Agreement and Plan of Merger by and among ShopRite of Pennington,
Inc., BVNJ Partnership, L.P., Big V Supermarkets, Inc., and the
Stockholders of ShopRite of Pennington, Inc.
10.45** Management Stock Subscription Agreement between Big V Holding Corp.
and Mark S. Schwartz, dated February 23, 1999.
10.46** Stock Pledge Agreement between Big V Holding Corp. and Mark S.
Schwartz, dated February 23, 1999.
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<PAGE>
10.47** Secured Promissory Note between Big V Holding Corp. and Mark S.
Schwartz, dated February 23, 1999.
12.1** Statement re: computation of ratio of earnings to fixed charges.
21.1 Subsidiaries of the Registrant.
27** Financial Data Schedule
_________________
** Included herein.
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<PAGE>
Exhibit 4.34
FIRST AMENDMENT
FIRST AMENDMENT (this "Amendment"), dated as of November 12, 1999,
among BIG V HOLDING CORP., a Delaware corporation ("Holdings"), BV HOLDINGS
CORPORATION, a Delaware corporation ("BV Holdings"), BIG V SUPERMARKETS, INC., a
New York corporation (the "Borrower"), the lenders from time to time party to
the Credit Agreement referred to below (each a "Lender" and, collectively, the
"Lenders"), DLJ CAPITAL FUNDING, INC., as Syndication Agent (in such capacity,
the "Syndication Agent"), FLEET NATIONAL BANK, as Administrative Agent (in such
capacity, the "Administrative Agent"), and SUMMIT BANK, as Documentation Agent
(in such capacity, the "Documentation Agent"). All capitalized terms used herein
and not otherwise defined herein shall have the respective meanings provided
such terms in the Credit Agreement referred to below.
W I T N E S S E T H :
WHEREAS, Holdings, BV Holdings, the Borrower, the Lenders, the
Administrative Agent, the Syndication Agent and the Documentation Agent are
parties to a Credit Agreement, dated as of January 14, 1999 (the "Credit
Agreement");
WHEREAS, the Borrower has requested, and the Lenders have agreed, to
certain amendments and/or modifications to the Credit Agreement to permit the
Borrower to consummate the acquisition of all of the outstanding capital stock
of ShopRite of Pennington, Inc., in each case as provided herein; and
WHEREAS, subject to the terms and conditions set forth below, the
parties hereto agree as follows;
NOW, THEREFORE, it is agreed:
1. Section 1.01 of the Credit Agreement is hereby amended by
inserting the following new clause (f) at the end thereof:
"(f) Subject to and upon the terms and conditions set forth
herein, each Lender with a Tranche C Term Loan Commitment severally agrees
to make on the First Amendment Effective Date and on the Second Tranche C
Term Loan Borrowing Date, a term loan or term loans (each a "Tranche C Term
Loan" and, collectively, the "Tranche C Term Loans") to the Borrower, which
Tranche C Term Loans (i) shall, at the option of the Borrower, be incurred
and maintained as, and/or converted into, Base Rate Loans or Eurodollar
Loans, provided that, except as specifically provided in Section 1.10(b),
all Tranche C Term Loans comprising the same Borrowing shall at all times
be of the same Type, and (ii) shall be made by each such Lender in that
aggregate principal amount which does not exceed the Tranche C Term Loan
Commitment of such Lender on any such Tranche C Term Loan Borrowing Date;
<PAGE>
provided, however, no more than $36,000,000 of Tranche C Term Loans may be
incurred on the First Amendment Effective Date. Once repaid, Tranche C Term
Loans incurred hereunder may not be reborrowed."
2. Section 1.03(a) of the Credit Agreement is hereby amended by
inserting the following new text immediately after the words "Tranche B Term
Loans" appearing therein:
", Tranche C Term Loans".
3. Section 1.05(a) of the Credit Agreement is hereby amended by (i)
deleting the word "and" appearing at the end of clause (iii) of such Section
1.05(a) and inserting a comma in lieu thereof and (ii) inserting the following
new clause (v) immediately after the final parenthetical appearing therein:
"and (v) if Tranche C Term Loans, by a promissory note duly executed and
delivered by the Borrower substantially in the form of Exhibit B-5, with
blanks appropriately completed in conformity herewith (each a "Tranche C
Term Note" and, collectively, the "Tranche C Term Notes")".
4. Section 1.05 of the Credit Agreement is hereby further amended by
inserting the following new clause (g) at the end thereof:
"(g) The Tranche C Term Note issued to each Lender that has a
Tranche C Term Loan Commitment or outstanding Tranche C Term Loans shall
(i) be executed by the Borrower, (ii) be payable to such Lender or its
registered assigns and be dated the First Amendment Effective Date (or, if
issued after the First Amendment Effective Date, be dated the date of
issuance thereof), (iii) be in a stated principal amount equal to the
Tranche C Term Loan Commitment of such Lender on the First Amendment
Effective Date (before giving effect to the making of any Tranche C Term
Loans on such date by such Lender) (or, if issued after the First Amendment
Effective Date, be in a stated principal amount equal to the outstanding
Tranche C Term Loan Commitment, if any, of such Lender at such time plus
the outstanding principal amount of Tranche C Term Loans of such Lender at
such time) and be payable in the outstanding principal amount of Tranche C
Term Loans evidenced thereby, (iv) mature on the Tranche C Term Loan
Maturity Date, (v) bear interest as provided in the appropriate clause of
Section 1.08 in respect of Base Rate Loans and Eurodollar Loans, as the
case may be, evidenced thereby, (vi) be subject to voluntary prepayment as
provided in Section 4.01, and mandatory repayment as provided in Section
4.02, and (vii) be entitled to the benefits of this Agreement and the other
Credit Documents."
5. Section 1.07 of the Credit Agreement is hereby amended by
deleting the first sentence thereof and inserting the following new first
sentence in lieu thereof:
"All Borrowings of Tranche A Term Loans, Tranche B Term Loans,
Tranche C Term Loans and Revolving Loans under this Agreement shall be
incurred from the
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<PAGE>
Lenders pro rata on the basis of their Tranche A Term Loan Commitments,
Tranche B Term Loan Commitments, Tranche C Term Loan Commitments or
Revolving Loan Commitments, as the case may be."
6. Section 1.09 of the Credit Agreement is hereby amended by deleting
clause (vii) thereof and inserting the following new clause (vii) in lieu
thereof:
"(vii) no Interest Period in respect of any Borrowing of Tranche A
Term Loans, Tranche B Term Loans or Tranche C Term Loans, as the case may
be, shall be selected which extends beyond any date upon which a mandatory
repayment of such Tranche of Term Loans will be required to be made under
Section 4.02(b)(i), (ii) or (iii), as the case may be, if the aggregate
principal amount of Tranche A Term Loans, Tranche B Term Loans or Tranche C
Term Loans, as the case may be, which have Interest Periods which will
expire after such date will be in excess of the aggregate principal amount
of Tranche A Term Loans, Tranche B Term Loans or Tranche C Term Loans, as
the case may be, then outstanding less the aggregate amount of such
required repayment."
7. Section 3.01 of the Credit Agreement is hereby amended by
inserting the following new clause (g) at the end thereof:
"(g) The Borrower agrees to pay to the Administrative Agent for
distribution to each Non-Defaulting Lender with a Tranche C Term Loan
Commitment, a commitment commission (the "C TL Commitment Commission") for
the period from and including the First Amendment Effective Date to but
excluding the Tranche C Term Loan Availability Termination Date (or such
earlier date on which the Total Tranche C Term Loan Commitment shall have
been terminated), computed at a rate for each day equal to 4.00% per annum
on the daily Tranche C Term Loan Commitment of such Non-Defaulting Lender.
Accrued C TL Commitment Commission shall be due and payable in arrears on
the date on which the Total Tranche C Term Loan Commitment shall have been
terminated."
8. Section 3.02 of the Credit Agreement is hereby amended by inserting
the following new clause (c) at the end thereof:
"(c) Upon at least one Business Day's prior written notice to the
Administrative Agent at the Notice Office (which notice the Administrative
Agent shall promptly transmit to each of the Lenders), the Borrower shall
have the right, at any time or from time to time, without premium or
penalty, to terminate in whole or in part, the remaining Total Tranche C
Term Loan Commitment, in a minimum amount of $500,000 or an integral
multiple of $500,000 in excess thereof in the case of the partial
terminations of the Total Tranche C Term Loan Commitment. Any reduction to
the Total Tranche C Term Loan Commitment pursuant to this Section 3.02(c)
shall be applied proportionately to permanently reduce the Tranche C Term
Loan Commitment of each Lender with such a Commitment."
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<PAGE>
9. Section 3.03(c) of the Credit Agreement is hereby amended by
inserting the following new sentence at the end thereof:
"In addition to any other mandatory commitment reductions pursuant
to this Section 3.03, the Total Tranche C Term Loan Commitment shall (i) be
reduced on each Tranche C Term Loan Borrowing Date (after giving effect to
the making of Tranche C Term Loans on each such date) in an amount equal to
the aggregate principal amount of Tranche C Term Loans incurred on each
such date, (ii) terminate in its entirety (to the extent not theretofore
terminated) on the earliest of (x) the Tranche C Term Loan Availability
Termination Date (after giving effect to the making of Tranche C Term Loans
on such date), (y) 5:00 P.M. (Boston, Massachusetts time) on the Tranche C
Term Loan Availability Termination Date, whether or not any Tranche C Term
Loans have been incurred on such date and (z) unless the Required Lenders
otherwise agree, the date on which a Change of Control occurs and (iii)
prior to the termination of the Total Tranche C Term Loan Commitment, be
reduced from time to time to the extent required by Section 4.02.
Notwithstanding anything to the contrary contained in clause (i) of the
immediately preceding sentence, in no event shall the Total Tranche C Term
Loan Commitment exceed $5,000,000 after giving effect to the incurrence of
Tranche C Term Loans on the First Amendment Effective Date and to the
extent that the Total Tranche C Term Loan Commitment on the First Amendment
Effective Date (and after giving effect to the incurrence of Tranche C Term
Loans on such date) would exceed $5,000,000, the Total Tranche C Term Loan
Commitment shall be reduced on such date to $5,000,000."
10. Section 3.03(e) of the Credit Agreement is hereby deleted and the
following new Section 3.03(e) is inserted in lieu thereof:
"(e) In addition to any other mandatory commitment reductions
pursuant to this Section 3.03, on each date after the Initial Borrowing
Date upon which a mandatory repayment of Term Loans, a mandatory reduction
to the Total Tranche A Term Loan Commitment and/or a mandatory reduction to
the Total Tranche C Term Loan Commitment pursuant to any of Sections
4.02(c) through (h), inclusive, or Section 4.02(m) is required (and exceeds
in amount the aggregate principal amount of Term Loans then outstanding
plus the sum of (1) the Total Tranche A Term Loan Commitment then in effect
and (2) the Total Tranche C Term Loan Commitment then in effect) or would
be required if Term Loans were then outstanding, the Total Tranche A Term
Loan Commitment was then in effect and/or the Total Tranche C Term Loan
Commitment was then in effect, the Total Revolving Loan Commitment shall be
permanently reduced by the amount, if any, by which the amount required to
be applied pursuant to said Sections (determined as if an unlimited amount
of Term Loans were actually outstanding) exceeds the aggregate principal
amount of Term Loans then outstanding plus the sum of (1) the Total Tranche
A Term Loan Commitment then in effect and (2) the Total Tranche C Term Loan
Commitment then in effect."
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<PAGE>
11. Section 3.03(f) of the Credit Agreement is hereby deleted and the
following new Section 3.03(f) is inserted in lieu thereof:
"(f) Each reduction to, or termination of, the Total Tranche A
Term Loan Commitment, the Total Tranche B Term Loan Commitment, the Total
Tranche C Term Loan Commitment and the Total Revolving Loan Commitment
pursuant to this Section 3.03 shall be applied to proportionately reduce or
terminate the Tranche A Term Loan Commitment, the Tranche B Term Loan
Commitment, the Tranche C Term Loan Commitment and the Revolving Loan
Commitment, as the case may be, of each Lender with such a Commitment."
12. Section 4.01 of the Credit Agreement is hereby deleted and the
following new Section 4.01 is inserted in lieu thereof:
"4.01 Voluntary Prepayments. The Borrower shall have the right to
prepay the Loans, without premium (except as otherwise provided below) or
penalty, in whole or in part at any time and from time to time on the
following terms and conditions: (i) the Borrower shall give the
Administrative Agent prior to 1:00 P.M. (Boston, Massachusetts time) at the
Notice Office (x) at least one Business Day's prior written notice (or
telephonic notice promptly confirmed in writing) of its intent to prepay
Base Rate Loans (or same day notice in the case of a prepayment of
Swingline Loans) and (y) at least three Business Days' prior written notice
(or telephonic notice promptly confirmed in writing) of its intent to
prepay Eurodollar Loans, which notice (in each case) shall specify whether
Tranche A Term Loans, Tranche B Term Loans, Tranche C Term Loans, Revolving
Loans or Swingline Loans shall be prepaid, the amount of such prepayment
and the Types of Loans to be prepaid and, in the case of Eurodollar Loans,
the specific Borrowing or Borrowings pursuant to which made, and which
notice the Administrative Agent shall, except in the case of Swingline
Loans, promptly transmit to each of the Lenders; (ii)(x) each partial
prepayment of Loans (other than Swingline Loans) pursuant to this Section
4.01 shall be in an aggregate principal amount of at least $250,000 or an
integral multiple of $50,000 in excess thereof and (y) each partial
prepayment of Swingline Loans pursuant to this Section 4.01 shall be in an
aggregate principal amount of at least $50,000 or an integral multiple of
$10,000 in excess thereof, provided that if any partial prepayment of
Eurodollar Loans made pursuant to any Borrowing shall reduce the
outstanding principal amount of Eurodollar Loans made pursuant to such
Borrowing to an amount less than the Minimum Borrowing Amount applicable
thereto, then such Borrowing may not be continued as a Borrowing of
Eurodollar Loans and any election of an Interest Period with respect
thereto given by the Borrower shall have no force or effect; (iii) each
prepayment pursuant to this Section 4.01 in respect of any Loans made
pursuant to a Borrowing shall be applied pro rata among such Loans,
provided that at the Borrower's election in connection with any prepayment
of Revolving Loans pursuant to this Section 4.01, such prepayment shall
not, so long as no Default or Event of Default then exists, be applied to
any Revolving Loan of a Defaulting Lender; (iv) except to the extent that a
B Lender or a
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<PAGE>
C Lender has waived its pro rata share of any such prepayment pursuant to
Section 4.02(k), each voluntary prepayment of Term Loans pursuant to this
Section 4.01 shall be applied pro rata to each Tranche of outstanding Term
Loans, with the Tranche A Term Loans to be allocated the Tranche A Term
Loan Percentage of the amount of such prepayment, the Tranche B Term Loans
to be allocated the Tranche B Term Loan Percentage of the amount of such
prepayment and the Tranche C Term Loans to be allocated the Tranche C Term
Loan Percentage of the amount of such prepayment, provided, however, so
long as any Tranche A Term Loans are then outstanding, the Borrower may
elect (as specified in the notice of prepayment given pursuant to this
Section 4.01) to have such prepayment applied solely to the then
outstanding Tranche A Term Loans; (v) each voluntary prepayment of any
Tranche of Term Loans pursuant to this Section 4.01 shall be applied (x) in
the case of Tranche A Term Loans, (1) first, to reduce the then remaining
Tranche A Term Loan Scheduled Repayments (other than the final Tranche A
Term Loan Scheduled Repayment) on a pro rata basis (based upon the
remaining unpaid principal amounts of such Tranche A Term Loan Scheduled
Repayments after giving effect to all prior reductions thereto, but
determined without regard to the final Tranche A Term Loan Scheduled
Repayment) and (2) second, to the extent in excess thereof, to reduce the
final Tranche A Term Loan Scheduled Repayment, (y) in the case of Tranche B
Term Loans, to reduce the then remaining Tranche B Term Loan Scheduled
Repayments on a pro rata basis (based upon the then remaining unpaid
principal amounts of such Tranche B Term Loan Scheduled Repayments after
giving effect to all prior reductions thereto), and (z) in the case of
Tranche C Term Loans, to reduce the then remaining Tranche C Term Loan
Scheduled Repayments on a pro rata basis (based upon the then remaining
unpaid principal amounts of such Tranche C Term Loan Scheduled Repayments
after giving effect to all prior reductions thereto); and (vi) in the case
of any voluntary prepayment of Tranche B Term Loans or Tranche C Term Loans
pursuant to this Section 4.01 (x) made on or prior to November 12, 2000,
such prepayment shall be an amount equal to the product of (A) the
principal amount specified pursuant to clause (i) of this Section 4.01 to
be allocated to such Tranche of Term Loans multiplied by (B) 102% and (y)
made after November 12, 2000 and on or prior to November 12, 2001, such
prepayment shall be an amount equal to the product of (A) the principal
amount specified pursuant to clause (i) of this Section 4.01 to be
allocated to such Tranche of Term Loans multiplied by (B) 101%."
13. Section 4.02(b) of the Credit Agreement is hereby amended by (i)
inserting the text "and the Tranche C Term Loan Scheduled Repayments"
immediately after the text "together with the Tranche B Term Loan Scheduled
Repayments" appearing in the parenthetical of clause (ii) thereof and (ii)
inserting the following new clause (iii) at the end thereof:
"(iii) In addition to any other mandatory repayments pursuant to
this Section 4.02, on each date set forth below, the Borrower shall be
required to repay that principal amount of Tranche C Term Loans, to the
extent then outstanding, as is set forth opposite such date below (each
such repayment, as the same may be reduced as
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<PAGE>
provided below in this clause (iii) and as provided in Sections 4.01 and
4.02(i), a "Tranche C Term Loan Scheduled Repayment"):
Tranche C Term Loan
Scheduled Repayment Date Amount
------------------------ ------
February 1, 2000 $102,500
May 1, 2000 $102,500
August 1, 2000 $102,500
November 1, 2000 $102,500
February 1, 2001 $102,500
May 1, 2001 $102,500
August 1, 2001 $102,500
November 1, 2001 $102,500
February 1, 2002 $102,500
May 1, 2002 $102,500
August 1, 2002 $102,500
November 1, 2002 $102,500
February 1, 2003 $102,500
May 1, 2003 $102,500
Tranche C Term Loan
Maturity Date $39,565,000.
If at the time of the termination of the Total Tranche C Term Loan
Commitment (and after giving effect to the incurrence of any Tranche C Term
Loans at such time) the Borrower has not theretofore incurred $41,000,000
of Tranche C Term Loans, then each of the Tranche C Term Loan Scheduled
Repayments set forth in the table above in this clause (iii) shall be
reduced on a pro rata basis (based on the relative proportion that the
amount of each such Tranche C Term Loan Scheduled Repayment as set forth in
such table above bears to the aggregate amount of all such Tranche C Term
Loan Scheduled Repayments)."
14. Section 4.02(c) of the Credit Agreement is hereby amended by
deleting the last parenthetical appearing therein and inserting the following
new parenthetical in lieu thereof:
"(and/or, if the Total Tranche A Term Loan Commitment or the Total
Tranche C Term Loan Commitment has not yet been terminated, as a mandatory
reduction to the Total Tranche A Term Loan Commitment and/or the Total
Tranche C Term Loan Commitment, as the case may be)".
15. Section 4.02(d) of the Credit Agreement is hereby amended by (i)
deleting the text "Effective Date" appearing in the first parenthetical thereof
and inserting the text "First
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<PAGE>
Amendment Effective Date" in lieu thereof and (ii) deleting the last
parenthetical appearing therein and inserting the following new parenthetical in
lieu thereof:
"(and/or, if the Total Tranche A Term Loan Commitment or the Total Tranche
C Term Loan Commitment has not yet been terminated, as a mandatory
reduction to the Total Tranche A Term Loan Commitment and/or the Total
Tranche C Term Loan Commitment, as the case may be)".
16. Section 4.02(e) of the Credit Agreement is hereby amended by
deleting the first, third and last parentheticals appearing therein and
inserting, in each case, the following new parenthetical in lieu thereof:
"(and/or, if the Total Tranche A Term Loan Commitment or the Total Tranche
C Term Loan Commitment has not yet been terminated, as a mandatory
reduction to the Total Tranche A Term Loan Commitment and/or the Total
Tranche C Term Loan Commitment, as the case may be)".
17. Section 4.02(g) of the Credit Agreement is hereby amended by
deleting the first, third and last parentheticals appearing therein and
inserting, in each case, the following new parenthetical in lieu thereof:
"(and/or, if the Total Tranche A Term Loan Commitment or the Total Tranche
C Term Loan Commitment has not yet been terminated, as a mandatory
reduction to the Total Tranche A Term Loan Commitment and/or the Total
Tranche C Term Loan Commitment, as the case may be)".
18. Section 4.02(h) of the Credit Agreement is hereby amended by
deleting the fourth, sixth and last parentheticals appearing therein and
inserting, in each case, the following new parenthetical in lieu thereof:
"(and/or, if the Total Tranche A Term Loan Commitment or the Total Tranche
C Term Loan Commitment has not yet been terminated, as a mandatory
reduction to the Total Tranche A Term Loan Commitment and/or the Total
Tranche C Term Loan Commitment, as the case may be)".
19. Section 4.02(i) of the Credit Agreement is hereby deleted and the
following new Section 4.02(i) is inserted in lieu thereof:
"(i) Any amount required to be applied to outstanding Term Loans,
the Total Tranche A Term Loan Commitment and/or to the Total Tranche C Term
Loan Commitment pursuant to Sections 4.02(c), (d), (e), (f), (g), (h) and
(m) shall be applied (i) first, to repay the outstanding principal amount
of Term Loans of the respective Tranche in accordance with the immediately
succeeding sentence and (ii) second, to the extent all outstanding Term
Loans have been repaid in full, to reduce the Total Tranche A Term Loan
Commitment and the Total Tranche C Term Loan Commitment in accordance with
the immediately succeeding sentence. Each amount
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required to be applied to outstanding Term Loans and/or to reduce the Total
Tranche A Term Loan Commitment and the Total C Term Loan Commitment
pursuant to Sections 4.02(c), (d), (e), (f), (g), (h) and (m) shall be
applied pro rata to each Tranche of Term Loans, with the Tranche A Term
Loans or the Total Tranche A Term Loan Commitment, as the case may be, to
be allocated the Tranche A Term Loan Percentage of the amount of such
repayment, the Tranche B Term Loans to be allocated the Tranche B Term Loan
Percentage of the amount of such repayment, and the Tranche C Term Loans or
the Total Tranche C Term Loan Commitment, as the case may be, to be
allocated the Tranche C Term Loan Percentage of the amount of such
repayment. The amount of each principal repayment of each Tranche of Term
Loans and the amount of each reduction to the Total Tranche A Term Loan
Commitment and the Total Tranche C Term Loan Commitment made as required by
said Sections 4.02(c), (d), (e), (f), (g), (h) and (m) shall be applied (x)
in the case of Tranche A Term Loans, (1) first, to reduce the then
remaining Tranche A Term Loan Scheduled Repayments (other than the final
Tranche A Term Loan Scheduled Repayment) on a pro rata basis (based upon
the remaining unpaid principal amounts of such Tranche A Term Loan
Scheduled Repayments after giving effect to all prior reductions thereto,
but determined without regard to the final Tranche A Term Loan Scheduled
Repayment) and (2) second, to the extent in excess thereof, to reduce the
final Tranche A Term Loan Scheduled Repayment, (y) in the case of Tranche B
Term Loans, to reduce the then remaining Tranche B Term Loan Scheduled
Repayments on a pro rata basis (based upon the then remaining unpaid
principal amounts of such Tranche B Term Loan Scheduled Repayments after
giving effect to all prior reductions thereto), and (z) in the case of
Tranche C Term Loans, to reduce the then remaining Tranche C Term Loan
Scheduled Repayments on a pro rata basis (based upon the then remaining
unpaid principal amounts of such Tranche C Term Loan Scheduled Repayments
after giving effect to all prior reductions thereto)."
20. Section 4.02(k) of the Credit Agreement is hereby deleted and the
following new Section 4.02(k) is inserted in lieu thereof:
"(k) Notwithstanding anything to the contrary contained in Section
4.01, this Section 4.02 or elsewhere in this Agreement (including, without
limitation, in Section 13.12), at any time that Tranche A Term Loans are
outstanding or the Total Tranche A Term Loan Commitment remains in effect,
the Borrower shall have the option, in its sole discretion, to give the
Lenders with outstanding Tranche B Term Loans (the "B Lenders") and the
Lenders with outstanding Tranche C Term Loans (the "C Lenders") the option
to waive their pro rata share of a voluntary prepayment or mandatory
repayment of Tranche B Term Loans and Tranche C Term Loans which is to be
made pursuant to Section 4.01 or Sections 4.02(c), (d), (e), (f), (g), (h)
and/or (m), as the case may be (each such prepayment or repayment, a
"Waivable Repayment"), in each case upon the terms and provisions set forth
in this Section 4.02(k). If the Borrower elects to exercise the option
referred to in the immediately preceding sentence, the Borrower shall give
to the Administrative Agent written notice of the Borrower's intention to
give the B Lenders and the C Lenders the right
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to waive a Waivable Repayment (including in such notice, the aggregate
amount of such proposed prepayment or repayment, as the case may be) at
least five Business Days prior to the date of the proposed prepayment or
repayment, as the case may be, which notice the Administrative Agent shall
promptly forward to all B Lenders and all C Lenders (indicating in such
notice the amount of such prepayment or repayment, as the case may be, to
be applied to each such B Lender's outstanding Tranche B Term Loans and
each such C Lender's outstanding Tranche C Term Loans). The Borrower's
offer to permit the B Lenders and the C Lenders to waive any such Waivable
Repayment may apply to all or part of such prepayment or repayment, as the
case may be, provided that any offer to waive part of such prepayment or
repayment, as the case may be, must be made ratably to the B Lenders and
the C Lenders on the basis of their outstanding Tranche B Term Loans and
outstanding Tranche C Term Loans. In the event that any such B Lender or C
Lender desires to waive its pro rata share of such Lender's right to
receive any such Waivable Repayment in whole or in part, such Lender shall
so advise the Administrative Agent no later than 5:00 P.M. (Boston,
Massachusetts time) on the date which is two Business Days after the date
of such notice from the Administrative Agent, which notice shall also
include the amount such Lender desires to receive in respect of such
prepayment or repayment, as the case may be. If any B Lender or C Lender
does not reply to the Administrative Agent within such two Business Day
period, such Lender will be deemed not to have waived any part of such
prepayment or repayment, as the case may be. If any B Lender or C Lender
does not specify an amount it wishes to receive, such B Lender or C Lender
will be deemed to have accepted 100% of its share of such prepayment or
repayment, as the case may be. In the event that any such B Lender or C
Lender waives all or part of its share of any such Waivable Repayment
(determined without regard to any premium that such B Lender or C Lender
might otherwise be entitled to), the Administrative Agent shall apply 100%
of the amount so waived by such Lender to the outstanding Tranche A Term
Loans and/or the Total Tranche A Term Loan Commitment in accordance with
Section 4.01 or Sections 4.02(i) and (j), as the case may be."
21. Section 4.02 of the Credit Agreement is hereby amended by
inserting the following new clause (m) at the end thereof:
"(m) In addition to any other mandatory repayments pursuant to
this Section 4.02, on each date on which Holdings or any of its
Subsidiaries receives any cash proceeds from any purchase price adjustment
under the ShopRite (Pennington) Merger Agreement, an amount equal to 100%
of the cash proceeds from such purchase price adjustment shall be applied
as a mandatory repayment of principal of outstanding Term Loans (and/or, if
the Total Tranche A Term Loan Commitment or the Total Tranche C Term Loan
Commitment has not yet been terminated, as a mandatory reduction to the
Total Tranche A Term Loan Commitment or the Total Tranche C Term Loan
Commitment, as the case may be) in accordance with the requirements of
Sections 4.02(i) and (j)."
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22. Section 7.08(b) of the Credit Agreement is hereby amended by
inserting the following new sentences at the end thereof:
"All proceeds of the Tranche C Term Loans incurred on the First
Amendment Effective Date will be used by the Borrower to make a
Borrower/BVNJ Intercompany Loan in an aggregate principal amount not to
exceed $36,000,000 to finance the purchase price for the ShopRite
(Pennington) Merger, to repay $1,000,000 of existing Indebtedness of BVNJ
and to pay the fees and expenses in connection therewith. All proceeds of
the Tranche C Term Loans incurred on the Second Tranche C Term Loan
Borrowing Date will be used by the Borrower to pay, in part, one-time
charges incurred in either the Borrower's third or fourth fiscal quarter in
fiscal year 1999 for employee severance costs in connection with the
Borrower's early retirement program."
23. Section 7.14 of the Credit Agreement is hereby amended by (i)
inserting the reference to clause "(a)" immediately following the text "7.14
Subsidiaries" appearing therein, (ii) deleting each reference to "Schedule VI"
appearing therein and inserting in each case the text "Schedule VI-A" in lieu
thereof and (iii) inserting the following new clause (b) at the end thereof:
"(b) As of the First Amendment Effective Date, the corporations,
partnerships and limited liability companies listed on Schedule VI-B are
all of the Subsidiaries of Holdings. Schedule VI-B correctly sets forth,
as of the First Amendment Effective Date, the percentage ownership (direct
or indirect) of Holdings in each class of capital stock or other equity of
each of its Subsidiaries and also identifies the direct owner thereof."
24. Section 7.25 of the Credit Agreement is hereby amended by deleting
clause (d) thereof and inserting the following new clause (d) in lieu thereof:
"(d) Dixx Mart has no significant assets (other than 99% of the
outstanding equity interests of BVNJ) or liabilities and engages in no
business activities other than those incidental to its ownership of such
equity interests."
25. Section 8.01(b) of the Credit Agreement is hereby amended by
deleting the words "stand-alone" appearing therein and inserting the word
"consolidated" in lieu thereof.
26. Section 8.01(c) of the Credit Agreement is hereby amended by
deleting the words "stand-alone" appearing therein and inserting the word
"consolidated" in lieu thereof.
27. Section 8 of the Credit Agreement is hereby amended by inserting
the following new Section 8.15 at the end thereof:
8.15 Intercompany Loans. The Borrower shall cause BVNJ to either
pay all interest on up to $36,000,000 of the initial Borrower/BVNJ
Intercompany Loan made on the First Amendment Effective Date (plus any
interest accrued
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thereon) in-kind rather than in cash or cause all such interest to continue
to accrue at the rate provided for in the Borrower/BVNJ Loan Agreement;
provided, however, that interest on additional Borrower/BVNJ Intercompany
Loans made after the First Amendment Effective Date and on the intercompany
note referred to in Section 9.05(xviii) may be paid in cash.
28. Section 9.01 of the Credit Agreement is hereby amended by (i)
deleting the word "and" appearing at the end of clause (xiv) thereof, (ii)
deleting the period appearing at the end of clause (xv) thereof and inserting a
semi-colon in lieu thereof and (iii) inserting the following new clauses (xvi)
and (xvii) at the end thereof:
"(xvi) Liens on the assets of ShopRite Pennington in existence on
the First Amendment Effective Date which are listed, and the property
subject thereto described, in Schedule XI, without giving effect to any
renewals, replacements or extensions thereof; and
(xvii) Liens created in favor of the Borrower pursuant to the
Borrower/BVNJ Intercompany Security Agreement."
29. Section 9.02 of the Credit Agreement is hereby amended by (i)
deleting the word "and" appearing at the end of clause (x) thereof, (ii)
deleting the period appearing at the end of clause (xi) thereof and inserting
the text "; and" in lieu thereof and (iii) inserting the following new clause
(xii) immediately following clause (xi) thereof:
"(xii) the ShopRite (Pennington) Merger shall be permitted."
30. Section 9.04 of the Credit Agreement is hereby amended by (i)
deleting the word "and" appearing at the end of clause (xiii) thereof, (ii)
deleting the period appearing at the end of clause (xiv) thereof and inserting a
semi-colon in lieu thereof and (iii) inserting the following new clauses (xv),
(xvi) and (xvii) at the end thereof:
"(xv) up to $425,000 of existing Indebtedness of ShopRite
Pennington assumed in connection with the ShopRite (Pennington) Merger and
listed on Schedule XII (as reduced by any permanent repayment of principal
thereof), without giving effect to any subsequent extension, renewal or
refinancing thereof, except to the extent set forth on Schedule XII,
provided that the aggregate principal amount of the Indebtedness to be
extended, renewed or refinanced does not increase from that amount
outstanding at the time of any such extension, renewal or refinancing;
(xvi) intercompany Indebtedness of BVNJ owing to the Borrower
under the Borrower/BVNJ Intercompany Loan Agreement to the extent permitted
by Sections 9.05(xvii) and (xviii) so long as (i) all of the terms and
conditions of the Borrower/BVNJ Intercompany Loan Agreement are
satisfactory to the Agents and (ii) such Indebtedness, and the related
security pledged and assigned pursuant to the Borrower/BVNJ Intercompany
Security Agreement, remain pledged and assigned to the Collateral Agent
pursuant to the respective Security Documents; and
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<PAGE>
(xvii) Indebtedness of the Borrower under the ShopRite
(Pennington) Seller Subordinated Notes in an aggregate principal amount not
to exceed $1,500,000 (as reduced by any repayments of principal thereof)."
31. Section 9.05 of the Credit Agreement is hereby amended by (i)
deleting the word "and" appearing at the end of clause (xiv) thereof, (ii)
deleting the period appearing at the end of clause (xv) thereof and inserting a
semi-colon in lieu thereof and (iii) inserting the following new clauses (xvi),
(xvii), (xviii) and (xix) at the end thereof:
"(xvi) the ShopRite (Pennington) Merger shall be permitted;
(xvii) the Borrower may (i) make a $36,000,000 intercompany loan
to BVNJ on the First Amendment Effective Date and (ii) make additional
intercompany loans to BVNJ from time to time thereafter in an aggregate
principal amount not to exceed $2,000,000 in any fiscal year, in each case
pursuant to the Borrower/BVNJ Intercompany Loan Agreement and so long as
all such intercompany loans are evidenced by a Borrower/BVNJ Intercompany
Note and are secured by the Borrower/BVNJ Intercompany Security Agreement;
(xviii) BVNJ may issue an intercompany note to the Borrower on the
First Amendment Effective Date in an aggregate principal amount equal to
the aggregate principal amount of the ShopRite (Pennington) Seller
Subordinated Notes so long as such intercompany note is issued pursuant to
the Borrower/BVNJ Intercompany Loan Agreement and is secured by the
Borrower/BVNJ Intercompany Security Agreement; and
(xix) on the First Amendment Effective Date, (i) the Borrower may
contribute $1,000 in cash to BVNJ and (ii) the Borrower may contribute
$9,900 in cash to Dixx Mart, who shall, in turn, contribute same to BVNJ."
