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
For the Fiscal year ended July 1, 1995
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
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Commission File Number 0-6544
BRUNO'S, INC.
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(Exact Name of Registrant as Specified in its Charter)
Alabama 63-0411801
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
800 Lakeshore Parkway, Birmingham, Alabama 35211
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(Address of Principal Executive Office) (Zip Code)
205/940-9400
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(Registrant's Telephone Number, Including Area Code)
Securities Registered Pursuant to Section 12(b) of the Act:
NONE
Securities Registered Pursuant to Section 12(g) of the Act:
COMMON STOCK
$.01 Par Value
Indicate by check mark whether Bruno's Inc. (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, and (2) has been subject to such
filing requirements for the past 90 days. Yes x No
----- -----
Indicate by check mark 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 registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of the Form 10-K or any
amendment to this Form 10-K [X]
The aggregate market value of the voting stock held by non-affiliates of
Bruno's, Inc. as of September 21, 1995 was approximately $46,753,687.
As of September 26, 1995, the number of shares of Bruno's, Inc. Common
Stock outstanding was 25,007,015.
<PAGE>
TABLE OF CONTENTS
Item Page
PART I
1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . 7
4. Submission of Matters to a Vote of Security Holders . . . . . 7
PART II
5. Market for Registrant's Common Equity and Related Stockholder
Matters . . . . . . . . . . . . . . . . . . . . . . . . . 8
6. Selected Financial Data . . . . . . . . . . . . . . . . . . . 9
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . 11
8. Financial Statements and Supplementary Data . . . . . . . . . 15
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure . . . . . . . . . . . . . . . . . 33
PART III
10. Directors and Executive Officers of the Registrant . . . . . 34
11. Executive Compensation . . . . . . . . . . . . . . . . . . . 35
12. Security Ownership of Certain Beneficial Owners and
Management . . . . . . . . . . . . . . . . . . . . . . . . 40
13. Certain Relationships and Related Transactions . . . . . . . 42
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form
8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
<PAGE>
2
PART I
Item 1. Business
The Company is a leading supermarket operator in the Southeastern
United States and is the largest supermarket operator in the state of
Alabama. The Company operates 252 supermarkets of which 124 are located in
Alabama, 86 in Georgia, 19 in Florida, 11 in Tennessee, 7 in Mississippi
and 5 in South Carolina. Seventy-nine of the store sites are owned
directly by the Company or through joint ventures. The Company also
operates two primary distribution facilities, one in Birmingham, Alabama
and one in Vidalia, Georgia, which total 2.1 million square feet. The
Company operates stores under three principal formats, each addressed to a
different market segment: everyday low price ("EDLP") stores aimed at the
value conscious shopper, upscale stores targeted to customers seeking
service and selection, and neighborhood stores stressing convenience in a
community setting. Under the EDLP and upscale formats, the Company also
operates 16 Supercenter stores that offer an expanded mix of higher margin
perishables and general merchandise products as well as various one-stop
shopping conveniences, such as in-store pharmacies, banks, photo
development services and optical centers.
On April 20, 1995, the Company and Crimson Acquisition Corp.
("Crimson") entered into an Agreement and Plan of Merger (the "Merger
Agreement"), which was amended on May 18, 1995. Crimson was a wholly-owned
subsidiary of Crimson Associates, L.P. ("Crimson Associates"), a
partnership organized by Kohlberg Kravis Roberts & Co. ("KKR"). Pursuant
to the Merger Agreement, on August 18, 1995, Crimson was merged with and
into the Company (the "Merger"), with the Company continuing as the
surviving corporation. Upon completion of the Merger, Crimson Associates
owned 20,833,333 shares, or approximately 83.33%, of the Company's Common
Stock (the "Common Stock") outstanding after the Merger, and warrants
("Warrants") to purchase an additional 10,000,000 shares of Common Stock.
Store Formats
Every Day Low Price ("EDLP") Formats. The Company's two EDLP
formats, Food World and FoodMax, on a combined basis account for 125 of the
Company's 252 stores. Both Food World (82 stores) and FoodMax (43 stores)
are widely regarded as low price leaders, and both formats are recognized
for the breadth and high quality of their product offerings. Eight of the
EDLP stores are Supercenters.
Food World. Food World stores are typically high volume stores
designed to appeal to a broad spectrum of customers. With a primary
emphasis on value, these stores offer every day low pricing along with
an extensive variety of name-brand merchandise and specialty
departments. Food World stores are promoted through television,
newspaper, and radio advertising. The Company's Food World stores
average approximately 44,000 total square feet.
FoodMax. FoodMax stores are large stores with an open design,
warehouse-style ceilings, and expanded perishables departments. These
stores emphasize low prices and an extensive product selection while
achieving low overhead through reduced staffing. These stores enhance
their EDLP image through unadvertised in-store specials. The
Company's FoodMax stores average approximately 51,000 total square
feet.
Upscale Formats. The Company's upscale formats, which operate
primarily under the Bruno's name, account for 39 of the Company's 252
stores. Bruno's stores are widely regarded as quality, service, and
perishables leaders in the markets the Company serves, and generally have a
substantial breadth and depth of product offerings. These stores typically
contain expanded produce, bakery, delicatessen, and gourmet foods not
generally found in conventional supermarkets, a variety of health and
beauty care products normally found in large drug stores, and a wide range
of general merchandise items. Bruno's stores are generally located in
suburban markets. Eight of the upscale stores are Supercenters. The
upscale stores average approximately 51,000 total square feet.
<PAGE>
3
Neighborhood Formats. The Company has two principal neighborhood
formats, Piggly Wiggly and Food Fair. The neighborhood format, on a
combined basis, accounts for 88 of the Company's 252 stores. Piggly Wiggly
(54 stores) and Food Fair (31 stores) are generally smaller than the
Company's other supermarkets and emphasize friendly service and promotional
pricing. For its neighborhood stores, which are generally located in small
to medium-sized towns and suburban neighborhoods, the Company advertises
primarily through direct mail.
Piggly Wiggly. Piggly Wiggly stores are located in medium to
small towns in central and southern Georgia. Piggly Wiggly stores are
promoted primarily through weekly advertised specials. Piggly Wiggly
stores average approximately 30,000 total square feet.
Food Fair. Food Fair stores, like Piggly Wiggly, are designed to
operate with lower overhead and competitive pricing in suburban
neighborhoods and towns that will not support the volume necessary for
a larger supermarket. Food Fair stores are located in Alabama and
average approximately 29,000 total square feet.
Store Development
The Company continuously evaluates its existing markets and
potential new markets for their ability to support new or expanded stores.
The Company combines market research and its in-depth knowledge of the
Southeast region in evaluating market opportunities. In conducting market
research for store sites, the Company evaluates population shifts, zoning
changes, traffic patterns, new construction and the proximity of
competitors' stores in an effort to determine a site's sales potential.
The Company has identified numerous sites which are suitable for new stores
and has either acquired such sites or is currently negotiating to acquire
or obtain rights to develop or lease such sites. The Company also
continuously evaluates its store base and has identified certain stores to
be remodeled.
The following table sets forth additional information concerning
changes in the Company's store base for fiscal 1993 through fiscal 1995.
Fiscal
-----------------------------------
1993 1994 1995
----------- ----------- -----------
Beginning of period . . . . . . . 253 257 257
Opened . . . . . . . . . . . . 23 8 6
Closed/Sold . . . . . . . . . . 19 8 11
--- --- ---
End of period . . . . . . . . . . 257 257 252
=== === ===
Remodels . . . . . . . . . . . . 13 39 15
Competition
The Company's competitors include national and regional
supermarket chains, independent and specialty grocers, drug and convenience
stores, and the newer "alternative format" food stores, including warehouse
club stores and supercenters. In addition to food retailers,
nontraditional retailers such as discount stores, drug stores and
department stores are increasing their selection of food products. The
supermarket industry is highly competitive and characterized by narrow
profit margins and, accordingly, the Company's earnings depend primarily on
the efficiency of its operations and on its ability to maintain a large
sales volume. Supermarket chains compete based upon convenience of store
location, price, service, cleanliness, store condition, product variety and
product quality. The Company believes that its policies of pricing its
merchandise competitively and providing superior quality and customer
service are important competitive factors. The Company actively monitors
its competitors' prices and adjusts its pricing and marketing strategy as
management deems appropriate in light of existing market conditions.
<PAGE>
4
The Company's principal competitors include Bi-Lo, Delchamps,
Kroger, Publix, WalMart and Winn Dixie. In recent years, supermarket
competition in the Southeast region has intensified as new entrants have
opened stores in certain principal markets of the Company. The Company's
traditional competitors in these markets have enhanced their capabilities
in response to the entry of these new chains. Certain of the Company's
competitors have significantly greater financial resources than the
Company.
Advertising and Promotion
The Company's advertising and promotions are specifically
tailored to each of its store formats. For EDLP stores, the Company's
promotions emphasize consistently low prices, and this image is reinforced
through television and radio advertising. The upscale format is typically
advertised through newspapers and newspaper inserts, with an emphasis
placed on quality produce and perishables and superior service at
competitive prices. Upscale stores also promote new products through in-
store demonstrations and samplings. For its neighborhood stores, which are
often located in small to medium-sized towns and suburban neighborhoods,
the Company advertises primarily through direct mail. In addition, to
enhance its name recognition and image, the Company sponsors a number of
regional and local events.
Private Label Program
Through its private label program, the Company offers
approximately 1,200 items under the Staff (dry groceries), Four Winds Farm
(dairy and perishables), Pharm (health and beauty care products) and Bay
Harbor (frozen seafood) brand names. Gross margins on private label goods
are higher than on national brands. Private label products are available
at each of the Company's different formats, with a higher concentration in
the EDLP and neighborhood stores.
Purchasing, Warehousing and Distribution
The Company has traditionally purchased merchandise from a large
number of third party suppliers. The Company has utilized many category
management techniques, including contract buying and most recently, a
continuous replenishment system, which provides for automatic daily product
replenishment for certain products in its distribution centers based on
inventory level changes.
The Company currently operates two primary distribution
facilities totaling 2.1 million square feet, located in Birmingham, Alabama
and Vidalia, Georgia, each of which has integrated warehousing and
distribution capacity. The Company owns these facilities subject to
arrangements with local industrial development agencies.
Each store submits orders to the distribution facilities through
a centralized processing system, and merchandise is normally received by
the stores on the next day. Merchandise is delivered from the distribution
facilities through a leased fleet of 140 tractors, 158 refrigerated
trailers and 184 dry trailers. Stores are located within approximately a
300-mile radius of each of the distribution centers. The Company believes
that its existing distribution capacity will be sufficient to support its
store growth strategy over the next several years.