32. Section 9.07(a) of the Credit Agreement is hereby amended by
deleting the reference to "$15,000,000" set forth opposite the text "December,
2000" appearing in the table therein and inserting the text "$30,000,000" in
lieu thereof.
33. Section 9.12 of the Credit Agreement is hereby amended by
inserting the following new clause (c) at the end thereof:
(c) No Credit Agreement Party will, nor will it permit any of its
Subsidiaries to, (i) make (or give any notice in respect of) any voluntary
or optional payment or prepayment on or redemption or acquisition for value
of, or any prepayment or redemption as a result of any asset sale, change
of control or similar event of (including in each case, without limitation,
by way of depositing with the trustee with respect thereto or any other
Person money or securities before due for the purpose of paying when due),
any ShopRite (Pennington) Seller Subordinated Notes, (ii) make (or give any
notice in respect of) any payment (other than regularly scheduled
amortization payments), prepayment, redemption or acquisition for value of
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<PAGE>
(including, without limitation, by way of depositing with the trustee with
respect thereto or any other Person money or securities before due for the
purpose of paying when due) the initial $36,000,000 Borrower/BVNJ
Intercompany Loan made on the First Amendment Effective Date (including any
interest accrued thereon except as provided in Section 8.16), or (iii)
amend or modify, or permit the amendment or modification of, any provision
of (A) the ShopRite (Pennington) Seller Subordinated Notes or (B) any of
the Borrower/BVNJ Intercompany Agreements."
34. Section 9.13 of the Credit Agreement is hereby amended by deleting
the text "Sections 9.01(iii), (vi) and (vii)" appearing at the end of clause (x)
thereof and inserting "Sections 9.01(iii), (vi), (vii) and (xvi)" in lieu
thereof.
35. Section 9.15 of the Credit Agreement is hereby amended by deleting
clause (e) thereof and inserting the following new clause (e) in lieu thereof:
"(e) Dixx Mart shall engage in no business other than its
ownership of 99% of the outstanding equity interests of BVNJ and activities
incidental to its ownership of such equity interests."
36. Section 9.16(c) of the Credit Agreement is hereby amended by (i)
deleting the reference to "Schedule VI" appearing therein and inserting the text
"Schedule VI-B" in lieu thereof and (ii) inserting the following new sentence at
the end of such Section 9.16(c):
"Notwithstanding the foregoing, (i) BVNJ shall not be required to
execute and deliver any Credit Document so long as (and to the extent
that) it is prohibited from doing so under the Senior Subordinated
Note Documents and the Junior Subordinated Note Documents and (ii) the
99% of the equity interest in BVNJ held by Dixx Mart shall not be
required to be pledged as security for the Obligations so long as (and
to the extent that) such pledge is prohibited under the Senior
Subordinated Note Documents and the Junior Subordinated Note
Documents.".
37. The paragraph immediately following Section 10.11 of the Credit
Agreement is hereby amended by inserting the words ", C TL Commitment
Commission" immediately following the words "A TL Commitment Commission"
appearing in clause (i) thereof.
38. The definition of "Adjusted Consolidated Net Income" appearing in
Section 11.01 of the Credit Agreement is hereby amended by deleting the
parenthetical appearing in clause (ii) of the first sentence thereof and
inserting the following new parenthetical in lieu thereof:
"(and/or, if the Total Tranche A Term Loan Commitment or the
Total Tranche C Term Loan Commitment has not yet been
terminated, reduce the Total Tranche A Term Loan Commitment
or the Total Tranche C Term Loan Commitment, as the case may
be)".
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39. The definition of "Applicable Base Rate Margin" appearing in
Section 11.01 of the Credit Agreement is hereby amended by (i) deleting the word
"and" appearing at the end of clause (a) thereof, (ii) deleting the percentage
"2.50%" appearing in clause (b) thereof and inserting the percentage "2.75%" in
lieu thereof, (iii) deleting the period appearing at the end of clause (b)
thereof and inserting "; and" in lieu thereof and (iv) inserting the following
new clause (c) immediately following clause (b) thereof:
"(c) in the case of Tranche C Term Loans maintained as Base Rate
Loans, 3.00%."
40. The definition of "Applicable Eurodollar Rate Margin" appearing in
Section 11.01 of the Credit Agreement is hereby amended by (i) deleting the word
"and" appearing at the end of clause (a) thereof, (ii) deleting the percentage
"3.50%" appearing in clause (b) thereof and inserting the percentage "3.75%" in
lieu thereof, (iii) deleting the period appearing at the end of clause (b)
thereof and inserting "; and" in lieu thereof, and (iv) inserting the following
new clause (c) immediately following clause (b) thereof:
"(c) in the case of Tranche C Term Loans maintained as Eurodollar
Loans, 4.00%."
41. The definition of "Commitment" appearing in Section 11.01 of the
Credit Agreement is hereby amended by inserting the following text immediately
after the words "Tranche B Term Loan Commitment" appearing therein:
", the Tranche C Term Loan Commitment".
42. The definition of "Consolidated EBITDA" appearing in Section 11.01
of the Credit Agreement is hereby amended by (i) deleting the word "and"
appearing at the end of clause (x)(iii) of the first sentence thereof and
inserting a comma in lieu thereof and (ii) inserting the following text
immediately following the words "of this Agreement" appearing in clause (x)(iv)
of the first sentence thereof:
"and the consummation of the ShopRite (Pennington) Merger and (v) for
purposes of Sections 9.08, 9.09, 9.10 and 9.11 only (but not for
purposes of the definitions of Applicable Base Rate Margin and
Applicable Eurodollar Rate Margin), up to $8,500,000 of one-time
charges incurred in either the Borrower's third or fourth fiscal
quarter in fiscal year 1999 for employee severance costs in connection
with the Borrower's early retirement program".
43. The definition of "Consolidated Interest Expense" appearing in
Section 11.01 of the Credit Agreement is hereby amended by inserting "and the
ShopRite (Pennington) Merger" immediately after the words "to this Agreement"
appearing in clause (i) of the proviso thereof.
44. The definition of "Leverage Ratio" appearing in Section 11.01 of
the Credit Agreement is hereby amended by inserting the following new sentence
at the end thereof:
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"Notwithstanding anything to the contrary contained in this Agreement,
for purposes of calculating the Leverage Ratio only at any time prior
to the one-year anniversary of the First Amendment Effective Date,
Consolidated EBITDA for any portion of a Test Period ended prior to
the First Amendment Effective Date shall be calculated on a pro forma
basis as if the ShopRite (Pennington) Merger (and the related
financing) had occurred on the date which is one year prior to the
First Amendment Effective Date (and giving pro forma effect to
factually supportable and identifiable cost savings and expenses which
would otherwise be accounted for as an adjustment pursuant to Article
11 of Regulation S-X under the Securities Act)."
45. The definition of "Loan" appearing in Section 11.01 of the Credit
Agreement is hereby amended by inserting the following text immediately after
the words "each Tranche B Term Loan," appearing therein:
"each Tranche C Term Loan,".
46. The definition of "Maturity Date" appearing in Section 11.01 of
the Credit Agreement is hereby amended by inserting the following text
immediately after the words "the Tranche B Term Loan Maturity Date," appearing
therein:
"the Tranche C Term Loan Maturity Date,".
47. The definition of "Note" appearing in Section 11.01 of the Credit
Agreement is hereby amended by inserting the following text immediately after
the words "each Tranche B Term Note," appearing therein:
"each Tranche C Term Note,".
48. The definition of "Required Lenders" appearing in Section 11.01 of
the Credit Agreement is hereby amended by inserting the words "and Tranche C
Term Loan Commitments" immediately following the words "Tranche A Term Loan
Commitments" appearing in the first and third parentheticals thereof.
49. The definition of "Term Loan" appearing in Section 11.01 of the
Credit Agreement is hereby deleted and the following new definition of "Term
Loan" is inserted in lieu thereof:
"Term Loan" shall mean each Tranche A Term Loan, each Tranche B
Term Loan and each Tranche C Term Loan.
50. The definition of "Tranche" appearing in Section 11.01 of the
Credit Agreement is hereby deleted and the following new definition of "Tranche"
is inserted in lieu thereof:
"Tranche" shall mean the respective facility and commitments
utilized in making Loans hereunder, with there being five separate
Tranches, i.e., Tranche A
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Term Loans, Tranche B Term Loans, Tranche C Term Loans, Revolving Loans and
Swingline Loans.
51. The definition of "Tranche A Term Loan Percentage" appearing in
Section 11.01 of the Credit Agreement is hereby amended by (i) inserting the
text "the sum of (i)" immediately prior to the text "the Total Tranche A Term
Loan Commitment" appearing in the second clause (y) thereof and (ii) inserting
the text "and (ii) the Total Tranche C Term Loan Commitment then in effect" at
the end of said definition.
52. The definition of "Tranche B Term Loan Percentage" appearing in
Section 11.01 of the Credit Agreement is hereby amended by (i) inserting the
text "the sum of (i)" immediately prior to the text "the Total Tranche A Term
Loan Commitment" appearing therein and (ii) inserting the text "and (ii) the
Total Tranche C Term Loan Commitment then in effect" at the end of said
definition.
53. Section 11.01 of the Credit Agreement is hereby further amended by
inserting the following new definitions in the appropriate alphabetical order:
"BVNJ" shall mean BVNJ Partnership, L.P., a New Jersey limited
partnership, 99% of which shall be owned by Dixx Mart as its limited
partner and 1% of which shall be owned by the Borrower as its general
partner."
"Borrower/BVNJ Intercompany Agreements" shall mean each of the
Borrower/BVNJ Intercompany Loan Agreement, the Borrower/BVNJ Intercompany
Security Agreement, the Borrower/BVNJ Intercompany Note and each of the
other documents related thereto.
"Borrower/BVNJ Intercompany Loan" shall mean each intercompany
loan made by the Borrower to BVNJ pursuant to the Borrower/BVNJ
Intercompany Loan Agreement.
"Borrower/BVNJ Intercompany Loan Agreement" shall mean the
Intercompany Loan Agreement, dated as of November 12, 1999, between the
Borrower and BVNJ, as same may be amended, modified or supplemented from
time to time in accordance with the terms hereof and thereof.
"Borrower/BVNJ Intercompany Notes" shall mean each of the
intercompany notes issued pursuant to the Borrower/BVNJ Intercompany Loan
Agreement.
"Borrower/BVNJ Intercompany Security Agreement" shall mean the
Intercompany Security Agreement, dated as of November 12, 1999, between the
Borrower and BVNJ, as the same may be amended, modified or supplemented
from time to time in accordance with the terms hereof and thereof.
"C Lenders" shall have the meaning provided in Section 4.02(k).
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"C TL Commitment Commission" shall have the meaning provided in
Section 3.01(g).
"First Amendment" shall mean the First Amendment, dated as of
November 12, 1999, to this Agreement.
"First Amendment Effective Date" shall mean November 12, 1999 so
long as all of the conditions precedent to the effectiveness of the First
Amendment shall have been satisfied on such date.
"Second Tranche C Term Loan Borrowing Date" shall mean a single
date occurring after the First Amendment Effective Date in which the
Borrower incurs Tranche C Term Loans for the purposes described in the
third sentence of Section 7.08(b), which date must occur on or prior to the
Tranche C Term Loan Availability Termination Date.
"ShopRite Pennington" shall mean ShopRite of Pennington, Inc., a
New Jersey corporation.
"ShopRite (Pennington) Merger" shall mean the merger of ShopRite
Pennington with and into BVNJ pursuant to, and in accordance with the terms
of, the ShopRite (Pennington) Merger Agreement for an aggregate
consideration of $36,350,000 to be paid to the existing shareholders (prior
to such merger) of ShopRite Pennington, which merger consideration includes
approximately $3,000,000 of working capital consisting of inventory and
accounts receivables, the assumption of up to $425,000 of existing
Indebtedness as set forth on Schedule XII and the issuance of the ShopRite
(Pennington) Seller Subordinated Notes in an aggregate principal amount not
to exceed $1,500,000.
"ShopRite (Pennington) Merger Agreement" shall mean the Merger
Agreement, dated as of November 12, 1999, among the Borrower, BVNJ and the
shareholders of ShopRite Pennington.
"ShopRite (Pennington) Seller Subordinated Notes" shall mean the
unsecured subordinated notes issued by the Borrower to the stockholders of
ShopRite Pennington pursuant to the ShopRite (Pennington) Merger Agreement.
"Total Tranche C Term Loan Commitment" shall mean, at any time,
the sum of the Tranche C Term Loan Commitments of each of the Lenders.
"Tranche C Term Loan" shall have the meaning provided in Section
1.01(f).
"Tranche C Term Loan Availability Termination Date" shall mean
December 12, 1999.
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"Tranche C Term Loan Borrowing Date" shall mean each of the First
Amendment Effective Date and the Second Tranche C Term Loan Borrowing Date.
"Tranche C Term Loan Commitment" shall mean, for each Lender, the
amount set forth opposite such Lender's name in Schedule I directly below
the column entitled "Tranche C Term Loan Commitment," as same may be (i)
reduced from time to time pursuant to Sections 3.02, 3.03, 4.02 and/or 10
or (ii) adjusted from time to time as a result of assignments to or from
such Lender pursuant to Section 1.13 or 13.04(b).
"Tranche C Term Loan Maturity Date" shall mean November 10, 2003.
"Tranche C Term Loan Percentage" shall mean, at any time, a
fraction (expressed as a percentage) the numerator of which is equal to the
sum of (x) the aggregate principal amount of all Tranche C Term Loans
outstanding at such time and (y) the Total Tranche C Term Loan Commitment
then in effect and the denominator of which is equal to the sum of (x) the
aggregate principal amount of all Term Loans outstanding at such time and
(y) the sum of (i) the Total Tranche A Term Loan Commitment then in effect
and (ii) the Total Tranche C Term Loan Commitment then in effect.
"Tranche C Term Loan Scheduled Repayment" shall have the meaning
provided in Section 4.02(b)(iii).
"Tranche C Term Note" shall have the meaning provided in Section
1.05(a).
55. Section 13.06(b) of the Credit Agreement is hereby amended by
inserting the text "C TL Commitment Commission," immediately after the text "A
TL Commitment Commission," appearing therein.
56. Section 13.07(c) of the Credit Agreement is hereby amended by
inserting the text "C TL Commitment Commission," immediately after each instance
the text "A TL Commitment Commission," appears therein.
57. Section 13.12(a) of the Credit Agreement is hereby amended by
deleting the text "any Tranche A Term Loan Scheduled Repayment or Tranche B Term
Loan Scheduled Repayment," appearing therein and inserting the following text in
lieu thereof:
"any Tranche A Term Loan Scheduled Repayment, Tranche B Term Loan
Scheduled Repayment or Tranche C Term Loan Scheduled Repayment,".
58. Section 13.17 of the Credit Agreement is hereby deleted and the
following new Section 13.17 is inserted in lieu thereof:
13.17 Certain Agreements with Respect to the Senior Subordinated
Notes and the Junior Subordinated Notes. Each Credit Agreement Party hereby
(A) represents
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<PAGE>
and warrants that (i) $46,666,667 of Term Loans may be incurred under this
Agreement on the Initial Borrowing Date in reliance on clause (ii)(A) of
the respective definition of "Permitted Indebtedness" contained in the
Senior Subordinated Note Indenture and the Junior Subordinated Note
Agreement, (ii) $25,000,000 of Revolving Loans, Swingline Loans and Letters
of Credit in the aggregate incurred pursuant to the Total Revolving Loan
Commitment as in effect on the Initial Borrowing Date may be incurred in
reliance on clause (ii)(B) of the respective definition of "Permitted
Indebtedness" contained in the Senior Subordinated Note Indenture and the
Junior Subordinated Note Agreement, (iii) $13,333,333 of Term Loans may be
incurred on the Initial Borrowing Date in reliance on clause (xiv) of the
respective definition of "Permitted Indebtedness" contained in the Senior
Subordinated Note Indenture and the Junior Subordinated Note Agreement,
(iv) $36,000,000 of Tranche C Term Loans may be incurred on the First
Amendment Effective Date and up to $1,500,000 of Indebtedness pursuant to
the ShopRite (Pennington) Seller Subordinated Notes may be issued on the
First Amendment Effective Date, in each case in reliance on the proviso to
Section 4.12 of the Senior Subordinated Note Indenture and the proviso to
Section 7E of the Junior Subordinated Note Agreement, (v) up to $425,000 of
existing Indebtedness of ShopRite Pennington may be assumed on the First
Amendment Effective Date, in each case in reliance on clause (vi) of the
respective definition of "Permitted Indebtedness" contained in the Senior
Subordinated Note Indenture and the Junior Subordinated Note Agreement, and
(vi) up to $5,000,000 of Tranche C Term Loans may be incurred on the Second
Tranche C Term Loan Borrowing Date in reliance on clause (xiv) of the
respective definition of "Permitted Indebtedness" contained in the Senior
Subordinated Note Indenture and the Junior Subordinated Note Agreement, and
(B) agrees it will not take any position contrary to the representations
and warranties set forth in preceding clause (A). In addition, each Credit
Agreement Party (A) acknowledges and agrees that the Borrower will not be
permitted to (i) incur any Tranche A Term Loans on any Additional Tranche A
Term Loan Borrowing Date or any Tranche C Term Loans on the Second Tranche
C Term Loan Borrowing Date unless such Tranche A Term Loans or Tranche C
Term Loans, as the case may be, may be incurred in reliance on clause (xiv)
of the respective definition of "Permitted Indebtedness" contained in the
Senior Subordinated Note Indenture or the Junior Subordinated Note
Agreement or (ii) incur any additional Revolving Loans, Swingline Loans or
Letters of Credit pursuant to an increase in the Total Revolving Loan
Commitment under Section 13.18 unless such additional extensions of credit
are incurred in reliance on clauses (ii)(B) and/or (xiv) of each respective
definition of "Permitted Indebtedness" contained in the Senior Subordinated
Note Indenture or the Junior Subordinated Note Agreement and (B) covenants
and agrees that it will take, and will cause each of its Subsidiaries to
take, all such actions as may be necessary so as to ensure that all
Indebtedness (including, without limitation, any Tranche A Term Loans
incurred on any Additional Tranche A Term Loan Date, any Tranche C Term
Loans incurred on the Second Tranche C Term Loan Borrowing Date and any
incremental Revolving Loans, Swingline Loans and/or Letters of Credit
incurred as a result of any increase to the Total Revolving Loan Commitment
by operation of
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<PAGE>
Section 13.18) incurred under this Agreement and the other Credit Documents
shall, except as provided in clause (A)(iv) of the first sentence of this
Section 13.17, always be permitted to be incurred under clauses (ii) and
(xiv) of each respective definition of the "Permitted Indebtedness"
contained in the Senior Subordinated Note Indenture and the Junior
Subordinated Note Agreement without relying on any other provision of the
Senior Subordinated Note Indenture or the Junior Subordinated Note
Agreement.
59. Schedule I to the Credit Agreement is hereby amended by inserting
therein the information set forth on Annex A hereto.
60. The Credit Agreement is hereby further amended by (i) deleting the
reference to "Schedule VI" appearing on Schedule VI thereof and inserting the
text "Schedule VI-A" in lieu thereof and (ii) inserting a new Schedule VI-B
thereto in the form of Annex B hereto.
61. The Credit Agreement is hereby further amended by adding Schedules
XI and XII thereto in the forms of Annexes C and D hereto, respectively.
62. The Credit Agreement is hereby further amended by attaching
thereto as Exhibit B-5 the form of Exhibit B-5 attached hereto.
63. Exhibit A of the Credit Agreement is hereby amended by inserting
the text "[Tranche C Term Loans]" immediately after the text "[Tranche B Term
Loans]" appearing in clause (iii) of the first paragraph thereof.
64. Exhibit J of the Credit Agreement is hereby amended by (i)
inserting the following new clause (y) immediately following existing clause (y)
appearing in Section 1 thereof:
"(y) in the case of any assignment of any portion of the
Assignor's outstanding Tranche C Term Loans and Tranche C Term Loan
Commitment, all rights and obligations with respect to the Assigned Share
of such outstanding Tranche C Term Loans and Tranche C Term Loan
Commitment,",
and (ii) redesignating existing clauses (x) and (y) appearing in Section 1
thereof as clauses (v) and (x), respectively.
65. Exhibit J of the Credit Agreement is hereby further amended by (i)
inserting the following new clause (z) immediately following existing clause (z)
of Section 6 thereof:
"(z) all C TL Commitment Commission (if applicable) of the
Assigned Share of the Total Tranche C Term Loan Commitment at the rate
specified in Item 10 of Annex I hereto",
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and redesignating clauses (x), (y) and (z) of Section 6 as clauses (v), (x) and
(y), respectively.
66. Annex I of Exhibit J of the Credit Agreement is hereby amended by
inserting the following column in Section 4 immediately to the right of the
second column of such Section 4:
"Outstanding Principal of "Tranche C Term Loan
Tranche C Term Loans Commitment
$_______________ $_______________
________% ________%
$______________ $______________".
67. Annex I of Exhibit J of the Credit Agreement is hereby amended by
inserting the following Section 10 (together with the related footnote)
immediately following existing Section 9 thereof:
"10. C TL Commitment
Commission to
the Assignee: As set forth in Section 3.01(g) of the
Credit Agreement (unless otherwise agreed
to by the Assignor and the Assignee).(5)
(5) Insert "Not Applicable" in lieu of text if no portion of the Total Tranche
C Loan Commitment is being assigned or if same has been terminated.
Otherwise the Borrower and the Administrative Agent shall, following
recordation of such assignment by the Administrative Agent on the Register,
direct the entire amount of the C TL Commitment Commission to the Assignee
at the rate set forth in Section 3.01(g) of the Credit Agreement, with the
Assignor and the Assignee effecting any agreed upon sharing of the C TL
Commitment Commission through payment by the Assignee to the Assignor."
68. The Borrower agrees that on or promptly after the First Amendment
Effective Date (as defined below), and at its own expense, the Borrower will
issue Tranche C Term Notes to those Lenders with Tranche C Term Loan Commitments
(or their assignees), which Tranche C Term Notes shall be in conformity with the
requirements of Section 1.05(g) of the Credit Agreement (as amended hereby).
69. All parties hereto acknowledge and agree that all extensions of
credit pursuant to the Credit Agreement, as amended hereby, shall be entitled to
the benefits of the Guaranties and the Security Documents.
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<PAGE>
70. All parties hereto acknowledge and agree, and the Security
Agreement is hereby amended to reflect, that (i) the term "Contracts" under, and
as defined in, the Security Agreement includes each of the Borrower/BVNJ
Intercompany Agreements and (ii) the term "Contract Rights" under, and as
defined in, the Security Agreement includes all rights, interests and claims of
the Borrower, whether now existing or hereafter arising, in connection with each
of the Borrower/BVNJ Intercompany Agreements and, accordingly, a security
interest in each of the Borrower/BVNJ Intercompany Agreements and all such
rights, interest and claims of the Borrower thereunder have been granted by the
Borrower pursuant to the terms of the Security Agreement.
71. All parties hereto acknowledge and agree, and each of the Security
Agreement and the Pledge Agreement (as applicable) is hereby amended to reflect,
that (i) the term "General Intangibles" under, and as defined in, the Security
Agreement includes all of the partnership interests in BVNJ now or in the future
owned by the Borrower, (ii) the term "Partnership Interests" under, and as
defined in, the Pledge Agreement includes all of the partnership interest in
BVNJ now or in the future owned by the Borrower and (iii) the term "Pledged
Notes" under, and as defined in, the Pledge Agreement includes each
Borrower/BVNJ Intercompany Note from time to time issued to the Borrower
pursuant to the Borrower/BVNJ Intercompany Loan Agreement and, accordingly, a
security interest in all such partnership interests and promissory notes has
been granted by the Borrower pursuant to the terms of the Security Agreement and
the Pledge Agreement.
72. In order to induce the Lenders to enter into this Amendment, each
Credit Agreement Party hereby represents and warrants that:
(i) all representations and warranties contained in the Credit
Documents (including in this Amendment) are true and correct in all
material respects on and as of the First Amendment Effective Date, both
before and after giving effect to this Amendment (unless such
representations and warranties relate to a specific earlier date, in which
case such representations and warranties shall be true and correct in all
material respects as of such earlier date);
(ii) there exists no Default or Event of Default on the First
Amendment Effective Date, both before and after giving effect to this
Amendment;
(iii) each Credit Agreement Party, BVNJ Partnership, L.P.
("BVNJ") and ShopRite Pennington has the corporate power and authority to
execute, deliver and perform the terms and provisions of each of this
Amendment, the ShopRite (Pennington) Merger Agreement and the Borrower/BVNJ
Intercompany Agreements (collectively, the "Transaction Documents") to the
extent that such Person is a party to each such Transaction Document, and
has taken all necessary corporate action to authorize the execution,
delivery and performance by it of each of such Transaction Documents. Each
Credit Agreement Party, BVNJ and ShopRite Pennington has duly executed and
delivered each of the Transaction Documents to which it is party, and each
of such Transaction Documents constitutes its legal, valid and binding
obligation enforceable in
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<PAGE>
accordance with its terms, except to the extent that the enforceability
thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws generally affecting
creditors' rights and by equitable principles (regardless of whether
enforcement is sought in equity or at law);
(iv) neither the execution, delivery nor performance by any
Credit Agreement Party, by BVNJ or by ShopRite Pennington of the
Transaction Documents to which it is a party, nor compliance by it with the
terms and provisions thereof, (i) will contravene any provision of any law,
statute, rule or regulation or any order, writ, injunction or decree of any
court or governmental instrumentality, (ii) will conflict with or result in
any breach of any of the terms, covenants, conditions or provisions of, or
constitute a default under, or result in the creation or imposition of (or
the obligation to create or impose) any Lien (except pursuant to the
Security Documents and/or the Borrower/BVNJ Intercompany Security
Agreement) upon any of the property or assets of Holdings, any of its
Subsidiaries or ShopRite Pennington pursuant to the terms of any indenture,
mortgage, deed of trust, credit agreement or loan agreement (including,
without limitation, the Senior Subordinated Note Indenture and the Junior
Subordinated Note Agreement), or any other material agreement, contract or
instrument, in each case to which Holdings, any of its Subsidiaries or
ShopRite Pennington is a party or by which it or any of its property or
assets is bound or to which it may be subject or (iii) will violate any
provision of the certificate or articles of incorporation or by-laws (or
equivalent organizational documents) of Holdings, any of its Subsidiaries
or ShopRite Pennington;
(v) all necessary governmental (domestic and foreign) and
third party approvals and/or consents in connection with the transactions
contemplated by the Transaction Documents and otherwise referred to herein
or therein shall have been obtained and remain in effect, and all
applicable waiting periods shall have expired without any action being
taken by any competent authority which restrains, prevents or imposes
materially adverse conditions upon the consummation of the transactions
contemplated by the Transaction Documents and otherwise referred to herein
or therein. Additionally, there shall not exist any judgment, order,
injunction or other restraint issued or filed or a hearing seeking
injunctive relief or other restraint pending or notified prohibiting or
imposing materially adverse conditions upon the consummation of the
transactions contemplated by the Transaction Documents;
(vi) the consolidated balance sheet of ShopRite Pennington for
its fiscal year and six-month period ended on January 2, 1999 and July 3,
1999, respectively, and the related consolidated statements of income, cash
flows and shareholders' equity of ShopRite Pennington for the fiscal year
or six-month period, as the case may be, ended on such dates, copies of
which have been furnished to the Lenders prior to the First Amendment
Effective Date, present fairly in all material respects the financial
position of ShopRite Pennington at the dates of such balance sheets and the
consolidated results of the operations of ShopRite Pennington for the
periods covered thereby. All of the foregoing historical financial
statements have been prepared in accordance with generally accepted
accounting principles consistently applied (except, in the case of the
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<PAGE>
aforementioned six-month interim financial statements, for normal year-end
audit adjustment and the absence of footnotes). The pro forma consolidated
balance sheet of Holdings and its Subsidiaries as of June 12, 1999 (after
giving effect to the transactions contemplated herein), and the related pro
forma consolidated statements of income and cash flows of Holdings and its
Subsidiaries for the twelve-month period ended on June 12, 1999 (after
giving effect to the transactions contemplated herein and the financing
therefor and assuming that the transactions contemplated herein had
occurred on July 2, 1998), copies of which have been furnished to the
Lenders prior to the First Amendment Effective Date, present fairly in all
material respects the pro forma consolidated financial position of Holdings
and its Subsidiaries as of June 12, 1999 and the pro forma consolidated
results of the operations of Holdings and its Subsidiaries for the period
covered thereby. All of the foregoing pro forma financial statements have
been prepared on a basis consistent with the historical financial
statements of Holdings delivered pursuant to the Credit Agreement. After
giving effect to the transactions contemplated herein, since December 26,
1998, there has been no material adverse change in the business,
operations, property, assets, liabilities, condition (financial or
otherwise) or prospects of the Borrower, of Holdings and its Subsidiaries
taken as a whole or of ShopRite Pennington;
(vii) the projections dated on or about October 18, 1999
relating to the business of Holdings and its Subsidiaries after giving
effect to the ShopRite (Pennington) Merger (the "ShopRite (Pennington)
Projections") and delivered to the Agents and the Lenders prior to the
First Amendment Effective Date have been prepared in good faith and are
based on reasonable assumptions, and there are no statements or conclusions
in the ShopRite (Pennington) Projections which are based upon or include
information known to any Credit Agreement Party to be misleading in any
material respect or which fail to take into account material information
known to any Credit Agreement Party regarding the matters reported therein.
On the First Amendment Effective Date, each Credit Agreement Party believes
that the ShopRite (Pennington) Projections are reasonable and attainable,
it being recognized by the Lenders, however, that projections as to future
events are not to be viewed as facts and that the actual results during the
period or periods covered by the ShopRite (Pennington) Projections may
differ from the projected results and that the differences may be material;
and
(viii) there are no actions, suits or proceedings pending or, to
the best knowledge of each Credit Agreement Party, threatened (i) with
respect to any Transaction Document, or (ii) that are reasonably likely to
materially and adversely affect the business, operations, property, assets,
liabilities, condition (financial or otherwise) or prospects of the
Borrower, of Holdings and its Subsidiaries taken as a whole or of ShopRite
Pennington.
73. This Amendment is limited to the specific modifications and
amendments set forth herein and shall not constitute a modification, amendment,
acceptance or waiver of any other provision of the Credit Agreement or any other
provision of any other Credit Document.
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<PAGE>
74. This Amendment may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which
counterparts when executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A complete set of
counterparts shall be lodged with the Borrower and the Administrative Agent.
75. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAW
OF THE STATE OF NEW YORK.
76. This Amendment shall become effective on the date (the "First
Amendment Effective Date") when each of the following conditions have been
satisfied:
(i) each Credit Agreement Party, the Required Lenders
(determined before giving effect to this Amendment) and each Lender which
is providing a Tranche C Term Loan Commitment pursuant to this Amendment
shall have signed a counterpart hereof (whether the same or different
counterparts) and shall have delivered (including by way of facsimile
transmission) the same to the Administrative Agent at the Notice Office;
(ii) the Agents shall have received true and correct copies of
the ShopRite Merger Agreement, and all of the terms and conditions thereof
shall be in form and substance reasonably satisfactory to the Agents;
(iii) the ShopRite (Pennington) Merger shall have been
consummated in accordance with the ShopRite (Pennington) Merger Agreement
(without giving effect to any amendment or modification thereof or waiver
with respect thereto unless consented to by the Agents), the relevant
requirements of the Credit Agreement (as amended hereby) and all applicable
laws;
(iv) the Agents shall have received one or more opinions of
Hutchins, Wheeler & Dittmar, special counsel to the Credit Parties, each in
form and substance reasonably satisfactory to the Agents, with respect to
the transactions contemplated by this Amendment (which opinion or opinions
also shall address the matters referred to in the parenthetical to clause
(viii) of the proviso to each of the definition of "Senior Debt" appearing
in the Senior Subordinated Note Indenture and the definition of "Superior
Indebtedness" appearing in the Junior Subordinated Note Agreement);
(v) all of the representations and warranties set forth in
Section 72 of this Amendment shall be true and correct in all material
respects as of the First Amendment Effective Date, and the Agents shall
have received one or more certificates, each in form and substance
reasonably satisfactory to the Agents, dated the First Amendment Effective
Date and signed on behalf of the Borrower by the Chief Financial Officer of
the Borrower and another authorized officer of the Borrower, stating that
all of the conditions in Section 72 of this Amendment and in clause (iii)
of this Section 76 have been satisfied on such date and such certificates
also shall demonstrate (in reasonable detail) that up to $36,000,000 of
Tranche C Term Loans may be incurred, up to $425,000 of existing
-26-
<PAGE>
Indebtedness of ShopRite Pennington may be assumed, and up to $1,500,000 of
ShopRite (Pennington) Seller Subordinated Notes may be issued, in each case
in accordance with the proviso to Section 4.12 of the Senior Subordinated
Note Indenture and the proviso to Section 7E of the Junior Subordinated
Note Agreement;
(vi) the Borrower shall have paid to the Agents and the Lenders
all costs, fees and expenses (including, without limitation, legal fees and
expenses) payable to the Agents and the Lenders to the extent then due and
as has been agreed upon by the Borrower and the Agents, including the
amendment fee referred to in clause (xiv) of this Section 76;
(vii) the Administrative Agent shall have received from each
Credit Agreement Party, BVNJ and ShopRite Pennington certified copies of
resolutions of their respective Boards of Directors (or the equivalent
governing body) or statements of unanimous written consent in lieu thereof
of each such Person with respect to the matters set forth in this Amendment
and the transactions contemplated herein, and such resolutions or
statements, as the case may be, shall be in form and substance reasonably
satisfactory to the Agents;
(viii) the Agents shall have received a solvency certificate from
the Chief Financial Officer of Holdings, in form and substance reasonably
satisfactory to the Agents;
(ix) the Agents shall have received true and correct copies of
the historical financial statements, the pro forma financial statements and
the projections referred to in Sections 72(vi) and (vii) of this Amendment,
all of which shall be in form and substance reasonably satisfactory to the
Agents and the Required Lenders;
(x) the Agents shall have received copies of all environmental
and hazardous substance assessments and analyses with respect to the real
property of ShopRite Pennington, all of which shall be in scope, form and
substance reasonably satisfactory to the Agents and the Required Lenders;
(xi) all corporate, partnership and legal proceedings and all
instruments and agreements in connection with the transactions contemplated
by this Amendment, the ShopRite (Pennington) Merger and each of the
Borrower/BVNJ Intercompany Agreements shall be reasonably satisfactory in
form and substance to the Agents, and the Agents shall have received all
information and copies of all documents and papers, including records of
corporate and partnership proceedings or governmental approvals, good
standing certificates and bring-down telegrams or facsimiles, if any, which
the Agents may have reasonably requested in connection therewith, such
documents and papers where appropriate to be certified by proper corporate,
partnership or governmental authorities;
(xii) the Agents shall have received updated certificates of
insurance complying with the requirements of Section 8.03 for the business
and properties of Holdings and its
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<PAGE>
Subsidiaries (including BVNJ), in form and substance reasonably
satisfactory to the Agents and naming the Collateral Agent as an additional
insured and as loss payee, and stating that such insurance shall not be
canceled without at least 30 days prior written notice by the insurer to
the Collateral Agent (or such shorter period of time as a particular
insurance company generally provides);
(xiii) the Borrower and BVNJ shall have duly authorized, executed
and delivered the Borrower/BVNJ Intercompany Agreements, each in form and
substance satisfactory to the Agents, together with:
(A) executed Financing Statements (Form UCC-1) in appropriate
form for filing under the UCC or other appropriate filing offices of each
jurisdiction as may be necessary or, in the reasonable opinion of the
Collateral Agent, desirable to perfect the security interests purported to
be created by the Borrower/Big V of New Jersey LP Loan and Security
Agreement;
(B) certified copies of Requests for Information or Copies (Form
UCC-11), or equivalent reports, listing all effective financing statements
that name ShopRite Pennington as debtor and that are filed in the
jurisdictions referred to in clause (A) above, together with copies of such
other financing statements that name ShopRite Pennington as debtor (none of
which shall cover the Collateral except to the extent evidencing Permitted
Liens or in respect of which the Collateral Agent shall have received
appropriate termination statements executed by the secured party
thereunder);
(C) proper Assignment Statements (Form UCC-3 or the equivalent)
evidencing the assignment of the security interests created pursuant to the
Borrower/BVNJ Intercompany Security Agreement to the Collateral Agent,
fully executed for filing under the UCC or other appropriate filing offices
in the jurisdictions referred to in clause (A) above; and
(D) proper termination statements (form UCC-3 or the equivalent)
terminating the security interests created pursuant to the certain
Indebtedness of BVNJ to be repaid by on the First Amendment Effective Date;
and
(xiv) the Borrower shall have paid to each Lender which has
executed and delivered to the Administrative Agent a counterpart of this
Amendment on or before 2:00 p.m. (New York time) on the First Amendment
Effective Date, a fee equal to 0.25% of the sum of (I) such Lender's
Revolving Loan Commitment on the First Amendment Effective Date, (II) such
Lender's Tranche A Term Loan Commitment on the First Amendment Effective
Date and (III) the aggregate outstanding principal amount of such Lender's
Tranche A Term Loans and Tranche B Term Loans on the First Amendment
Effective Date (it being understood that this fee is in addition to any
other fees that the Borrower has agreed to pay to the Agents and the
Lenders with respect to the transactions contemplated by this Amendment).
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<PAGE>
Notwithstanding anything to the contrary contained above or elsewhere in this
Amendment, unless both the First Amendment Effective Date and the ShopRite
(Pennington) Merger occur on or prior to November 15, 1999, the First Amendment
Effective Date shall not thereafter occur and this Amendment shall be of no
further force or effect. The acceptance by the Borrower of the proceeds of the
Tranche C Term Loans shall be deemed to constitute a representation and warranty
by each Credit Agreement Party (including, without limitation, for purposes of
Section 10.02 of the Credit Agreement) to the effect that all conditions
contained above in this Section 76 have been satisfied as of the First Amendment
Effective Date.
77. From and after the First Amendment Effective Date, all references
in the Credit Agreement and each of the other Credit Documents to the Credit
Agreement shall be deemed to be references to the Credit Agreement as amended or
modified hereby.
* * *
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of
this Amendment to be duly executed and delivered as of the date first above
written.
BIG V HOLDING CORP.
By: /s/ James A. Toopes, Jr.
-------------------------------------
Name: James A. Toopes, Jr.
Title: Vice Chairman
BV HOLDINGS CORPORATION
By: /s/ James A. Toopes, Jr.
-------------------------------------
Name: James A. Toopes, Jr.
Title: Vice Chairman
BIG V SUPERMARKETS, INC.
By: /s/ James A. Toopes, Jr.
-------------------------------------
Name: James A. Toopes, Jr.
Title: Vice Chairman
DLJ CAPITAL FUNDING, INC., Individually
and as Syndication Agent
By: /s/ Dana Klein
-------------------------------------
Name: Dana F. Klein
Title: Vice President
<PAGE>
FLEET NATIONAL BANK, Individually
and as Administrative Agent
By: /s/ Stephen M. Curran
-------------------------------------
Name: Stephen M.. Curran
Title: Vice President
SUMMIT BANK, Individually and as
Documentation Agent
By: /s/ Catherine E. Garrity
-------------------------------------
Name: Catherine E. Garrity
Title: Vice President
FIRST SOURCE FINANCIAL LLP
By: First Source Financial, Inc., its
Agent/Manager
By: /s/ David C. Wagner
-------------------------------------
Name: David C. Wagner
Title: Vice President
MERRILL LYNCH PRIME RATE
PORTFOLIO
By: Merrill Lynch Asset Management, L.P.
as Investment Advisor
By: /s/ Anthony Heyman
-------------------------------------
Name: Anthony Heyman
Title: Authorized Signatory
<PAGE>
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.
By: /s/ Anthony Heyman
----------------------------------
Name: Anthony Heyman
Title: Authorized Signatory
MORGAN STANLEY DEAN WITTER
PRIME INCOME TRUST
By: /s/ Sheila Finnerty
----------------------------------
Name: Sheila Finnerty
Title: Vice President
STEIN ROE & FARNHAM FLOATING RATE LTD.
By: /s/ Brian W. Good
----------------------------------
Name: Brian W. Good
Title: Vice President,
Stein Roe & Farnham Incorporated,
as Advisor to the Stein Roe
Floating Rate Limited Liability
Company
VAN KAMPEN CLO I, LTD.
By: /s/ Darvin D. Pierce
----------------------------------
Name: Darvin D. Pierce
Title: Vice President
<PAGE>
Exhibit 4.35
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND MAY NOT BE PLEDGED, HYPOTHECATED, TRANSFERRED, OFFERED FOR SALE OR SOLD
EXCEPT PURSUANT TO A REGISTRATION UNDER SAID ACT OR AN OPINION OF COUNSEL,
REASONABLY SATISFACTORY TO COUNSEL FOR THE COMPANY, THAT SUCH REGISTRATION IS
NOT REQUIRED UNDER SAID ACT.
THIS NOTE, AND THE OBLIGATIONS OF THE COMPANY HEREUNDER, SHALL BE SUBORDINATE
AND JUNIOR TO ALL INDEBTEDNESS OF THE COMPANY CONSTITUTING SENIOR INDEBTEDNESS
(AS DEFINED IN SECTION 1.08 OF ANNEX A ATTACHED HERETO) ON THE TERMS AND
CONDITIONS SET FORTH IN ANNEX A ATTACHED HERETO, WHICH ANNEX A IS HEREIN
INCORPORATED BY REFERENCE AND MADE A PART HEREOF AS IF SET FORTH HEREIN IN ITS
ENTIRETY.
10% SUBORDINATED PROMISSORY NOTE
$1,238,772 November 12, 1999
New York, New York
FOR VALUE RECEIVED, the undersigned, Big V Supermarkets, Inc., a New York
corporation (the "Company"), hereby promises to pay to Laurence R. Laurenti,
Jr., as trustee of the Laurenti Marital Trust (the "Holder"), pursuant to that
certain Agreement and Plan of Merger, dated as of November 12, 1999 (the "Merger
Agreement"), by and among the Company, ShopRite of Pennington, Inc. and its
stockholders, and BVNJ Partnership, L.P., the principal amount of One Million
Two Hundred Thirty Eight Thousand Seven Hundred Seventy-Two Dollars and 00/100
($1,238,772), payable on the terms specified below. This Promissory Note (the
"Note") is executed and delivered on this date in connection with the merger of
ShopRite of Pennington, Inc. with and into BVNJ Partnership, L.P., a New Jersey
limited partnership and an affiliate of the Company ("BVNJ"), all pursuant to
the terms and provisions of the Merger Agreement.
1. Payment of Principal.
(a) Scheduled Payment. Subject to prepayment as provided herein, the
entire principal amount of this Note shall be payable on February 12, 2003.
(b) Optional Prepayment. The Company may, at any time and from time
to time, prepay this Note in part or in full without premium or penalty. At the
time of any prepayment, the Company shall also pay all accrued interest on the
principal amount prepaid.
2. Interest.
(a) Interest shall accrue on the outstanding principal amount
hereof, commencing on the date hereof and continuing until the date of payment
in full, at the rate of
<PAGE>
ten percent (10%) per annum, based on the actual number of days elapsed over a
365-day year, and shall be payable quarterly in arrears on the last day of
February, May, August and November, commencing on the last day of February,
2000.
3. Manner of Payment. All payments shall be made in lawful money of the
United States of America in immediately available funds and shall be made at the
address of the Holder for receiving notices hereunder or at such other address
as the Holder may designate for payments hereunder by notice given to the
Company.
4. Default; Remedy. Upon the occurrence of an Event of Default pursuant to
Section 4(b) hereof, the unpaid balance of the principal of this Note and all
accrued interest thereon shall automatically become immediately due and payable
without any action on the part of the Holder. Upon the occurrence of any other
Event of Default (as hereinafter defined), the Holder may by written notice to
the Company declare this Note to be in default, whereupon the unpaid balance of
the principal of this Note and all accrued interest thereon shall immediately
become due and payable. If within five (5) business days following either such
declaration of default or such automatic default pursuant to Section 4(b) the
Company shall fail to pay promptly in full the unpaid balance of this Note and
all interest accrued thereon, the Holder shall be entitled to pursue all such
remedies as it may have, at law or in equity, for the enforcement and collection
hereof, and to receive in addition to such principal and interest all costs of
collection (including reasonable attorney's fees). For the purpose of this Note,
an "Event of Default" shall consist only of one or more of the following:
(a) The Company shall fail to make any payment of principal or
interest within ten (10) business days of the date when due.
(b) The Company shall make an assignment for the benefit of
creditors, file a petition in bankruptcy, be adjudicated insolvent or bankrupt,
petition or apply to any tribunal for the appointment of a receiver or any
trustee for it or a substantial part of its assets, or shall commence any
proceedings under any bankruptcy, reorganization, arrangement, adjustment of
debt, dissolution or liquidation law or statute of any jurisdiction, whether now
or hereafter in effect, or there shall have been filed any such petition or
application against the Company or any such proceedings shall have been
commenced against the Company which remain undismissed for a period of sixty
(60) days or more.
5. Subordination. This Note, and the obligations of the Company hereunder,
shall be subordinate and junior to all indebtedness of the Company constituting
senior indebtedness (as defined in Section 1.08 of Annex A attached hereto) on
the terms and conditions set forth in Annex A attached hereto, which Annex A is
herein incorporated by reference and made a part hereof as if set forth herein
in its entirety.
The Company covenants and agrees that each payment of interest hereunder
shall be accompanied by a written certification of the chief financial officer
of the Company, addressed to the Holder, confirming the absence of any "Event of
Default" under the Senior Indebtedness, or, if any such Event of Default does
then exist, describing the nature of such Event of Default and any actions being
undertaken by the Company and/or the Lenders, or representatives of Lenders, of
the Senior Indebtedness with respect to such Event of Default.
- 2 -
<PAGE>
6. Transfer. Neither this Note nor any interest hereon may be transferred
or endorsed to any other party, except for testamentary and intestate transfers
upon the death of the Holder. Neither this Note nor any interest hereon has been
registered under the Securities Act of 1933, as amended, or any applicable state
securities laws, and may not be pledged, hypothecated, transferred, offered for
sale or sold, except pursuant to a registration under said Act or an opinion of
counsel, reasonably satisfactory to counsel for the Company, that such
registration is not required under said Act.
7. Miscellaneous.
(a) This Note shall be binding upon and inure to the benefit of the
Holder hereof and its successors and assigns. This Note shall be binding upon
the Company and any successor to the principal business interests of the
Company, whether by merger or otherwise.
(b) Any notice, request or communication pursuant to this Note shall
be deemed duly given if delivered by hand or mailed by certified or registered
mail, addressed to the parties as follows:
If to the Company: Big V Supermarkets, Inc.
176 North Main Street
Florida, NY 10921
Attention: James A. Toopes, Jr.
Chief Financial Officer
Facsimile Transmission Number: (914) 651-7048
With a copy to: Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, MA 02110
Attention: David T. Dinwoodey
Facsimile Transmission Number: (617) 951-1295
If to the Holder: Laurence R. Laurenti, Jr., as Trustee
of the Laurenti Marital Trust
6 Whitwood Drive
West Trenton, NJ 08628
Facsimile Transmission Number: (609) 298-0735
With a copy to: Reed Smith Shaw and McClay, LLP
Princeton Forrestal Village
136 Main Street
P.O. Box 7839
Princeton, NJ 08543-7839
Attention: Steven J. Picco
Facsimile Transmission Number: (609) 951-0824
or, in the case of either party, to such other address as it may have designated
by a notice to the other party in the manner herein provided.
- 3 -
<PAGE>
(c) Except as otherwise provided herein, the Company waives
presentment, demand, protest, and notice of every kind in connection with the
enforcement and collection of this Note.
(d) The Company, by its delivery of this Note, and the Holder, by
its acceptance thereof, each acknowledges and agrees that this Note (x) shall
not be senior in right of payment to the "Senior Subordinated Notes" of the
Company, and (y) shall not be senior in right of payment to, but shall be pari
passu in right of payment with the "Junior Subordinated Notes" of the Company,
each such quoted term being defined in that certain Credit Agreement, dated as
of January 14, 1999, as amended, by and among the Company, Big V Holding Corp.,
BV Holdings Corporation, various Lenders party thereto, DLJ Capital Funding,
Inc., as Syndication Agent, Fleet National Bank as Administrative Agents and
Summit Bank as Documentation Agent.
(e) The Holder, by its acceptance thereof, acknowledges and agrees
that this Note is subject to certain contractual rights of setoff held by the
Company and/or BVNJ, all as more particularly set forth in the Merger Agreement.
(f) The execution, delivery and performance of this Note shall be
governed and construed in accordance with the laws of the State of New Jersey,
without reference to its conflicts of laws principles.
- 4 -
<PAGE>
EXECUTED as an instrument under seal as of the date first above written.
BIG V SUPERMARKETS, INC.
By: /s/ James A. Toopes, Jr.
-------------------------------------
Name: James A. Toopes, Jr.
Title: Vice Chairman, Chief Financial and
Administrative Officer
- 5 -
<PAGE>
Exhibit 4.36
SECOND AMENDMENT
SECOND AMENDMENT (this "Amendment"), dated as of March 2, 2000, among
BIG V HOLDING CORP., a Delaware corporation ("Holdings"), BV HOLDINGS
CORPORATION, a Delaware corporation ("BV Holdings"), BIG V SUPERMARKETS, INC., a
New York corporation (the "Borrower"), the lenders from time to time party to
the Credit Agreement referred to below (each a "Lender" and, collectively, the
"Lenders"), DLJ CAPITAL FUNDING, INC., as Syndication Agent (in such capacity,
the "Syndication Agent"), FLEET NATIONAL BANK, as Administrative Agent (in such
capacity, the "Administrative Agent"), and SUMMIT BANK, as Documentation Agent
(in such capacity, the "Documentation Agent"). All capitalized terms used herein
and not otherwise defined herein shall have the respective meanings provided
such terms in the Credit Agreement referred to below.
W I T N E S S E T H :
WHEREAS, Holdings, BV Holdings, the Borrower, the Lenders, the
Administrative Agent, the Syndication Agent and the Documentation Agent are
parties to a Credit Agreement, dated as of January 14, 1999 (as amended,
modified or supplemented through, but not including, the date hereof, the
"Credit Agreement"); and
WHEREAS, the parties hereto wish to amend certain provisions of the
Credit Agreement as herein provided, subject to and on the terms and conditions
set forth herein;
NOW, THEREFORE, it is agreed:
1. Section 1.05(g) of the Credit Agreement is hereby amended by
inserting the following text immediately after the last word appearing in the
second parenthetical of clause (iii) thereof:
", including any additional Tranche C Term Loans made pursuant to
Section 13.18(b)".
2. Section 4.02(b)(iii) of the Credit Agreement is hereby amended by
inserting the following new sentence at the end thereof:
"To the extent that any additional Tranche C Term Loans are
incurred pursuant to Section 13.18(b), the final Tranche C Term
Loan Scheduled Repayment set forth in the table above shall be
increased by the aggregate principal amount of such additional
Tranche C Term Loans so incurred."
<PAGE>
3. Section 7.08(b) of the Credit Agreement is hereby amended by
inserting the following new sentence at the end thereof:
"All proceeds of Tranche C Term Loans incurred pursuant to Section
13.18(b) shall be used for the Borrower's and its Subsidiaries'
general corporate purposes."
4. The definition of "Tranche C Term Loan" appearing in Section
11.01 of the Credit Agreement is hereby amended by inserting the following new
text immediately after the last word thereof:
"and also shall include any additional Tranche C Term Loans made
pursuant to Section 13.18(b)".
5. Section 13.17 of the Credit Agreement is hereby amended as
follows:
(i) by deleting the word "or" appearing at the end of clause
(A)(i) of the second sentence thereof and inserting a comma in lieu thereof;
(ii) by inserting the following new text immediately after the
words "Junior Subordinated Note Agreement" appearing at the end of clause
(A)(ii) of the second sentence thereof:
"or (iii) incur any additional Tranche C Term Loans under Section
13.18 unless such additional Tranche C Term Loans are incurred in
reliance on the proviso to Section 4.12 of the Senior Subordinated
Note Indenture and the proviso to Section 7E of the Junior
Subordinated Note Agreement and/or clause (xiv) of the respective
definition of "Permitted Indebtedness" contained in the Senior
Subordinated Note Indenture and the Junior Subordinated Note
Agreement (although to the extent that such additional Tranche C
Term Loans are incurred in reliance on such Sections 4.12 and 7E,
the Borrower shall deliver to the Agents both (I) a certificate of
the Borrower's chief financial officer demonstrating (in
reasonable detail) that such additional Tranche C Term Loans may
be so incurred under such Sections and (II) an opinion of counsel,
in form and substance reasonably satisfactory to the Agents, with
respect to the matters referred to in the parenthetical to clause
(viii) of the proviso to each of the definition of "Senior Debt"
appearing in the Senior Subordinated Note Indenture and the
definition of "Superior Debt" appearing in the Junior Subordinated
Note Agreement";
(iii) by inserting the following new text immediately after the
words "Second Tranche C Term Loan Borrowing Date" appearing in clause (B) of the
second sentence thereof:
"and/or by operation of Section 13.18"; and
(iv) by inserting the following new text immediately after the
words "the first sentence of this Section 13.17" appearing in clause (B) of the
second sentence thereof:
2
<PAGE>
"and as provided in clause (A)(iii) above of this sentence".
6. Section 13.18 of the Credit Agreement is hereby amended as
follows:
(i) by deleting the heading thereof and inserting the
following new heading in lieu thereof:
"13.18 Increases of Revolving Loan Commitments and Additional
Tranche C Term Loans. (a)";
(ii) by deleting all references to "Section 13.18" appearing in
the existing text thereof and inserting "Section 13.18(a)" in lieu thereof;
(iii) by inserting the following new text immediately after the
text "Section 13.18" appearing in clause (iv) of the first sentence thereof:
"less the aggregate principal amount of additional Tranche C Term
Loans made pursuant to Section 13.18(b)"; and
(iv) by inserting the following new clause (b) at the end
thereof:
"(b) So long as no Default or Event of Default then exists or
would result therefrom, the Borrower shall have the right at any
time and from time to time to request one or more Lenders to make
additional Tranche C Term Loans, it being understood and agreed,
however, that (i) no Lender shall be obligated to make additional
Tranche C Term Loans as a result of any request by the Borrower,
(ii) any Lender may so make additional Tranche C Term Loans
without the consent of any other Lender, (iii) any additional
Tranche C Term Loans made pursuant to this Section 13.18(b) shall
be in a minimum amount of at least $1,000,000, (iv) no more than
$5,000,000 in the aggregate of additional Tranche C Term Loans may
be made pursuant to this Section 13.18(b) less the amount by which
the Total Revolving Loan Commitment has been increased pursuant to
Section 13.18(a), (v) the Borrower may not request any Lender to
make additional Tranche C Term Loans pursuant to this Section
13.18(b) without first obtaining the prior consent of the
Syndication Agent and the Administrative Agent, (vi) no additional
Tranche C Term Loans may be made pursuant to this Section 13.18(b)
unless same is permitted under Section 13.17 and (vii) any
additional Tranche C Term Loans made by any Lender pursuant to
this Section 13.18(b) shall be made in coordination with the
Administrative Agent. At the time of any additional Tranche C Term
Loans being made pursuant to this Section 13.18(b), (i) the
Borrower shall, in coordination with the Administrative Agent,
take all such actions as may be necessary to ensure that all
Lenders with outstanding Tranche C Term Loans continue to
participate in each Borrowing of outstanding Tranche C Term Loans
on a pro rata basis (after giving effect to any additional Tranche
C Term Loans made pursuant to this Section 13.18(b)), including by
adding such additional Tranche C Term Loans to the then
outstanding Borrowings of Tranche C Term Loans on a pro rata basis
even though as a result thereof such new additional Tranche C Term
Loans (to the extent required to be maintained as Eurodollar
3
<PAGE>
Loans) may effectively have a shorter Interest Period than the
then outstanding Borrowings of Tranche C Term Loans, and it is
hereby agreed that (x) to the extent any then outstanding
Borrowings of Tranche C Term Loans that are maintained as
Eurodollar Loans are affected as a result thereof, any costs of
the type described in Section 1.11 incurred by such Lenders in
connection therewith shall be for the account of the Borrower or
(y) to the extent the additional Tranche C Term Loans to be so
incurred are added to the then outstanding Borrowings of Tranche C
Term Loans which are maintained as Eurodollar Loans, the Lenders
that have made such additional Tranche C Term Loans shall be
entitled to receive an effective interest rate on such additional
Tranche C Term Loans as is equal to the Eurodollar Rate as in
effect two Business Days prior to the incurrence of such
additional Tranche C Term Loans plus the then Applicable
Eurodollar Rate Margin for such Tranche of Term Loans until the
end of the respective Interest Period or Interest Periods, (ii)
Schedule I shall be deemed modified to reflect the additional
Tranche C Term Loans made by the affected Lenders, and (iii) upon
surrender of any old Tranche C Term Notes by those Lenders that
have made such additional Tranche C Term Loans pursuant to this
Section 13.18(b), to the extent requested by such Lenders, new
Tranche C Term Notes will be issued, at the Borrower's expense, to
such Lenders to be in conformity with the requirements of Section
1.05 (with appropriate modifications). Any Lender agreeing to make
additional Tranche C Term Loans pursuant to this Section 13.18(b)
shall make such additional Tranche C Term Loans within one
Business Day after all of the procedures set forth in the first
sentence of this Section 13.18(b) have been complied with and
otherwise in accordance with the terms of this Agreement."
7. In order to induce the Lenders to enter into this Amendment, each
of Holdings, BV Holdings and the Borrower hereby represents and warrants that
(i) the representations and warranties contained in the Credit Agreement are
true and correct in all material respects on and as of the Second Amendment
Effective Date (as defined below) (it being understood and agreed that any
representation or warranty which by its terms is made as of a specified date
shall be required to be true and correct in all material respects only as of
such specified date), both before and after giving effect to this Amendment,
(ii) there exists no Default or Event of Default on the Second Amendment
Effective Date, both before and after giving effect to this Amendment, and (iii)
each Credit Party has the power and authority (corporate and otherwise) to incur
(and/or guaranty) any additional Tranche C Term Loans as contemplated by this
Amendment.
8. This Amendment is limited as specified and shall not constitute a
modification, acceptance or waiver of any other provision of the Credit
Agreement or any other Credit Document.
9. This Amendment may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which
counterparts when executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A complete set of
counterparts shall be lodged with the Borrower and the Administrative Agent.
4
<PAGE>
10. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE
STATE OF NEW YORK.
11. This Amendment shall become effective on the date (the "Second
Amendment Effective Date") when Holdings, BV Holdings, the Borrower and the
Required Lenders (i) shall have signed a counterpart hereof (whether the same or
different counterparts) and (ii) shall have delivered (including by way of
facsimile transmission) the same to the Administrative Agent at the Notice
Office.
12. From and after the Second Amendment Effective Date, all
references in the Credit Agreement and each of the Credit Documents to the
Credit Agreement shall be deemed to be references to the Credit Agreement as
amended hereby.
* * *
5
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Amendment to be duly executed and delivered as of the date
first above written.
BIG V HOLDING CORP.
By: /s/ James A. Toopes, Jr.
--------------------------------------
Name: James A. Toopes, Jr.
Title: Vice Chairman
BV HOLDINGS CORPORATION
By: /s/ James A. Toopes, Jr.
--------------------------------------
Name: James A. Toopes, Jr.
Title: Vice Chairman
BIG V SUPERMARKETS, INC.
By: /s/ James A. Toopes, Jr.
--------------------------------------
Name: James A. Toopes, Jr.
Title: Vice Chairman
DLJ CAPITAL FUNDING, INC., Individually
and as Syndication Agent
By: /s/ Dana Klein
--------------------------------------
Name: Dana F. Klein
Title: Senior Vice President
<PAGE>
FLEET NATIONAL BANK, Individually
and as Administrative Agent
By: /s/ Thomas J. Flanagan, II
-----------------------------------------------
Name: Thomas J. Flanagan
Title: Senior Vice President
SUMMIT BANK, Individually and as
Documentation Agent
By: /s/ Catherine E. Garrity
-----------------------------------------------
Name: Catherine E. Garrity
Title: Vice President
FIRST SOURCE FINANCIAL LLP
By: First Source Financial, Inc., its
Agent/Manager
By: /s/ David C. Wagner
-----------------------------------------------
Name: David C. Wagner
Title: Vice President
MERRILL LYNCH PRIME RATE
PORTFOLIO
By: Merrill Lynch Asset Management, L.P., as
Investment Advisor
By:
-----------------------------------------------
Name:
Title:
<PAGE>
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.
By:
-----------------------------------------------
Name:
Title:
MORGAN STANLEY DEAN WITTER
PRIME INCOME TRUST
By: /s/ Sheila A. Finnerty
-----------------------------------------------
Name: Sheila A. Finnerty
Title: Vice President
STEIN ROE FLOATING RATE LIMITED
LIABILITY COMPANY
By: /s/ James R. Fellows
-----------------------------------------------
Name: James R. Fellows
Title: Vice President, Stein Roe & Farnham
Incorporated, as Advisor to the Stein
Roe Floating Rate Limited Liability
Company
VAN KAMPEN CLO I, LIMITED
By: Van Kampen Management Inc., as Collateral
Manager
By: /s/ Darvin D. Pierce
-----------------------------------------------
Name: Darvin D. Pierce
Title: Vice President
<PAGE>
NUVEEN FLOATING RATE FUND
By: Nuveen Senior Loan Asset Management
Inc.
By: /s/ Lisa M. Mincheski
-----------------------------------------------
Name: Lisa M. Mincheski
Title: Managing Director
KZH STERLING LLC
By: /s/ Susan Lee
-----------------------------------------------
Name: Susan Lee
Title: Authorized Agent
STEIN ROE & FARNHAM CLO I LTD.
By: Stein Roe & Farnham Incorporated, as
Porfolio Manager
By: /s/ James R. Fellows
--------------------------------------------
Name: James R. Fellows
Title: Vice President
LIBERTY-STEIN ROE ADVISOR
FLOATING RATE ADVANTAGE FUND
By: Stein Roe & Farnham Incorporated, as Advisor
By: /s/ James R. Fellows
-----------------------------------------------
Name: James R. Fellows
Title: Vice President
<PAGE>
ELF FUNDING TRUST I
By:
-----------------------------------------------
Name:
Title:
OSPREY INEVESTMENT PORTFOLIO STRATEGIC MANAGED
LOAN FUND
By:
-----------------------------------------------
Name:
Title:
ELT Ltd.
By:
-----------------------------------------------
Name:
Title:
<PAGE>
Exhibit 10.43
BIG V SUPERMARKETS, INC.
PROMISSORY NOTE
For value received, the undersigned (the Obligor) promises to pay to the order
of Big V Holding Corp., a Delaware corporation, with its principal executive
offices located at 75 State Street, Boston, Massachusetts 02109 (the Company),
the principal sum of Two Hundred Thousand Dollars ($200,000) (the Principal
Amount) in lawful money of the United States of America, together with all
accrued but unpaid interest, on December 31, 2003 (the Maturity Date), subject
to the terms outlined below:
. The note, together with accrued but unpaid interest thereon, will be
forgiven in its entirety at the maturity date if the Obligor remains
in the employ of Big V Supermarkets, Inc. through the maturity date
(December 31, 2003).
. The note, together with accrued but unpaid interest thereon, will be
forgiven in its entirety upon a change of control, directly or
indirectly, of fifty percent or more of the outstanding voting
securities of the Company or any of its subsidiaries and employment
in the new company is not continued.
. The note, together with accrued but unpaid interest thereon, will be
due and payable if the Obligor leaves the employ of the Company at
any time prior to the maturity date, other than a termination
without cause (as defined in the undersigned's Employment Agreement
with the Company).
. Interest shall accrue at the minimum rate allowed under Internal
Revenue Service regulations.
In witness whereof, the Note has been duly executed and delivered by the Obligor
on the date first above written.
/s/ Mark S. Schwartz
- --------------------------
Mark S. Schwartz
2 White Tail Drive
Goshen, NY 10924
Date: April 22, 1999
--------------
<PAGE>
Exhibit 10.44
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
SHOPRITE OF PENNINGTON, INC.,
BVNJ PARTNERSHIP, L.P.,
BIG V SUPERMARKETS, INC.
AND
THE STOCKHOLDERS OF SHOPRITE OF PENNINGTON, INC.
November 12, 1999
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I....................................................................1
1.1 Definitions...........................................................1
ARTICLE II...................................................................8
2.1 The Merger............................................................8
2.2 Consideration.........................................................8
2.3 Control of Assets and Liabilities.....................................9
2.4 Time and Place of Closing............................................10
2.5 Deliveries by the Stockholders.......................................10
2.6 Designation of Stockholders' Agent...................................10
2.7 Indemnification of Stockholders' Agent...............................10
2.8 Closing Balance Sheet................................................11
2.9 Post-Closing Adjustment to the Merger Consideration re:
Net Working Capital ...............................................12
2.10 Escrow Accounts......................................................12
2.11 Exchange of Certificates.............................................13
2.12 Stock Transfer Books.................................................14
2.13 No Further Ownership Rights in Company Capital Stock.................14
2.14 Allocation of Merger Consideration...................................14
ARTICLE III.................................................................15
3.1 Organization and Qualification.......................................15
3.2 Authority; No Violation..............................................15
3.3 Capitalization.......................................................16
3.4 Subsidiaries; Investments............................................16
3.5 Financial Statements.................................................16
3.6 Absence of Undisclosed Liabilities...................................16
3.7 Absence of Certain Changes...........................................16
3.8 Listing of Accounts Payable..........................................18
3.9 Title to Assets; Condition of Assets.................................18
3.10 Real Estate..........................................................18
3.11 Accounts Receivable..................................................19
3.12 Inventories..........................................................20
3.13 Intellectual Property................................................20
3.14 Contracts............................................................20
3.15 Customers and Suppliers..............................................21
3.16 Compliance with Laws.................................................22
3.17 Taxes................................................................22
3.18 Employee Benefit Plans...............................................25
3.19 Environmental Matters...............................................28
3.20 Employees............................................................30
3.21 Litigation...........................................................30
3.22 Insurance............................................................31
- i -
<PAGE>
3.23 Company Products.....................................................31
3.24 Powers of Attorney...................................................31
3.25 Brokers..............................................................32
3.26 Burdensome Agreements................................................32
3.27 Records and Books....................................................32
3.28 Transactions with Interested Persons.................................32
3.29 Bank Accounts........................................................32
3.30 Copies of Documents..................................................32
3.31 Disclosure of Material Information...................................32
ARTICLE IV..................................................................33
4.1 Organization and Qualification.......................................33
4.2 Authority; No Violation..............................................33
4.3 Brokers..............................................................33
4.4 Financing Commitment.................................................33
4.5 Concerning the Merger Sub............................................34
4.6 Sophistication: Investment Intent...................................34
4.7 Availability of Documents............................................34
4.8 Unregistered Shares..................................................35
4.9 Opportunity to Discuss terms.........................................35
4.10 Representations of Company and Stockholders Unaffected...............35
ARTICLE V...................................................................35
5.1 Covenants of the Company.............................................35
5.2 Covenants of the Company and Each Stockholder........................37
5.3 Covenants of Each Stockholder........................................38
5.4 Covenants of Merger Sub and Parent...................................38
ARTICLE VI..................................................................39
6.1 Conditions to Obligations of Merger Sub and Parent...................39
6.2 Conditions to Obligations of the Company and the Stockholders........43
ARTICLE VII.................................................................44
7.1 Termination of Agreement.............................................44
7.2 Effect of Termination and Right to Proceed...........................45
ARTICLE VIII................................................................45
8.1 Survival of Representations and Warranties...........................45
8.2 Indemnification by Stockholders......................................46
8.3 Indemnification by Parent and Merger Sub.............................47
8.4 Notice and Opportunity to Defend.....................................47
8.5 Contribution.........................................................48
8.6 Right of Set-Off.....................................................48
8.7 Unconditionality of Stockholders' Liability..........................48
8.8 Adjustment for Insurance and Taxes...................................48
ARTICLE IX..................................................................49
9.1 Pennington Land......................................................49
9.2 Consultation Regarding Parent's Plans for Current Employees..........49
- ii -
<PAGE>
ARTICLE X...................................................................50
10.1 Fees and Expenses....................................................50
10.2 Publicity and Disclosures............................................50
10.3 Notices..............................................................50
10.4 Successors and Assigns...............................................51
10.5 Descriptive Headings.................................................51
10.6 Counterparts.........................................................51
10.7 Severability.........................................................51
10.8 Attorneys' Fees......................................................52
10.9 Course of Dealing....................................................52
10.10 Third Parties........................................................52
10.11 Tax Matters..........................................................52
10.12 Waivers and Consents; Amendments.....................................56
10.13 Variations in Pronouns...............................................57
10.14 WAIVER OF JURY TRIAL.................................................57
10.15 Governing Law........................................................57
10.16 Entire Agreement.....................................................58
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Table of Exhibits
Exhibit A Listing of Stockholders and Shares Held
Exhibit B Form of Stockholder Note
Exhibit C-1 Form of Escrow Agreement
Exhibit C-2 Second Escrow Agreement
Exhibit D Form of Non-Competition Agreements
Exhibit E Form of Consulting Agreements
Exhibit F Form of Opinion of Stockholders' and Company's Counsel
Exhibit G-1 Form of Opinion of Parent/Merger Sub's Special Counsel
Exhibit G-2 Form of Opinion of Parent/Merger Sub's Special Counsel
Exhibit H Merger Certificate
Table of Schedules
Schedule 3.1 Qualification
Schedule 3.3 Capitalization
Schedule 3.4 Subsidiaries
Schedule 3.5 Financial Statements
Schedule 3.6 Liabilities
Schedule 3.7 Changes
Schedule 3.8 Payables
Schedule 3.10(b) Leased Real Property
Schedule 3.11 Accounts Receivables
Schedule 3.12 Inventories
Schedule 3.14 Contracts
Schedule 3.15 Major Customers and Suppliers
Schedule 3.17 Taxes
Schedule 3.18 Employee Benefit Plans
Schedule 3.19 Environmental Matters
Schedule 3.20 Employees
Schedule 3.21 Litigation
Schedule 3.22 Insurance
Schedule 3.23 Warranty and other Claims
Schedule 3.25 Brokers
Schedule 3.28 Transactions with Interested Persons
Schedule 3.29 Bank Accounts
Schedule 5.1(a) Interim Conduct
Schedule 10.11(h)(i) Allocation of Merger Consideration
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<PAGE>
AGREEMENT AND PLAN OF MERGER
The Agreement and Plan of Merger (the "Agreement") dated as of November 12,
1999, by and among Big V Supermarkets, Inc., a New York corporation ("Parent"),
BVNJ Partnership, L.P., a New Jersey Limited Partnership ("Merger Sub"),
ShopRite of Pennington, Inc., a New Jersey corporation (the "Company"), and the
parties whose names are set forth on Exhibit A attached hereto (the
"Stockholders").