Employees and Labor Relations
The Company is one of the leading private employers in Alabama
and, as of July 1, 1995, the Company employed approximately 25,600 persons,
of whom approximately 44% were full-time and 56% were part-time employees.
Approximately 23,900 were employed in supermarkets, 1,350 were employed in
the warehousing operations and 350 were employed in the Company's business
office. Of these employees, approximately 77% are union-affiliated, while
approximately 6% are salaried. The Company currently employs, on average,
approximately 95 employees in each store.
<PAGE>
5
The Company is currently a party to a number of separate
collective bargaining agreements with affiliates of either the United Food
and Commercial Workers Union or the Retail, Wholesale and Department Store
International Union. The contracts are generally negotiated in three- or
four-year cycles. The Company is currently negotiating with the union
representing the employees of its 62 of its Food World stores in Alabama.
This contract expires on September 30, 1995. Pursuant to the collective
bargaining agreements, the Company contributes to various union-sponsored
multi-employer pension plans. In general, the Company believes its
relationship with its employees is good.
The Company has an incentive compensation plan covering its key
management staff. Incentive compensation for store operations managers is
based upon the profitability of the operations within the scope of their
management responsibility.
Trade Names, Service Marks, Trademarks and Franchises
The Company uses a variety of trade names, service marks and
trademarks. Except for "Bruno's," "Food World," "FoodMax," "Piggly
Wiggly," and "Food Fair," the Company does not believe any of such trade
names, service marks or trademarks are material to its business. The
Company licenses the "Piggly Wiggly" trade name and trademark.
The Company's Piggly Wiggly stores are operated pursuant to a
franchise agreement that is restricted to certain areas of central and
southern Georgia.
Environmental Matters
The Company is subject to federal, state and local laws,
regulations and ordinances that (i) govern activities or operations that
may have adverse environmental effects, such as discharges to air and
water, as well as handling and disposal practices for solid and hazardous
wastes and (ii) impose liability for costs of cleaning up, and certain
damages resulting from, sites of past spills, disposal or other releases of
hazardous materials. The Company believes that it currently conducts its
operations, and in the past has operated its business, in substantial
compliance with applicable environmental laws and regulations. From time
to time, operations of the Company have resulted or may result in
noncompliance with or liability for cleanup pursuant to environmental laws
and regulations. However, the Company believes that any such noncompliance
or liability under current environmental laws and regulations would not
have a material adverse effect on its results of operations and financial
condition.
The Company has not incurred material capital expenditures for
environmental controls during the previous three years, nor does the
Company anticipate incurring such expenditures during the current fiscal or
the succeeding fiscal year.
Governmental Regulations
The Company is subject to regulation by a variety of governmental
agencies, including, but not limited to, the United States Food & Drug
Administration, the United States Department of Agriculture, and other
federal, state and local agencies.
Item 2. Properties
The Company operates a total of 252 supermarkets, of which 124
are located in Alabama, 86 in Georgia, 19 in Florida, 11 in Tennessee, 7 in
Mississippi and 5 in South Carolina. In addition, the Company operates
nine liquor stores located adjacent to Food World stores in Florida.
<PAGE>
6
Number of Average Total
Stores Square Footage
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EDLP Formats:
Food World . . 82 44,000
FoodMax . . . . 43 51,000
Subtotal . . . 125
Upscale Formats:
Bruno's . . . . 38 52,000
Other . . . . . 1 32,000
Subtotal . . . 39
Neighborhood Formats:
Piggly Wiggly . 54 30,000
Food Fair . . . 31 29,000
Other . . . . . 3 37,000
Subtotal . . . 88
Total . . . 252
The Company owns 79 of its 252 food stores. Eleven of the stores
are owned by a joint venture between the Company and Metropolitan Life
Insurance Company, which leases such stores back to the Company. The
Company also owns a number of sites that can be used for future store and
warehouse development, as well as certain non-operating real estate assets.
The Company leases 173 of its 252 stores under standard
commercial leases which generally obligate the Company to pay its
proportionate share of real estate taxes, common area maintenance charges
and insurance costs. In addition, such leases generally provide for
percentage of sales rent when sales from the store exceed a certain dollar
amount. Generally these leases are long-term, with one or more renewal
options. The Company owns the fixtures and equipment in each leased
location and has made various leasehold improvements to the store sites.
The approximately 1,375,000 square foot Birmingham warehouse,
distribution center and office complex is located on a 200-acre site in the
Oxmoor West Industrial Park in Birmingham, Alabama. Approximately 100
acres of the site are currently undeveloped land. The Company owns the
Birmingham facility subject to certain arrangements with The Industrial
Development Board of the City of Birmingham. The approximately 686,000
square foot Vidalia warehouse and distribution center is located on a 90-
acre site in Vidalia, Georgia and is owned by the Company subject to a
similar industrial development authority arrangement with respect to a
portion of the facility.
Item 3. Legal Proceedings
In 1991, the Company received a favorable termination letter with
respect to the termination of the employee pension plan of a supermarket
chain acquired by the Company in 1989. Pursuant to that termination,
distributions were made to all participants of that employee pension plan.
After all of the benefit liabilities were paid, there remained a balance of
$2,716,795, which was transferred to the Company as a reversion of excess
pension assets. On June 15, 1992, the Company received a letter from the
Pension Benefit Guaranty Corporation ("PBGC") contending that inappropriate
actuarial assumptions were used to determine the value of the employees'
benefits distributed and that additional distributions must be made to
numerous former participants of said plan. In August 1994, the Company
filed suit in the U.S. District Court for the Northern District of Alabama
challenging the PBGC's determination. In April 1995, the District Court
entered summary judgment against the Company and in favor of the PBGC. The
Company has appealed the District Court's ruling to the U.S. Court of
Appeals for the Eleventh Circuit. The Company believes its liability, if
any, in connection with this matter will not exceed $2,716,795 plus accrued
interest.
<PAGE>
7
Except for this matter, the Company is not a party to any
material pending legal proceedings, other than ordinary litigation
incidental to the conduct of its business and the ownership of its
property.
Item 4. Submission of Matters to a Vote of Security Holders
The Company did not submit any matters to a vote of its security
holders during the fourth quarter of its fiscal year ended July 1, 1995.
<PAGE>
8
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
During the fiscal year ended July 1, 1995, the Common Stock
traded on the NASDAQ National Market System under the symbol BRNO.
The following table sets forth, by fiscal quarter, the high and low sales
prices, rounded to the nearest eighth, reported by the NASDAQ National
Market System for the periods indicated. Following the Merger, the Common
Stock was delisted from the NASDAQ National Market System. Consequently,
the Common Stock currently trades only in the over-the-counter market.
For Fiscal Year July 2, 1994 July 1, 1995
Ended: High Low High Low
First Quarter 12-1/4 8-7/8 9-1/4 7
Second Quarter 11-3/8 8-1/2 10-1/4 7-7/8
Third Quarter 9-5/8 7-1/8 10-3/16 9-1/4
Fourth Quarter 8-1/2 6-7/8 12-1/4 9-1/4
As of September 26, 1995, there were approximately 6,112 holders
of record of the Common Stock following the Merger.
The following table sets forth the dividends paid by Bruno's to
its shareholders during the last two fiscal years. After the Merger, the
payment of regular quarterly cash dividends on the Common Stock was
discontinued. Further, the Company does not contemplate the declaration
of dividends on the Common Stock. In addition, the 10-1/2% Senior
Subordinated Notes due 2005 and the credit facility entered into by the
Company in connection with the Merger restrict any future payment of
dividends.
For Fiscal Year Ended: July 2, 1994 July 1, 1995
First Quarter $.06 $.065
Second Quarter $.06 $.065
Third Quarter $.06 $.065
Fourth Quarter $.06 $.065
<PAGE>
9
Item 6. Selected Financial Data
<TABLE><CAPTION>
BRUNO'S INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(Dollar Amounts in Thousands, Except Per Share Amounts)
Fiscal Year Ended
---------------------------------------------------------------------
July 1, July 2, July 3, June 27, June 29,
1995 1994 1993 1992 1991
(52 weeks) (52 weeks) (53 weeks) (52 weeks) (52 weeks)
<S> <C> <C> <C> <C> <C>
SELECTED INCOME STATEMENT DATA:
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,869,569 $ 2,834,688 $ 2,872,327 $ 2,657,846 $ 2,585,934
Cost and expenses:
Cost of products sold . . . . . . . . . . . . . . . . . . 2,196,556 2,185,587 2,242,455 2,067,560 2,012,042
Store operating, selling and administrative expenses . . 544,936 512,063 489,950 439,713 410,464
Depreciation and amortization . . . . . . . . . . . . . . 54,031 52,343 48,718 44,261 40,758
Interest expense, net . . . . . . . . . . . . . . . . . . 20,784 15,925 17,817 10,777 11,005
Writedown of property and securities . . . . . . . . . . 0 0 0 8,393 0
--------- --------- --------- --------- ---------
Income from continuing operations before income taxes
and extraordinary item . . . . . . . . . . . . . . . 53,262 68,770 73,387 87,142 111,665
Provision for income taxes . . . . . . . . . . . . . . . 19,920 28,189 26,493 30,776 40,854
------------ ------ ------ ------ ------
Income from continuing operations before extraordinary
item . . . . . . . . . . . . . . . . . . . . . . . 33,342 40,581 46,894 56,366 70,811
------------ ------ ------ ------ ------
Discontinued operations, net:
Loss on disposal . . . . . . . . . . . . . . . . . . . . 0 0 0 (8,550) 0
Loss from operations . . . . . . . . . . . . . . . . . . 0 0 0 (4,400) (4,085)
------------ ------ ------ ------ ------
0 0 0 (12,950) (4,085)
------------ ------ ------ ------ ------
Extraordinary item, net . . . . . . . . . . . . . . . . . 0 (3,288) 0 0 0
------------ ------ ------ ------ ------
Net income . . . . . . . . . . . . . . . . . . . . . . $ 33,342 $ 37,293 $ 46,894 $ 43,416 $ 66,726
====== ====== ====== ====== ======
</TABLE>
<PAGE>
10
<TABLE><CAPTION>
Fiscal Year Ended
-----------------------------------------------------------------------
July 1, July 2, July 3, June 27, June 29,
1995 1994 1993 1992 1991
(52 weeks) (52 weeks) (53 weeks) (52 weeks) (52 weeks)
------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Earnings per common share:
Income from continuing operations before
extraordinary item . . . . . . . . . . . . . . . . . . $ 0.43 $ 0.52 $ 0.60 $ 0.69 $ 0.87
Discontinued operations, net . . . . . . . . . . . . . 0.00 0.00 0.00 (0.16) (0.05)
Extraordinary item, net . . . . . . . . . . . . . . . . 0.00 (0.04) 0.00 0.00 0.00
------------ ----- ---- ---- ----
Net income . . . . . . . . . . . . . . . . . . . . . . $ 0.43 $ 0.48 $ 0.60 $ 0.53 $ 0.82
==== ==== ==== ==== ====
Cash dividends per common share . . . . . . . . . . . . . $ 0.26 $ 0.24 $ 0.22 $ 0.20 $ 0.18
==== ==== ==== ==== ====
Weighted average number of common and common equivalent
shares outstanding . . . . . . . . . . . . . . . . . . 77,571,000 78,088,000 78,717,000 81,874,000 81,661,000
============ ========== ========== ========== ==========
SELECTED BALANCE SHEET DATA:
Working capital . . . . . . . . . . . . . . . . . . . . . $ 141,420 $ 174,392 $ 117,510 $ 110,968 $ 125,286
Property and equipment, net . . . . . . . . . . . . . . . 516,374 540,139 543,877 467,824 420,113
Total assets . . . . . . . . . . . . . . . . . . . . . . 895,641 927,208 916,923 834,683 765,696
Long-term debt and capitalized lease obligations . . . . 219,561 296,460 269,046 172,190 175,750
Shareholders' investment . . . . . . . . . . . . . . . . 429,814 421,354 402,667 422,443 390,187
============ ======= ======= ======= =======
</TABLE>
<PAGE>
11
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
General
The Company operates a chain of 252 supermarkets and combination food
and drug stores. The Company operates on a 52 or 53 week fiscal year. The
Company's fiscal year ends on the Saturday nearest June 30 of each year.