The Board of Directors of the Company, the general partner of Merger Sub,
the Board of Directors of the Parent and the Stockholders holding 100% of the
outstanding shares of the Company's common stock, have approved a merger (the
"Merger") of the Company with and into the Merger Sub, with the Merger Sub as
the surviving entity, all in accordance with the New Jersey Business
Corporations Act (the "NJBCA"), on the terms and conditions set forth herein.
In consideration of the foregoing, the mutual representations, warranties
and covenants set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties to
this Agreement hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. For the purposes of this Agreement, all capitalized words
or expressions used in this Agreement (including the Schedules and Exhibits
annexed hereto) shall have the meanings specified in this Article I (such
meanings to be equally applicable to both the singular and plural forms of the
terms defined):
"Affiliate" means when used with respect to any Person, (a) if such Person
is a corporation, any officer or director thereof and any Person which is,
directly or indirectly, the beneficial owner (by itself or as part of any group)
of more than five percent (5%) of any class of any Equity Security thereof, and,
if such beneficial owner is a partnership, any general or limited partner
thereof, or if such beneficial owner is a corporation, any Person controlling,
controlled by or under common control with such beneficial owner, or any officer
or director of such beneficial owner or of any corporation occupying any such
control relationship, (b) if such Person is a partnership, any general or
limited partner thereof and (c) any other Person which, directly or indirectly,
controls or is controlled by or is under common control with such Person. For
purposes of this definition, "control" (including the correlative terms
"controlling", "controlled by" and "under common control with"), with respect to
any Person, shall mean possession, directly or indirectly, of the power to
direct the management and policies of such Person, whether through the ownership
of voting securities or by contract or otherwise.
"Agreement" means this Agreement and Plan of Merger (together with all
Exhibits and Schedules hereto).
<PAGE>
"Assets" means all of the Company's, or the Parent's, (as the case may be)
assets, properties, business, goodwill and rights of every kind and description,
real and personal, tangible and intangible, wherever situated and whether or not
reflected in financial statements.
"Business Day" means any day, excluding Saturday, Sunday and any other day
on which commercial banks in New York, New York are authorized or required by
law to close.
"CERCLA" means the Comprehensive Environmental Response Compensation and
Liability Act of 1980, as amended, and the regulations thereunder, and court
decisions in respect thereof, all as the same shall be in effect at the time.
"Charter" means the Certificate of Incorporation, Articles of Incorporation
or Organization or other organizational document of a corporation, as amended
through the date hereof.
"Claim" means an action, suit, proceeding, hearing, investigation,
litigation or any written statement of intent by a third party to initiate any
of the foregoing in the absence of settlement.
"Code" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder, published Internal Revenue Service rulings, and
controlling court decisions in respect thereof, all as the same shall be in
effect at the time.
"Commission" means the Securities and Exchange Commission and any successor
agency of the federal government administering the Securities Act or the
Exchange Act.
"Common Stock" means the common stock of the Company, no par value.
"Company" means ShopRite of Pennington, Inc., a New Jersey corporation.
"Effective Time" is defined in Section 2.1.
"Environmental Action" means any administrative, regulatory or judicial
action, suit, demand, demand letter, claim, notice of non-compliance or
violation, investigation, request for information, proceeding, consent order or
consent agreement relating in any way to any Environmental Law or any
Environmental Permit, including without limitation (a) any claim by any
governmental or regulatory authority for enforcement, cleanup, removal,
response, remedial or other actions or damages pursuant to any Environmental Law
and (b) any claim by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief resulting from
Hazardous Materials, damage to the environment or alleged injury or threat of
injury to human health or safety from pollution or other environmental
degradation.
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<PAGE>
"Environmental Law" means any applicable federal, state or local law,
statute, rule, regulation, or ordinance relating to the environment, human
health or safety from pollution or other environmental degradation or Hazardous
Materials, including, without limitation, CERCLA, the Resource Conservation and
Recovery Act, the Hazardous Materials Transportation Act, the Clean Water Act,
the Toxic Substances Control Act, the Clean Air Act, the Safe Drinking Water
Act, the Atomic Energy Act, the Federal Insecticide, Fungicide and Rodenticide
Act and the Occupational Safety and Health Act and the rules, regulations and
interpretations thereunder, all as the same shall be in effect from time to
time.
"Environmental Permit" means any permit, approval, identification number,
license or other authorization required under any Environmental Law.
"Equity Security" shall have the meaning given to such term in Section
3(a)(ii) of the Exchange Act.
"ERISA" means the Employee Retirement Income Security Act of 1974, and any
similar or successor federal statute, and the rules, regulations and
interpretations thereunder, all as the same shall be in effect at the time.
"ERISA Affiliate" means, for purposes of Title IV of ERISA, any trade or
business, whether or not incorporated, that together with the Company would be
deemed to be a "single employer" within the meaning of Section 4001 of ERISA,
and, for purposes of the Code, any member of any group that, together with the
Company is treated as a "single employer" for purposes of Section 414 of the
Code.
"Exchange Act" means the Securities Exchange Act of 1934, and any similar
or successor federal statute, and the rules and regulations and interpretations
of the Commission thereunder, all as the same shall be in effect at the time.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
"Hazardous Materials" means (a) petroleum or petroleum products, natural or
synthetic gas, asbestos, urea formaldehyde foam insulation and radon gas, (b)
any substances defined as or included in the definition or "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely hazardous
wastes" "restricted hazardous waters," toxic substances," "toxic pollutants,"
"contaminants" or "pollutants," or words of similar import, under any
Environmental Law and (c) any other substance exposure to which is regulated
under any Environmental Law.
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<PAGE>
"Indebtedness" means all obligations, contingent or otherwise, whether
current or long-term, which in accordance with GAAP would be classified upon the
obligor's balance sheet as liabilities (other than deferred taxes) and shall
also include capitalized leases, guaranties, endorsements (other than for
collection in the ordinary course of business) or other arrangements whereby
responsibility is assumed for the obligations of others, including any agreement
to purchase or otherwise acquire the obligations of others or any agreement,
contingent or otherwise, to furnish funds for the purchase of goods, supplies or
services for the purpose of payment of the obligations of others.
"Indemnity Agreement" is defined in Section 2.10(c).
"IRS" means the Internal Revenue Service and any successor agency of the
federal government administering the Code.
"Lien" means, with respect to any asset, any mortgage, deed of trust,
pledge, hypothecation, assignment, security interest, lien, charge, restriction
or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof, any assignment or other
conveyance of any right to receive income and any assignment of receivables with
recourse against assignor), any filing of any financing statement as debtor
under the Uniform Commercial Code or comparable law of any jurisdiction and any
agreement to give or make any of the foregoing.
"Material Adverse Effect" means a material adverse effect on (a) the
business, operations, assets, liabilities or condition (financial or otherwise)
of the Company taken as a whole, (b) the ability of the Company or any of the
Stockholders to perform their respective obligations under any of the Merger
Documents, (c) the validity or enforceability of any of the Purchaser Documents
or (d) the rights and remedies of the Parent hereunder or thereunder.
"Merger" is defined in the Recitals.
"Merger Certificate" is defined in Section 2.1(b).
"Merger Documents" means this Agreement, the Merger Certificate, the Non-
Competition Agreements, the Consulting Agreements, the Merger Notes and the
Escrow Agreement, and any other certificate, document, instrument, stock power,
or agreement executed in connection therewith.
"Merger Note" is defined in Section 2.1(b).
"Merger Sub" means BVNJ Partnership, L.P., a New Jersey limited
partnership, and its successors and assigns.
"NJBCA" means The New Jersey Business Corporation Act, as amended.
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<PAGE>
"Officer's Certificate" means a certificate signed in the name of a
corporation by its President, Chief Executive Officer, Treasurer, Chief
Financial Officer, or, if so specified, the Clerk or Secretary, acting in his or
her official capacity.
"Parent" means Big V Supermarkets, Inc., a New York corporation, and its
successors and assigns.
"Person" means any individual, firm, partnership, association, trust,
corporation, limited liability company, governmental body or other entity.
"PBGC" means the Pension Benefit Guaranty Corporation, and any successor
thereto.
"Premiums Liability" is that amount of all retrospective premiums which may
become due as a result of all workman's compensation insurance policies of the
Company existing as of the Closing Date.
"Release" means any release, issuance, disposal, discharge, dispersal,
leaching or migration into the indoor or outdoor environment or into or out of
any property, including the movement of Hazardous Materials through or in the
air, soil, surface water, ground water, or property other than in compliance
with all Environmental Laws and Permits.
"Securities Act" means the Securities Act of 1933, and any similar or
successor federal statute, and the rules, regulations and interpretations of the
Commission thereunder, all as the same shall be in effect at the time.
"Shares" means the outstanding shares of Common Stock of the Company.
"Subsidiary" means, with respect to any Person (a) any corporation,
association or other entity of which at least a majority in interest of the
outstanding capital stock or other Equity Securities having by the terms thereof
voting power under ordinary circumstances to elect a majority of the directors,
managers or trustees thereof, irrespective of whether or not at the time capital
stock or other Equity Securities of any other class or classes of such
corporation, association or other entity shall have or might have voting power
by reason of the happening of any contingency, is at the time, directly or
indirectly, owned or controlled by such Person, or (b) any entity (other than a
corporation) in which such Person, one or more Subsidiaries of such Person, or
such Person and one or more Subsidiaries of such Person, directly or indirectly
at the date of determination thereof, has at least majority ownership interest.
For purposes of this Agreement, a Subsidiary of the Company shall include the
direct and indirect Subsidiaries of the Company.
"Surviving Entity" is defined in Section 2.1(a).
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<PAGE>
"Tax" means any federal, state or local income, gross receipts, license,
payroll, employment, excise, severance, stamp, occupation, premium, windfall
profits, environmental, customs duties, capital stock, franchise, profits,
withholding, social security, unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated, other tax of any kind whatsoever, including any interest,
penalty, or addition thereto, whether disputed or not and any reasonable
expenses or costs incurred in connection with the determination, settlement and
litigation of any liability.
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
The following terms are defined in the following Sections of this
Agreement:
Term Section
- ---- -------
Assumed Liabilities 2.3
Parent's Accountants 2.8
Closing 2.4
Closing Balance Sheet 2.8
Closing Date 2.4
Company Statement 2.3
Consulting Agreements 6.1
Election 2.11
First Escrow Account 2.2
First Escrow Agreement 2.10
Financial Statements 3.5
Indemnifying Party 8.5
Net Working Capital 2.8
Losses 8.2
Merger Notes 2.2
Non-Competition Agreements 6.1
Pennington Lease 6.1
Pennington Store 2.3
Plan 3.19(a)
Purchased Assets 2.3
Real Estate 3.19
Real Estate Escrow Account 2.2
Real Estate Escrow Agreement 2.10
Second Escrow Account 2.2
Second Escrow Agreement 2.10
Stockholder and Marital Trust
Advances 2.2
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<PAGE>
Stockholders' Accountants 2.8
Stockholders' Report 2.8
Third Accounting Firm 2.8(b)
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<PAGE>
ARTICLE II
THE MERGER
2.1 The Merger.
(a) Upon the terms and subject to the conditions hereof, and in
accordance with the relevant provisions of applicable law, the Company shall be
merged with and into the Merger Sub as soon as practicable following the
satisfaction or waiver of the conditions set forth in Section 6. Following the
Merger, the Merger Sub shall continue as the surviving entity (the "Surviving
Entity") under the name "BVNJ Partnership, L.P." and shall continue its
existence under the laws of the State of New Jersey, and the separate corporate
existence of the Company shall cease.
(b) The Merger shall be consummated by filing with the New Jersey
Secretary of State a certificate of merger in the form attached hereto as
Exhibit H (the "Merger Certificate"), as is required by, and executed in
accordance with, the relevant provisions of the NJBCA (the time of such filing
being the "Effective Time"). The Merger shall become effective at the close of
business on the Closing Date.
(c) The Merger shall have the effects set forth in N.J.S.A. 14A:10-1,
et.seq.
2.2 Consideration. Upon the terms and subject to the conditions contained
in this Agreement, in reliance upon the representations, warranties and
agreements of the Stockholders contained herein and in consideration of the
Merger, the Shares of the Company issued and outstanding, as of the Effective
Time shall, by virtue of the Merger and without any action on the part of such
holders, automatically be converted into the right to receive from the Merger
Sub at the Closing a total consideration of $34,882,000 (the "Merger
Consideration"). The Merger Consideration shall consist of the following
components:
(a) the first $2,500,000 of Merger Consideration proceeds shall be set
aside in a cash escrow account as described in Section 2.10(a) hereof (the
"First Escrow Account") for the purpose of covering possible payments to the
Parent or Merger Sub for certain post-Closing adjustments and/or
indemnification;
(b) the next $2,000,000 of Merger Consideration proceeds shall be set
aside in a cash escrow account as described in Section 2.10(b) hereof (the
"Second Escrow Account") for the purpose of covering possible liabilities
relating to workmens' compensation insurance premiums.
(c) the next $1,000,000 of the Merger Consideration proceeds shall be
set aside in a cash escrow account as described in Section 2.10(c) hereof (the
"Real Estate Escrow
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<PAGE>
Account") for the purpose of covering possible costs and liabilities arising out
of certain environmental, landlord-tenant and liquor business matters.
(d) the amount of $1,238,772, being the actual amount of all internal
advances (including interest) previously made by any of the Stockholders or the
Laurenti Marital Trust (the "Marital Trust") to the Company and remaining
outstanding as of the Closing Date (the "Stockholder and Marital Trust Advances"
(the amount of which is $1,875,237), less the actual amount of all internal
advances (including interest) previously made by the Company to any of the
Stockholders or to the Marital Trust and remaining outstanding as of the Closing
Date (the "Company Advances") (the amount of which is $636,465), shall be
debited against the Merger Consideration and shall be recorded as continuing
debt of the Company owing solely as provided in a promissory note payable to the
Marital Trust (the "Merger Note"), substantially in the form attached hereto as
Exhibit B;
(e) the remaining cash portion of the Merger Consideration, which
shall equal (i) $34,882,000 less (ii) the amounts set aside or debited, as the
case may be, pursuant to clauses (a), (b), (c) and (d) above shall be paid by
the Merger Sub to the Stockholders' Agent at the Closing by certified check in
immediately available funds or by federal funds wire transfer.
The Merger Consideration is subject to adjustment pursuant to Section 2.9
hereof.
2.3 Control of Assets and Liabilities. In completing the Merger described
in Section 2.1 above, the Merger Sub shall acquire control of the Company's
assets and liabilities as set forth on the compiled balance sheet and statements
of income and retained earnings for the Company for the most recent six-month
fiscal period ending July 3, 1999, as previously provided by the Stockholders to
the Merger Sub (the "Company Statement") excluding only (i) the land and
building improvements located at the Company's store at 2555 Pennington Road,
Hopewell, New Jersey (the "Pennington Store"), (ii) the real property commonly
known as the Bert Avenue property consisting of, inter alia, six garages, and
(iii) the liquor license and all assets, fixtures, inventory, and equipment
located at the liquor store presently operating at or adjacent to the Pennington
Store, the title to all of which is to be transferred by the Company to an
Affiliate of one or more of the Stockholders on or prior to the Closing Date
(except as to the assets described in clause (iii) above, which are to be
transferred as soon as possible subsequent to the Closing). The foregoing assets
and liabilities will constitute the "Purchased Assets and Assumed Liabilities"
which underlie the purchase and sale agreement contained herein. The Purchased
Assets and Assumed Liabilities shall be subject only to such changes as may
occur in the ordinary course of business between the date of the Company
Statement and the Closing (it being understood that any changes in the
liabilities of the Company which are not included within the representations and
warranties of the Company as to existing and disclosed liabilities and/or which
the Company has covenanted not to incur shall not be considered changes in the
ordinary course of the business). The Assumed Liabilities will include (i) all
existing long-term debt (excluding current liabilities) and deferred
pension/benefit costs, which non-current
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liabilities shall total no more than $1,153,000, being the amount of such non-
current liabilities shown on the Company Statement, and (ii) continuing
indebtedness in respect of Stockholder and Marital Trust Advances, to the extent
provided under Section 2.2(b) hereof.
2.4 Time and Place of Closing. The closing of the transactions described
in Sections 2.1 and 2.2 of this Agreement (the "Closing") shall take place at
the offices of White & Case, 1155 Avenue of the Americas, New York, New York at
10:00 a.m. on November 12, 1999, or at such other place or time as the parties
hereto may mutually agree. The date and time at which the Closing actually
occurs is hereinafter referred to as the "Closing Date."
2.5 Deliveries by the Stockholders. At the Closing, the Stockholders will
deliver to Merger Sub (a) the various certificates, instruments and documents
referred to in Section 6.1 below, and (b) stock certificates representing the
Shares duly endorsed for cancellation or accompanied by stock powers duly
executed in blank, and any other documents that are necessary to complete such
cancellation, and Merger Sub will deliver to the Stockholders the various
certificates, instruments, and documents referred to in Section 6.2 below.
2.6 Designation of Stockholders' Agent. Each Stockholder hereby
irrevocably appoints Laurence R. Laurenti, Jr. (the "Stockholders' Agent") as
the true and lawful agent and attorney-in-fact of such Stockholder with full
power of substitution (a) to receive and act upon all notices and advices
required or permitted hereunder including, without limitation, all notices
pursuant to Article VII and Article X; (b) to give all notices and advices
required or permitted hereunder; (c) to deliver or authorize the delivery of the
Shares to be cancelled as part of the Merger, with all accompanying evidences of
transfer and authenticity, to Merger Sub in accordance with the terms of this
Agreement; (d) to accept from Merger sub the entire Merger Consideration, to pay
all of the expenses contemplated to be paid by the Stockholders pursuant to this
Agreement and to remit the net proceeds to each of the Stockholders in
accordance with each such Stockholder's pro rata portion as set forth on Exhibit
A; (e) to present certificates representing such Shares for cancellation as part
of the Merger; and (f) unless otherwise provided herein, to take all such other
actions and execute such other documents, agreements, certificates and
instruments on behalf of such Stockholder as may be necessary or desirable in
order to consummate the Merger pursuant to this Agreement. Notwithstanding the
foregoing, the Stockholders' Agent may not, on behalf of any Stockholder, agree
to any waiver or amendment to this Agreement without the prior written consent
of the Stockholders holding a majority of the Shares. This power of attorney is
a power coupled with an interest, and each such Stockholder declares that it is
irrevocable and that it shall survive the death, disability, incapacity or
incompetency of such Stockholder and in all other circumstances.
2.7 Indemnification of Stockholders' Agent. Each Stockholder shall
reimburse and indemnify the Stockholders' Agent, in proportion to his or her
respective interest in all of the Shares outstanding as of the Merger, from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses (including counsel fees and
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<PAGE>
disbursements) or disbursements of any kind or nature whatsoever (including all
expenses) which may be imposed on, incurred by or asserted against the
Stockholders' Agent in performing its duties hereunder or in any way relating to
or arising out of this Agreement, provided that no Stockholder shall be liable
for any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from the
Stockholders' Agent's gross negligence or willful misconduct.
2.8 Closing Balance Sheet.
(a) Upon the Closing, the Merger Sub shall engage its independent
auditors, Deloitte & Touche, LLP (the "Merger Sub's Accountants") to audit the
balance sheet and related footnotes for the Company as of the Closing Date,
prepared in accordance with GAAP (as so described, the "Closing Balance Sheet")
and to render as soon as practicable an unqualified auditor's report on such
Closing Balance Sheet, all in accordance with the "Scope of Work" proposal of
the Merger Sub's Accountants previously approved by the Merger Sub and the
Stockholders' Agent. The Merger Sub and the Stockholders shall jointly and
equally bear the audit fees and related costs and expenses relating to the
preparation of the Closing Balance Sheet, provided, however, that accounting
costs associated with the Parent's and Merger Sub's due diligence process and
related matters prior to the Closing are not to be included in the calculation
of such jointly shared costs of the Closing Balance Sheet. The Closing Balance
Sheet shall include, inter alia, a statement of the Company's current assets
less current liabilities, each as determined in accordance with GAAP ("Net
Working Capital"), as of the Closing Date. As part of the completion of the
Closing Balance Sheet, Stockholders, the Company, Merger Sub, Stockholders'
Accountants and Merger Sub's Accountants shall cooperate in carrying out a
store-by-store check of all goods and inventory on hand immediately prior to the
Closing Date, with each party entitled to utilize its own inventory service at
its own cost.
(b) Within thirty (30) business days after delivery by the Merger Sub
to the Stockholders of the Closing Balance Sheet together with all related
footnotes and calculations on which it is based, Stockholders' Agent may deliver
to the Merger Sub a written report (the "Stockholders' Report") of Withum, Smith
& Brown, the Company's independent certified public accountants (the
"Stockholders' Accountants"), setting forth any disagreement of the
Stockholders' Accountants with any of the information contained in the Closing
Balance Sheet which affects the determination of Net Working Capital. The costs
and expenses of the services of the Stockholders' Accountants shall be borne by
the Stockholders. If Stockholders' Agent does not submit a Stockholders' Report
within such period, then the Net Working Capital as calculated by the Merger
Sub's Accountants shall be final and binding on the parties hereto.
(c) If Merger Sub and the Stockholders' Agent do not resolve the
disagreements set forth in the Stockholders' Report, within ten (10) business
days of the Merger Sub's receipt of the Stockholders' Report, then either party
by written notice delivered to the other party may elect to have the
disagreements between the two reports resolved by a nationally
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<PAGE>
recognized accounting firm mutually agreed upon by the Merger Sub's Accountants
and the Stockholders' Accountants (the "Third Accounting Firm") which shall make
a final and binding resolution of the disagreements and, based on such
resolution, a final and binding determination of Net Working Capital. The Third
Accounting Firm shall be instructed to use all reasonable best efforts to effect
a resolution within fifteen (15) business days of submission of the matter to it
and in any case, as soon as practicable after such submission to it, and to
communicate such resolution in writing to each party hereto. The costs and
expenses for the services of the Third Accounting Firm shall be shared fifty
percent (50%) by Merger Sub and fifty percent (50%) by the Stockholders.
(d) The Merger Sub and/or the Stockholders' Agent, as the case may be,
shall instruct each of the Merger Sub's Accountants, the Stockholders'
Accountants and the Third Accounting Firm to include in their respective reports
or determinations regarding Net Working Capital a calculation of the amount, if
any, by which the Company's Net Working Capital, as determined pursuant to this
Section 2.8, is less than $3,002,000, being the amount of Net Working Capital
shown on the Company Statement (such difference being the "Net Working Capital
Shortfall"), or greater than $3,002,000 (such difference being the "Net Working
Capital Excess"), as the case may be.
2.9 Post-Closing Adjustment to the Merger Consideration re: Net Working
Capital. The Merger Consideration shall be deemed to increase or decrease,
dollar for dollar, by the amount, if any, of the Net Working Capital Shortfall
or the Net Working Capital Excess, as the case may be. The Stockholders shall
pay to Merger Sub the amount of any Net Working Capital Shortfall, or the Merger
Sub shall pay to the Stockholders the amount of any Net Working Capital Excess,
in either case payable in immediately available funds by wire transfer in
accordance with instructions provided by the Stockholders' Agent or Merger Sub,
as the case may be, at least two (2) Business Days prior to such payment. The
payments required to be made pursuant to this Section 2.9 shall be made not
later than five (5) Business Days after final determination of the Net Working
Capital in accordance with Section 2.8 hereof. In order to further assure the
payment to the Merger Sub of any Net Working Capital Shortfall, the Escrow
Accounts will be established at Closing pursuant to Section 2.10(a) hereof.
2.10 Escrow Accounts.
(a) First Escrow Account. The First Escrow Account will be established
by the Parent, Merger Sub and the Stockholders at the time of Closing, and
$2,500,000 of the Merger Consideration proceeds shall be deposited in the First
Escrow Account, all pursuant to an Escrow Agreement (the "First Escrow
Agreement") substantially in the form attached hereto as Exhibit C-1. The First
Escrow Account shall be used to assure (i) payment to the Merger Sub of any Net
Working Capital Shortfall, as determined pursuant to Sections 2.8 and 2.9
hereof, and/or (ii) payment or reimbursement by the Stockholders to the Merger
Sub for those Losses of Merger Sub which are subject to indemnification as
referenced in Section 8 hereof. The procedures for
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the holding, application or release of funds held in the First Escrow Account
shall be those set forth in the First Escrow Agreement. If the total amount of
the Stockholders' obligations under Section 2.9 regarding a Merger Consideration
adjustment and under Section 8 regarding indemnification exceed the total amount
of the First Escrow Account available at any time, the Stockholders shall
nevertheless remain legally responsible, jointly and severally, to pay such
excess to the Merger Sub.
As to that specified portion of the Premiums Liability (as defined in and
finally determined pursuant to the provisions of paragraph (b) below) which is
deemed to be payable within one (1) year and is therefore treated as a current
liability under GAAP, the amount of such current portion of the Premiums
Liability shall be excluded entirely from the calculation of current liabilities
as part of the determination of Net Working Capital.
(b) Second Escrow Account. The Second Escrow Account will be
established by Parent, Merger Sub and the Stockholders at the time of Closing,
and $2,000,000 of the Merger Consideration proceeds shall be deposited in the
Second Escrow Account, all pursuant to the Second Escrow Agreement attached
hereto as Exhibit C-2. The Second Escrow Account shall be used solely to pay to
the Merger Sub an amount equal to all retrospective premiums which may become
due under all workmens' compensation insurance policies of the Company existing
as of the date hereof (the "Premiums Liability"). The procedures for the
holding, application or release of funds held in the Second Escrow Account shall
be those set forth in the Second Escrow Agreement. If the total amount of the
Premiums Liability exceeds the total amount of the Second Escrow Amount, the
Stockholders shall nevertheless remain legally responsible, jointly and
severally, to pay such excess to the Merger Sub.
(c) Real Estate Escrow Account. The Real Estate Escrow Account will be
established by Parent, Merger Sub and the Stockholders at the time of Closing,
and $1,000,000 of the Merger Consideration Proceeds shall be deposited in the
Real Estate Escrow Account, all pursuant to a certain Indemnity Agreement (the
"Indemnity Agreement"), attached hereto as Exhibit C-3. The Real Estate Escrow
Account shall be used to assure payment to the Merger Sub of certain losses
arising from landlord/tenant matters, environmental risk matters, and matters
arising out of the ownership and operation of the liquor store presently
operating at or adjacent to the Pennington Store prior to the transfer of title
of such liquor store and its assets and business to an Affiliate of one or more
of the Stockholders subsequent to the Closing. The procedures for the holding,
application or release of funds held in the Real Estate Escrow Account, and the
limits of liability for particular matters, shall be those set forth in the
Indemnity Agreement.
2.11 Exchange of Certificates. At the Closing, certificates (the
"Certificates") representing all of the issued and outstanding shares of Company
Common Stock shall be surrendered for cancellation and termination in the
Merger. At the Effective Time, each Certificate shall be cancelled in exchange
for the Merger Consideration. Until surrendered, each
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outstanding Certificate which prior to the Effective Time represented the Shares
shall be deemed for all corporate purposes to evidence ownership of the right to
receive the Merger Consideration, but shall, subject to applicable appraisal
rights under the N.J.B.C.A., have no other rights. Subject to appraisal rights
from and after the Effective Time, the holders of the Shares shall cease to have
any rights in respect of such shares and their rights shall be solely in respect
to the Merger Consideration.
2.12 Stock Transfer Books. At the Effective Time, the stock transfer books
of the Company shall be closed, and there shall be no further registration of
transfers of the Shares thereafter on the records of the Company.
2.13 No Further Ownership Rights in Company Capital Stock. The Merger
Consideration delivered upon the surrender for exchange of the Shares in
accordance with the terms hereof shall be deemed to have been issued in full
satisfaction of all rights pertaining to such Shares, and there shall be no
further registration of transfers on the records of the Surviving Corporation of
the Shares which were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates for the Shares are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Article II.
2.14 Allocation of Merger Consideration.
(a) Upon the Closing, the Merger Sub shall engage the Merger Sub's
Accountants to complete expeditiously an appraisal to assist in determining the
allocation of the value of the Merger Consideration (plus Assumed Liabilities
and plus or minus adjustments pursuant to Sections 2.8 and 2.9, each to the
extent properly taken into account under Section 1060 of the Code amongst the
Assets and the Non-Competition Agreement contained in Section 6.1(k)) (the
"Allocation"). The Parent shall be responsible for the payment of fees and
related costs and expenses incurred by the Merger Sub's Accountants in
connection with the completion of such appraisal. As part of the completion of
such appraisal, the Company, Stockholders, Parent and Merger Sub and
Stockholder's Accountants shall, at their own costs, cooperate with and assist
Merger Sub's Accountants in completing such tasks. Upon completion of such
appraisal, the Merger Sub's Accountant shall forward a copy of such appraisal to
the Merger Sub, the Stockholders' Agent and their respective counsels.
(b) Upon receipt of such appraisal, the Stockholders' Agent, the
Parent and the Merger Sub shall work in good faith to reach an agreement as to
the Allocation, each recognizing the relative costs and benefits resulting from
such Allocation. Once the parties have agreed upon the Allocation, the parties
shall be bound by the terms set forth in Section 10.11 hereof.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE STOCKHOLDERS
Each of the Company and each of the Stockholders, jointly and severally,
hereby represents and warrants to Merger Sub and Parent as follows as of the
Closing Date:
3.1 Organization and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New Jersey. The Company has full power and authority to own, use and lease its
properties and to conduct its business as such properties are owned, used or
leased and as such business is currently conducted. The copies of the Company's
Charter and By-Laws, as amended to date, in each case certified by the Company's
Secretary and delivered to Merger Sub's counsel prior to the Closing, are true,
complete and correct. Except as set forth on Schedule 3.1 attached hereto, the
Company is qualified to do business as a foreign corporation and is in good
standing in each jurisdiction in which it owns or leases property or maintains
inventories or where the conduct of its business would require such
qualification.
3.2 Authority; No Violation. The Company has all requisite corporate power
and authority to enter into this Agreement and to carry out the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
by the Company have been duly and validly authorized and approved by all
necessary corporate action. Each Stockholder has all requisite legal or trust
capacity to enter into this Agreement and to carry out the transactions
contemplated hereby. This Agreement and the other Merger Documents to which the
Company or the Stockholders, respectively, are parties constitutes the legal,
valid and binding obligation of the Company and each of the Stockholders,
enforceable against each of them in accordance with their respective terms.
Assuming the accuracy of the representations and warranties of Merger Sub
hereunder, (a) the entering into of this Agreement by the Company and each of
the Stockholders does not, and the consummation by the Company and each of the
Stockholders of the transactions contemplated hereby, including specifically the
consummation of the Merger, will not violate the provisions of (i) any
applicable federal, state or local laws, (ii) the Company's Charter or By-Laws,
or (iii) any provision of, or result in a default of any obligation under, or
result in any change in the rights or obligations of the Company, any Subsidiary
of the Company or any Stockholder under, any Lien, contract, agreement, license,
order, arbitration award, judgment, or decree to which the Company or any
Stockholder is a party or by which any of them is bound, or to which any
property of the Company is subject; and (b) the transfer and cancellation of the
Shares, as contemplated by this Agreement, are exempt from the registration
requirements of the Securities Act and from any registration or filing
requirements of any applicable state securities laws.
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3.3 Capitalization. The Company's authorized capital stock consists of
1,000 shares of Common Stock, no par value per share, of which 968 shares are
issued and outstanding and owned beneficially and of record by the Stockholders
as set forth on Schedule 3.3. There are no treasury shares held by the Company.
All of such outstanding shares are duly authorized, validly issued, fully paid,
non-assessable, free of all Liens, adverse claims and preemptive rights and have
been issued in compliance with all applicable federal and state laws. Except for
the rights of Parent and Merger Sub hereunder, there are no outstanding options,
warrants, rights or agreements of any kind for the issuance or sale of, or
outstanding securities convertible into or exchangeable for, any additional
shares of Common Stock or any other Equity Security of the Company. Each
Stockholder has good and marketable title to all of the Shares set opposite its
name in Schedule 3.3.
3.4 Subsidiaries; Investments. The Company does not have any Subsidiaries.
Except as set forth on Schedule 3.4, the Company does not own, directly or
indirectly, any securities issued by any other Person except for United States
government securities, certificates of deposit, or other cash equivalents and is
not a partner or participant in any partnership or joint venture of any kind.
3.5 Financial Statements. Attached hereto as Schedule 3.5 are the
following financial statements (collectively the "Financial Statements"): (i)
the Company Statement, which has been prepared in accordance with GAAP, and (ii)
reviewed balance sheets and statements of income, changes in stockholders'
equity and cash flow of the Company as of and for the fiscal year ended January
2, 1999 for the Company. The Financial Statements (including the notes thereto)
have been prepared in accordance with GAAP applied on a consistent basis
throughout the periods covered thereby, present fairly the financial condition
of the Company as of such dates and the results of operations of the Company for
such periods are correct and complete, and are consistent with the books and
records of the Company, subject in the case of the Company Statement to normal
year-end adjustments (which will not be material individually or in the
aggregate) and the absence of footnotes and other presentation items.
3.6 Absence of Undisclosed Liabilities. Except as set forth in the Company
Statement and in Schedule 3.6 attached hereto, there were no material
liabilities of the Company, whether accrued, absolute, contingent or otherwise
(including, without limitation, liabilities as guarantor or otherwise with
respect to obligations of any other Person, or liabilities for Taxes due or then
accrued or to become due), existing on the date of the Company Statement.
3.7 Absence of Certain Changes. Except as expressly addressed in this
Agreement or otherwise disclosed in Schedule 3.7 attached hereto, since the date
of the Company Statement there has not been:
(a) any change in the business, operations, assets, liabilities or
condition (financial or otherwise) of the Company taken as a whole that, by
itself or in conjunction with all
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other such changes, whether or not arising in the ordinary course of business,
has been or is reasonably likely to be materially adverse with respect to the
Company (including, by way of example and not of limitation, the loss of any
significant distributor, customer or vendor, any announcement of new
developments in competitive technology, or the intention on the part of any key
employee of the Company to leave the Company's employ);
(b) any obligation or liability (whether direct or contingent or
with respect to the obligations of any other Person) incurred by the Company
other than obligations and liabilities incurred in the ordinary course of
business for an amount not more than $5,000 in any one case or $50,000 in the
aggregate;
(c) any Lien placed on any of the Company's properties or assets, or
any notice of adverse claim with respect to such properties or assets, which
remains in existence on the date hereof, other than Liens incurred in the
ordinary course of business securing an aggregate amount of liabilities of not
more than $25,000;
(d) any purchase, sale, lease, assignment, transfer or other
disposition, or any agreement or other arrangement for the purchase, sale,
lease, assignment, transfer or other disposition, of any part of the Company's
properties or assets, other than purchases for and sales from inventory for fair
consideration and purchases to replace obsolete equipment, each in the ordinary
course of business, except for fixed assets purchased or other capital
expenditures made in amounts not exceeding $5,000 for any single item and
$50,000 in the aggregate for all such items;
(e) any material damage, destruction or loss, whether or not covered
by insurance, adversely affecting the Company's properties, assets or business;
(f) any declaration, setting aside or payment of any dividend on, or
the making of any other distribution in respect of, any Equity Security of the
Company, or any direct or indirect redemption, purchase or other acquisition by
the Company of any of its own Equity Securities, or any issuance by the Company
of any Equity Security;
(g) any material labor trouble or claim of unfair labor practices
involving the Company; any change in the employment contracts of or compensation
payable or to become payable by the Company to any of its officers, directors,
employees, consultants or agents excepting changes made in the ordinary course
of business pursuant to existing employment contracts or policies); or any
change in coverage or benefits available under any Plan described in Section
3.18;
(h) any payment or discharge of a material Lien or liability of the
Company not disclosed on the Financial Statements or incurred in the ordinary
course of business;
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(i) any obligation, indebtedness or liability incurred by the
Company with respect to any loan, advance or commitment to lend by any bank,
financial institution or institutional lender to lend to the Company or to any
of its officers, directors, employees, consultants, agents, or stockholders of
the Company or to any other Person; or any loans or advances made by the Company
to any officers, directors, employees, consultants, agents or stockholders of
the Company, except for normal compensation, professional fees, expense
allowances [and bonuses (all pursuant to established policies)] payable to
officers and directors;
(j) any contracts, licenses, leases or agreements entered into by
the Company which are outside the ordinary course of business or which obligate
the Company for more than $5,000 in any one case or more than $25,000 in the
aggregate;
(k) any amendment or other change (or any authorization to make such
an amendment or change) to the Company's Charter or By-Laws, except as required
in connection with the consummation of the transactions contemplated hereby;
(l) any postponement or delay in payment of any accounts payable or
other liability of the Company except in the ordinary course of business
consistent with prior practices;
(m) any cancellation, waiver, compromise or release of any right or
claim either involving more than $10,000 or outside the ordinary course of
business consistent with prior practices; or
(n) any cancellation, termination, modification, or acceleration by
any party to any contract, license, lease or agreement involving more than
$10,000 to which the Company is a party or by which it is bound.
3.8 Listing of Accounts Payable. Schedule 3.8 sets forth a summary of
accounts payable as of the dates set forth thereon and references a detailed
list supporting such listed payables.
3.9 Title to Assets; Condition of Assets. The Company has good and
marketable title to, or a valid leasehold interest in, all real, personal,
tangible and intangible property and assets necessary for the conduct of its
business as such business is presently conducted, free and clear of all Liens,
except for properties and assets disposed of in the ordinary course of business
since the date of the Company Statement and as previously disclosed and listed
in Schedule 3.7(2) and the information referenced therein. All tangible
properties and assets owned or leased by the Company are in good operating
condition and repair, ordinary wear and tear excepted, have been well
maintained, and conform with all applicable laws, statutes, ordinances, rules
and regulations.
3.10 Real Estate.
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(a) The Company owns no real property;
(b) Schedule 3.10(b) lists and describes briefly all real property
leased or subleased to the Company. With respect to each such lease and
sublease;
(i) correct and complete copies thereof have been delivered to
Parent;
(ii) the lease or sublease is legal, valid binding,
enforceable, and in full force and effect;
(iii) no party to the lease or sublease is currently in breach
or default of any lease provision which, with notice and/or lapse of time and a
continuing failure to cure, would permit termination, modification, or
acceleration of such lease or sublease;
(iv) no party to the lease or sublease has repudiated any
provision thereof, and there are no material disputes, oral agreements, or
forbearance programs in effect as to the lease or sublease;
(v) with respect to each sublease, the representations and
warranties set forth in subsections (ii), (iii) and (iv) above are, to the
knowledge of the Company, true and correct with respect to the underlying lease;
(vi) the Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the leasehold or
subleasehold;
(vii) all facilities leased or subleased thereunder have
received all approvals of governmental authorities (including licenses and
permits) required in connection with the operation thereof and have been
operated and maintained in accordance with applicable laws, statutes,
ordinances, rules and regulations;
(viii) all facilities leased or subleased thereunder are
supplied with utilities and other services necessary for the operation of said
facilities; and
(ix) all consents which may be required under any such lease
or sublease in order to permit the Merger pursuant to this Agreement have been
obtained.
3.11 Accounts Receivable. All of the accounts receivable of the Company
are properly reflected in the Company Statement in accordance with GAAP and are,
subject to the allowance for doubtful accounts set forth therein, valid and
enforceable claims, subject to no set-off or counterclaim, and are to the
Company's knowledge, fully collectible in the ordinary course of business.
Except as set forth in Schedule 3.11 attached hereto, the Company has no
accounts receivable or loans or notes receivable from any Affiliates or from any
of its officers, directors, consultants, employees, agents or stockholders.
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3.12 Inventories. Except as disclosed in Schedule 3.12 attached hereto:
(i) the inventories of the Company are properly reflected in the Company
Statement and are of a quality and quantity saleable in the ordinary course of
business of the Company at prevailing market prices, are priced at the lower of
cost (first in, first out) or market and (ii) the values of the inventories
stated in the Company Statement reflect the Company's normal inventory valuation
policies and were determined in accordance with GAAP consistently applied.
3.13 Intellectual Property. The Company does not own, or hold any license
for, any patents, trademarks, copyrights, trade secrets or license products used
or useful on account of its business, except for the licenses granted to the
Company by Wakefern Food Corp. with respect to the use of the "ShopRite"
trademark or label or any other trademark licensed by or through Wakefern. The
Company has no applications for any patents, trademarks or copyrights, or
negotiations for any license or licensed products, which are currently pending.
3.14 Contracts. Except for contracts, commitments, leases, licenses, plans
and agreements described in Schedule 3.14 attached hereto, the Company is not a
party to or subject to:
(a) any plan or contract regarding or providing for bonuses,
pensions, options, stock purchases, deferred compensation, severance benefits
retirement payments, profit sharing, stock appreciation, collective bargaining
or the like, or any contract or agreement with any labor union;
(b) any employment or consulting contract or contract for personal
services not terminable at will by the Company without penalty to the Company;
(c) any contract or agreement for the purchase of any commodity,
product, material, supplies, equipment or other personal property, or for the
receipt of any service, other than purchase orders entered into in the ordinary
course of business for less than $5,000 each and which in the aggregate do not
exceed $25,000;
(d) any contract or agreement for the purchase or lease of any fixed
asset, whether or not such purchase or lease is in the ordinary course of
business, for a price in excess of $5,000;
(e) any contract or agreement for the sale of any commodity, product,
material, equipment, or other personal property, or the furnishing by the
Company of any service, other than contracts with customers entered into in the
ordinary course of business;
(f) any contract or agreement with any sales agent or distributor of
products of the Company or any of its Subsidiaries;
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(g) any contract or agreement concerning a partnership or joint
venture with one or more Persons;
(h) any confidentiality agreement or any non-competition agreement
or other contract or agreement containing covenants limiting the Company's
freedom to compete in any line of business or in any location or with any
Person;
(i) any license agreement (as licensor or licensee);
(j) any contract or agreement with any Stockholder or any present or
former officer, director, consultant, agent or stockholder of the Company or
with any Affiliate of any of them;
(k) any loan agreement, indenture, note, bond, debenture or any
other document or agreement evidencing a capitalized lease obligation or
Indebtedness to any Person;
(l) any agreement of guaranty, indemnification, or other similar
commitment with respect to the obligations or liabilities of any other Person
(other than lawful indemnification provisions contained in the Charters and
By-Laws of the Company);
(m) any agreement under which the consequences of a default or
termination is reasonably expected to have a Material Adverse Effect;
(n) any agreement, contract or commitment with Wakefern Food Corp.;
or
(o) any other agreement or contract (or group or related agreements
or contracts) the performance of which involves consideration paid or received
by the Company or any Subsidiary of the Company in excess of $5,000.
Copies of all such contracts, commitments, plans, leases, licenses and
agreements have been provided to Parent or Merger Sub or their counsel prior to
the execution of this Agreement, and all such copies are true, correct and
complete, except such as are described in Schedule 3.14.] Except as listed and
described in Schedule 3.14, none of the Company, or to the knowledge of the
Company and each Stockholder, any other Person, is in default under any such
contract, commitment, plan, lease, license or agreement described in Schedule
3.14 (a "default" being defined for purposes hereof as an actual default or
event of default or the existence of any fact or circumstance which would, upon
receipt of notice or passage of time, constitute a default).
3.15 Customers and Suppliers. Schedule 3.15 attached hereto sets forth the
twenty (20) largest suppliers and customers of the Company in the calendar year
19__ (the "Large Suppliers and Customers"). Except as reflected in Schedule
3.15, no supplier is a material sole source of supply to the Company. Except as
set forth on Schedule 3.15, neither (i) any of the
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Large Suppliers and Customers nor (ii) any supplier who was or is the sole
source of supply of any item, has canceled or otherwise terminated, or
threatened to cancel or otherwise terminate, its relationship with the Company
or has during the last twelve (12) months decreased materially or threatened to
decrease or limit materially, its services, supplies or materials to the Company
or its usage or purchase of the services or products of the Company. The Company
has no knowledge that any of the Large Suppliers and Customers intends to cancel
or otherwise adversely modify its relationship with the Company, or to decrease
materially or limit its services, supplies or materials to the Company, or its
usage or purchase of the services or products of the Company.
3.16 Compliance with Laws.
(a) The Company has all licenses, permits, franchises, orders,
approvals, accreditations, written waivers and other authorizations as are
necessary in order to enable it to own and conduct its business as currently
conducted and to occupy and use its real and personal properties without
incurring any material liability. No registration, filing, application, notice,
transfer, consent, approval, order, qualification, waiver or other action of any
kind on the part of the Company or any Stockholder is required by virtue of the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby to avoid the loss of any rights pertaining to any such
license, permit, franchise, order, approval, accreditation, waiver or
authorization. The Company is in full compliance with the terms and conditions
of all such licenses, permits, franchises, orders, approvals, accreditations,
waivers and authorizations.
(b) The Company has conducted and is conducting its business in
material compliance with all applicable federal, state or local laws, statutes,
ordinances, regulations, rules or orders or other requirements of any
governmental, regulatory or administrative agency or authority or court or other
tribunal relating to it (including, but not limited to, any law, statute,
ordinance, regulation, rule, order or requirement relating to securities,
properties, business, products, advertising, sales or employment practices,
immigration, terms and conditions of employment, wages and hours, safety,
occupational safety, health or welfare conditions relating to premises occupied,
product safety and liability or civil rights). The Company is not currently
charged with, and to the knowledge of the Company and each of the Stockholders,
is not now under investigation with respect to, any material violation of any
applicable law, statute, ordinance, regulation, rule, order or requirement
relating to any of the foregoing in connection with the business of the Company,
and the Company has filed all material reports required to be filed with any
governmental, regulatory or administrative agency or authority.
3.17 Taxes.
(a) Except as set forth in Schedule 3.17 attached hereto, the
Company has filed all Tax Returns that it was required to file. All such Tax
Returns were correct and prepared in accordance with applicable law in all
respects. All Taxes owed by the Company have been
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paid (whether or not shown on any Tax Return). The Company currently is not the
beneficiary of any extension of time within which to file any Tax Return. There
is no outstanding Claim by an authority in a jurisdiction where the Company does
not file Tax Returns that it is or may be subject to the imposition of any Tax
by that jurisdiction. There are no Liens on any of the assets of any of the
Company which have arisen in connection with any failure (or alleged failure) to
pay any Tax.
(b) The Company has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any employee,
consultant, independent contractor, creditor, stockholder, or other third party.
(c) To the best of their knowledge, none of the Stockholders or the
Company expects any authority to assess any additional Taxes for any period for
which Tax Returns have been filed. Neither the Company nor any of the
Stockholders is aware of any dispute or Claim concerning any liability for Taxes
of the Company. Schedule 3.17 attached hereto lists all federal, state and local
Tax Returns filed with respect to any of the Company's taxable periods ended on
or after January 1, 1996, indicates those Tax Returns that have been audited,
and indicates those Tax Returns that currently are the subject of audit. The
Stockholders have delivered to Parent correct and complete copies of all federal
income Tax Returns, examination reports, and statements of deficiencies assessed
against or agreed to by the Company since January 1, 1996.
(d) The Company has not waived any statute of limitations in respect
of Taxes or agreed to any extension of time with respect to any Tax assessment
or deficiency, or the collection of any Tax, which remains outstanding.
(e) The Company has not filed a consent under Section 341(f) of the
Code concerning collapsible corporations, or agreed to have Section 341(f)(2)
applied to any disposition of an asset owned by the Company. The Company has not
made or is obligated to make any payments or is a party to any agreement that
under certain circumstances could obligate it to make any payments that will not
be deductible under Section 280G of the Code or that are subject to an excise
tax under Section 4999 of the Code. The Company is not, and has not been a
United States real property holding corporation within the meaning of Section
897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code. The Company is not a party to any Tax allocation
or sharing agreement. The Company has not been a member of an Affiliated Group
(as defined by Section 1504 of the Code) filing a consolidated federal income
Tax Return (other than a group the common parent of which was the Company). The
Company has no Liability for the Taxes of any Person (other than that of the
Company) under Treas. Reg. Section 1.1502-6 (or any similar provision of state
and local law), as a transferee, successor by contract, guarantee,
indemnification or otherwise.
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(f) The unpaid Taxes of the Company (i) did not, as of the date of
the Company Statement, exceed the reserve allocated for Tax Liabilities, which
is maintained under the statement entry entitled "Accrued expenses and other
current liabilities" (other than any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) set forth on the face of
the Company Statement (rather than in any notes thereto) and (ii) do not exceed
such allocated portion of that reserve as adjusted for the passage of time
through the Closing Date in any manner that is inconsistent with the past custom
and practice of the Company in filing its Tax Returns.
(g) The Company has been a validly electing S corporation within the
meaning of Sections 1361 and 1362 of the Code effective March 29, 1987, and
thereafter also elected S corporation status under applicable state statutes
after such election was permitted under the laws of New Jersey, all as set forth
on Schedule 3.17 and at all times during its existence and will be such an S
corporation up to and including the Closing Date.
(h) The Stockholders timely reported their distributive share of the
Company's income, gain and losses on their Tax Returns and paid all Taxes due
with respect to said income, gain and losses.
(i) The Company will not be required (i) as a result of a change in
method of accounting for a tax period, to include any adjustment under Section
481(a) of the Code (or any corresponding provision of state, local or foreign
Tax law) in taxable income for any such Tax period or (ii) as a result of any
"closing agreement," as described in Section 7121 of the Code (or any
corresponding provision of state, local or foreign Tax law), to include any item
of income or exclude any item of deduction from any Tax period.
(j) The Company is not subject to any closing agreements with any
Tax authority.
(k) The Company would not be liable for any Tax under Section 1374
of the Code or corresponding state statute if its assets were sold for their
fair market value as of the Closing Date. The Company will not be liable for any
Tax under Section 1374 of the Code or corresponding state statute in connection
with the Merger, the Deemed Asset Sale, or the transactions contemplated hereby
or under any other Merger Document). The Company has not, in the past 10 years,
(A) acquired assets from another corporation in a transaction in which the
Company's Tax basis for the acquired assets was determined, in whole or in part,
by reference to the Tax basis of the acquired assets (or any other property) in
the hands of the transferor, or (B) acquired the stock of any corporation which
is a qualified subchapter S subsidiary. The Company will not be in its taxable
year ending on the Closing Date, and has not been in any prior taxable year
subject to tax under Section 1375 of the Code on any of its income or gains. The
Company does not own any stock in another corporation that is a qualified
Subchapter S Subsidiary as defined in Section 1361(b)(3)(B) of the Code.
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(l) Except as disclosed in Schedule 3.17, the Company is not a party
to any joint venture, partnership or other arrangement that is treated as a
partnership for federal income Tax purposes.
(m) The Company has not taken any action including, but not limited
to, the sale of any asset using the installment method that would have the
effect of deferring any material liability for Taxes for the Company from any
taxable period ending at or before the date hereof to any taxable period
thereafter.
(n) No power of attorney has been granted by the Company, and is
currently in force, with respect to any matter relating to Taxes.
(o) Compensation paid to Stockholders, officers, directors,
employees and owners of the Company is not unreasonable and all rental or lease
payments paid to Stockholders, officers, directors, employees or owners of the
Company are reasonable.
3.18 Employee Benefit Plans.
(a) Identification of Plans.
Schedule 3.18 attached hereto lists and identifies each:
(1) "Employee Pension Benefit Plan" (as such term is defined in
Section 3(2) of ERISA) which is not a Multiemployer Plan;
(2) "Multiemployer Plan" (as such term is defined in Section 3(37)
or 4001(a)(3) of ERISA);
(3) "Employee Welfare Benefit Plan" (as such term is defined in
Section 3(3) of ERISA); and
(4) Stock purchase, option or bonus plan, deferred compensation,
severance pay, incentive, vacation, sick pay or leave, fringe benefit plan,
policy or arrangement or payroll practice;
which is maintained or contributed to by the Company or any ERISA Affiliate or
under which the Company or any ERISA Affiliate has any liability or contingent
liability (individually a "Plan" and collectively, the "Plans").
(b) Representations Applicable to All Employee Pension Benefit Plans.
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(1) Each Plan which is intended to be "qualified" under Section
401(a) of the Code is and has been at all times so qualified, and the trusts
maintained thereunder are and have been at all times exempt from taxation under
Section 501(a) of the Code. There have been no amendments to any such Plans
which are not the subject of a determination letter issued with respect thereto
by the Internal Revenue Service. No event has occurred that will or could give
rise to disqualification of any such Plan under the Code.
(2) No Plan has incurred any "accumulated funding deficiency" (as
described in Section 302 of ERISA or Section 412 of the Code), whether or not
waived, nor has there been any failure to make by its due date a required
installment under Section 302(e) of ERISA or Section 412(m) of the Code with
respect to any Plan.
(c) Representations Applicable to All Title IV Plans.
(1) With respect to each Plan, no liability under Title IV of ERISA
has been incurred since the effective date of ERISA that has not been satisfied
in full, and no condition exists that presents a risk of incurring a liability
under Title IV, other than liability for PBGC premiums which have been paid when
due.
(2) No steps have been taken to terminate any Plan subject to Title
IV of ERISA.
(3) No Plan has been the subject of a "reportable event" (as
described in Section 4043 of ERISA) as to which a notice would be required to be
filed with the PBGC.
(4) With respect to each Plan which is subject to Title IV of ERISA,
neither (i) the present value of accrued benefits under such Plan (based upon
the actuarial assumptions used for funding purposes in the most recent actuarial
report prepared by the Plan's actuary with respect to such Plan), nor (ii) the
"benefit liabilities" (as described in Section 4001(a)(18) of ERISA) of such
Plan exceeded, as of its last valuation date, the then current value of the
assets of such Plan. All costs of any Plan subject to Title IV of ERISA have
been provided for on the basis of consistent methods in accordance with sound
actuarial assumptions and practices. Since the last valuation date for each such
Plan, there have been no amendments or changes to such Plans that would increase
the amount of benefits thereunder.
(5) No Plan is a plan described in Section 4063(a) of ERISA.
(d) Representations Applicable to All Multiemployer Plans.
(1) With respect to each Multiemployer Plan: (i) none of the Company
or any ERISA Affiliate has withdrawn, partially withdrawn, or received any
notice of any claim or demand for withdrawal liability or partial withdrawal
liability against any of them; (ii) none of the Company or any ERISA Affiliate
has received any notice that any Multiemployer Plan is in
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reorganization, that increased contributions may be required to avoid a
reduction in plan benefits or the imposition of any excise tax, or that any
Multiemployer Plan is or may become insolvent or may be terminated; and (iii)
none of the Company or any ERISA Affiliate has failed to make any required
contribution.
(2) For each Multiemployer Plan, Schedule 3.18 sets forth, as of its
last valuation date, the amount of potential withdrawal liability of the Company
and the ERISA Affiliates, calculated according to the information made available
by each Multiemployer Plan pursuant to Section 4221(e) of ERISA.
(e) Representations Applicable to All Plans.
(1) Each Plan complies and has been administered in form and
operation with all requirements of law and regulation applicable thereto. The
Company and the ERISA Affiliates have performed all of their obligations under
all such Plans.
(2) There have been no acts or omissions which have given rise to,
or which could give rise to, any penalty, tax, or fine under Sections 409,
502(c), or 502(i) of ERISA, or Sections 4975 or 4976 of the Code, for which the
Company or any ERISA Affiliate may be liable.
(3) None of the assets of any Plan are invested in any employer
securities, employer real property, or any annuity contracts.
(4) All payments required by any Plan, any collective bargaining
agreement or other agreement, or by-law (including, without limitation, all
contributions, insurance premiums, or intercompany charges) with respect to all
periods through the date of the Closing shall have been made prior to the
Closing (on a pro rata basis where such payments are otherwise discretionary at
year end) or provided for by the Company as applicable, by full accruals as if
all targets required by such Plan had been or will be met at maximum levels) on
its financial statements. All such payments and contributions intended to be
deducted for income tax purposes have been fully deducted; and no such deduction
has been challenged or disallowed or is expected to be challenged or disallowed.
(5) All required reports and descriptions of each Plan (including
IRS Form 5500 Annual Reports, Summary Annual Reports, and Summary Plan
Descriptions) have been timely filed and distributed.
(6) None of the Company or any ERISA Affiliate has any plan or
commitment to establish any additional Plans or to amend any existing Plan.
(7) No Plan provides benefits, including without limitation death,
medical, or severance benefits, with respect to current or former employees or
directors (or their
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beneficiaries) beyond their retirement or other termination of service other
than (i) coverage for benefits mandated by applicable law, (ii) death benefits
or retirement benefits under an Employee Pension Benefit Plan, (iii) deferred
compensation benefits properly accrued as liabilities on the Financial
Statements, or (iv) benefits the full cost of which is borne by the current or
former employee or director or his beneficiaries.
(8) There are no actions, suits, or claims (other than routine
claims for benefits made in the ordinary course of plan administration for which
plan administrative review procedures have not been exhausted) pending or
threatened involving any Plans or the assets of such Plans, and no facts exist
which could give rise to any such action, suit, or claim.
(9) No Plan is, or to the knowledge of the Company and the
Stockholders is reasonably expected to be, under audit or investigation by the
IRS, DOL, or any other governmental authority and no such completed audit, if
any, has resulted in the imposition of any additional tax or penalty. With
respect to each Plan that is funded mostly or partially through an insurance
policy, the Company has no liability in the nature of retroactive rate
adjustment, loss sharing arrangement or other actual or contingent liability
arising wholly or partially out of events occurring on or before the Closing. No
event, condition or circumstance exists that would prevent the amendment or
termination of any Plan.
(10) For each Plan, a true and complete copy of each of the
following documents have been delivered to Parent: (i) Plan document and all
amendments thereto; (ii) most recent Summary Plan Description (together with
each Summary of Material Modifications required under ERISA); (iii) IRS Form
5500 Annual Report, if required under ERISA, for the two most recent plan years,
together with all schedules, financial statements, and opinions of independent
accountants; (iv) the actuarial report, if required under ERISA, for the two
most recent plan years; (v) Form PBGC-1, if required under ERISA, for the two
most recent plan years; (vi) if the Plan is funded through a trust or any third
party funding vehicle (including a voluntary employee benefit association under
Section 501(c)(9) of the Code, or a "multiple employer welfare arrangement"
described in Section 3(40) of ERISA), the trust or other funding agreement, all
amendments thereto, and the latest financial statements thereof for the two most
recent plan years; and (vii) the most recent determination letter received from
the Internal Revenue Service with respect to each Plan that is intended to be
qualified under Section 401 of the Code.
3.19 Environmental Matters.
(a) Except as disclosed in Schedule 3.19 attached hereto, the use
and operation by the Company and, to the knowledge of the Company, by all past
owners and operators, of all facilities and properties used in the business of
the Company have been, and will be on the Closing Date, in compliance in all
material respects with all Environmental Laws, and no Environmental Action has
been filed, commenced, or, to the knowledge of the Company and
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each of the Stockholders, threatened with or against any of them alleging any
failure so to comply.
(b) The Company has received all Environmental Permits required to
allow it to conduct its operations and businesses, such Environmental Permits
are valid and in effect, and the Company is in compliance with such
Environmental Permits.
(c) Except as disclosed in Schedule 3.19, the Company has never sent
or arranged for the transportation of Hazardous Materials to a site, or owned or
operated a site, which, pursuant to CERCLA or any similar state law, has been
placed or is proposed (by the United States Environmental Protection Agency
("EPA") or similar state authority) to be placed, on the "National Priorities
List," as in effect as of the Closing Date, of hazardous waste sites or any
similar state list.
(d) Except as disclosed in Schedule 3.19, neither the Company nor
any Stockholder has received notice from any Person, (i) that it has been
identified by the EPA or similar state authority as a potentially responsible
party under CERCLA with respect to a site listed on the "National Priorities
List," as in effect as of the Closing Date, of hazardous waste sites or any
similar state list; (ii) that any Hazardous Materials which the Company has
generated, transported, or disposed of has been found at any site at which a
Person has conducted or has ordered that the Company conduct a remedial
investigation, removal, or other response action pursuant to any Environmental
Law; or (iii) that the Company is or shall be a named party to any Environmental
Action arising out of any Person's incurrence of costs, expenses, losses, or
damages of any kind whatsoever in connection with the release of Hazardous
Materials.
(e) Except as disclosed in Schedule 3.19, there are no underground
fuel or other storage tanks located at any of the facilities of the Company. All
such tanks disclosed in Schedule 3.19, together with all appurtenant piping,
valve, and related facilities, are, except as disclosed in Schedule 3.19,
structurally sound, are not currently and have not in the past been leaking or
releasing their contents into the soil or groundwater, and are in compliance
with all applicable registration, testing, monitoring, containment, and
corrosion protection requirements.
(f) Except as disclosed in Schedule 3.19, there have been no
unpermitted Releases or threatened Releases that are or at any time were
reasonably likely to occur of Hazardous Materials on, upon, into, or from any
real property owned or leased by the Company or any of its Subsidiaries (the
"Real Estate"); and, to the knowledge of the Company and each of the
Stockholders, there have been no Releases on, upon, from, or into any real
property located in the vicinity of the Real Estate or other assets of the
Company or any of its Subsidiaries which, through the soil, groundwater, or
surface water, may have come to be located on, upon, or under such Real Estate
or other assets.
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(g) Without in any way limiting the generality of the foregoing,
there is, to the knowledge of the Company and each of the Stockholders, no
asbestos contained in or forming part of any building, building component,
structure, or office space owned or leased by the Company; and, to the knowledge
of the Company and each of the Stockholders, no polychlorinated biphenyls
("PCBs") are used or stored at any property owned or leased by the Company. All
properties and equipment used in the business of the Company and its respective
predecessors have been free of methylene chloride, trichloroethylene, 1, 2 -
transdichloroethylene, dioxins, dibenzofurans, and Extremely Hazardous
Substances, as such term is defined in Section 302 of the Emergency Planning and
Community Right-to-Know Act of 1986, as amended.
(h) None of the Real Estate or other assets of the Company is or is
expected to be subject to any applicable environmental clean-up responsibility
law or environmental restrictive transfer law or regulation, solely by virtue of
the transactions set forth herein and contemplated hereby.
3.20 Employees. Schedule 3.20 attached hereto sets forth a true and
complete list of (a) all directors of the Company, (b) all officers (with office
held) of the Company, (c) all consultants and independent contractors retained
by the Company currently or during the last fiscal year and (d) all employees of
the Company, including each such employee's job title, remuneration and duration
of employment period. Except as disclosed in Schedule 3.20 or Schedule 3.18, the
Company is not a party to any written or oral employment, consulting, service,
severance or pension agreement. The Company is not a party to, and none of its
employees are subject to, any collective bargaining agreement or other union
contract, other than as disclosed in Schedule 3.20. The Company is in compliance
in all material respects with applicable federal, state and local laws affecting
employment and employment practices, including terms and conditions of
employment and wages and hours, and there are, and have been during the past
five (5) years, no complaints against the Company pending or, to the knowledge
of the Company and each of the Stockholders, threatened before the National
Labor Relations Board or any similar state or local agency, except as set forth
on Schedule 3.20. There is no pending or, to the knowledge of the Company and
each of the Stockholders, threatened labor trouble with or effort to organize
any of its employees, and there has been no such labor trouble or, to the
knowledge of the Company and each of the Stockholders, effort to organize during
the past five (5) years.
3.21 Litigation. Except as disclosed on Schedule 3.21 attached hereto, (a)
there is no Claim pending or, to the knowledge of the Company or any Stockholder
threatened (or, to the knowledge of the Company and each Stockholder, any facts
which could lead to such a Claim) by, against, affecting or regarding the
Company or its business, properties or assets, or any Stockholder at law or in
equity, before any federal, state or local court or any other governmental or
administrative agency or tribunal or any arbitrator or arbitration panel, and
(b) there are no judgments, orders, rulings, charges, decrees, injunctions,
notices of violation or other mandates
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against or affecting the Company or any Stockholder with respect to the
business, properties or assets of the Company. Nothing listed on Schedule 3.21,
either individually or when aggregated with other listings on such Schedule, is
reasonably expected to have a Material Adverse Effect.
3.22 Insurance. Schedule 3.22 attached hereto sets forth a summary of all
insurance policies (including policies providing property, casualty, liability,
and workers' compensation coverage, benefits or coverage for any Plan described
in Section 3.18, and bond and surety arrangements) to which the Company is a
party, a named insured, or otherwise the beneficiary of coverage and specifies
the insurer, the amount of coverage, type of insurance, expiration date, and any
retroactive premium adjustments or other loss sharing arrangements. With respect
to each such insurance policy: (a) the policy is legal, valid, binding,
enforceable, and in full force and effect; (b) neither the Company nor any other
party to the policy is in breach or default of any requirements thereunder which
is reasonably expected to lead to the cancellation of, or refusal to recognize
any claim under, such policy (including with respect to the payment of all
premiums or the giving of notices), and no event has occurred which, with notice
or the lapse of time, would constitute such a breach or default, or permit
termination, modification, or acceleration under the policy; and (c) no party to
the policy has repudiated any provision thereof. The Company has been covered
during the past ten (10) years by insurance in scope and amount customary and
reasonable for the businesses in which it has engaged during the aforementioned
period. Schedule 3.22 describes any self-insurance arrangements affecting any of
the Company.