The consolidated statements of income for the fiscal years ended July 1,
1995 and July 2, 1994 include 52 weeks of operation while the fiscal year
ended July 3, 1993 includes 53 weeks of operation.
Net Sales
Net sales increased 1.2% ($34.9 million) from fiscal 1994 to
fiscal 1995 while sales decreased 1.3% ($37.6 million) from fiscal 1993 to
fiscal 1994. The net sales increase from fiscal 1994 to fiscal 1995 was
primarily due to the Company's recent focus on remodeling its existing
stores and increasing its emphasis on customer service. The Company's
recent focus on remodeling its existing stores has resulted in positive
same store sales growth despite competitive pressures. The net sales
decrease from fiscal 1993 to fiscal 1994 was primarily due to the
additional week of sales included in fiscal 1993. Excluding the effects of
the additional week in fiscal 1993, fiscal 1994 sales slightly increased
over fiscal 1993.
Gross Profit
Gross profit as a percentage of net sales increased 0.6% between
fiscal 1994 and 1995 and increased 1.0% between fiscal 1993 and fiscal
1994. The increase in gross profit is primarily due to an increased sales mix
of higher margin perishable and general merchandise products. This
improvement is a direct result of the Company's continued development and
emphasis on its larger format stores which carry a greater percentage of
these products.
Store Operating, Selling, and Administrative Expenses
On May 18, 1995, the Company announced that it had reviewed the
methodology it used to estimate required balance sheet reserves for
self-insured workers' compensation and general liability claims. The
Company had historically followed the guidance in Statement of Financial
Accounting Standards ("SFAS") No. 5 and SFAS No. 112 to account for
exposures under its workers' compensation, general liability and medical
self-insurance programs. This guidance requires accrual of the best
estimate of probable liabilities within a range of loss estimates. In
applying this accounting principle, the Company had consistently utilized
case estimates of probable liabilities prepared by experienced parties
using all available claims data as to the extent of losses and related
costs. The Company believes this practice to be consistent with the method
used by many other companies. Because (a) the number of stores and
employees had remained flat from fiscal 1992 through fiscal 1995, (b)
annual cash payments under these plans had only increased approximately 6%
from fiscal 1993 through fiscal 1995 (an average of 3% per year), and (c)
the number of outstanding claims had also remained relatively flat, the
Company did not believe a complete actuarial study was either necessary or
cost beneficial. Consequently, actuarially-based computations were
previously not performed. During May 1995, in connection with the Merger,
KKR independently obtained actuarially-based estimates of the Company's
liabilities for workers' compensation and general liability self-insurance
exposures which were substantially higher than the Company's case
estimates. After a review of these estimates and consultation with its
advisors, the Company determined that these actuarial techniques provided
better estimates than those which had previously been used by the Company.
The Company then computed new estimated reserve requirements using
actuarial techniques, and, in accordance with its policy and SFAS No. 5 and
SFAS No. 112, recorded an adjustment to increase these self-insurance
reserves by approximately $22.2 million (approximately $13.8 million net of
income taxes) as a change in accounting estimate in the third fiscal
quarter ended April 8, 1995.
<PAGE>
12
Approximately $19.2 million of the $22.2 million charge relating to this
change in accounting estimate is of a nonrecurring nature.
Excluding the self-insurance reserve adjustment, store operating,
selling, and administrative expenses as a percentage of net sales increased
by .1% from fiscal 1994 to fiscal 1995 and by 1.0% from fiscal 1993 to
fiscal 1994. These increases as a percentage of net sales are primarily
due to the higher operating costs associated with the increasing number of
larger format stores. These larger stores employ additional personnel and
have higher operating costs, particularly in their expanded
service-oriented departments.
Depreciation and Amortization
Depreciation and amortization as a percentage of net sales
remained relatively constant during fiscal 1993, 1994 and 1995.
Interest Expense, Net
The increase in net interest expense during fiscal 1995 compared
to fiscal 1994 and fiscal 1993, is due to an increase in interest rates
which affected the Company's borrowings, including its net interest position
on its $80 million notional interest rate swap.
Income Taxes
The Company's effective income tax rate decreased from 41% for
fiscal 1994 to 37% for fiscal 1995. The higher effective tax rate for
fiscal 1994 relates to an additional tax provision of $2.2 million to
retroactively restate income tax liabilities to reflect the change in
federal income tax rates mandated by the Omnibus Budget Reconciliation Act
of 1993.
Extraordinary Item
In the first quarter of fiscal 1994, the Company redeemed its
$143.0 million 6.5% Convertible Subordinated Debentures at a conversion
price above par value. The redemption of the Debentures resulted in an
extraordinary loss of $3.3 million, net of the applicable income tax
benefit of $2.0 million.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has funded working capital
requirements, capital expenditures, and other cash requirements primarily
through cash flows from operations and short-term borrowings. Operating
activities have generated $125.7 million, $86.9 million, and $87.8 million,
respectively, in cash flows in each of the three fiscal years in the period
ended July 1, 1995. During fiscal 1995 and 1994, the Company utilized $100
million of unsecured lines of credit to meet any short-term cash
requirements, under which the Company's weighted average borrowings during
fiscal 1995 and 1994 were $1.4 million and $8.4 million, respectively. No
amounts were outstanding at July 1, 1995 and July 2, 1994 under its lines
of credit.
Cash flows used in investing activities were $26.0 million in
fiscal 1995 compared with $47.9 million in fiscal 1994, and $122.9 million
in fiscal 1993 and primarily related to the Company's capital expenditures.
Capital expenditures for fiscal 1995 were $54.8 million compared with $64.0
million in fiscal 1994 and $131.7 million in fiscal 1993. The decrease in
expenditures in fiscal 1995 results from the Company opening fewer new
stores and focusing instead on expanding and remodeling existing stores.
Capital expenditures were primarily financed with internally generated
funds and the proceeds from the sale of other property. Proceeds from the
sale of certain property totaled $28.8 million in fiscal 1995 compared to
$16.1 million during the prior fiscal year. There were no material gains
or losses from these sales.
<PAGE>
13
The Company believes that capital expenditures for fiscal 1996
will be financed through internally generated funds or other available
resources. These estimated capital expenditures are primarily related to
the opening of new stores and the remodeling of existing stores.
Management continuously evaluates all stores based upon volume,
profitability, location, age, demographics, etc., and makes closure
decisions based upon such evaluations.
The primary uses of cash in financing activities during fiscal
1995 were $79.1 million in long-term debt principal payments, $20.2 million
in cash dividend payments, and the purchase of 595,000 shares of treasury
stock for $4.7 million. During the first quarter of fiscal 1994, the
Company redeemed its issue of 6.5% Convertible Subordinated Debentures with
the proceeds of a private placement of $100.0 million of 6.62% Series A
Senior Notes due 2003 (the "6.62% Series A Notes") and $100.0 million of
7.09% Series B Senior Notes due 2008 (the "7.09% Series B Notes"). In
addition, during fiscal 1994, the Company paid off its line of credit
borrowings of $35.0 million and paid cash dividends of $18.7 million. The
Company paid cash dividends of $17.4 million during fiscal year 1993.
Following the Merger, the payment of regular quarterly dividends on the
Company's Common Stock will be discontinued. The 6.62% Series A Notes and
the 7.09% Series B Notes were prepaid in connection with the Merger.
The Company does not expect any significant impact on its cash
flow as a result of the change in accounting estimate to increase reserves
by $22.2 million ($13.8 million on an after-tax basis) with respect to
self-insurance for workers' compensation and general liability claims.
The Company plans to continue to expand through the opening of
new stores and may acquire existing stores or one or more supermarket
chains, if attractive acquisition opportunities become available. The
Company anticipates that funds necessary for the expansion of its business
during the foreseeable future will be financed through available cash
reserves, internally generated funds, and short-term borrowings. However,
the Company may use for such purposes additional sources of financing,
which may include long-term borrowings and the issuance of additional debt
or equity securities.
The Company's principal sources of liquidity after the Merger are
expected to be cash flow from operations and borrowings under a $125.0
million 78-month Revolving Credit Facility entered into in connection with
the Merger (the "Revolving Credit Facility"). It is anticipated that the
Company's principal uses of liquidity will be to provide working capital,
meet debt service requirements and finance the Company's strategic plans.
In addition to the Revolving Credit Facility, the Company entered
into a $475.0 million Term Loan Facility in connection with the Merger (the
"Term Loan Facility"). The Term Loan Facility is comprised of $275.0
million of Tranche A Term Loans, $75.0 million of Tranche B Term Loans,
$75.0 million of Tranche C Term Loans and $50.0 million of Tranche D Term
Loans. The Term Loan Facility was fully drawn to finance a portion of the
cash Merger consideration.
The Tranche A Term Loans will have a final maturity approximately
six years and six months after August 18, 1995, the closing of the Term
Loan Facility (the "Bank Closing"), and will be subject to amortization in
the amounts of (i) $17.5 million on the date that is twelve months after
the Bank Closing, (ii) $17.5 million on the date that is twenty-four months
after the Bank Closing, (iii) in equal semi-annual installments totaling
$30.0 million in the third year after the Bank Closing, (iv) in equal
semi-annual installments totaling $40.0 million in the fourth year after
the Bank Closing, (v) in equal semi-annual installments totaling $60.0
million in the fifth year after the Bank Closing, (vi) in equal semi-annual
installments totaling $75.0 million in the sixth year after the Bank
Closing, and (vii) $35.0 million in the final six months prior to the final
maturity of the Tranche A Term Loans. Tranche B Term Loans will have a
final maturity approximately seven years and six months after the Bank
Closing and will amortize in equal semi-annual installments totaling $1.0
million in each of the first six years after the Bank Closing and totaling
$69.0 million during the final 18 months prior to the final maturity of the
Tranche B Term Loans. The Tranche C Term Loans will have a final
<PAGE>
14
maturity approximately eight years and six months after the Bank Closing
and will amortize in equal semi-annual installments totaling $1.0 million
in each of the first seven years after the Bank Closing and totaling $68.0
million during the final 18 months prior to the final maturity of the
Tranche C Term Loans. The Tranche D Term Loans will have a final maturity
approximately nine years and six months after the Bank Closing and will
amortize in equal semi-annual installments totaling $1.0 million in each of
the first eight years after the Bank Closing and totaling $42.0 million
during the final 18 months prior to the final maturity of the Tranche D
Term Loans. The commitments under the Revolving Credit Facility terminate
approximately six years and six months after the Bank Closing.
OTHER
During fiscal year 1993, the Company entered into stock purchase
agreements with the Estates of Angelo J. Bruno and Lee J. Bruno (former
executive officers of the Company) to purchase an aggregate of 3,600,000
shares of the Common Stock at a price of $12.50 per share. The
agreements allowed the Estates to increase the number of shares of Common
Stock to be purchased by the Company up to an aggregate of 400,000
additional shares. Under this agreement, and other previously existing
stock purchase agreements, the Company purchased 3,943,726 shares of Common
Stock at a total cost of $49.6 million, including acquisition costs. The
Company financed the purchase through a bank note payable.
UNAUDITED QUARTERLY FINANCIAL DATA
In the opinion of management, the disclosures of unaudited
quarterly data contain all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the consolidated results
of operations of the Company for the interim periods.
As discussed above, (1) during the third quarter of fiscal 1995,
the Company recorded an adjustment of $22.2 million to increase
self-insurance reserves; (2) during the first quarter of fiscal 1994, the
Company recorded an extraordinary loss of $3.3 million on the redemption of
$143.0 million in 6.5% Convertible Subordinated Debentures; and (3) an
additional tax provision of $2.2 million was required in the first quarter
of fiscal 1994 due to the change in income tax rates mandated by the
Omnibus Budget Reconciliation Act of 1993.
<PAGE>
15
Item 8. Financial Statements and Supplementary Data
<TABLE><CAPTION>
BRUNO'S, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JULY 1, 1995 AND JULY 2, 1994
(Dollar Amounts in Thousands, Except Per Share Amounts)
ASSETS 1995 1994 LIABILITIES AND SHAREHOLDERS' 1995 1994
INVESTMENT
- - ------------------------------- -------- -------- ------------------------------------------------ ------- --------
CURRENT ASSETS: CURRENT LIABILITIES:
<S> <C> <C> <C> <C> <C>
Current maturities of long-term debt and
Cash and cash equivalents . . . $ 25,916 $ 30,259 capitalized lease obligations . . . . . . . $ 1,900 $ 4,092
Receivables . . . . . . . . . . 30,125 34,770 Accounts payable . . . . . . . . . . . . . . 114,661 108,712
Inventories . . . . . . . . . . 249,766 255,047 Accrued income taxes . . . . . . . . . . . . 1,096 0
Prepaid expenses . . . . . . . 9,527 9,237 Accrued payroll and related expenses . . . . 20,696 18,557
Deferred income taxes . . . . . 9,265 1,428 Other accrued expenses . . . . . . . . . . . 44,826 24,988
------- ------- ------- -------
324,599 330,741 183,179 156,349
------- ------- ------- -------
NON-CURRENT LIABILITIES:
Long-term debt . . . . . . . . . . . . . . . 200,642 276,015
Capitalized lease obligations . . . . . . . . 18,919 20,445
Deferred income taxes . . . . . . . . . . . . 50,106 51,136
Self-insurance reserves . . . . . . . . . . . 10,673 0
Deferred compensation . . . . . . . . . . . . 2,308 1,909
PROPERTY AND EQUIPMENT, NET . . 516,374 540,139 282,648 349,505
------- ------- ------- -------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' INVESTMENT:
Common stock, $.01 par value, 200,000,000
shares authorized, 78,098,341 shares issued
and outstanding in 1995 and 78,090,441
shares issued and outstanding in 1994. . . 781 781
Paid-in capital . . . . . . . . . . . . . . 42,008 41,999
Retained earnings . . . . . . . . . . . . . 391,704 378,574
NONCURRENT ASSETS: ------- -------
Intangibles, net . . . 40,872 42,170 434,493 421,354
Other, net . . . . . . 13,796 14,158 Treasury stock, at cost (595,020 shares) . . (4,679) 0
------- ------- ------- -------
54,668 56,328 429,814 421,354
------- ------- ------- -------
$895,641 $927,208 $895,641 $927,208
======= ======= ======= =======
The accompanying notes are an integral part of these consolidated balance sheets.
</TABLE>
<PAGE>
16
<TABLE><CAPTION>
BRUNO'S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE FISCAL YEAR ENDED JULY 1, 1995, FISCAL YEAR ENDED JULY 2, 1994,
AND FISCAL YEAR ENDED JULY 3, 1993
(Dollar Amounts in Thousands, Except Per Share Amounts)
1995 1994 1993
----------- ----------- ----------
(52 Weeks) (52 Weeks) (53 Weeks)
<S> <C> <C> <C>
NET SALES $2,869,569 $2,834,688 $2,872,327
---------- ---------- ----------
COST AND EXPENSES:
Cost of products sold . . . . . . . . . . . . . . . . . . . . . 2,196,556 2,185,587 2,242,455
Store operating, selling, and administrative expenses . . . . . 544,936 512,063 489,950
Depreciation and amortization . . . . . . . . . . . . . . . . . 54,031 52,343 48,718
Interest expense, net . . . . . . . . . . . . . . . . . . . . . 20,784 15,925 17,817
--------- --------- ---------
2,816,307 2,765,918 2,798,940
--------- --------- ---------
Income before income taxes and extraordinary item . . . . . . . 53,262 68,770 73,387
PROVISION FOR INCOME TAXES 19,920 28,189 26,493
--------- --------- ---------
Income before extraordinary item . . . . . . . . . . . . . . . 33,342 40,581 46,894
EXTRAORDINARY ITEM, net 0 (3,288) 0
--------- --------- ---------
NET INCOME $33,342 $37,293 $46,894
========= ========= =========
EARNINGS PER COMMON SHARE:
Income before extraordinary item . . . . . . . . . . . . . . . $ 0.43 $0.52 $0.60
Extraordinary item, net . . . . . . . . . . . . . . . . . . . . 0.00 (0.04) 0.00
------ ----- ----
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.43 $0.48 $0.60
====== ===== =====
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
17
BRUNO'S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
FOR THE FISCAL YEAR ENDED JULY 1, 1995, FISCAL YEAR ENDED JULY 2, 1994,
AND FISCAL YEAR ENDED JULY 3, 1993
(Dollar Amounts in Thousands, Except Per Share Amounts)
<TABLE><CAPTION>
Common Stock Treasury Stock
------------------------ -----------------
Number Paid-In Retained Deferred Number
of Shares Amount Capital Earnings Compensation of Shares Amount
------------- ------- ------- -------- ------------ --------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, June 27, 1992 81,890,150 $ 819 $91,806 $330,511 $(693) 0 $ 0
Net income . . . . . . . . . . . . . . . . . . 0 0 0 46,894 0 0 0
Repurchase and cancellation of common stock . . (3,943,726) (39) (49,529) 0 0 0 0
Cash dividends ($.22 per share) . . . . . . . . 0 0 0 (17,383) 0 0 0
Stock bonus and option plan activity . . . . . 100,917 0 (205) 0 486 0 0
---------- --- ------ ------- --- ------- ------
BALANCE, July 3, 1993 78,047,341 780 42,072 360,022 (207) 0 0
Net income . . . . . . . . . . . . . . . . . . 0 0 0 37,293 0 0 0
Cash dividends ($.24 per share) . . . . . . . . 0 0 0 (18,741) 0 0 0
Stock bonus and option plan activity . . . . . 43,100 1 (73) 0 207 0 0
---------- --- ------ ------- --- ------- ------
BALANCE, July 2, 1994 78,090,441 781 41,999 378,574 0 0 0
Net income . . . . . . . . . . . . . . . . . . 0 0 0 33,342 0 0 0
Stock bonus and option plan activity . . . . . 7,900 0 9 0 0 0 0
Cash dividends ($.26 per share) . . . . . . . . 0 0 0 (20,212) 0 0 0
Repurchase of common stock . . . . . . . . . . 0 0 0 0 0 595,020 (4,679)
---------- --- ------ ------- --- ------- ------
BALANCE, July 1, 1995 78,098,341 $ 781 $42,008 $391,704 $0 595,020 $(4,679)
========== === ====== ======= === ======= ======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
18
<TABLE><CAPTION>
BRUNO'S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEAR ENDED JULY 1, 1995, FISCAL YEAR ENDED JULY 2, 1994,
AND FISCAL YEAR ENDED JULY 3, 1993
(Dollar Amounts in Thousands)
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . $33,342 $37,293 $46,894
------- ------- -------
Adjustments to reconcile net income to net cash provided
by operating activities:
Extraordinary item, net . . . . . . . . . . . . . . . . . . 0 3,288 0
Depreciation and amortization . . . . . . . . . . . . . . . 54,031 52,343 48,718
Deferred income taxes . . . . . . . . . . . . . . . . . . . (8,867) 4,132 534
Amortization of deferred compensation . . . . . . . . . . . 0 15 (284)
Provision (credit) to value inventories at LIFO cost . . . 242 (588) (4,748)
(Gain) loss on sale of property, net . . . . . . . . . . . (2,781) 872 (400)
(Increase) decrease in assets:
Receivables . . . . . . . . . . . . . . . . . . . . . . . 4,645 (9,467) 3,346
Receivable due on sale of discontinued operations . . . . 0 0 9,500
Inventories . . . . . . . . . . . . . . . . . . . . . . . 5,039 4,780 (17,742)
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . (290) (1,340) (476)
Other noncurrent assets . . . . . . . . . . . . . . . . . 208 (521) 3,022
Increase (decrease) in liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . 5,949 (8,040) 6,250
Accrued income taxes . . . . . . . . . . . . . . . . . . . 1,096 1,462 (7,367)
Accrued payroll and related expenses . . . . . . . . . . . 2,139 536 1,858
Other accrued expenses . . . . . . . . . . . . . . . . . . 19,838 2,046 (1,743)
Deferred compensation . . . . . . . . . . . . . . . . . . 399 55 462
Other noncurrent liabilities . . . . . . . . . . . . . . . 10,673 0 0
------- ------- -------
Total adjustments . . . . . . . . . . . . . . . . . . . 92,321 49,573 40,930
------- ------- -------
Net cash provided by operating activities . . . . . . . $125,663 $86,866 $87,824
------- ------- -------
</TABLE>
<PAGE>
19
<TABLE><CAPTION>
1995 1994 1993
--------- ---------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property . . . . . . . . . . . . . . . . . $28,805 $16,079 $8,867
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . (54,838) (63,989) (131,741)
------- ------- --------
Net cash used in investing activities . . . . . . . . . . . (26,033 (47,910) (122,874)
------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings (repayments) under line of credit, net . . . . . . . . 0 (35,000) 5,000
Proceeds from issuance of long-term debt . . . . . . . . . . . . 0 200,000 100,000
Reductions of long-term debt and capitalized lease obligations . (79,091) (171,627) (2,978)
Payments for early extinguishment of debt . . . . . . . . . . . . 0 (3,542) 0
Proceeds from exercise of stock options . . . . . . . . . . . . . 9 120 565
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . (20,212) (18,741) (17,383)
Repurchase of common stock . . . . . . . . . . . . . . . . . . . (4,679) 0 (49,568)
Net cash provided by (used in) financing activities . . . . (103,973) (28,790) 35,636
-------- ------- ------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . . . . . . . (4,343) 10,166 586
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR . . . . . . . . . . 30,259 20,093 19,507
-------- ------- ------
CASH AND CASH EQUIVALENTS AT END OF YEAR . . . . . . . . . . . . . $25,916 $30,259 $20,093
======= ======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . $18,993 $19,605 $18,025
Income taxes, net of refunds . . . . . . . . . . . . . . . . . 27,558 22,595 33,326
====== ====== ======
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Noncash compensation under stock plans . . . . . . . . . . . . $ 0 $(192) $(770)
======= ===== =====
</TABLE>
The accompanying notes are an integral part of these consolidated
statements.