3.23 Company Products. Each product manufactured, sold, leased,
distributed or delivered by the Company ("Company Products") has been in
conformity with all material and applicable contractual commitments and all
applicable express and implied service and product warranties. Except as
disclosed in Schedule 3.23 attached hereto, (a) there are no existing or, to the
knowledge of the Company or any Stockholder, threatened Claims against the
Company for services or merchandise which are defective or fail to meet any
express or implied service or product warranties, or any facts which, if
discovered by a third party, would support such a Claim; and (b) no Claim has
been asserted against the Company for renegotiation or price redetermination
with respect to any transaction, and there are no facts upon which any such
Claim could be based. Except as set forth on Schedule 3.23, there are no
statements, citations or decisions by any governmental or regulatory body or
agency that any Company Product is defective or fails to meet any standards
promulgated by any such governmental or regulatory body or agency. Except as set
forth on Schedule 3.23, there have been no recalls ordered by any such
governmental or regulatory body or agency with respect to any Company Product.
3.24 Powers of Attorney. Except for powers of attorney granted in the
ordinary course of business to independent certified public accountants or in
connection with the establishment or amendment of a Plan described in Schedule
3.18(a)(1), the Company has not granted any outstanding power of attorney.
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3.25 Brokers. Except as disclosed in Schedule 3.25 attached hereto,
neither the Company nor the Stockholders, or anyone acting on their behalf, has
engaged, retained, or incurred any liability to any broker, investment banker,
finder or agent or has agreed to pay any brokerage fees, commissions, finder's
fees or other fees with respect to the Merger, this Agreement or the
transactions contemplated hereby.
3.26 Burdensome Agreements. The Company is not subject to or bound by any
agreement, judgment, decree or order which does or may in the future reasonably
be expected to result in a Material Adverse Effect.
3.27 Records and Books. The minute books of the Company have previously
been made available to Parent and Merger Sub and accurately record all corporate
action taken by the stockholders and boards of directors and committees thereof
from the date of organization through the date hereof. The stock transfer
ledgers or record books of the Company completely and accurately set forth all
transfers of the Company's capital stock from the date of organization through
the date hereof.
3.28 Transactions with Interested Persons. Except as set forth on Schedule
3.28 attached hereto, no officer, supervisory employee or director of the
Company owns directly or indirectly, either individually or jointly, any
material interest in, or serves as an officer or director of, any customer,
competitor or supplier of the Company, or any organization which has a material
contract or arrangement with the Company.
3.29 Bank Accounts. Schedule 3.29 contains a complete and accurate list of
all bank accounts, safe deposit boxes and lock boxes maintained by the Company,
together with a list of all authorized signatories thereto.
3.30 Copies of Documents. The Company and the Stockholders have made
available for inspection and copying by Merger Sub and its counsel true and
correct copies of all documents referred to in this Article III or in the
Schedules delivered to Parent pursuant to this Agreement.
3.31 Disclosure of Material Information. Neither this Agreement (including
the Schedules and Exhibits hereto) nor any document, certificate or instrument
furnished in connection therewith contains, with respect to the Company or any
Stockholder, any untrue statement of a material fact or intentionally, knowingly
or recklessly omits to state a material fact necessary to made the statements
therein not misleading. There is no fact known to the Company or any Stockholder
which has or would reasonably be expected in the future to result in a Material
Adverse Effect and which has not been set forth in this Agreement.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent hereby represents and warrants to the Company and the Stockholders
as follows as of the Closing Date:
4.1 Organization and Qualification. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York, with full power and authority to own, use or lease its properties and
to conduct its business as such properties are owned, used or leased and as such
business is conducted. The copies of the Parent's Charter and By-Laws, as
amended to date, in each case certified by its Secretary and delivered to
Stockholders' counsel prior to the Closing, are true, complete and correct.
4.2 Authority; No Violation. Parent has the requisite corporate power and
authority to enter into this Agreement and to carry out the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
by Parent have been duly and validly authorized and approved by all necessary
corporate action on the part of Parent. This Agreement and the other Merger
Documents to which the Parent is a party constitute the legal, valid and binding
obligations of Parent, enforceable against Parent in accordance with their
respective terms. Assuming the accuracy of the representations and warranties of
the Company and the Stockholders hereunder, the entering into of this Agreement
by Parent does not, and the consummation by Parent of the transactions
contemplated hereby will not, violate the provisions of (i) any applicable laws
of the United States or any other state or jurisdiction in which Parent does
business, (ii) the Charter or By-Laws of Parent or (iii) any provision of, or
result in a default of any obligation under, or result in any change in the
rights or obligations of Parent under, any Lien, agreement, contract, license,
order, arbitration award, judgment, or decree to which Parent is a party or by
which Parent is bound, or to which any property of Parent is subject.
4.3 Brokers. Neither Parent nor anyone acting on its behalf has engaged,
retained or incurred any liability to any broker, investment banker, finder or
agent or has agreed to pay any brokerage fees, commissions, finder's fees or
other fees with respect to the Merger, this Agreement or the transactions
contemplated hereby.
4.4 Financing Commitment. Parent has previously delivered to the
Stockholders true, accurate and complete copies of commitment letter(s) relating
to the debt financing of the transactions contemplated hereby. Pending the
Closing, Parent shall keep in place such commitments or replacements thereof
from institutional lenders who are not Affiliates of Parent that are no less
favorable taken as a whole to Parent than terms and conditions generally
available from commercial lenders for transactions of the kind contemplated
hereby and for borrowers having a credit rating similar to Parent.
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4.5 Concerning the Merger Sub. The Parent and the Merger Sub jointly
represent and warrant to the Company and the Stockholders as follows:
(a) The Merger Sub is a limited partnership duly organized and
existing and in good standing under the laws of the State of New Jersey. An
accurate and complete copy of the Certificate of Limited Partnership of the
Merger Sub will be delivered to the Company and the Stockholders prior to the
Closing.
(b) The Merger Sub has the requisite organizational power and
authority to execute, deliver and perform the Merger Documents to which it is a
party and to perform the transactions contemplated hereby and thereby. Such
execution, delivery and performance have been duly authorized by all necessary
action in accordance with the Limited Partnership Agreement. This Agreement and
the other Merger Documents to which the Merger Sub a party constitute the legal,
valid and binding obligations of the Merger Sub, enforceable against the Merger
Sub in accordance with their terms.
(c) Assuming the accuracy of the representations and warranties of
the Company and the Stockholders hereunder, the entering into of this Agreement
by the Merger Sub does not, and the consummation by the Merger Sub of the
transactions contemplated hereby will not, violate the provisions of or
constitute a default under (i) any applicable laws of the United States or any
other state or jurisdiction in which Merger Sub does business, (ii) the Limited
Partnership Agreement of Merger Sub, or (iii) any Lien, agreement, contract,
license, order, arbitration order, judgment or decree to which Merger Sub is a
party or by which Merger Sub is bound, or to which any property of Merger Sub is
subject.
4.6 Sophistication: Investment Intent. Each of the Parent and Merger Sub
possess the experience and sophistication as an investor which are adequate for
the evaluation of the merits and risks of the Merger. Each of Parent and Merger
Sub has determined that the Merger is appropriate to undertake.
4.7 Availability of Documents. Each of the Parent and Merger Sub
acknowledges that the Company and the Stockholders have made available to each
of the Parent and Merger Sub copies of the Company's current financial
information as set forth in the Merger Documents, including on the disclosure
schedules annexed hereto. Except as set forth in the Merger Documents, no other
representations, assurances, or warranties have been made to either the Parent
or the Merger Sub by the Company or any of the Stockholders, or by any of their
officers, directors, agents, employees, or affiliates, nor anyone else on their
behalf, concerning, among other things, future profitability of the Company, or
the tax consequences of the Merger. Neither Parent nor Merger Sub is relying
upon any information supplied by the Stockholders other than that contained or
referenced in the Merger Documents (including all schedules and exhibits
thereto) and the results of its own independent investigation.
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4.8 Unregistered Shares. Parent is aware that the Shares have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
or any state securities laws or regulations in reliance upon exemptions under
the Securities Act and under exemptions under state law.
4.9 Opportunity to Discuss Terms. Parent has been provided the opportunity
to discuss the terms and conditions of the Merger and the business of the
Company with members of the Company's management.
4.10 Representations of Company and Stockholders Unaffected. The
acknowledgements of Parent and Merger Sub set forth in Sections 4.6 through 4.9,
inclusive, shall not be deemed in any manner to limit or diminish the applicable
terms of each representation and warranty of each of the Stockholders and the
Company as set forth in the Merger Documents.
ARTICLE V
COVENANTS
The parties hereto agree to the following covenants:
5.1 Covenants of the Company. The Company hereby agrees with Merger Sub
and Parent to keep, perform and fully discharge the following covenants and
agreements:
(a) Interim Conduct of Business. From the date hereof until the
Closing, the Company shall operate its business as a going concern consistent
with prior practice and in the ordinary course of business (except as may be
authorized pursuant to this Agreement or as set forth on Schedule 5.1(a)
hereto). Without limiting the generality of the foregoing, from the date hereof
until the Closing, except for transactions contemplated by this Agreement or
expressly approved in writing by Merger Sub, the Company shall not:
(i) make any increases in the level of compensation of its
officers or employees, or make any changes in pensions, benefits,
bonus or severance plans except such increases or changes as are
mandated by existing contracts or policies (it being understood that
bonus payments to employees shall continue to accrue as a Company
liability in accordance with historic practice through the Closing
Date);
(ii) purchase, lease or otherwise acquire any real estate or
any interest therein;
(iii) declare, set aside or pay any dividend or make any other
distribution with respect to any Equity Security;
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(iv) merge or consolidate with or agree to merge or consolidate
with, or purchase or agree to purchase all or substantially all of the
assets of, acquire securities of or otherwise acquire any Person;
(v) sell, lease or otherwise dispose of or agree to sell,
lease or otherwise dispose of any of its assets, properties, rights or
claims, whether tangible or intangible, except in the ordinary course
of business consistent with prior practice;
(vi) authorize for issuance, issue, sell or deliver any of its
own Equity Securities;
(vii) split, combine or reclassify any class of Equity Security
or redeem or otherwise acquire, directly or indirectly, any of its
Equity Securities;
(viii) incur any additional indebtedness above that shown on the
Company Statement, or any other liability, guaranty or obligation
(fixed or contingent) other than in the ordinary course of business
consistent with prior practice;
(ix) place or permit to be placed any Lien on any of its assets
or properties, other than statutory Liens arising in the ordinary
course of business;
(x) make or authorize any amendments or changes to its Charter
or By-Laws, or make or authorize any change to its existing
capitalization;
(xi) make investments in excess of $50,000 in the aggregate in
property, plant and equipment and other items of capital expenditure;
(xii) accelerate receivables or delay or postpone payment of any
accounts payable or other liability, except in the ordinary course of
business consistent with prior practice;
(xiii) abandon any part of its business;
(xiv) make any payment, distribution or advance of cash,
securities or other property to any of the Stockholders or any related
parties, except pursuant to currently existing compensation
arrangements or historic practices of the Company (including the
repayment of Stockholder Advances prior to the Closing);
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(xv) make any change in financial or Tax accounting principles
or methods from those employed as of the date of the audited Financial
Statements, except as required by GAAP or by applicable law or
regulatory requirements; or
(xvi) make any material Tax election, file any amended return or
settle or compromise any material federal, state or local Tax
liability.
(b) Access. The Company and each of its Subsidiaries shall, upon
reasonable notice, give Parent and Merger Sub and its representatives full and
free access to all properties, assets, books, contracts, commitments and records
of the Company and each of its Subsidiaries during reasonable business hours and
shall promptly furnish Parent and Merger Sub with all financial and operating
data and other information as to the history, ownership, Affiliates, business,
operations, properties, assets, liabilities, or condition (financial or
otherwise) of the Company and each of its Subsidiaries as Parent and Merger Sub
may from time to time reasonably request, provided that such access shall be
subject to the Company's need to avoid disruption of its business and
operations. Parent and Merger Sub shall promptly restore any physical damages
caused by its access to the Company's store properties, inventory or equipment.
(c) Satisfaction of Conditions. The Company agrees to use its
reasonable commercial good faith efforts to accomplish the satisfaction of the
conditions precedent to Closing contained in Section 6.1 herein on or prior to
the Closing Date.
5.2 Covenants of the Company and Each Stockholder. Each of the Company and
each Stockholder agrees with Merger Sub and Parent to keep, perform and fully
discharge the following covenants and agreements:
(a) No Solicitation, Confidentiality, Etc. The Stockholders and the
Company agree that, prior to the termination of this Agreement pursuant to
Article VII hereof, neither the Company or any of the Stockholders will (i)
solicit or negotiate with respect to any inquiries or proposals relating to (x)
the possible direct or indirect acquisition of the Shares or any other Equity
Security of the Company or of all or a portion of the assets or business of the
Company, or (y) any merger, consolidation, joint venture or business combination
with the Company, or (ii) discuss or disclose either this Agreement or other
confidential information pertaining to the Company with any Person (except as
may be required by law or except as may be required in connection with the
transactions contemplated by this Agreement to Affiliates, officers, directors,
employees and agents of the Company or any of the Stockholders) without the
prior written approval of Parent or Merger Sub. The Company and the Stockholders
shall advise such parties of the existence of this Agreement and shall refrain
from entering into further discussions with such parties concerning the sale of
the Company or any Subsidiary of the Company to the extent otherwise prohibited
by this Section 5.2(a).
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5.3 Covenants of Each Stockholder. Each Stockholder, severally and not
jointly, agrees with Merger Sub and Parent to keep, perform and fully discharge
the following covenants and agreements:
(a) Accuracy of Representations and Warranties. Without the prior
written consent of Parent or Merger Sub, no Stockholder will take any action
from the date hereof to the Closing Date, whether as an officer, director or
stockholder of the Company or otherwise, that would cause any representation or
warranty of the Company or any Stockholder contained in this Agreement to become
untrue or cause the breach of any agreement hereof or covenant contained herein.
Each of the Company and the Stockholders will promptly bring to the attention of
Parent or Merger Sub any facts which come to his or her attention that the
Company or such Stockholder knows could reasonably be expected to cause any of
the representations and warranties of the Company or any of the Stockholders to
be untrue or materially misleading in any respect.
(b) Satisfaction of Conditions. The Stockholders agree to use their
reasonable commercial good faith efforts to cause the Company to comply with
Sections 5.1 and 5.2 above and to accomplish the satisfaction of the conditions
precedent to Closing contained in Section 6.1 below on or prior to the Closing
Date.
(c) Disclosure Supplements. From time to time prior to the Closing,
the Company and the Stockholders will supplement or amend the Schedule(s) hereto
with respect to any matter hereafter arising which, if existing or occurring at
or prior to the date of this Agreement, would have been required to be set forth
or described in any such Schedule or which is necessary to complete or correct
any information in any such Schedule or in any representation or warranty of the
Company and the Stockholders which has been rendered inaccurate thereby. For
purposes of determining the satisfaction of the conditions set forth in Section
6.1 hereof, no such supplement or amendment shall be given effect.
5.4 Covenants of Merger Sub and Parent. Merger Sub and Parent each hereby
agrees with the Company and the Stockholders to keep, perform and fully
discharge the following covenants and agreements:
(a) Confidentiality. Each of Parent and Merger Sub agree to hold,
and to cause its officers, directors, employees, consultants, advisors, agents
and stockholders to hold, all information heretofore or hereafter obtained from
the Company or its advisors in strict confidence and to use the information so
obtained only for the purpose of evaluating and consummating the purchase of the
Company; provided however, that (a) Parent or Merger Sub shall also be entitled
to share such information with any Person with whom it is discussing the
possibility of providing funds to finance the transactions contemplated hereby
or their respective officers, employees, accountants, attorneys or advisors, and
(b) the parties hereto acknowledge that the employees of the Company have been
generally informed of the purchase of the
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Company by the Parent or Merger Sub. Parent or Merger Sub shall promptly return
all such information to the Company if the Closing is not consummated as
contemplated hereby.
(b) Satisfaction of Conditions. Parent agrees to use its reasonable
commercial good faith efforts to accomplish the satisfaction of the conditions
precedent to Closing contained in Section 6.2 herein on or prior to the Closing
Date.
(c) WARN Act. The parties hereto agree that for purposes of the
United States Worker Adjustment and Restraining Notification Act, as amended
(the "WARN Act") and any similar state statute, the Closing Date shall be the
"effective date" as such term is used in the WARN Act. Parent and Merger Sub
each acknowledges and represents that it has no present intent to engage in a
"mass layoff" or "plant closing" with respect to the Company as defined in the
WARN Act. Parent and Merger Sub each agrees that after the Closing Date Merger
Sub shall be responsible for any notification required under the WARN Act or any
similar state statute with respect to the Company.
ARTICLE VI
CLOSING CONDITIONS
6.1 Conditions to Obligations of Merger Sub and Parent. The obligations of
Merger Sub and Parent to consummate this Agreement and the transactions
contemplated hereby are subject to the fulfillment, prior to or at the Closing,
of the following conditions precedent:
(a) Representations, Warranties and Covenants; No Default. Each of
the representations and warranties of the Company and each of the Stockholders
contained in this Agreement shall remain true and correct at the Closing Date as
fully as if made on the Closing Date; the Company and each of the Stockholders
shall have performed, on or before the Closing Date, all of its, his or her
respective obligations under this Agreement and the other Merger Documents which
by the terms thereof are to be performed on or before the Closing Date; and
there shall not exist any Default or Event of Default under this Agreement at
the Closing Date. The Company and each of the Stockholders shall have delivered
to Merger Sub an Officer's Certificate dated the Closing Date of the Company and
a certificate from each Stockholder in his or her individual capacity to the
foregoing effect;
(b) No Pending Action. No legislation, order, rule, ruling or
regulation shall have been proposed, enacted or made by or on behalf of any
governmental body, department or agency, and no legislation shall have been
introduced in either House of Congress or in the legislature of any state, and
no investigation by any governmental authority shall have been commenced or
threatened, and no action, suit, investigation or proceeding shall have been
commenced before, and no decision shall have been rendered by, any court or
other governmental authority or arbitrator, which, in any such case, in the
reasonable judgment of Parent or Merger Sub is likely to adversely affect,
restrain, prevent or rescind the transactions
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contemplated by this Agreement (including, without limitation, the Merger) or
result in a Material Adverse Effect;
(c) Merger Permitted by Applicable Laws; Legal Investment. The
Merger (a) shall not be prohibited by any applicable law or governmental order,
rule, ruling, regulation, release or interpretation, (b) shall not subject
Merger Sub or Parent to any penalty, Tax, liability or, in Parent or Merger
Sub's reasonable judgment, any other onerous condition under or pursuant to any
applicable law, statute, ordinance, regulation or rule, (c) shall not constitute
a fraudulent or voidable conveyance under any applicable law and (d) shall be
permitted by all applicable laws, statutes, ordinances, regulations and rules of
the jurisdictions to which Merger Sub or Parent is subject;
(d) Proceedings Satisfactory. All proceedings taken in connection
with the Merger, the transactions contemplated by the Financing, all of the
other Merger Documents and all documents and papers relating thereto, shall be
in form and substance reasonably satisfactory to Parent or Merger Sub. Parent or
Merger Sub and their counsel shall have received copies of such documents and
papers as Merger Sub or its counsel may reasonably request in connection
therewith, all in form and substance reasonably satisfactory to Merger Sub. Any
Merger Document, any Schedule or Exhibit to this Agreement and any other
document, agreement or certificate contemplated by this Agreement shall be
reasonably satisfactory in form and substance to Parent and Merger Sub;
(e) Consents; Permits. The Company shall have received (and there
shall be in full force and effect) all material consents, approvals, licenses,
permits, orders and other authorizations of, and shall have made (and there
shall be in full force and effect) all such filings, registrations,
qualifications and declarations with, any Person pursuant to any applicable law,
statute, ordinance regulation or rule or pursuant to any agreement, order or
decree to which the Company is a party or to which it is subject, in connection
with the Merger and the other transactions contemplated by this Agreement. All
applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, with respect to the transactions contemplated hereby
shall have expired or been terminated;
(f) Corporate Documents. The Company shall have delivered to Merger
Sub:
(i) an Officer's Certificate of the [Secretary] [Clerk] of the
Company certifying (x) the incumbency and genuineness of signatures of all
officers of the Company executing this Agreement, any document delivered by the
Company at the Closing and any other document, instrument or agreement executed
in connection herewith, (y) the correctness, completeness and continuing effect
of resolutions of the Company authorizing the entry by the Company into this
Agreement and the transactions contemplated hereby and (z) the correctness,
completeness and continuing effect of the By-Laws of the Company;
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(ii) the minute books and stock record books of the Company;
(iii) the Charter of the Company certified as of a recent date
by the Secretary of State of the State of Jersey; and
(iv) certificates of corporate and tax good standing and legal
existence of the Company as of a recent date from the Secretary of State of the
State of New Jersey.
(g) Appraisal Rights. The holders of 100% of the issued and
outstanding shares of Common Stock shall have voted in favor of the approval of
the Merger and the transactions contemplated hereby and no holders of shares of
Common Stock shall have demanded appraisal rights in respect of the Merger;
(h) Certificate of Merger. The Company shall have executed and
delivered to the Merger Sub and Parent counterparts of the Certificate of Merger
to be filed with the Secretary of State of the State of New Jersey in connection
with the Merger;
(i) Due Diligence. The Merger Sub and Parent shall have completed
its business, accounting and legal due diligence investigations with respect to
the Company's business (including, without limitation, review of financial
statements, accountant's work papers, tax returns and related work papers),
assets, liabilities, inventory, methods of accounting, information systems and
other business records; investigation of the Company's customers and suppliers,
and inspection of the Company's facilities; examination of the corporate
records, material contracts, leases, employee benefit plans (including
bonus/severance plans or policies), agreements respecting stock, labor and
collective bargaining agreements and similar documents or matters; title and
lien searches; and completion of a "phase 1" environmental study of the
Company's supermarket properties showing no material environmental exposure or
risk. The results of all such due diligence shall be reasonably satisfactory to
the Parent;
(j) Escrow Agreements. The Parent, the Merger Sub, the Stockholders'
Agent, the Stockholders and the Person acting as escrow agent shall have
executed and delivered the First Escrow Agreement, the Second Escrow Agreement
and the Real Estate Escrow Agreement.
(k) Non-Competition Agreements. Each of the Stockholders except
Jeanne Brown shall have executed and delivered to the Parent and Merger Sub
non-competition and non-disclosure agreements in substantially the form of
Exhibit D attached hereto (the "Non-Competition Agreements");
(l) Consulting Agreements. Each of Laurence R. Laurenti, Jr. and
Brian R. Laurenti shall have entered into a consulting agreement with Merger Sub
in substantially the form attached hereto as Exhibit E (the "Consulting
Agreements");
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(m) Solvency Certificate. The Merger Sub shall have received a
solvency certificate addressed to it in satisfactory form and content from the
Chief Financial Officer of the Company regarding the financial condition of the
Company after giving effect to the transactions contemplated hereby;
(n) Financing. The Parent and the Merger Sub shall have entered into
and received the proceeds of definitive financing arrangements in an amount
sufficient to pay the cash portion of the Merger Consideration;
(o) Lease Agreement. A Lease Agreement between Laurenti Holdings
L.L.C. ("Holdings"), and the Merger Sub shall have been executed, on mutually
satisfactory terms, governing the leasing by Holdings to the Company of the
Company's Pennington Store (it being understood that Holdings will retain the
fee ownership of the land and building(s) at the aforesaid Pennington location).
In connection with the transfer of all leases to the Merger Sub and the other
real estate transactions hereunder, a portion of the Merger Consideration will
be set aside in a cash escrow account for the purpose of covering possible
losses relating to such transactions;
(p) Severance of Liquor Store. The parties shall have entered into
documentation providing for the interim operation of the liquor store adjacent
to the Company's Pennington Store location and the ultimate severing of such
liquor business to Big "L", Inc. or Laurenti Holdings or its Affiliate as soon
as practical, all upon terms mutually satisfactory to the Merger Sub and the
Stockholders' Agent;
(q) Real Estate Indemnities. The parties shall have entered into the
Indemnity Agreement and any related documents assuring indemnification by the
Stockholders for the benefit of BVNJ and Parent as to certain environmental and
landlord/tenant matters and as to the liquor business referenced in clause (p)
above, all upon terms mutually satisfactory to the Merger Sub and the
Stockholders' Agent.
(r) Obligations. All contractual or other obligations, including
notice and disclosure requirements, existing between the Company, the Parent and
Wakefern Food Corp., a New Jersey corporation of which both the Company and the
Parent are members, shall have been satisfied;
(s) Titling of Equipment, etc. Each Stockholder shall have caused to
be transferred to the Company good and marketable title to all equipment and
tangible personal property (excluding fixtures) which are currently owned by any
of the Stockholders or any affiliate thereof and which are used or useful in the
Company's business;
(t) Opinion of Counsel. Parent and Merger Sub shall have received a
favorable opinion, dated the Closing Date and satisfactory in form to Parent,
Merger Sub and its special counsel Hutchins, Wheeler & Dittmar, A Professional
Corporation, of Reed Smith Shaw
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& McClay, LLP, counsel to the Company and the Stockholders substantially in the
form set forth on Exhibit F attached hereto.
6.2 Conditions to Obligations of the Company and the Stockholders. The
obligations of the Company and the Stockholders to consummate this Agreement and
the transactions contemplated hereby are subject to the fulfillment, prior to or
at the Closing, of the following conditions precedent:
(a) Representations and Warranties. Each of the representations and
warranties of Parent and Merger Sub in this Agreement shall remain true and
correct at the Closing Date, and Parent and Merger Sub shall, on or before the
Closing Date, have performed all of their respective obligations under this
Agreement and the other Merger Documents which by the terms thereof are to be
performed by it on or before the Closing Date; and Parent and Merger Sub shall
have delivered an Officer's Certificate to the Stockholders dated the Closing
Date to such effect.
(b) No Pending Action. No legislation, order, rule, ruling or
regulation shall have been proposed, enacted or made by or on behalf of any
governmental body, department or agency, and no legislation shall have been
introduced in either House of Congress or in the legislature of any state, and
no investigation by any governmental authority shall have been commenced or
threatened, and no action, suit, investigation or proceeding shall have been
commenced before, and no decision shall have been rendered by, any court or
other governmental authority or arbitrator, which, in any such case, was not
known by the Company or any Stockholder on the date hereof and which, in the
reasonable judgment of the Company or Stockholders, is likely to adversely
affect, restrain, prevent or rescind the transactions contemplated by this
Agreement (including, without limitation, the purchase and sale of the Shares)
or result in a Material Adverse Effect.
(c) Corporate Documents. Parent shall have delivered to the
Stockholders:
(i) an Officer's Certificate of the Secretary of Parent
certifying (x) the incumbency and genuineness of signatures of all officers of
Parent executing this Agreement, any document delivered by Parent at the Closing
and any other document, instrument or agreement executed in connection herewith,
(y) the correctness, completeness and continuing effect of resolutions of Parent
authorizing the entry by Parent into this Agreement and the transactions
contemplated hereby and (z) the correctness, completeness and continuing effect
of the By-Laws of Parent;
(ii) the Charter of Parent certified as of a recent date by
the Secretary of State of the State of New York; and
(iii) certificates of corporate good standing and legal
existence of Parent as of a recent date from the Secretary of State of the State
of New York.
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(d) Opinion of Counsel to Merger Sub and Parent. The Stockholders
shall have received favorable opinions, each dated the Closing Date and
satisfactory in form to the Stockholders, Hutchins, Wheeler & Dittmar, A
Professional Corporation and Cole, Schotz, Meisel, Forman & Leonard, each as
special counsel to Parent and Merger Sub, substantially in the respective forms
set forth on Exhibit G-1 and G-2 hereto.
(e) Execution and Delivery of Documents. The Parent and Merger Sub
shall have executed and delivered all of the contractual documents listed in
Section 6.1 hereof as to which it is a named party.
(f) Certificate of Merger. The Merger Sub shall have executed and
delivered to the Company counterparts of the Certificate of Merger to be filed
with the Secretary of State of the State of New Jersey in connection with the
Merger.
ARTICLE VII
TERMINATION
7.1 Termination of Agreement. This Agreement and the transactions
contemplated hereby may (at the option of the party having the right to do so)
be terminated at any time on or prior to the Closing Date:
(a) Mutual Consent. By mutual written consent of Merger Sub and the
Stockholders holding a majority of the Shares;
(b) Court Order. By Merger Sub, the Company or the Stockholders
holding a majority of the Shares if any court of competent jurisdiction shall
have issued an order pursuant to the request of a third party restraining,
enjoining or otherwise prohibiting the consummation of the transactions
contemplated by this Agreement;
(c) Failure to Close By November 15, 1999. By Merger Sub or the
Stockholders holding a majority of the Shares if the transactions contemplated
hereby shall not have been consummated on or before November 15, 1999, provided,
however, that such right to terminate this Agreement shall not be available to
any party whose intentional or willful failure to fulfill any obligation of this
Agreement has been the cause of, or resulted in or contributed to, the failure
of the transactions contemplated hereby to be consummated on or before such
date;
(d) Termination by Stockholders. By the Stockholders holding a
majority of the Shares upon notice to Merger Sub at any time prior to the
Closing Date if (i) a condition to the performance of the Stockholders set forth
in Section 6.2 hereof shall not be fulfilled at the time specified for the
fulfillment thereof, (ii) a default under or a breach shall be made by Parent or
Merger Sub with respect to their respective covenants and agreements hereunder,
or (iii) any
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representation or warranty set forth in this Agreement or in any instrument
delivered by Parent or Merger Sub pursuant hereto shall be materially false or
misleading; or
(e) Termination by Merger Sub. By Merger Sub by notice to the
Company and the Stockholders at any time prior to the Closing Date if (i) a
condition to the performance of Parent and Merger Sub set forth in Section 6.1
hereof shall not be fulfilled at the time specified for the fulfillment thereof,
(ii) a default under or a breach of this Agreement shall be made by the Company
or the Stockholders with respect to their respective covenants and agreements
hereunder, or (iii) any representation set forth in this Agreement or in any
instrument delivered by the Company or the Stockholders pursuant hereto shall be
materially false or misleading.
7.2 Effect of Termination and Right to Proceed. If this Agreement is
terminated pursuant to this Article VII, then except as provided below, all
further obligations of Merger Sub, the Company and the Stockholders under this
Agreement shall terminate without further liability of Parent or Merger Sub or
any Affiliate thereof to the Stockholders or the Company or of the Stockholders
or the Company to Parent or Merger Sub or any Affiliate thereof, except, in the
case of termination pursuant to Section 7.1(d) or Section 7.1(e), because of a
material default or a material breach resulting from the fault of the other
party, the aggrieved party or parties may pursue whatever rights and remedies
they may have at law or in equity by reason of such breach, including the right
to specifically enforce this Agreement and recover from the defaulting party
damages for breach of this Agreement, including, without limitation, the amount
of expenses incurred by such aggrieved party or parties in connection with this
Agreement and the transactions contemplated hereby. In addition, anything in
this Agreement to the contrary notwithstanding, if any of conditions to
obligations specified in Sections 5.1, 5.2 or 5.3 hereof have not been
satisfied, Parent and Merger Sub, in addition to any other rights which it may
have, shall have the right to waive their respective rights to have such
conditions satisfied and elect to proceed with the transactions contemplated
hereby and, if any of the conditions to the obligations of the Stockholders
specified in Section 5.4 hereof have not been satisfied, the Stockholders
holding a majority of the Shares may elect, in addition to any other rights
which may be available to them, to waive their rights to have such conditions
satisfied and elect to proceed with the transactions contemplated hereby.
ARTICLE VIII
INDEMNIFICATION
8.1 Survival of Representations and Warranties. The parties hereto agree
that each and every representation and warranty set forth in this Agreement
(including the Officer's Certificates required by Sections 6.1(a) and 6.2(a)
above), which in each case shall be deemed to apply to the facts and
circumstances in existence on and as of the Closing Date shall continue until
the third anniversary of the Closing Date, except with respect to (a) the
representations and warranties set forth in Sections 3.2, 3.3, 3.9, 3.18, 3.19,
3.25, 4.2 and 4.3, which shall survive the
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Closing without limitation; and (b) the representations and warranties set forth
in Section 3.17, which shall survive the Closing until the first to occur of (x)
the expiration of the statute of limitations (after giving effect to any mutual
agreement extending the statute or anything tolling the statute) applicable to
the Tax in respect of which indemnification is being sought without the
assertion of a deficiency in respect thereof by the applicable governmental
entity, or (y) the completion of the final audit and determination by the
applicable governmental entity with respect to such Tax and final disposition of
any deficiency resulting therefrom. From and after the applicable period of
survival with respect to such respective representations and warranties of the
Stockholders and Parent or Merger Sub, as the case may be, none of the
Stockholders or Parent or any Affiliate of the Stockholders, Merger Sub or
Parent shall have any right of action whatsoever with respect to any such
representation or warranty, except for breaches as to which any party shall have
notified the other party prior to such date, and except for claims for fraud or
intentional misrepresentation. This Section 8.1 shall have no effect upon any
other obligation of the parties hereto, whether to be performed before or after
the Closing Date.
8.2 Indemnification by Stockholders. Each Stockholder hereby agrees,
jointly and severally, to indemnify, defend and hold each of the Parent and the
Merger Sub and their officers, directors, employees, owners, agents and
Affiliates, harmless from and in respect of any and all losses, damages, costs
and expenses of any kind and nature whatsoever (including, without limitation,
interest and penalties, reasonable expenses of investigation and court costs,
reasonable attorneys' fees and disbursements and the reasonable fees and
disbursements of other professionals) which may be sustained or suffered by any
of them (collectively, "Losses"), arising out of or resulting from (i) any
breach or inaccuracy of any representation or warranty or the breach of or
failure to perform any warranty, covenant, undertaking or other agreement of the
Company or any Stockholder contained in this Agreement or any other Merger
Document; (ii) fraud or intentional misrepresentation on the part of the Company
or any Stockholder; (iii) any Taxes required to be paid, indemnified or
reimbursed by the Company or the Stockholders pursuant to Section 10.11; (iv)
any and all Claims by any Person subsequent to the date hereof relating to the
single share described in Schedule 3.3; (v) the failure by the Company to obtain
a favorable determination letter from the Internal Revenue Service for its
ShopRite of Pennington, Inc. Savings and Investment Plan ("401k Plan); (vi) any
event or circumstance which is specified as entitling Parent or Merger Sub to
indemnification under the Indemnity Agreement and is not otherwise paid
thereunder (subject, however, to all applicable limits on maximum liability set
forth in such Indemnity Agreement; and/or (vii) any and all actions, suits,
investigations, proceedings, demands, assessments, audits, judgments and claims
arising out of any of the foregoing.