<PAGE>
20
BRUNO'S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 1, 1995 and July 2, 1994
(Dollar Amounts in Thousands, Except Per Share Amounts)
1. ORGANIZATION
Bruno's, Inc. and subsidiaries (the "Company") operates a chain of
supermarkets located in Alabama, Florida, Tennessee, Mississippi, South
Carolina, and Georgia.
2. MERGER ACTIVITIES
The Company and Crimson Acquisition Corp. ("Crimson"), an Alabama
corporation and a wholly owned subsidiary of Crimson Associates, L.P.
("Crimson Associates"), which is a partnership organized by Kohlberg Kravis
Roberts & Co. ("KKR"), entered into an Agreement and Plan of Merger dated
as of April 20, 1995, and amended as of May 18, 1995 (as amended, the
"Merger Agreement"), pursuant to which Crimson will be merged with and into
the Company (the "Merger"), with the Company continuing as the surviving
corporation. On August 18, 1995, the Merger was approved by the Company's
shareholders. Upon consummation of the Merger, each share of the Company's
common stock outstanding immediately prior to the time the Merger becomes
effective (the "Effective Time of the Merger") will be converted at the
election of the holder thereof into either (i) the right to receive $12.00
in cash from the Company following the Merger or (ii) the right to retain
that share of common stock. The Merger contemplates that approximately
94.7% of the presently issued and outstanding shares of the Company's
common stock will be converted into cash, and that approximately 5.3% of
the presently issued and outstanding shares will be retained by
shareholders. Because the Company's existing shareholders will retain
approximately 4.2 million shares of common stock, the right to receive
$12.00 in cash or to retain common stock will be subject to proration.
Such number of retained shares will represent approximately 16.67% of the
Company's common stock expected to be outstanding after the Merger.
As a result of the Merger, Crimson Associates will hold approximately
20.8 million shares, or approximately 83.33%, of the Company common stock
expected to be outstanding after the Merger, and 10 million warrants (the
"Warrants") to purchase up to an additional 10 million shares of Common
Stock in the aggregate at an exercise price of $12.00 per share, subject to
certain adjustments. Each Warrant will be exercisable in whole or in part
during the ten year period following the Effective Time of the Merger and,
upon exercise, may be exchanged, at the option of the holder, for either
(i) such number of shares of Company common stock for which the Warrant is
then exercisable upon payment by the holder to the Company of the aggregate
exercise price or (ii) that number of shares of Company common stock having
a value equal to the difference between the "fair market value" at the time
of exercise of such number of shares of common stock for which the Warrant
is then exercisable and the aggregate exercise price. If the Warrants were
exercised in full by the payment of the aggregate cash exercise price
immediately after the Merger, Crimson Associates would hold approximately
88% of the shares of the Company's common stock expected to be outstanding
after the Merger.
In accordance with the Merger Agreement, the Company will pay KKR, on
the closing date of the Merger, a fee of $15,000 in cash, and will also
reimburse KKR for all of its expenses in connection with the transactions
contemplated by the Merger Agreement. In addition, upon the Effective Time
of the Merger the Company's employment continuity agreements and deferred
compensation agreements (see Note 8) will become fully vested and are
expected to result in payments to participants of approximately $10,746.
Also, all outstanding stock options (see Note 7) will vest as a consequence
of the Merger and be settled by the Company in cash.
<PAGE>
21
The Company expects that the Merger will be financed by the proceeds
of term loans ($475,000), debt securities ($400,000), revolving credit
loans ($10,100), an equity contribution by Crimson Associates ($250,000),
and the application of a portion of the Company's cash balances ($20,000).
The proceeds of such financings will be applied to pay the cash merger
consideration ($880,100), repay historical debt ($200,000), and pay fees
and expenses ($75,000). The fees and expenses are anticipated to consist
of (i) fees and expenses related to financing the Merger, including bank
syndication and commitment fees and underwriting discounts and commissions,
(ii) fees in connection with the prepayment of historical debt and an
interest rate swap, (iii) professional, advisory, and investment banking
fees and expenses, and (iv) miscellaneous fees and expenses, such as
printing and filing fees. Included in the $75,000 of estimated fees and
expenses is the $15,000 fee payable by the Company to KKR upon closing in
accordance with the Merger Agreement. It is expected that the most
substantial portion of the remaining estimated fees and expenses will
relate to financing the Merger.
Pursuant to a Stock Option Agreement, dated as of April 20, 1995, as
amended as of May 18, 1995 (as amended, the "Option Agreement"), between
the Company and Crimson, the Company has granted to Crimson an irrevocable
option, expiring upon the first to occur of the Effective Time of the
Merger and April 30, 1996, which may be exercised by Crimson or its
designee (which may be an affiliate or a third party), in whole or in part,
to purchase up to 15,541,570 newly issued shares of the Company's common
stock (or 16.6% of the outstanding Company common stock after giving effect
to the issuance of such shares) at an exercise price of $12.00 per share in
cash (the "Exercise Price"). Any such issuance would dilute the
proportionate holdings of all of the Company's shareholders. Such shares
would be canceled and would not be entitled to be converted into any merger
consideration in the Merger. The terms of the Option Agreement provide,
among other things, for upward adjustment of the Exercise Price in certain
circumstances. The number and kind of securities subject to the Option
Agreement and the Exercise Price are also subject to adjustments in the
event of certain changes in the number of issued and outstanding shares of
Company common stock. The Option Agreement also includes customary
provisions relating to the registration and listing of such option shares.
On August 18, 1995, in connection with their approval of the Merger,
the Company's shareholders approved the proposed related financing
arrangements and a restated and amended articles of incorporation which,
among other things, reduced the authorized shares of common stock from 200
million to 60 million.
The following unaudited pro forma balance sheet summary gives effect
to the Merger and related transactions as if such transactions had occurred
on July 1, 1995, and the unaudited pro forma statements of income summary
gives effect to the Merger and related transactions as if such transactions
were consummated as of July 3, 1994 for the fiscal year ended July 1, 1995
and as of July 4, 1993 for the fiscal year ended July 2, 1994. Pro forma
adjustments (increased debt and interest expense and the related tax effect
and decreased equity) were applied to the respective historical financial
statement amounts to reflect and account for the Merger as a
recapitalization. Accordingly, the historical basis of the Company's
assets and liabilities has not been impacted by the transaction.
<PAGE>
22
Pro Forma Balance Sheet Summary
July 1, 1995
-----------------
(Unaudited)
Cash . . . . . . . . . . . . . . . . . . . . $ 5,916
Other current assets . . . . . . . . . . . . 298,683
-------
Total current assets . . . . . . . . . . . 304,599
Noncurrent assets . . . . . . . . . . . . . . 571,042
-------
$875,641
=======
Current liabilities . . . . . . . . . . . . . $183,179
-------
Long-term debt and capitalized lease
obligations . . . . . . . . . . . . . . . . . 904,661
Other noncurrent liabilities . . . . . . . . 63,087
-------
Total noncurrent liabilities . . . . . . . 967,748
-------
Shareholders' deficit . . . . . . . . . . . . (275,286)
--------
$875,641
=======
Pro Forma Statements of Income Summary
Fiscal Year Ended
--------------------------
July 1, 1995 July 2, 1994
------------- ------------
(Unaudited)
Net sales . . . . . . . . . . . . . . $2,869,569 $2,834,688
Gross profit . . . . . . . . . . . . 673,013 649,101
Interest expense, net . . . . . . . . 88,700 86,125
Loss before extraordinary item . . . (8,766) (2,919)
Net loss . . . . . . . . . . . . . . (8,766) (6,207)
Loss per common share:
Loss before extraordinary item . . (0.35) (0.12)
Net loss . . . . . . . . . . . . . (0.35) (0.25)
The pro forma summary information should not be considered indicative
of actual results that would have been achieved had the Merger and related
transactions been consummated on the date or for the periods indicated and
do not purport to indicate balance sheet data or results of operations as
of any future date or for any future period.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements of the Company include its
accounts and the accounts of all wholly owned subsidiaries. All
significant intercompany balances and transactions have been eliminated in
consolidation.