In furtherance of the rights described in this Section 8.2, the Parent and
the Merger Sub shall have the right to be reimbursed from the Escrow Accounts
established pursuant to Section 2.10 hereof and the Escrow Agreements.
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8.3 Indemnification by Parent and Merger Sub. Each of Parent and Merger
Sub hereby agree to indemnify, defend and hold each Stockholder, its officers,
directors, employees, owners, agents and Affiliates, harmless from and in
respect of any and all Losses which may be sustained or suffered by any of them
arising out of or resulting from (i) any breach or inaccuracy of any
representation or warranty or the breach of or failure to perform any warranty,
covenant, undertaking or other agreement of Parent and the Merger Sub contained
in this Agreement or any other Merger Document; (ii) fraud or intentional
misrepresentation on the part of the Parent or the Merger Sub; and/or (iii) any
and all actions, suits, investigations, proceedings, demands, assessments,
audits, judgments and claims arising out of any of the foregoing.
8.4 Notice and Opportunity to Defend. If there occurs an event which a
party asserts is an indemnifiable event pursuant to Section 8.2 or 8.3, the
parties seeking indemnification shall promptly notify the other parties
obligated to provide indemnification (collectively, the "Indemnifying Party").
If such event involves any Claim, or the commencement of any Claim, by a third
person, the party seeking indemnification will give such Indemnifying Party
prompt written notice of such Claim or the commencement thereof, provided,
however, that the failure to provide prompt notice as provided herein will
relieve the Indemnifying Party of its obligations hereunder only to the extent
that such failure prejudices the Indemnifying Party hereunder. In case any such
action, suit or proceeding shall be brought against any party seeking
indemnification and it shall notify the Indemnifying Party of the commencement
thereof, the Indemnifying Party shall be entitled to participate therein and, to
the extent that it desires to do so, to assume the defense thereof, with counsel
reasonably satisfactory to such party seeking indemnification and, after notice
from the Indemnifying Party to such party seeking indemnification of such
election so to assume the defense thereof, the Indemnifying Party shall not be
liable to the party seeking indemnification hereunder for any attorneys' fees or
any other expenses, in each case subsequently incurred by such party, in
connection with the defense of such action, suit or proceeding (unless the
interests of such Indemnifying Party and the interests of the party seeking
indemnification cannot adequately be represented by a single counsel, in which
event such counsel fees and expenses incurred by the party seeking
indemnification shall be included as a Loss). The party seeking indemnification
agrees to cooperate fully with the Indemnifying Party and its counsel in the
defense against any such action, suit or proceeding. In any event, the party
seeking indemnification shall have the right to participate at its own expense
in the defense of such action, suit or proceeding. In no event shall an
Indemnifying Party be liable for any settlement or compromise effected without
its prior consent, which shall not be unreasonably withheld. If, however, the
party seeking indemnification refuses its consent to a bona fide offer of
settlement which the Indemnifying Party wishes to accept (which must include the
unconditional release of the parties seeking indemnification from all liability
with respect to the Claim at issue), the party seeking indemnification may
continue to pursue such matter, free of any participation by the Indemnifying
Party, at the sole expense of the party seeking indemnification. In such event,
the obligation of the Indemnifying Party to the party seeking indemnification
shall be equal to the lesser of (i) the amount of the offer or settlement which
the party seeking indemnification refused to accept plus the costs and expenses
of such party prior to
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the date the Indemnifying Party notifies the party seeking indemnification of
the offer of settlement and (ii) the actual out-of-pocket amount the party
seeking indemnification is obligated to pay as a result of such party's
continuing to pursue such matter.
8.5 Contribution. If the indemnification provided for in Section 8.2 or
8.3, as the case may be, of this Agreement is unavailable to a party seeking
indemnification in respect to any Losses, then the Indemnifying Party, in lieu
of indemnifying such party seeking indemnification, shall have an obligation to
contribute, and shall contribute, to the amount paid or payable by such party
seeking indemnification as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party, on the one
hand, and the party seeking indemnification, on the other hand, in connection
with the actions which resulted in such Losses, as well as any other relevant
equitable considerations. The relative fault of the Indemnifying Party and the
parties seeking indemnification shall be determined by reference to, among other
things, whether any action in question, including any breach or inaccuracy of
any representation or warranty, relates to information supplied by the
Indemnifying Party or the parties seeking indemnification and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. No Person guilty of fraudulent
misrepresentation shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
8.6 Right of Set-Off. If a claim for indemnification is made by Parent or
Merger Sub as the party seeking indemnification under this Article VIII, Parent
may, at its option by written notice to the Stockholders' Agent (and without
limiting any other rights it may have at law or in equity), withhold the amount
of such claimed indemnity by Parent or Merger Sub from the amount of any
payments otherwise due under the Merger Note. Upon final determination of such
claim, Parent may reduce, for its own account, the principal of the Merger Note
or any interest payments or payment of principal thereunder, at Parent's
election, by the amount to which it is entitled hereunder provided that, in the
event of a determination of such claim in favor of Stockholders, all amounts (if
any) of overdue principal and/or overdue interest thereon which have been
withheld by Parent shall be promptly paid in full to the holder(s) of the Merger
Note.
8.7 Unconditionality of Stockholders' Liability. Each Stockholder hereby
waives any rights he or she may claim at law or in equity to seek damages,
reimbursement, indemnification, contribution or other similar rights or relief
from the Company in respect of any breach of the representations, warranties and
covenants hereunder.
8.8 Adjustment for Insurance and Taxes. The amount which an Indemnifying
Party is required to pay to, for or on behalf of any other party (hereinafter
referred to as an "Indemnitee") pursuant to this Article VIII shall be adjusted
(including, without limitation, retroactively) (i) by any insurance proceeds
actually recovered by or on behalf of such Indemnitee in reduction of the
related indemnifiable loss (the "Indemnifiable Loss") and (ii) to take account
of any Tax benefit realized as a result of any Indemnifiable Loss. Amounts
required to be paid, as so reduced, are
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hereafter sometimes called an "Indemnity Payment." If an Indemnitee shall have
received or shall have had paid on its behalf an Indemnity Payment in respect of
an Indemnifiable Loss and shall subsequently receive insurance proceeds in
respect of such Indemnifiable Loss, or realize any Tax benefit as a result of
such Indemnifiable Loss, then the Indemnitee shall pay to the Indemnifying Party
the amount of such insurance proceeds or Tax benefit or, if lesser, the amount
of the Indemnity Payment.
ARTICLE IX
POST-CLOSING AGREEMENTS OF THE PARTIES
9.1 Pennington Land. The parties acknowledge that one or more of the
Stockholders, or Affiliates of the same, are currently attempting to acquire a
parcel of land adjoining or abutting the Company's store location in Pennington,
New Jersey in order to permit future expansion of such store. The parties
further acknowledge that the availability of such adjoining land or abutting
parcel or rights thereto (the "Additional Pennington Land") sufficient to permit
future expansion is an important component of the Parent's decision to acquire
all of the stock of the Company. Accordingly, the Stockholders agree to continue
to diligently pursue the ultimate acquisition of the Additional Pennington Land,
or rights therein, sufficient to permit the expansion of the Pennington store
and thereafter undertake, as soon as feasible (and subject to applicable
governmental approvals and the availability of utilities), such expansion for
the benefit of the Company.
9.2 Consultation Regarding Parent's Plans for Current Employees. The
parties hereto acknowledge and agree that, following the Closing, the Parent
shall be entitled to all of its management prerogatives as the owner of the
Company with respect to the continuation or termination of any individual's
employment, or any employment, compensation or bonus plan or policy (subject to
the Company's legal obligations regarding any such employment, plan or policy,
including any legal requirement to the effect that any such employment, plan or
policy must be continued as a matter of contract or applicable law). The parties
further acknowledge that the Parent will undertake, following the Closing, a
plan of staff reductions to eliminate redundant officer, supervisor and
administrative staff positions and related overhead expenses. However, in order
to facilitate the Company's disclosures to its employees regarding the
transactions contemplated by this Agreement, the Parent agrees (i) to maintain
until December 31, 1999 the Company's existing bonus plan for those employees
who currently are included and remain eligible to participate therein, and to
pay year-end bonuses to such employees based on all accruals under such existing
bonus plan for calendar year 1999, and (ii) not to terminate without cause the
employment of any Company employee prior to December 31, 1999.
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ARTICLE X
MISCELLANEOUS
10.1 Fees and Expenses. Each of the parties hereto will pay and discharge
its own expenses and fees in connection of with the negotiation of and entry
into this Agreement and the consummation of the transactions contemplated
hereby.
10.2 Publicity and Disclosures. Prior to the Closing, no press release or
any public disclosure, either written or oral, of the transactions contemplated
by this Agreement shall be made by any party without the prior knowledge and
written consent of the Company and Parent.
10.3 Notices. All notices, requests, demands, consents and communications
necessary or required under this Agreement or any other Purchase Document shall
be made in the manner specified, or, if not specified, shall be delivered by
hand or sent by registered or certified mail, return receipt requested, by
overnight courier or by telecopy (receipt confirmed) to:
if to Parent Big V Supermarkets, Inc.
or the Merger Sub: 176 North Main Street
Florida, NY 10921
Attention: James A. Toopes, Jr.
Chief Financial Officer
Facsimile Transmission Number: (914) 651-7048
with a copy to: Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, MA 02110
Attention: David T. Dinwoodey
Facsimile Transmission Number: (617) 951-1295
if to any Stockholder or to Laurence R. Laurenti, Jr.
Stockholders' Agent: 6 Whitwood Drive
Trenton, NJ 08628
Facsimile Transmission Number: (609) 298-0735
with a copy to: Reed Smith Shaw and McClay, LLP
Princeton Forrestal Village
136 Main Street
P.O. Box 7839
Princeton, NJ 08543-7839
Attention: Steven J. Picco
Facsimile Transmission Number: (609) 951-0824
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if to the Company: ShopRite of Pennington, Inc.
6 Whitwood Drive
Trenton, NJ 08628
Attention: Laurence R. Laurenti, Jr.
Facsimile Transmission Number: (609) 298-0735
with a copy to: Reed Smith Shaw and McClay, LLP
Princeton Forrestal Village
136 Main Street
P.O. Box 7839
Princeton, NJ 08543-7839
Attention: Steven J. Picco
Facsimile Transmission Number: (609) 951-0824
All such notices, requests, demands, consents and other communications
shall be deemed to have been duly given or sent (i) two (2) business days
following the date on which mailed, (ii) one (1) business day following the date
on which received by an overnight courier, or (iii) on the date on which
delivered by hand or by facsimile transmission (receipt confirmed), as the case
may be, and addressed as aforesaid. All such notices, requests, demands,
consents and communications shall be deemed to have been duly given only when
such notice, request, demand, consent or communication is delivered or, if sent
by telecopier, when received.
10.4 Successors and Assigns. All covenants and agreements set forth in
this Agreement and made by or on behalf of any of the parties hereto shall bind
and inure to the benefit of the successors and assigns of such party, whether or
not so expressed, except that none of the Stockholders or the Company may assign
or transfer any of their respective rights or obligations under this Agreement
without the consent in writing of Parent.
10.5 Descriptive Headings. The headings of the sections and paragraphs of
this Agreement have been inserted for convenience of reference only and shall
not be deemed to be part of this Agreement.
10.6 Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
together shall constitute one and the same instrument, and it shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.
10.7 Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason in any
jurisdiction, the validity, legality and enforceability of any such
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provision in every other respect and of the remaining provisions hereof shall
not be in any way impaired or affected, it being intended that each of parties'
rights and privileges shall be enforceable to the fullest extent permitted by
law, and any such invalidity, illegality and unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the fullest extent permitted by law, the parties hereby
waive any provision of any law, statute, ordinance, rule or regulation which
might render any provision hereof invalid, illegal or unenforceable.
10.8 Attorneys' Fees. In any action or proceeding brought to enforce any
provision of this Agreement or the other Merger Documents, or where any
provision hereof or thereof is validly asserted as a defense, the successful
party shall be entitled to recover reasonable attorneys' fees in addition to any
other available remedy.
10.9 Course of Dealing. No course of dealing and no delay on the part of
any party hereto in exercising any right, power, or remedy conferred by this
Agreement shall operate as a waiver thereof or otherwise prejudice such party's
rights, powers and remedies. The failure of any of the parties to this Agreement
to require the performance of a term or obligation under this Agreement or the
waiver by any of the parties to this Agreement of any breach hereunder shall not
prevent subsequent enforcement of such term or obligation or be deemed a waiver
of any subsequent breach hereunder. No single or partial exercise of any rights,
powers or remedies conferred by this Agreement shall preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
10.10 Third Parties. Except as specifically set forth or referred to
herein, nothing herein expressed or implied is intended or shall be construed to
confer upon or give to any Person, other than the parties hereto and their
successors or assigns, any rights or remedies under or by reason of this
Agreement or any other Merger Document.
10.11 Tax Matters.
(a) (i) Stockholders will cause to be timely filed on behalf of
the Company all federal, state and local Tax Returns for any period which ends
on or prior to the Closing Date and which are required to be filed to reflect
the operations of the Company. The Stockholders will also cause to be prepared
and filed federal, state, and local income Tax Returns for the Company for the
period commencing on January 1, 1999 and ending on the day of Closing. Such
final short S corporation Tax Returns shall reflect, among other required items,
(i) taxable income of the Company (including separately stated items) arising
from the Merger, the Deemed Asset Sale, and all transactions contemplated hereby
or under any other Merger Document and (ii) other taxable income of the Company,
including separately stated items. Copies of all such returns shall be submitted
to Parent for review and its timely consent (which shall not be unreasonably
withheld) at least thirty (30) days prior to filing such returns. Parent shall
be entitled to reasonably participate in the preparation of such returns. All
such returns will
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be prepared and filed using Tax accounting methods, elections and principles
which are substantially consistent with those used in the returns of Taxes for
the Company for preceding Tax periods unless Parent otherwise consents (which
consent shall not be unreasonably withheld). No positions shall be taken on any
such Tax Return that would have a material adverse effect on the Company, Merger
Sub or Parent for Tax periods ending after the Closing Date without the consent
of the Parent. Any item of income, deduction or credit to be included in any
such Tax Return shall be based on the permanent records (including work papers)
of the Company.
(ii) Parent shall prepare or cause to be prepared and file or
cause to be filed any Tax Returns of the Company or Merger Sub for Tax periods
which begin before the Closing Date and end after the Closing Date. Copies of
all such Tax Returns shall be submitted to Stockholders' Agent for review at
least thirty (30) days prior to filing such Tax Return. Stockholders' Agent
shall be entitled to reasonably participate in the preparation of such Tax
Returns. All Tax Returns will be prepared and filed using Tax accounting
methods, elections and principles which are substantially consistent with those
used in the Tax Returns for the Company for preceding Tax periods unless
Stockholders' Agent otherwise consents (which consent shall not be unreasonably
withheld). Any item of income, deduction or credit to be included in any such
Tax Returns shall be based upon the permanent records (including work papers) of
the Company. Stockholders shall pay to Parent within fifteen (15) days after the
date on which Taxes are paid with respect to such periods an amount equal to the
portion of such Taxes which relates to the portion of such Tax period ending on
the Closing Date. For purposes of this Section 10.11(a)(ii), in the case of any
Taxes that are imposed on a periodic basis and are payable for a Tax period that
includes (but does not end on) the Closing Date, the portion of such Tax which
relates to the portion of such Tax period ending on the Closing Date shall (x)
in the case of any Taxes other than Taxes based upon or related to income or
receipts, be deemed to be the amount of such Tax for the entire Tax period
multiplied by a fraction the numerator of which is the number of days in the Tax
period ending on the Closing Date and the denominator of which is the number of
days in the entire Tax period, and (y) in the case of any Tax based upon or
related to income or receipts be deemed equal to the amount which would be
payable if the relevant Taxable period ended on the Closing Date. All Taxes
attributable to the transactions contemplated hereby shall be paid by
Stockholders.
(b) All refunds of Taxes attributable to the Company or Merger Sub
for any or all years or periods after the Closing shall belong to and be
retained by Merger Sub and any such refunds attributable to prior periods shall
be paid over to Stockholders
(c) Parent will give notice to Stockholders' Agent of any Tax Claim
relating to any Tax year or period ending on or prior to the Closing Date or
that includes the Closing Date, and shall keep Stockholders' Agent informed of
the progress of, and the issues involved in, the same, in each case which may be
the subject of indemnification by Stockholders pursuant to this Agreement.
Parent shall be entitled to control the defense and resolution of any such
audits
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and proceedings; provided, however, that Stockholders' Agent will be allowed,
through a representative selected by him and at his own expense (and with
appropriate access to books and records), to participate in and observe any such
audits or proceedings to the extent such audits or proceedings covers any period
of time in which the Stockholders were responsible for the operations of the
Company. The parties hereto shall, and shall cause Merger Sub to, provide such
necessary information as any other party hereto may reasonably request in
connection with the preparation of such parties' Tax Returns, or to respond to
or contest any audit, prosecute any claim for refund or credit or otherwise
satisfy any requirements relating to Taxes of the Company or Merger Sub.
Sections 8.4, 8.5 and 8.8 shall not apply to any matters covered by this Section
10.11 with respect to indemnification for Taxes.
(d) Parent, Merger Sub and Stockholders shall cooperate fully, as
and to the extent reasonably requested by the other party, in connection with
the filing of Tax Returns pursuant to this Section 10.11(d) and any audit,
litigation or other proceeding with respect to Taxes. Such cooperation shall
include the retention and (upon the other party's request) the provision of
records and information which are reasonably relevant to any such audit,
litigation or other proceeding and making employees available on a mutually
convenient basis to provide additional information and explanation of any
material provided hereunder. Merger Sub and Stockholders agree (A) to retain all
books and records with respect to Tax matters pertinent to the Company or Merger
Sub relating to any Tax period beginning before the Closing Date until the
expiration of the statute of limitations (and, to the extent notified by Parent
or Stockholders, any extensions thereof) of the respective Tax periods, and to
abide by all record retention agreements entered into with any Tax authority,
and (B) to give the other party reasonable written notice prior to transferring,
destroying or discarding any such books and records and, if the other party so
requests, Merger Sub or Stockholders, as the case may be, shall allow the other
party to take possession of such books and records.
(e) Parent and Stockholders further agree, upon request, to use
their reasonable commercial good faith efforts to obtain any certificate or
other document from any governmental authority or any other person as may be
necessary to mitigate, reduce or eliminate any Tax that could be imposed
(including, but not limited to, with respect to the transactions contemplated
hereby).
(f) Stockholders shall pay all stock transfer Taxes, real property
transfer Taxes, sales Taxes, documentary stamp Taxes, recording charges and
other similar Taxes resulting from, arising under or in connection with the
Merger, the Deemed Asset Sale, or the transactions contemplated hereby or under
any other Merger Document, the New York Cap Transfer Tax and any similar tax
imposed in other states or subdivisions.
(g) The obligations of the Stockholders set forth in the Agreement
relating to Taxes shall, except as otherwise agreed in writing, be unconditional
and absolute and shall remain in effect without limitation as to time or amount
of recovery by Parent until thirty (30)
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days after the expiration of the applicable statute of limitations governing the
Taxes to which such obligations relate (after giving effect to any agreement
extending the statute of limitations or any tolling of such statute of
limitations).
[(h) Stockholders shall be responsible for and shall pay and shall
indemnify and hold harmless the Company, Merger Sub and Parent for any Tax
imposed on the Company or Merger Sub attributable to, arising under or resulting
from the Merger, the Deemed Asset Sale, or any of the transactions contemplated
hereby or under any other Merger Document, including, but not limited to, (i)
any Tax imposed under Section 1374 or 1375 of the Code or corresponding foreign,
state or local law, (ii) any federal, state, local or foreign Tax imposed on the
Company's or Merger Sub's gain or income and (iii) any Taxes for periods after
the Closing Date if measured by gain or income resulting from the Merger, the
Deemed Asset Sale, or transactions contemplated hereby or under any other Merger
Document, and Stockholders shall indemnify Parent, the Company and Merger Sub
against any adverse consequences arising out of any failure to pay any such
Taxes.]
(i) The Merger Consideration shall be allocated as follows:
(i) The Merger Consideration (plus Assumed Liabilities and
plus or minus any adjustments pursuant to Section 2.9, each to the extent
properly taken into account under Section 1060 of the Code) shall be allocated
in accordance with the Allocation.
(ii) Once the parties have agreed to the Allocation pursuant
to Section 2.14, Stockholders and Parent each agree (A) to be bound by the
Allocation, (B) to act in accordance with the Allocation in the preparation of
financial statements and filing of all Tax returns (including, without
limitation filing Form 8594 with its federal income Tax return for the Tax year
that includes the date of the Closing) and in the course of any Tax audit, Tax
review or Tax litigation relating thereto and (C) to take no position and cause
their Affiliates to take no position inconsistent with the Allocation for all
Tax or accounting purposes.
(iii) Not later than 30 days prior to the filing of their
respective Forms 8594 relating to the Merger, the Deemed Asset Sale, and the
transactions contemplated hereby, each party shall deliver to the other party a
copy of its Form 8594.
(iv) To the extent permitted by applicable law, the
Stockholders shall include on their individual returns any income, gain, loss,
deduction or other Tax items on the final short S corporation Tax Return in a
manner consistent with the Schedules K-1 furnished by the Company to the
Stockholders in connection with such final short S corporation Tax Return,
including any income, gain, loss deduction or other tax item of the Company
resulting from the Merger, the Deemed Asset Sale, and all of the transactions
contemplated hereby or under any other Merger Document.
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(j) The Company and Stockholders will not revoke the Company's
election to be taxed as an S corporation within the meaning of Sections 1361 and
1362 of the Code and corresponding state statute. The Company and Stockholders
will not take or allow any action that would result in the termination of the
Company's status as a validly electing S corporation within the meaning of
Sections 1361 and 1362 of the Code and corresponding state statute. Stockholders
shall indemnify Parent, the Company and Merger Sub for all Taxes and against any
adverse consequences arising out of any failure to comply with this Section
10.11(j) or for breach of warranties and representations contained in Section
3.17(g).
(k) All indemnification payments under this Agreement shall be
deemed an adjustment of the Merger Consideration.
(l) Stockholders shall be responsible for and shall pay and shall
indemnify and hold harmless the Company, Merger Sub (other than with respect to
pre-Merger activities of Merger Sub) and Parent for (i) all Taxes and Losses
resulting from any breach of warranties and representations contained in Section
3.17 and (ii) for all Taxes and related Losses of the Company and Merger Sub due
for periods ending on or before the Closing Date, and Stockholders shall
indemnify Parent, the Company, and Merger Sub against any adverse consequences
arising out of any failure to pay any such Taxes.
(m) Stockholders shall be responsible for and shall pay and shall
indemnify and hold harmless the Company, Merger Sub and Parent for all Taxes
that may result with respect to the Company's disposition of the Company's
Pennington Store to Holdings described in Section 6.1(o); the Company's
severance from its business the operation of the liquor store as described in
Section 6.1(p); and the disposition of the real property commonly known as the
Bert Avenue Property consisting of, inter alia, six garages, as described in
Section 2.3 and Stockholders shall indemnify Parent, the Company, and Merger Sub
against any adverse consequences arising out of any failure to pay any such
Taxes.
(n) The parties agree and intend that for Tax purposes the Merger
shall constitute a fully taxable sale of assets of the Company to the Merger Sub
for the Merger Consideration plus the assumption of the Company's liabilities by
the Merger Sub followed by a complete liquidation of the Company immediately
thereafter (the "Deemed Asset Sale"). The parties shall not take a position or
take any action on any Tax Return or before any taxing authority or otherwise
that is inconsistent with this Section 10.11.
10.12 Waivers and Consents; Amendments. No consents required hereunder, or
waiver of any provision hereof, shall be effective unless signed by the party
which is to be bound by such consent or waiver. No amendment or modification of
any of the provisions of this Agreement shall be effective unless set forth in a
written instrument executed by the Company, the Parent and the Stockholders'
Agent.
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10.13 Variations in Pronouns. All pronouns and any variations thereof
refer to the masculine, feminine or neuter, singular or plural, as the identity
of the Person or Persons may require.
10.14 WAIVER OF JURY TRIAL. EACH OF PARENT, MERGER SUB, THE COMPANY AND
THE STOCKHOLDERS HEREBY EXPRESSLY WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL
OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, ANY
OTHER MERGER DOCUMENT OR THE SHARES OR ANY DEALINGS BETWEEN THEM RELATING TO THE
SUBJECT MATTER OF THIS AGREEMENT. THE COMPANY, THE STOCKHOLDERS AND PARENT ALSO
WAIVE ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS
WAIVER, BE REQUIRED OF ANY PARTY. THE SCOPE OF THIS WAIVER IS INTENDED TO BE
ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT
RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING WITHOUT LIMITATION,
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW
AND STATUTORY CLAIMS. THE COMPANY, THE STOCKHOLDERS AND PARENT FURTHER WARRANT
AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND
THAT EACH VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH
LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE AND MAY ONLY BE MODIFIED BY A WRITTEN
INSTRUMENT EXECUTED BY THE PARTIES HERETO. IN THE EVENT OF LITIGATION, THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL (WITHOUT A JURY) BY THE
COURT.
10.15 Governing Law. This agreement, including the validity hereof and the
rights and obligations of the parties hereunder, shall be construed in
accordance with and governed by the laws of the State of New Jersey applicable
to contracts made and to be performed entirely in such state (without giving
effect to the conflicts of laws provisions thereof). Each of the parties hereto
agrees that any action or proceeding brought to enforce the rights or
obligations of any party hereto under this agreement may be commenced and
maintained in any court of competent jurisdiction located in the State of New
Jersey, and that any United States District Court for the State of New Jersey
shall have non-exclusive jurisdiction over any such action, suit or proceeding
brought by any of the parties hereto. Each of the parties hereto further agrees
that process may be served upon it by certified mail, return receipt requested,
addressed as more generally provided in section 9.3 hereof, and consents to the
exercise of jurisdiction over it and its properties with respect to any action,
suit or proceeding arising out of or in connection with this agreement or the
transactions contemplated hereby or the enforcement of any rights under this
agreement.
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10.16 Entire Agreement. This Agreement, including the Schedules and
Exhibits referred to herein, is complete, and all promises, representations,
understandings, warranties and agreements with reference to the subject matter
hereof, and all inducements to the making of this Agreement relied upon by all
the parties hereto, have been expressed herein or in said Schedules or Exhibits.
This Agreement supersedes, in their entirety, all of the terms and provisions of
that certain letter of intent, dated September 8, 1999, among Parent,
Stockholders and the Company relating to the transactions hereunder. This
Agreement may not be amended except by an instrument in writing signed on behalf
of the Company, Parent and the Stockholders holding a majority of the Shares.
[Remainder of Page Intentionally Left Blank]
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<PAGE>
IN WITNESS WHEREOF the parties hereto have executed this Agreement under
seal as of the date first set forth above.
ATTEST: COMPANY:
SHOP-RITE OF PENNINGTON, INC.
By: /s/ Laurence R. Laurenti, Jr.
______________________________ ----------------------------------------
Laurence R. Laurenti, Jr., President
By: /s/ Brian R. Laurenti
----------------------------------------
Brian R. Laurenti, Vice President
MERGER SUB:
BVNJ PARTNERSHIP, L.P.,
a New Jersey limited partnership
By: Big V Supermarkets, Inc.
General Partner
By: /s/ James A. Toopes, Jr.
----------------------------------------
ATTEST: PARENT:
BIG V SUPERMARKETS, INC.
______________________________ By: /s/ James A. Toopes, Jr.
----------------------------------------
Title: Vice Chairma
WITNESS: STOCKHOLDERS:
______________________________ /s/ Laurence R. Laurenti, Jr.
--------------------------------------------
Laurence R. Laurenti, Jr.
Shareholder, Shop-Rite of Pennington, Inc.
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<PAGE>
______________________________ /s/ Brian R. Laurenti
--------------------------------------------
Brian R. Laurenti
Shareholder, Shop-Rite of Pennington, Inc.
______________________________ /s/ Jeanne Brown by Laurence R. Laurenti, Jr.
--------------------------------------------
Jeanne Brown
Shareholder, Shop-Rite of Pennington, Inc.
Florence V. Laurenti, Grantor Retained
Interest Trust
Shareholder, Shop-Rite of Pennington, Inc.
By: /s/ Laurence R. Laurenti, Jr.
------------------------------------
Laurence R. Laurenti, Jr., Trustee
By: /s/ Brian R. Laurenti
------------------------------------
Brian R. Laurenti, Trustee
For due and valuable consideration, receipt and sufficiency of which is
hereby acknowledged, the undersigned hereby Consents as to Section 8.16
hereunder.
Laurenti Marital Trust
By: /s/ Laurence R. Laurenti, Jr.
------------------------------------
Laurence R. Laurenti, Jr., Trustee
By: /s/ Brian R. Laurenti
------------------------------------
Brian R. Laurenti, Trustee
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EXHIBIT A
On the date of this agreement, the number of shares of ShopRite of Pennington,
Inc. issued and outstanding and owned beneficially and of record are as follows:
968 total shares issued and outstanding (of total of 1,000 authorized shares)
Stockholder: Laurence R. Laurenti, Jr.
Address: 6 Whitwood Drive, West Trenton, New Jersey 08628
Shares: 260 Shares
Percentage of Voting Interest: 26.86 Percent
Stockholder: Brian R. Laurenti
Address: 6 Francis Court, Robbinsville, New Jersey 08691
Shares: 260 Shares
Percentage of Voting Interest: 26.86 Percent
Stockholder: Jeanne M. Brown
Address: 308 Central Avenue, Mountain View, California 94043
Shares: 144 Shares
Percentage of Voting Interest: 14.88 Percent
Stockholder: Florence V. Laurenti Grantor Retained Interest Trust
Address: 1436 Liberty Street, Trenton, New Jersey 08629
Shares: 304 Shares
Percentage of Voting Interest: 31.40 Percent
NOTE: Records indicate that in 1963, one (1) share of the Company's stock was
given by Laurence R. Laurenti, Sr. to Gina Laurenti, his mother. No written
record exists documenting the transfer of this share back to Laurence R.
Laurenti, Sr. However, every written record dated 1965 or after, whether in the
Company's minute books, the Company's share certificates or the merger documents
on file with the Secretary of State of New Jersey, indicates that Laurence R.
Laurenti, Sr. came to own this one (1) share that had been at one time owned by
Gina Laurenti. The Stockholders listed above and the Secretary of the Company
all believe and hereby certify that collectively they represent 100% of the
total issued and outstanding shares of the Company. This disclosure, however,
does not relieve the Stockholders from liability resulting from losses arising
from the matter set forth above.
<PAGE>
Exhibit 10.45
MANAGEMENT STOCK SUBSCRIPTION AGREEMENT
---------------------------------------
This Management Stock Subscription Agreement is entered into as of the 23rd
day of February, 1999, by and between Big V Holding Corp., a Delaware
corporation (the "Company"), and the management investor so indicated on the
signature page hereof (the "Management Investor").
WHEREAS, the Company desires to sell to the Management Investor, and the
Management Investor desires to purchase from the Company, shares of common stock
of the Company on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and conditions set forth in this Agreement, the parties to
this Agreement, intending to be legally bound, mutually agree as follows:
ARTICLE I
Purchase and Sale of Shares
---------------------------
1.1 Sale and Issuance of Shares. Subject to the terms and conditions of
---------------------------
this Agreement, the Management Investor does hereby subscribe for and agrees to
acquire at the Closing (as hereinafter defined), and the Company agrees to issue
to the Management Investor at the Closing, the aggregate number of shares of the
Company's common stock set forth under his name on the signature page hereto
(the "Shares") in exchange for the aggregate consideration set forth on the
signature page hereto (the "Purchase Price"). The Purchase Price shall be paid
by the Management Investor's issuance to the Company of a Secured Promissory
Note in the principal amount set forth on the signature page hereto (the
"Note").
1.2 Closing. The closing (the "Closing") of the purchase and sale of the
-------
Shares being purchased by the Management Investor shall occur at the offices of
the Company, on the date hereof (the "Closing Date"). At the Closing, the
Company shall deliver to the Management Investor a certificate or certificates
representing the Shares purchased hereunder and the Management Investor shall
deliver to the Company (i) the Note, (ii) a Stock Pledge Agreement executed in
favor of the Company, and (iii) a counterpart signature page to the Amended and
Restated Shareholders' Agreement dated as of December 17, 1993 (the
"Shareholders' Agreement").
<PAGE>
ARTICLE II
Representations and Warranties of the Company
---------------------------------------------
The Company represents and warrants to the Management Investor that:
2.1 Organization and Standing. The Company is a corporation duly
-------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to carry on its
business as now conducted and as proposed to be conducted.
2.2 Authorization. All corporate action on the part of the Company and its
-------------
officers and directors necessary for the authorization, execution and delivery
of this Agreement and the performance of all obligations of the Company under
this Agreement required to be performed at or prior to the Closing and for the
authorization, issuance and delivery of the Shares being sold under this
Agreement has been taken. This Agreement, when executed and delivered by all
parties hereto, shall constitute the valid and legally binding obligations of
the Company, except to the extent the enforceability thereof may be limited by
bankruptcy laws, insolvency laws, reorganization laws, moratorium laws or other
laws affecting creditors' rights generally or by general equitable principles.
2.3 Validity of Shares. The Shares, when issued, sold and delivered in
------------------
accordance with the terms of this Agreement, shall be duly and validly issued,
fully paid and nonassessable.
ARTICLE III
Representations, Warranties and Agreements of
---------------------------------------------
the Management Investor
-----------------------
3.1 Authorization. The Management Investor represents and warrants that
-------------
this Agreement, when executed and delivered by him, will constitute a valid and
legally binding obligation of the Management Investor, except to the extent the
enforceability thereof may be limited by bankruptcy laws, insolvency laws,
reorganization laws, moratorium laws or other laws affecting creditors' rights
generally or by general equitable principles.