<PAGE>
23
Inventories
Substantially all inventories are valued at last-in, first-out
("LIFO") cost, which is not in excess of market. Under the first-in,
first-out ("FIFO") cost method of accounting, inventories would have been
$7,264 and $7,022 higher than reported at July 1, 1995 and July 2, 1994,
respectively.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is provided
on a straight-line basis over the estimated service lives of depreciable
assets (10 to 40 years for buildings and 3 to 15 years for equipment) or,
in the case of leasehold improvements, over 10 to 20 years or the life of
the applicable lease, if shorter. Property and equipment included in the
financial statements under capital leases are amortized over the related
lease terms.
Maintenance and repairs are charged to expense as incurred;
expenditures for renewals and betterments are capitalized. When assets are
retired or otherwise disposed of, the property accounts are relieved of
costs and accumulated depreciation and any resulting gain or loss is
credited or charged to income.
Leasehold interests represent the excess of current rental values over
the present value of net minimum lease payments on favorable leases
acquired and are being amortized on a straight-line basis over the
remaining lives of the related leases.
Investment in Joint Venture
The Company maintains a 50% interest in a joint venture with a major
life insurance company for certain of its store locations. The Company's
investment in this joint venture ($3,869 and $4,279 at July 1, 1995 and
July 2, 1994, respectively) is accounted for on the equity method and
taxable income/loss is allocated directly to the joint venture partners.
Intangibles
The Company's intangibles are as follows:
- Franchise rights ($9,447 and $9,747 at July 1, 1995 and July 2,
1994, respectively) represent amounts assigned to a franchise
with Piggly Wiggly Corporation and are being amortized on a
straight-line basis over 40 years (amortization of $300 for each
of the three fiscal years in the period ended July 1, 1995), and
- Goodwill ($31,425 and $32,423 at July 1, 1995 and July 2, 1994,
respectively) is being amortized on the straight-line basis over
40 years (amortization of $998, $998, and $999, respectively, for
each of the three fiscal years in the period ended July 1, 1995).
Self-Insurance Accruals
The Company is substantially self-insured with respect to general
liability, workers' compensation and nonunion employee medical claims.
Stop-loss insurance coverage is maintained in amounts determined to be
adequate by management ($100 per incident for general liability and
currently $400 per incident for workers' compensation). Prior to the third
quarter of the fiscal year ended July 1, 1995, the Company utilized case
estimates of probable liabilities prepared by experienced parties using all
available claims data as to the extent of losses and related costs to
estimate required balance sheet reserves for such claims. As of the third
quarter of the fiscal year ended July 1, 1995, the Company began using
actuarial estimation techniques to evaluate their accrual for such claims
and recorded an adjustment to increase these self-insurance reserves by
approximately $22,200 as a change in accounting estimate. Amounts charged
to expense and actual claims paid were approximately $49,500 and $27,900,
$26,600 and $26,800, and $25,300 and $26,300, respectively, for each of the
three fiscal years in the period ended
<PAGE>
24
July 1, 1995. Current and noncurrent accruals aggregating $27,269 and
$5,568 are reflected in the accompanying consolidated balance sheets as of
July 1, 1995 and July 2, 1994, respectively, to provide for unsettled
claims.
Income Taxes
The Company accounts for income taxes using an asset and liability
method which generally requires recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have
been included in the financial statements or tax returns. Under this
method, deferred tax assets and liabilities are determined based on the
difference between the financial statements and tax bases of assets and
liabilities, using enacted tax rates in effect for the year in which the
differences are expected to reverse. In addition, the asset and liability
method requires the adjustment of previously deferred income taxes for
changes in tax rates.
Earnings Per Common Share
Earnings per common share were computed based on the weighted average
number of common shares outstanding during each period (77,571,000 shares
in fiscal 1995, 78,088,000 shares in fiscal 1994, and 78,717,000 shares in
fiscal 1993). Outstanding stock options are common stock equivalents but
were excluded from earnings per common share computations as their effect
was either not material or antidilutive.
Statements of Cash Flows
For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid investments with an original maturity of three
months or less to be cash equivalents.
Disclosures About Fair Value of Financial Instruments
In preparing disclosures about the fair value of financial
instruments, the Company has assumed that the carrying amount approximates
fair value for cash and cash equivalents, receivables, short-term
borrowings and accounts payable, because of the short maturities of those
instruments. The fair values of long-term debt instruments and financial
derivatives are based upon stated repurchase prices (if applicable), or the
current interest rate environment and remaining term to maturity.
Derivatives
The Company's only involvement with derivative financial instruments
includes an interest rate swap agreement intended to manage interest rate
risk (see Note 6). Under this interest rate swap, the Company agrees with
other parties to exchange, at specified intervals, the difference between
fixed-rate and floating-rate interest amounts calculated by reference to an
agreed notional principal amount. The notional amounts of derivatives do
not represent amounts exchanged by the parties and, thus, are not a measure
of the exposure of the Company through its use of derivatives. Amounts
receivable and payable under the interest rate swap agreement are accrued
as interest income and interest expense, respectively.
Reclassifications
Certain prior year amounts have been reclassified to conform to the
current year presentation.
4. PROPERTY AND EQUIPMENT, NET
Property and equipment, net, consists of the following:
<PAGE>
25
July 1, 1995 July 2, 1994
------------ ------------
Land . . . . . . . . . . . . . . . . $62,808 $65,243
Buildings . . . . . . . . . . . . . . 218,988 229,749
Equipment . . . . . . . . . . . . . . 438,073 403,722
Construction in progress . . . . . . 11,843 16,404
------ ------
731,712 715,118
Less accumulated depreciation . . . .
274,978 234,657
------- -------
456,734 480,461
Leasehold improvements, net . . . . . 35,566 32,711
Investment in property under capital
leases, net . . . . . . . . . . . . . 12,529 14,102
Leasehold interests, net . . . . . . 11,545 12,865
------ ------
$516,374 $540,139
======= =======
5. INCOME TAXES
The provisions for income taxes are as follows:
Fiscal Year Ended
--------------------------------
July 1, 1995 July 2, 1994 July 3, 1993
------------ ------------ ------------
Current:
Federal . . . . . . . . . . . $26,001 $19,896 $23,273
State . . . . . . . . . . . . 2,786 2,146 2,686
------- ------- -------
28,787 22,042 25,959
------- ------- -------
Deferred:
Accelerated depreciation . . 1,327 2,110 1,979
Effect of change in enacted
federal tax rate. . . . . . 0 1,874 0
Accrual differences . . . . . (10,525) (16) (885)
Other items, net . . . . . . 331 164 (560)
------- ------- -------
(8,867) 4,132 534
------- ------- -------
Income tax benefit on:
Extraordinary item . . . . . 0 2,015 0
------- ------- -------
$19,920 $28,189 $26,493
======= ======= =======
The difference in the federal statutory rate applied to income before
income taxes and the total provision for each of the three fiscal years in
the period ended July 1, 1995 is as follows:
Fiscal Year Ended
----------------------------------------------
July 1, 1995 July 2, 1994 July 3, 1993
--------------- --------------- ---------------
Amount % Amount % Amount %
Statutory rate . . . . . . . . . $18,642 35% $24,070 35% $24,952 34%
Effect of:
State income taxes, net of
federal tax benefits . . . . . 1,810 3 1,394 2 1,773 2
Change in enacted tax rate . . 0 0 2,224 3 0 0
Other, net (532) (1) 501 1 (232) 0
------- -- ------- -- ------- --
Effective rate . . . $19,920 37% $28,189 41% $26,493 36%
======= == ======= == ======= ==
<PAGE>
26
The increase in the effective rate for fiscal 1994 is due to the
Omnibus Budget Reconciliation Act of 1993 which increased the maximum
corporate federal income tax rate to 35% retroactively effective to
January 1, 1994.
Temporary differences and carryforwards which give rise to deferred
tax assets and liabilities are as follows:
July 1, 1995 July 2, 1994
------------ ------------
Deferred tax assets:
Accruals . . . . . . . . . . . . . $15,029 $4,504
Capital leases . . . . . . . . . . 10,681 10,580
Capital loss carryover . . . . . . 428 897
Deferred compensation . . . . . . . 863 713
Other items . . . . . . . . . . . . 495 500
-------- --------
Total deferred tax asset . . . . 27,496 17,194
-------- --------
Deferred tax liabilities:
Property and equipment . . . . . . (58,907) (57,292)
Joint venture . . . . . . . . . . . (2,332) (2,418)
Inventories . . . . . . . . . . . . (2,538) (3,197)
Franchise rights . . . . . . . . . (3,533) (3,643)
Other items . . . . . . . . . . . . (1,027) (352)
-------- --------
Total deferred tax liability . . (68,337) (66,902)
Net deferred tax liability . . . . . $(40,841) $(49,708)
======== ========
6. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
The Company maintains variable rate unsecured bank lines of credit
aggregating $100,000 under which there were no amounts outstanding at
July 1, 1995 and July 2, 1994. The maximum and average amounts of
borrowings outstanding under these lines of credit during fiscal 1995 were
$25,000 and $1,414, respectively, and during fiscal 1994 were $50,000 and
$8,403 respectively. The weighted average interest rates on these
borrowings during fiscal 1995 and 1994 were 5.9% and 3.4%, respectively.
The Company's long-term debt is as follows:
July 1, 1995 July 2, 1994
------------ ------------
Private Placement Loan . . . . . . . $200,000 $200,000
Note Payable--Bank Credit Agreement . 0 75,000
Other borrowings . . . . . . . . . . 1,016 3,625
-------- --------
201,016 278,625
Less current maturities . . . . . . . 374 2,610
-------- --------
$200,642 $276,015
======== ========
In the first quarter of fiscal 1994 the Company redeemed $142,750 of
6.5% Convertible Subordinated Debentures at 103.9% of face value in
accordance with the terms of the related indenture. The redemption was
financed with the proceeds of a $200,000 private placement loan which will
amortize over 10 to 15 years at fixed rates of 6.62% on $100,000 of
Series A senior notes and 7.09% on $100,000 of Series B senior notes. This
redemption resulted in a loss of $3,288 (net of the applicable income tax
benefit of $2,015) which is classified as an extraordinary item in the
accompanying fiscal 1994 consolidated statement of income.
The amount of debt maturing in each of the next five fiscal years,
1996 through 2000, is $374, $296, $14,404, $23,377, and $23,377,
respectively.
<PAGE>
27
In fiscal 1993, the Company entered into an interest rate swap
agreement with a commercial bank which became effective September 1, 1993.
Under this agreement, the Company records a receivable at a fixed rate of
interest (5.92%) and records a payable at a variable rate of interest
(based on LIBOR--6.4% weighted average rate for fiscal 1995) on $80,000 of
notional principal for a term of ten years. At the end of the ten year
term a cash settlement will occur. The transaction effectively changes a
portion of the Company's interest rate exposure from a fixed-rate to a
floating-rate basis. At July 1, 1995, a net interest receivable of $867 is
reflected in receivables in the accompanying consolidated balance sheet.
The Company has entered into lease and guaranty agreements with
various Industrial Development Boards in order to fund construction of
certain warehouse and office additions. Upon issuance, each bond issue was
purchased in its entirety by the Company. Thus, the outstanding bonds
($55,098 at July 1, 1995 and $59,891 at July 2, 1994) and the related
investment by the Company, together with the related interest expense and
interest income, respectively, are excluded from the accompanying
consolidated financial statements.
At July 1, 1995, the estimated fair values of the Company's long-term
debt and interest rate swap off-balance sheet liabilities were $181,450 and
$1,842, respectively.
See Note 2 regarding the possible early extinguishment of the Private
Placement Loan and interest rate swap in connection with the Merger.
7. STOCK OPTION AND STOCK BONUS PLANS
The Company grants options for shares of common stock under various
plans to officers, directors, and key employees. Options are granted at
either a price equal to the fair market value of the stock at the date of
grant (noncompensatory stock options) or at a price significantly under the
fair market value of the stock at the date of grant (compensatory stock
options). Upon exercise of the stock options, the excess of the proceeds
over par value is credited to paid-in capital. For compensatory stock
options, compensation expense is recorded to reflect the difference in the
market value and the option price at the date of grant. Stock options
granted become exercisable at various dates after the date of grant and
expire ten years from the date of the grant.
At July 1, 1995, 3,982,617 shares of common stock are reserved and
available for issuance under the Company's stock option plans. Information
with respect to stock options for each of the three fiscal years in the
period ended July 1, 1995 is summarized as follows (weighted average
exercise price of $8.28 at July 1, 1995):
Shares Subject Option Price
to Option Range Per Share
-------------- ---------------
Balance, June 27, 1992 . . . . . . 227,634 $3.25 - $10.00
Canceled or expired . . . . . . . (3,000) $10.00
Exercised . . . . . . . . . . . . (69,917) $5.00 - $10.00
Options granted . . . . . . . . . 318,600 $8.375 - $10.00
---------
Balance, July 3, 1993 . . . . . . . 473,317 $3.25 - $10.00
Canceled or expired . . . . . . . (31,400) $3.25 - $10.00
Exercised . . . . . . . . . . . . (18,100) $5.00 - $10.00
Options granted . . . . . . . . . 369,800 $7.00 - $7.50
---------
Balance, July 2, 1994 . . . . . . . 793,617 $5.00 - $8.595
Exercised . . . . . . . . . . . . (1,400) $5.00 - $7.00
Options granted . . . . . . . . . 450,700 $7.00 - $9.375
---------
Balance, July 1, 1995 . . . . . . . 1,242,917 $5.00 - $9.375
=========
<PAGE>
28
Under the terms of the Company's stock bonus plan, shares of stock are
awarded to officers and key employees which vest upon the completion of
three years of service after the award. Each year, one third of the shares
awarded are issued and transferred to an escrow agent. As an estimate of
compensation under the Plan, deferred compensation and a related credit to
paid-in capital are recorded equal to the current market value of the
awarded stock. The deferred compensation is reflected as a reduction in
shareholders' investment in the accompanying consolidated balance sheets
and is amortized to compensation expense over the vesting period. At
July 1, 1995, all shares of stock awarded under this plan have vested and
have been issued by the Company.
See Note 2 regarding additional stock option grants in connection with
the Merger.
8. EMPLOYEE BENEFIT PLANS
All of the Company's union employees are covered by two
union-sponsored, collectively-bargained, multi-employer pension plans.
Contributions to these plans are determined in accordance with the
provisions of labor contracts and generally are based on the number of man
hours worked.
The Company maintains a profit sharing retirement plan for nonunion
employees. Matching contributions are made for employee voluntary
contributions up to a specified limit with additional contributions made at
the Company's discretion.
The Company has deferred compensation agreements, as amended, with
certain of its officers whereby the officers or their beneficiaries will be
provided specific amounts of annual retirement benefits for a period of 15
years following retirement. The total estimated obligation under these
agreements based upon current salaries and expected retirement dates
(approximately $12,655 at July 1, 1995) is to be paid through fiscal 2035.
The amended agreements provide for an acceleration of benefits in the event
of a change in control of the Company.
The expense applicable to the above plans is as follows:
Profit Sharing
Retirement Plan
----------------------- Deferred
Union Matching Discretionary Compensation
Plans Contributions Contributions Plan
------ ------------- ------------- ------------
Fiscal year:
1995 . . . . $4,308 $1,330 $ 0 $399
1994 . . . . 4,089 1,494 1,750 55
1993 . . . . 3,685 1,447 0 462
The Company maintains certain incentive compensation plans for store
management, officers, and other key employees which is paid annually based
on achievement of established profit goals.
The Company maintains employment continuity agreements with certain
key employees which provide for benefits to be paid to these employees in
the event employment with the Company is terminated in connection with a
change in control. Compensation which might be accrued under these
agreements has not been accrued in the consolidated financial statements as
a change in control had not occurred at July 1, 1995. (See Note 2).
9. LONG-TERM LEASES
The Company has a number of leases in effect for store properties and
delivery equipment. The initial terms of the real property leases will
expire within the next 25 years; however, most of the leases have options
providing for additional lease terms ranging from 5 to 25 years at terms
substantially the same
<PAGE>
29
as the initial terms. It is expected that real property leases will be
renewed upon expiration. The leases for delivery equipment are primarily
for a duration of five to ten years and it is expected that most will be
replaced by leases on similar equipment.
In addition to fixed minimum rentals, many of the Company's leases
require contingent rental payments. Contingent rentals for real property
are based on a percentage of sales. Contingent rentals for delivery
equipment are based on the number of miles driven.
Presented below is an analysis of the property under capital leases
and the related lease obligations included in the accompanying consolidated
balance sheets:
July 1, 1995 July 2, 1994
------------ ------------
Property under capital leases:
Real property . . . . . . . . . . . $31,470 $34,428
Delivery equipment . . . . . . . . 0 2,161
------- -------
31,470 36,589
Less accumulated amortization . . . 18,941 22,487
------- -------
$12,529 $14,102
======= =======
Capitalized lease obligations
(interest at 8% to 18%):
Current . . . . . . . . . . . . . . $ 1,526 $1,482
Noncurrent . . . . . . . . . . . . 18,919 20,445
------ ------
$20,445 $21,927
======= =======
A schedule by years of future minimum lease payments required under
capital leases (together with the present value of the lease payments) and
operating leases (net of sublease rentals) having initial or remaining
noncancelable lease terms in excess of one year as of July 1, 1995, is as
follows:
Operating Capital
Leases Leases
------------ ------------
Fiscal year:
1996 . . . . . . . . . . . . . . . $40,380 $4,168
1997 . . . . . . . . . . . . . . . 40,041 4,130
1998 . . . . . . . . . . . . . . . 39,131 4,033
1999 . . . . . . . . . . . . . . . 37,415 3,993
2000 . . . . . . . . . . . . . . . 35,788 3,950
Subsequent years . . . . . . . . . . 317,432 15,462
-------- ------
Total minimum lease payments . . . . $510,187 35,736
======== ======
Less estimated executory costs
included in total minimum lease
payments . . . . . . . . . . . . . 4,157
------
Net minimum lease payments . . . . . 31,579
Less estimated interest . . . . . . . 11,134
------
Present value of net future minimum
lease payments . . . . . . . . . . . $20,445
=======
Contingent rentals for the preceding capital leases and rental expense
for the operating leases are as follows:
<PAGE>
30
Fiscal Year Ended
--------------------------------
July 1, 1995 July 2, 1994 July 3, 1993
------------- ------------- ------------
Contingent rentals on capital leases . $ 291 $ 338 $ 452
======= ======= =======
Rental expense on operating
leases:
Real property:
Minimum rentals . . . . . . . . . . $39,511 $34,586 $34,682
Contingent rentals . . . . . . . . 625 842 890
Equipment:
Minimum rentals . . . . . . . . . . 4,902 5,514 3,912
Contingent rentals . . . . . . . . 6,287 5,478 6,165
------- ------- -------
$51,325 $46,420 $45,649
======= ======= =======
The capitalized lease obligation of store properties leased under
capital leases from a joint venture in which the Company maintains a 50%
ownership interest was approximately $12,868 and $13,586 at July 1, 1995
and July 2, 1994, respectively.
10. REPURCHASE OF COMMON STOCK
On August 13, 1992, the Company entered into stock purchase agreements
with the Estates of Angelo J. Bruno and Lee J. Bruno (former executive
officers of the Company) to purchase an aggregate of 3,600,000 shares of
the Company's common stock at a price of $12.50 per share. The agreements
allowed the Estates to increase the number of shares of common stock to be
purchased by the Company up to an aggregate of 400,000 additional shares.
Under this agreement, and other previously existing stock purchase
agreements, the Company purchased 3,943,726 shares of common stock at a
total cost of $49,568, including acquisition costs.
11. COMMITMENTS AND CONTINGENCIES
Litigation
In 1991, the Company received a favorable termination letter with
respect to the termination of the employee pension plan of a supermarket
chain acquired by the Company in 1989. Pursuant to that termination,
distributions were made to all participants of that employee pension plan.
After all of the benefit liabilities were paid, remaining plan assets of
approximately $2,700 were transferred to the Company as a reversion of
excess pension assets. On June 15, 1992, the Company received a letter
from the Pension Benefit Guaranty Corporation ("PBGC") contending that
inappropriate actuarial assumptions were used to determine the value of the
employee's benefits distributed and that additional distributions must be
made to numerous former participants of said plan. In August 1994, the
Company filed suit in the U.S. District Court for the Northern District of
Alabama challenging the PBGC's determination. In April 1995, the District
Court entered summary judgment against the Company and in favor of the
PBGC. The Company has appealed the District court's ruling to the U.S.
Court of Appeals for the Eleventh Circuit. The ultimate resolution of this
matter is currently unknown; thus, no accrual has been recorded by the
Company. The Company believes its liability, if any, in connection with
this matter will not exceed $2,700, plus accrued interest.
In addition, the Company is a party to various legal and taxing
authority proceedings incidental to its business. In the opinion of
management, the ultimate liability with respect to these actions will not
materially affect the financial position or results of operations of the
Company.