3.2 Investment Representations.
--------------------------
(a) This Agreement is made with the Management Investor in reliance
upon the Management Investor's representation to the Company, which by his
acceptance hereof the Management Investor hereby confirms, that (i) the
Shares to be received by him will be acquired by him, or a trust for the
benefit of his spouse, children or parents, for investment for his own
account, and not with a view to the sale or distribution of any part
thereof in violation of applicable Federal and state securities laws, and
(ii) he has no current intention of selling, granting participation in or
otherwise distributing the same in violation of applicable Federal and
state securities laws. By executing this Agreement, the Management Investor
further represents that he does not
-2-
<PAGE>
have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participation to such person, or to any third
person, with respect to any of the Shares in violation of applicable
Federal and state securities laws.
(b) The Management Investor understands that the Shares have not been
registered under the 1933 Act on the basis that the sale provided for in
this Agreement and the issuance of securities hereunder is exempt from
registration under the 1933 Act pursuant to Section 4(2) thereof and
regulations issued thereunder, and that the Company's reliance on such
exemption is predicated on representations of the Management Investor set
forth herein.
(c) The Management Investor represents that he has, either alone or
together with his "purchaser representative" as that term is defined in
Regulation D promulgated under the 1933 Act, such knowledge and experience
in financial and business matters as to be capable of evaluating the merits
and risks of his investment. The Management Investor further represents
that he has had access, during the course of the transaction and prior to
his purchase of Shares, to information concerning the Company and its
assets, liabilities and prospects, and that he has had, during the course
of the transaction and prior to his purchase of the Shares, the opportunity
to ask questions of, and receive answers from, the Company concerning the
terms and conditions of the offering and to obtain additional information
(to the extent the Company possessed such information or could acquire it
without unreasonable effort or expense) necessary to verify the accuracy of
any information furnished to him or to which he had access.
(d) The Management Investor understands that the Shares may not be
sold, transferred or otherwise disposed of without registration under the
1933 Act or an exemption therefrom, and that in the absence of an effective
registration statement covering the Shares or an available exemption from
registration under the 1933 Act, the Shares must be held indefinitely. In
particular, the Management Investor is aware that the Shares may not be
sold pursuant to Rule 144 promulgated under the 1933 Act unless all of the
conditions of that Rule are met. Among the current conditions for use of
Rule 144 by certain holders is the availability to the public of current
information about the Company. Such information is not now available, and
the Company has no current plans to make such information available. Such
Management Investor represents that, in the absence of an effective
registration statement covering the Shares, he will sell, transfer or
otherwise dispose of the Shares only in a manner consistent with his
representations set forth herein and then only in accordance with the
Shareholders' Agreement.
(e) Each Management Investor agrees, except with respect to transfers
permitted under the Shareholders' Agreement, that he will not make a
transfer, disposition or pledge of any of the Shares other than pursuant to
an effective registration statement under the 1933 Act, unless and until
(i) the Management Investor shall have notified the Company of the proposed
disposition and shall have furnished the Company with a statement of the
circumstances surrounding the disposition, and (ii) if requested by the
Company, at the expense of the Management Investor or transferee, he shall
have furnished to the Company an opinion of counsel, reasonably
satisfactory to the Company
-3-
<PAGE>
and its counsel, to the effect that such transfer may be made without
registration of the Shares under the 1933 Act.
3.3 Legends; Stop Transfer.
----------------------
(a) The Management Investor acknowledges that all certificates
evidencing the Shares shall bear the following legend:
"TRANSFER RESTRICTED
These securities have not been registered under the Securities Act of
1933, as amended, and may not be sold, offered for sale, pledged or
hypothecated in the absence of an effective registration statement as
to the securities under said Act or an opinion of counsel satisfactory
to the Company and its counsel that such registration is not required.
These securities are subject to the terms and conditions, including
restrictions on transfer, of an Amended and Restated Shareholders'
Agreement dated as of December 17, 1993, as amended from time to time,
a copy of which is on file with the Secretary of the Company."
(b) The certificates evidencing the Shares shall also bear any legend
required by any applicable state securities law.
(c) In addition, the Company shall make a notation regarding the
restrictions on transfer of the Shares in its stock books, and the Shares
shall be transferred on the books of the Company only if transferred or
sold pursuant to an effective registration statement under the 1933 Act
covering such Shares or pursuant to and in compliance with the provisions
of Section 3.2(e) hereof. All Common Stock of the Company hereafter issued
to the Management Investor shall bear the same endorsement, shall be
subject to all the terms and conditions of this Agreement, and for all
purposes shall be deemed "Shares" hereunder. A copy of this Agreement,
together with any amendments thereto, shall remain on file with the
Secretary of the Company and shall be available for inspection to any
properly interested person without charge within five (5) days after the
Company's receipt of a written request therefor.
ARTICLE IV
Miscellaneous
-------------
4.1 Notices. All notices and other communications necessary or
-------
contemplated under this Agreement shall be in writing and shall be delivered in
the manner specified herein or, in the absence of such specification, shall be
deemed to have been duly given when delivered by hand or one day after sending
by overnight delivery service, or five days after sending by certified mail,
postage prepaid, return receipt requested: to the Company, at the address of
its principal
-4-
<PAGE>
executive offices, and to the Management Investor, at his address listed on the
signature page hereto.
By notice complying with the foregoing provisions of this Section 4.1, each
party shall have the right to change the mailing address for future notices and
communications to such party.
4.2 Execution of Counterparts. This Agreement may be executed in
-------------------------
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed to be an original and all of which counterparts, taken together, shall
constitute but one and the same Agreement.
4.3 Binding Effect; Assignment. The rights and obligations of the
--------------------------
Management Investor under this Agreement may not be assigned to any other
person. Except as expressly provided in this Agreement, this Agreement shall
not be construed so as to confer any right or benefit upon any person other than
the parties to this Agreement, and their respective successors and assigns.
This Agreement shall be binding upon the Company and the Management Investor,
and their respective successors and assigns.
4.4 Governing Law. This Agreement shall be deemed to be a contract made
-------------
under the laws of the State of Delaware, and for all purposes shall be construed
in accordance with the laws of said State, without regard to principles of
conflicts of law. Both of the parties hereto agrees to submit to the
jurisdiction of the courts of the State of Delaware in any action or proceeding
arising out of or relating to this Agreement.
4.5 Severability of Provisions. Any provision of this Agreement which is
--------------------------
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
4.6 Exhibits and Headings. All Exhibits to this Agreement shall be deemed
---------------------
to be a part of this Agreement. The Article and Section headings used or
contained in this Agreement are for convenience of reference only and shall not
affect the construction of this Agreement.
* * *
-5-
<PAGE>
MANAGEMENT STOCK SUBSCRIPTION AGREEMENT
SIGNATURE PAGE
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as an instrument under seal, as of the date first above written.
BIG V HOLDING CORP.
By: /s/ David G. Bronstein
------------------------------------
Name: David G. Bronstein
Title: Chairman of the Board & Interim
Chief Executive Officer
MANAGEMENT INVESTOR
/s/ Mark S. Schwartz
---------------------------------------
Name: Mark S. Schwartz
Number of Shares: 20,000
Aggregate Purchase Price: $700,000
Cash Amount: $ 0
Note Amount: $700,000
-6-
<PAGE>
COUNTERPART SIGNATURE PAGE
--------------------------
The undersigned, in connection with the purchase of shares of Common Stock,
par value $.01 per share, of Big V Holding Corp., a Delaware corporation (the
"Company"), hereby agrees to be bound by the terms and conditions of the Amended
and Restated Shareholders' Agreement, dated as of December 17, 1993, by and
among the Company and the investors named therein (the "Shareholders'
Agreement"), as a "Management Investor" (as such term is defined in the
Shareholders' Agreement).
IN WITNESS WHEREOF, the undersigned has executed this Counterpart Signature
Page as of February __, 1999.
____________________________
Name:
-7-
<PAGE>
Exhibit 10.46
STOCK PLEDGE AGREEMENT
----------------------
THIS STOCK PLEDGE AGREEMENT dated as of February 23, 1999 is made and
entered into by and between Big V Holding Corp., a Delaware corporation
("Holding") and Mark S. Schwartz (the "Pledgor").
RECITALS
--------
A. The Pledgor has entered into a certain Management Stock Subscription
Agreement dated as of even date herewith by and between Holding and the Pledgor
(the "Subscription Agreement") whereby Holding has agreed to issue and sell an
aggregate of 20,000 shares of its common stock, par value $0.01 per share (the
"Common Stock") to the Pledgor. Capitalized terms used herein and not otherwise
defined shall have the same meanings ascribed to them in the Employment
Agreement.
B. On the date hereof the Pledgor is delivering a note or notes of
Pledgor payable to Holding in the principal amount of $700,000 dated as of the
date hereof (the "Indebtedness"), which Indebtedness is being incurred in
connection with the sale of 20,000 shares of Common Stock to the Pledgor.
C. The Pledgor wishes to grant further security and assurance to Holding
in order to secure the payment of the principal and interest on the Indebtedness
and to pledge to Holding all shares of Common Stock to be held by such Pledgor.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
1. Pledge. As collateral security for the full and timely payment of the
------
principal of and interest on the Indebtedness, the Pledgor hereby delivers,
deposits, pledges, transfers and assigns to Holding, in form transferable for
delivery, and creates in Holding a security interest in 20,000 shares of Common
Stock held by the Pledgor and all certificates or other instruments or documents
evidencing the same now or hereafter owned by the Pledgor (together with any
securities or property to be delivered to the Pledgor pursuant to Section 2(c)
hereof, the "Pledged Securities").
The Pledgor hereby delivers to Holding appropriate undated security
transfer powers duly executed in blank for the Pledged Securities set forth
above and will deliver appropriate undated security transfer powers duly
executed in blank for the Pledged Securities to be pledged hereunder from time
to time hereafter.
<PAGE>
2. Administration of Security. The following provisions shall govern the
--------------------------
administration of the Pledged Securities:
(a) So long as an Event of Default has not occurred and is continuing
with respect to any Indebtedness (as used herein, "Event of Default" shall mean
the occurrence of any event of default under any instrument evidencing any
Indebtedness), the Pledgor shall be entitled to act with respect to the Pledged
Securities in any manner not inconsistent with this Stock Pledge Agreement, the
Subscription Agreement, the Amended and Restated Shareholders' Agreement dated
as of December 17, 1993 by and among the Holding and its stockholders (the
"Shareholders' Agreement") or any instrument evidencing any Indebtedness,
including voting the Pledged Securities and receiving all cash distributions
thereon and giving consents, waivers and ratifications in respect thereof;
(b) If at any time, the Pledgor receives any proceeds from the sale
by the Pledgor or any of the Pledgor's Permitted Transferees (as that term is
defined in the Shareholders' Agreement) of any Common Stock to anyone, the Net
Proceeds (as defined below) from such sale of Common Stock shall be applied to
the prepayment first of the accrued and unpaid interest on any Indebtedness and
then to the unpaid principal of any Indebtedness. The term "Net Proceeds" shall
mean the total proceeds received from the sale of Common Stock, minus an amount
-----
equal to the sum of (i) the federal income tax liability that would be payable
in respect of the gain recognized upon such sale, after giving effect to any
state income tax liability described in clause (ii) below, assuming a tax rate
equal to the maximum federal income tax rate on long-term capital gains in
effect at the time of sale, and (ii) any state income tax liability that would
be payable in respect of such gain, assuming the maximum applicable state income
tax rate on sales of such securities.
(c) If, while this Stock Pledge Agreement is in effect, the Pledgor
(or any of the Pledgor's Permitted Transferees) shall become entitled to receive
or shall receive any debt or equity security certificate (including, without
limitation, any certificate representing a stock dividend or a distribution in
connection with any reclassification, increase or reduction of capital, or
issued in connection with any reorganization), option or right, whether as a
dividend or distribution in respect of, in substitution of, or in exchange for
any Pledged Securities, or otherwise, the Pledgor and each of the Pledgor's
Permitted Transferees agree to accept the same as Holding's agent and to hold
the same in trust on behalf of and for the benefit of Holding and to deliver the
same forthwith to Holding in the exact form received, with the endorsement of
the Pledgor and the Pledgor's Permitted Transferees when necessary and/or
appropriate undated security transfer powers duly executed in blank, to be held
by Holding, subject to the terms of this Stock Pledge Agreement, as additional
collateral security for the Indebtedness. Notwithstanding the foregoing, it is
agreed that the Pledgor or any of the Pledgor's Permitted Transferees may
exercise any option or right received as contemplated in the preceding sentence,
and Holding will exercise any such option or right upon receipt of written
instructions to that effect and any required payments or documents from the
Pledgor or the Pledgor's Permitted Transferees and the securities received upon
such exercise of any such option or right shall thereafter be held by Holding as
contemplated by the preceding sentence.
-2-
<PAGE>
(d) The Pledgor and each of the Pledgor's Permitted Transferees shall
immediately upon request by Holding and in confirmation of the security
interests hereby created, execute and deliver to Holding such further
instruments, deeds, transfers, assurances and agreements, in form and substance
as Holding shall request, including any financing statements and amendments
thereto, or any other documents, as required under Delaware law and any other
applicable law to protect the security interests created hereunder and to enable
Holding to exercise its rights hereunder.
(e) If at any time, Holding exercises its right as set forth in the
Shareholders' Agreement to purchase the Pledged Securities, or the Pledgor
exercises his right as set forth in the Shareholders' Agreement to require
Holding to purchase the Pledged Securities, then the cash payable for the
Pledged Securities so purchased shall be the difference between the Put Price or
the Call Price, as applicable (as those terms are defined in the Shareholders'
Agreement), and the outstanding principal balance and accrued but unpaid
interest then due in respect of the Indebtedness.
(f) Subject to any sale by Holding or other disposition by Holding of
the Pledged Securities or other property pursuant to this Stock Pledge Agreement
and subject to Section 5 below, the Pledged Securities shall be returned to the
Pledgor or such Pledgor's Permitted Transferees upon payment in full of the
unpaid principal of, accrued interest on and any other amounts due in respect of
the Indebtedness.
3. Remedies in Case of an Event of Default.
---------------------------------------
(a) In case of an Event of Default shall have occurred and be
continuing, Holding shall have in each case all of the remedies of a secured
party under the Delaware Uniform Commercial Code, and, without limiting the
foregoing, shall have the right, in its sole discretion, to sell, resell, assign
and deliver all or, from time to time, any part of the Pledged Securities, or
any interest in or option or right to purchase any part thereof, on any
securities exchange on which the Pledged Securities or any of them may be
listed, at any private sale or at public auction, with or without demand of
performance or other demand, advertisement or notice of the time or place of
sale or adjournment thereof or otherwise (except that Holding shall give ten
days' notice to the Pledgor of the time and place of any sale pursuant to this
Section 3), for cash, on credit or for other property, for immediate or future
delivery, and for such price or prices and on such terms as Holding shall, in
its sole discretion, determine, the Pledgor and the Pledgor's Permitted
Transferees hereby waiving and releasing any and all right or equity of
redemption whether before or after sale hereunder. At any such sale Holding may
bid for and purchase the whole or any part of the Pledged Securities so sold
free from any such right or equity of redemption. Holding shall apply the
proceeds of any such sale first to the payment of all costs and expenses,
-----
including reasonable attorneys' fees, incurred by Holding in enforcing its
rights under this Stock Pledge Agreement, second to the payment of accrued and
------
unpaid interest on and then of unpaid principal of the Indebtedness of the
Pledgor and third to any other amounts due on the Indebtedness.
-----
-3-
<PAGE>
(b) The Pledgor and the Pledgor's Permitted Transferees recognize
that Holding may be unable to effect a public sale of all or a part of the
Pledged Securities by reason of certain prohibitions contained in the Securities
Act of 1933, as amended (the "Act"), or in the rules and regulations promulgated
thereunder, or in applicable state securities or "blue sky" laws, but may be
compelled to resort to one or more private sales to a restricted group of
purchasers who will be obliged to agree, among other things, to acquire the
Pledged Securities for their own account, for investment and not with a view to
the distribution or resale thereof. The Pledgor and the Pledgor's Permitted
Transferees agree that private sale so made may be at prices and on other terms
less favorable to the seller and that Holding has no obligation to delay the
sale of the Pledged Securities for the period of time necessary to permit the
registration of the Pledged Securities for public sale under the Act and under
applicable state securities or "blue sky" laws. The Pledgor and the Pledgor's
Permitted Transferees agree that a private sale or sales made under the
foregoing circumstances shall be deemed to have been made in a commercially
reasonable manner.
(c) If any consent, approval or authorization of any state, municipal
or other governmental department, agency or authority should be necessary to
effectuate any sale or disposition by Holding pursuant to this Section 3 of the
Pledged Securities, the Pledgor and each of the Pledgor's Permitted Transferee
will execute all such applications and other instruments as may be required in
connection with securing any such consent, approval or authorization, and will
otherwise use their best efforts to secure the same.
(d) Neither failure nor delay on the part of Holding to exercise any
right, remedy power or privilege provided for herein or by statute or at law or
in equity shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, remedy, power or privilege preclude any other right,
remedy, power or privilege.
4. Pledgor's Obligations Not Affected. The obligations of the Pledgor and
----------------------------------
each of the Pledgor's Permitted Transferees under this Stock Pledge Agreement
shall remain in full force and effect without regard to, and shall not be
impaired or affected by: (a) any subordination, amendment or modification of or
addition or supplement to the Employment Agreement, the Shareholders' Agreement,
or the Indebtedness or any assignment or transfer thereof; (b) any exercise or
non-exercise by Holding of any right, remedy, power or privilege under or in
respect of this Stock Pledge Agreement, the Shareholders' Agreement or any
instrument evidencing any Indebtedness, or any waiver of any such right, remedy,
power or privilege; (c) any waiver, consent, extension indulgence or other
action or inaction in respect of this Stock Pledge Agreement, the Employment
Agreement, the Shareholders' Agreement or any instrument evidencing any
Indebtedness, or any assignment or transfer of any thereof; or (d) any
bankruptcy, insolvency, reorganization arrangement, readjustment, composition,
liquidation or the like, of Holding, whether or not the Pledgor and the
Pledgor's Permitted Transferees shall have notice or knowledge of any of the
foregoing.
5. Transfer by Pledge. The Pledgor and the Pledgor's Permitted
------------------
Transferees will not sell, assign, transfer or otherwise dispose of, grant any
option with respect to, or mortgage, pledge or otherwise encumber the Pledged
Securities or any interest therein except as provided in
-4-
<PAGE>
the Employment Agreement and the Shareholders' Agreement. In the event of a
sale, assignment, transfer or other disposition of or mortgage, pledge or other
encumbrance of Pledged Securities pursuant to the Subscription Agreement or the
Shareholders' Agreement, the Common Stock so sold, assigned, transferred or
otherwise disposed of or mortgaged, pledged or otherwise encumbered shall remain
subject to the provisions of this Stock Pledge Agreement and of the
Shareholders' Agreement and the purchaser, assignee, transferee or other
acquirer, mortgagee or pledgee shall agree in writing, in form and substance
satisfactory to Holding, to be bound by all the terms of this Stock Pledge
Agreement and of the Shareholders' Agreement with the same force and effect as
if such transferee were a party hereto.
6. Attorney-in-Fact. Holding is hereby appointed the attorney-in-fact of
----------------
the Pledgor and the Pledgor's Transferees for the purpose of carrying out the
provisions of this Stock Pledge Agreement and taking any action and executing
any instrument which Holding reasonably may deem necessary or advisable to
accomplish the purposes hereof, including without limitation, the execution of
the applications and other instruments described in Section 3(c) hereof, which
appointment as attorney-in-fact is irrevocable as one coupled with an interest.
7. Termination. Upon payment in full of the unpaid principal of, accrued
-----------
interest on and all other amounts payable in respect of the Indebtedness, this
Stock Pledge Agreement shall terminate and the Pledgor or the Pledgor's
Permitted Transferees shall be entitled to the return of such of the Pledged
Securities as have not theretofore been sold or otherwise applied pursuant to
the provisions of this Stock Pledge Agreement.
8. Notices. All notices or other communications required or permitted to
-------
be given hereunder shall be deemed delivered when delivered by hand or when sent
by first class, certified mail, postage and fees prepaid, as follows:
(i) If to Holding: Big V Holding Corp.
c/o Thomas H. Lee Company
75 State Street
Boston, Massachusetts 02109
Copy to: Charles W. Robins, Esquire
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, Massachusetts 02110
(ii) If to the Executive: To the address set forth below
unless and until notice of another
or different address shall be
given as provided herein.
9. Binding Effect, Successors and Assigns. This Stock Pledge Agreement
--------------------------------------
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns and nothing herein is intended or shall be
construed to give any other person any right,
-5-
<PAGE>
remedy or claim under, to or in respect of this Stock Pledge Agreement. No
transfer of Pledged Securities of the Pledgor to the Pledgor's Permitted
Transferees shall be permitted hereunder, and any such transfer shall be null
and void, unless and until each such Permitted Transferee agrees in writing, in
form and substance satisfactory to Big V Supermarkets, Inc. and Holding, to
become bound by this Stock Pledge Agreement with respect to the Pledged
Securities so transferred.
10. Miscellaneous. Holding and its assigns shall have no obligation in
-------------
respect of the Pledged Securities, except to hold and dispose of the same in
accordance with the terms of this Stock Pledge Agreement. Neither this Stock
Pledge Agreement nor any provision hereof may be amended, modified, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the amendment, modification, waiver,
discharge or termination is sought. The provisions of this Stock Pledge
Agreement shall be binding upon the successors and assigns of the Pledgor and
each of the Pledgor's Permitted Transferees. The captions in this Stock Pledge
Agreement are for convenience of reference only and shall not limited the
provisions hereof. This Stock Pledge Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware,
without regard to the conflicts of law rules thereof. This Stock Pledge
Agreement may be executed simultaneously in counterparts, each of which is an
original, but all of which together shall constitute one instrument.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Stock Pledge
Agreement to be executed and delivered on the date first above written.
BIG V HOLDING CORP.
By: /s/ David G. Bronstein
---------------------------------
Title: Chairman of the Board and Interim Chief
Executive Officer
/s/ Mark S. Schwartz
------------------------------------
Name: Mark S. Schwartz
Address: 3422 Hidden River View
Annapolis, MD 21403
-7-
<PAGE>
Exhibit 10.47
$700,000 February 23, 1999
SECURED PROMISSORY NOTE
-----------------------
FOR VALUE RECEIVED, the undersigned (the "Obligor"), promises to pay
to the order of Big V Holding Corp., a Delaware corporation, with its principal
executive offices located at 75 State Street, Boston, Massachusetts 02109 (the
"Company"), the principal sum of SEVEN HUNDRED THOUSAND DOLLARS ($700,000.00)
(the Principal Amount"), together with any amounts which are deemed to be
converted to principal in accordance with the terms hereof ("Converted Amounts",
and collectively with the Principal Amount, sometimes referred to herein as the
"Aggregate Principal Amount") in lawful money of the United States of America,
together with all accrued but unpaid interest, on December 31, 2003 (the
"Maturity Date"), subject to mandatory prepayment and/or acceleration as set
forth herein.
Interest shall accrue on the Principal Amount outstanding from time to
time, and to the extent permitted by applicable law, on the Converted Amounts
outstanding from time to time, at a rate equal to 5.24% per annum (the "Stated
Rate"), until the date of payment of the Aggregate Principal Amount. Interest
shall be payable hereunder annually on each Interest Payment Date (as defined
below), in an amount equal to the aggregate federal, state and local income tax
liability incurred by the Company as a result of all interest accrued hereunder
for the preceding fiscal year of the Company, as conclusively determined by the
Company, and as set forth in the Interest Notice (as defined below). All
interest accrued hereunder and not required to be paid on the next succeeding
Interest Payment Date in accordance with the terms hereof shall be deemed for
all purposes hereunder converted to principal hereunder and shall be deemed to
be a Converted Amount and shall be due and payable on the Maturity Date, subject
to mandatory prepayment and/or acceleration as set forth below.
If the date set for payment of principal or interest hereunder is a
Saturday, Sunday or legal holiday, then such payment shall be made on the next
succeeding business day.
The terms below shall have the following definitions:
(a) "Interest Notice" as used herein shall mean a written notice sent
by the Company to the Obligor specifying the aggregate amount of federal, state
and local income tax liability incurred by the Company as a result of all
interest accrued hereunder for the preceding fiscal year of the Company.
(b) "Interest Payment Date" as used herein shall mean a date ten days
after the Obligor receives the Interest Notice. For purposes hereof, the
Obligor shall conclusively be deemed to have received the Interest Notice (i)
three days after the Company sends such notice by certified or registered mail
or the day after the Company sends such notice by certified or registered mail
or the day after the Company sends such notice by a nationally recognized
overnight courier, to the address of the Obligor set forth below the Obligor's
signature hereon or
<PAGE>
such other address that the Obligor specifies in writing to the Company at its
address set forth above, or (ii) the day the Company delivers such notice by
hand.
(c) "Obligations" as used herein shall mean the Aggregate Principal
Amount outstanding from time to time, all accrued but unpaid interest hereunder
and all other amounts hereunder, whether principal, interest, fees or
otherwise.
Payment of the principal of and interest on this Note is secured pursuant
to the terms of a Stock Pledge Agreement dated as of the date hereof, between
the Obligor and the Company (the "Pledge Agreement"), reference to which is made
for a description of the collateral provided thereby and the rights of the
Company and the holder of this Note in respect of such collateral.
This Note is subject to the following further terms and conditions:
1. Payment and Prepayment.
-----------------------
(a) All payments and prepayments of principal of and interest on this
Note shall be made to the Company or its order, or to the legal holder of this
Note or such holder's order, in lawful money of the United States of America at
the principal offices of the Company (or at such other place as the holder
hereof shall notify the Obligor in writing) upon final payment of principal of
and interest on this Note it shall be surrendered for cancellation. Concurrently
with any prepayment of any portion of the Aggregate Principal Amount of this
Note pursuant to this Section 1, the Company (or other holder of this Note)
shall make a notation of such payment hereon. Any partial prepayment shall be
applied first to accrued and unpaid interest hereof and then to the unpaid
Aggregate Principal Amount.
(b) Voluntary Prepayment. The Obligor may, at its option, prepay this
--------------------
Note in whole or in part at any time or from time to time without penalty or
premium. Any prepayments of any portion of the Aggregate Principal Amount of
this Note shall be accompanied by payment of all interest accrued but unpaid
hereunder.
(c) Mandatory Prepayment.
--------------------
(i) Pursuant to Section 2.2 of the Employment Agreement between
the Company and the Obligor, the Company is required to pay under certain
conditions an Initial Bonus to the Obligor equal to at least $200,000. Upon
payment to the Obligor of the Initial Bonus, the Company may withhold up to
$50,000 from such bonus, which amount shall be applied to the Aggregate
Principal Amount due to the Company hereunder.
(ii) If at any time, or from time to time, after the date hereof
and following the occurrence and during the continuance of an Event of Default
(as that term is defined below) the Obligor or any of the Obligor's Permitted
Transferees (as that term is defined in an Amended and Restated Shareholders'
Agreement dated as of December 17, 1993 among the Company and its shareholders
(the "Shareholders' Agreement")) shall receive or shall otherwise become
entitled to receive from the Company (or other holder of this Note) any cash
payments, cash dividends or other cash distributions in respect of the Company's
Common
-2-
<PAGE>
Stock, then and in each case the Obligor and any of the Obligor's Permitted
Transferees shall, upon the receipt thereof, return to the Company (or other
holder of this Note) such payments, dividends and distributions, and the Company
(or other holder of this Note) shall apply such amount to the prepayment of the
Obligations in the manner set forth in Section 1(b), and the Company (or other
holder of this Note) shall not be obligated to make any such payment, cash
dividend or other cash distribution not theretofore made to which the Obligor
and any of the Obligor's Permitted Transferees are otherwise entitled in respect
of their Common Stock and may, instead, in lieu thereof, set off the amount of
such cash payment, cash dividend or other cash distribution against the
Obligations.
(iii) If at any time, the Obligor receives any proceeds from the
sale by the Obligor or any of the Obligor's Permitted Transferees of any Common
Stock to anyone, the Net Proceeds (as defined in the Stock Pledge Agreement
dated as of the date hereof between the Obligor and the Company) from such sale
of Common Stock shall be applied to the prepayment of this Note in the manner
provided in the Stock Pledge Agreement.
(iv) In addition to the provisions of subsections (c)(ii) and
(c)(iii) above:
(A) If the Obligor voluntarily terminates his employment with
the Company, of if the Company terminates the employment of the Obligor for
Cause (as such term is defined in the Employment Agreement), then the Obligor
shall, without the necessity of any notice or demand by the Company of any kind,
immediately make a mandatory prepayment hereunder in an amount equal to the then
outstanding Obligations.
(B) If the Obligor dies, suffers a disability in accordance
with Section 3.02 of the Employment Agreement or if the Company terminates his
employment without Cause (as such term is defined in the Shareholders'
Agreement) (each an "Involuntary Termination"), then the Obligor shall, without
the necessity of any notice or demand by the Company of any kind, immediately
make a mandatory prepayment hereunder in an amount equal to the then outstanding
Obligations; provided, however, that the Converted Amounts due hereunder may be
payable by the Obligor through the sale of Company's capital stock owned by the
Obligor, at a per share price calculated using the Put Share Price Formula set
forth in Section IV of Schedule I of the Obligor's Employment Agreement with the
Company, dated February 23, 1999. Any Converted Amounts that remain outstanding
thereafter shall not be immediately due and payable but shall be due and payable
in equal monthly installments ("Converted Amount Installments") payable on the
first day of each month from the date of the Involuntary Termination until the
Maturity Date. The Converted Amount shall bear interest hereunder at the Stated
Rate and such interest shall be payable with each Converted Amount Installment.
2. Events of Default. Upon the occurrence of any of the following
-----------------
events ("Events of Default"):
(a) Failure to pay any principal of this Note, including any
prepayments required hereunder, when due;
-3-
<PAGE>
(b) Failure to pay any interest installment due under this Note
which shall remain unremedied for ten days following the date when
such installment was originally due hereunder;
(c) Failure to pay any Converted Amount Installment when due;
(d) Failure of the obligor to perform his obligations under the
terms of his employment with the Company; or
(e) The filing of a voluntary or involuntary petition for an
order of relief under the Bankruptcy Code by or against the Obligor,
or any filing for relief under any statue or federal insolvency
statute by or against the Obligor;
then, and in any such event, the holder of this Note may declare, by notice of
default given to the Obligor, the entire unpaid Aggregate Principal Amount of
the Note, all Converted Amount Installments, if any, and all accrued and unpaid
interest thereon to be forthwith due and payable whereupon the entire Aggregate
Principal Amount of this Note outstanding, all Converted Amount Installments, if
any, and any accrued and unpaid interest hereunder shall become due and payable
without presentment, demand, protest, notice of dishonor or other demands and
notices of any kind, all of which are hereby expressly waived. Upon the
occurrence of an Event of Default, the accrued and unpaid interest hereunder
shall thereafter bear the same rate of interest as on the Principal Amount
hereunder, but in no event shall such interest be charged which would violate
any applicable usury law. If an Event of Default shall occur hereunder, the
obligor shall, subject to Section 3 hereof, pay costs of collection, including
reasonable attorneys' fees, incurred by the holder in the enforcement hereof.
No delay or failure by the holder of this Note in the exercise of any right
or remedy shall constitute a waiver thereof, and no single or partial exercise
by the holder hereof
of any right or remedy shall preclude other or future exercise thereof or the
exercise of any other right or remedy.
3. Miscellaneous.
--------------
(a) The provisions of this Note shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to the
conflicts of law rules thereof.
(b) Notwithstanding the terms set forth above, in no event shall the
interest rate on this Note exceed the maximum interest rate permitted by
law.
(c) All notices and other communications (other than the Interest
Notice) hereunder shall be in writing and will be deemed to have been duly
given if delivered or mailed in accordance with the Shareholders'
Agreement.
-4-
<PAGE>
IN WITNESS WHEREOF, this Note has been duly executed and
delivered by the Obligor on the date first above written.
/s/ Mark S. Schwartz
- ----------------------------
Name of Obligor: Mark S. Schwartz
Address: 3422 Hidden River View, Annapolis, MD 21403
-5-
<PAGE>
Exhibit 12.1
BIG V SUPERMARKETS, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
52 52 52 52 52
Weeks Weeks Weeks Weeks Weeks
Ended Ended Ended Ended Ended
December 25, December 26, December 27, December 28, December 30,
1999 1998 1997 1996 1995
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Income (loss) from continuing
operations before
income taxes $ (5,431) $ 1,972 $ (4,367) $ (6,467) $ (7,188)
Add:
Interest on indebtedness,
including amortization
of deferred debt costs 23,809 23,911 24,839 24,637 27,588
Portion of rents
representative of the
interest factor 3,432 3,477 2,545 2,226 2,374
--------- -------- -------- -------- --------
Income, as adjusted 21,810 29,360 23,017 20,396 22,774
--------- -------- -------- -------- --------
Fixed charges:
Interest on indebtedness,
including amortization
of deferred debt costs 23,809 23,911 24,839 24,637 27,588
Portion of rents
representative of the
interest factor 3,432 3,477 2,545 2,226 2,374
--------- -------- -------- -------- --------
Fixed charges 27,241 27,388 27,384 26,863 29,962
--------- -------- -------- -------- --------
Ratio of earnings to
fixed charges -- 1.1x -- -- --
--------- -------- -------- -------- --------
Deficiency in earnings
available to cover
fixed charges $ 5,431 $ -- $ 4,367 $ 6,467 $ 7,188
========= ======== ======== ======== ========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-25-1999
<PERIOD-START> DEC-27-1998
<PERIOD-END> DEC-25-1999
<CASH> 21,604
<SECURITIES> 0
<RECEIVABLES> 18,967
<ALLOWANCES> 219
<INVENTORY> 47,672
<CURRENT-ASSETS> 99,035
<PP&E> 168,453
<DEPRECIATION> 99,117
<TOTAL-ASSETS> 312,454
<CURRENT-LIABILITIES> 107,038
<BONDS> 193,904
0
0
<COMMON> 1
<OTHER-SE> (30,837)
<TOTAL-LIABILITY-AND-EQUITY> 312,454
<SALES> 856,872
<TOTAL-REVENUES> 856,872
<CGS> 630,444
<TOTAL-COSTS> 630,444
<OTHER-EXPENSES> 191,272
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,236
<INCOME-PRETAX> (5,431)
<INCOME-TAX> (3,300)
<INCOME-CONTINUING> (2,131)
<DISCONTINUED> 0
<EXTRAORDINARY> 492
<CHANGES> 543
<NET-INCOME> (3,166)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