<PAGE>
31
Store Expansion
The Company's store expansion activities are primarily accomplished
through the lease of facilities or the acquisition of sites and
self-construction. Commitments involving facilities under construction at
July 1, 1995 were approximately $3,611.
MANAGEMENT'S REPORT
Primary responsibility for the integrity and objectivity of the
financial information included in this annual report rests with management.
The consolidated financial statements in this report have been prepared in
accordance with generally accepted accounting principles and properly
include some amounts that are based on management's best estimates and
judgments.
The Company maintains an internal control structure designed to
provide reasonable assurance that transactions are executed in accordance
with proper authorization; that all such transactions are properly recorded
and summarized to produce reliable financial records and reports; that
assets are safeguarded; and that the accountability for assets is
maintained. Management believes this internal control structure, augmented
by its internal auditing function, assures the adequacy and quality of
financial reporting.
Arthur Andersen LLP, the Company's independent public accountants,
evaluates our internal control structure to the extent they consider
necessary in order to plan their audit and determine the nature and extent
of testing required to support their opinion on the consolidated financial
statements. Their report contains an independent, informed judgment as to
the fair presentation, in all material respects, of the Company's
consolidated financial statements.
The Board of Directors, through the activities of its Audit Committee,
participates in the reporting of financial information by the Company. The
Audit Committee meets regularly with the Company's independent public
accountants to discuss the scope and results of their audit work.
Management believes the consolidated financial statements and related
financial information in this report are accurate in all material respects
and that they were prepared in accordance with appropriate and generally
accepted accounting principles.
<PAGE>
32
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Bruno's, Inc.:
We have audited the accompanying consolidated balance sheets of
BRUNO'S, INC. (an Alabama corporation) AND SUBSIDIARIES as of July 1, 1995
and July 2, 1994, and the related consolidated statements of income,
shareholders' investment and cash flows for each of the three fiscal years
in the period ended July 1, 1995. 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, the financial statements referred to above present
fairly, in all material respects, the financial position of Bruno's, Inc.
and subsidiaries as of July 1, 1995 and July 2, 1994 and the results of
their operations and their cash flows for each of the three fiscal years in
the period ended July 1, 1995 in conformity with generally accepted
accounting principles.
Arthur Andersen LLP
Birmingham, Alabama
August 18, 1995
<PAGE>
33
BRUNO'S INC. AND SUBSIDIARIES
UNAUDITED QUARTERLY FINANCIAL DATA
FISCAL YEARS ENDED JULY 1, 1995 AND JULY 2, 1994
(Dollar Amounts in Thousands, Except Per Share Amounts)
Fiscal Year Ended July 1, 1995 (52 Weeks)
------------------------------------------------------
First Second Third Fourth
12 Weeks 14 Weeks 14 Weeks 12 Weeks Total
-------- -------- -------- -------- ----------
NET SALES $653,621 $784,120 $763,274 $668,554 $2,869,569
GROSS PROFIT 156,045 185,126 175,028 156,814 673,013
NET INCOME (LOSS) 11,532 14,070 (4,575)(1) 12,315 33,342
EARNINGS PER COMMON SHARE:
Net income (loss) $0.15 $0.18 $(0.06)(1) $0.16 $0.43
Fiscal Year Ended July 1, 1994 (52 Weeks)
------------------------------------------------------
First Second Third Fourth
12 Weeks 14 Weeks 14 Weeks 12 Weeks Total
-------- -------- -------- -------- ----------
NET SALES $640,911 $768,244 $764,602 $660,931 $2,834,688
GROSS PROFIT 147,831 172,878 173,359 155,033 649,101
NET INCOME BEFORE
EXTRAORDINARY ITEM 9,200(2) 9,321 9,441 12,619 40,581
NET INCOME 5,912(3) 9,321 9,441 12,619 37,293
EARNINGS PER COMMON SHARE:
Net income before
extraordinary item $0.12 $0.12 $0.12 $0.16 $0.52
Net income 0.08(3) 0.12 0.12 0.16 0.48
(1) In the third quarter of the fiscal year ended July 1, 1995,
the Company completed an actuarially based evaluation of
self insurance reserves for workers' compensation and
general liability claims. Based on this evaluation, an
adjustment to increase recorded reserves by $22,178 ($13,750
net of income taxes) was recorded as a change in accounting
estimate.
(2) In the first quarter of the fiscal year ended July 2, 1994
the Company recorded an additional tax provision of $2,224
to retroactively restate the current and deferred income tax
liabilities to reflect the change in federal income tax
rates from 34.0% to 35.0% in connection with the Omnibus
Budget Reconciliation Act of 1993.
(3) In the first quarter of the fiscal year ended July 2, 1994
the Company redeemed $142,750 of its Convertible
Subordinated Debentures. The early extinguishment of this
debt resulted in an extraordinary loss of $3,288 ($.04 per
share), net of the applicable tax benefit.
<PAGE>
34
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
On September 28, 1995, the Company dismissed Arthur Andersen LLP
as its independent accountants. The reports of Arthur Andersen LLP on the
financial statements for the past two years contained no adverse opinion or
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principle. The Company's Audit Committee
participated in and approved the decision to change independent
accountants.
In connection with its audit for the two most recent fiscal
years and through September 28, 1995, there have been no disagreements with
Arthur Andersen LLP on any matter of accounting principle or practice,
financial statements disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of Arthur Andersen LLP,
would have caused them to make reference in their report on the financial
statements for such years.
The Company has requested that Arthur Andersen LLP furnish it
with a letter addressed to the SEC stating whether or not it agrees with
the above statements. A copy of such letter, dated September 28, 1995, is
filed as Exhibit 16 to this Form 10-K.
The Company engaged Deloitte & Touche LLP as its new independent
accountants and tax advisors as of September 28, 1995. During the two most
recent years and through September 28, 1995, the Company has not consulted
with Deloitte & Touche LLP on items which (1) were or should have been
subject to SAS 50 or (2) concerned the subject matter of a disagreement or
reportable event with the former auditor (as described in Regulation SK
Item 304(a)(2)).
<PAGE>
35
PART III
Item 10. Directors and Executive Officers of the Registrant
A. Directors and Executive Officers
Name Age Position
- - ---- --- --------
<TABLE>
<S> <C> <C>
William J. Bolton 49 Chairman of the Board of Directors and
Chief Executive Officer of the Company
since August 1995. President of Jewel
Food Stores from 1991 to August 1995 and
Chief Operating Officer-Markets of
American Stores Company from April 1995
to August 1995.
Henry R. Kravis 51 Director of the Company since August 1995.
General Partner, KKR. Member of the Board of
Directors of American Re Corporation, AutoZone,
Inc., Borden, Inc., Duracell International Inc.,
Flagstar Companies, Inc., Flagstar Corporation,
IDEX Corporation, K-III Communications Corp.,
Owens-Illinois, Inc., Owens-Illinois Group, Inc.,
Safeway Inc., The Stop & Shop Companies, Inc.,
Union Texas Petroleum Holdings, Inc., Walter
Industries, Inc. and World Color Press, Inc.
George R. Roberts 51 Director of the Company since August
1995. General Partner, KKR. Member of
the Board of Directors of American Re
Corporation, AutoZone, Inc., Borden,
Inc., Duracell International Inc.,
Flagstar Companies, Inc., Flagstar
Corporation, IDEX Corporation, K-III
Communications Corp., Owens-Illinois,
Inc., Owens-Illinois Group, Inc., Red
Lion Properties, Inc., Safeway Inc., The
Stop & Shop Companies, Inc., Union Texas
Petroleum Holdings, Inc., Walter
Industries, Inc. and World Color Press,
Inc.
Paul E. Raether 48 Director of the Company since August 1995.
General Partner, KKR. Member of the Board of
Directors of Duracell International Inc., Flagstar
Companies, Inc., Flagstar Corporation, Fred Meyer,
Inc., IDEX Corporation, and The Stop & Shop
Companies, Inc.
James H. Greene, Jr. 44 Director of the Company since August
1995. General Partner, KKR. Member of
the Board of Directors of Owens-
Illinois, Inc., Owens-Illinois Group,
Inc., Safeway Inc., The Stop & Shop
Companies, Inc., Union Texas Petroleum
Holdings, Inc. and The Vons Companies,
Inc.
Robert G. Tobin 57 Director of the Company since September 1995.
Chairman of the Board of Directors, Chief
Executive Officer and President of The Stop & Shop
Companies, Inc. Member of the Board of Directors
of First Brands Corporation.
Ronald G. Bruno 43 Director of the Company since 1983. Chairman of
the Board from December 1991 to August 1995, Chief
Executive Officer of the Company from October 1990
to August 1995 and President of the Company from
1986 to 1994. Member of the Board of Directors of
SouthTrust Bank of Alabama, Books-A-Million, Inc.
and Russell Corp.
</TABLE>
<PAGE>
36
<TABLE>
<S> <C> <C>
Nils P. Brous 30 Director of the Company since August 1995.
Executive of KKR. Prior thereto, associate,
Goldman, Sachs & Co. Member of the Board of
Directors of Canadian General Insurance Group
Limited and Granum Communications, Inc.
Paul F. Garrison 66 President and Chief Operating Officer since April
1994. Senior Executive Vice President--Human
Resources and Distribution from July 1991 to April
1994.
Glenn J. Griffin 57 Executive Vice President, Chief Financial Officer
and Treasurer since 1980, Assistant Secretary
since July 1992, and Secretary from 1980 to July
1992.
R. Michael Conley 44 Secretary since July 1992, Corporate
Counsel since July 1989 and Assistant
Secretary from 1988 to July 1992.
</TABLE>
Directors shall be elected by the shareholders at each annual
meeting (except directors may be elected at special meetings, such as the
one held to approve the Merger on August 18, 1995) and shall hold office
until the next annual meeting of shareholders. The officers are appointed
by the Board of Directors and serve at its discretion.
Ronald G. Bruno is the nephew of Joseph S. Bruno, the former Chairman
Emeritus of the Board of Directors.
<PAGE>
37
Item 11. Executive Compensation
The following table summarizes the compensation paid to or
accrued by the Company for the chief executive officer and the other four
most highly compensated executive officers of the Company during the last
three fiscal years. Subsequent to the end of fiscal 1995, (i) Ronald G.
Bruno resigned as Chief Executive Officer and Chairman of the Board of
Directors and William J. Bolton succeeded him in those positions and (ii)
Kenneth J. Bruno resigned as Executive Vice President. The remaining
executive officers discussed below continue to be executive officers.
<TABLE><CAPTION>
Long-Term Compensation
Annual Compensation Awards All Other Compensation
------------------------------ ---------------------- -----------------------
Other
Annual Options by Deferred
Compen- Restricted No. of Profit Compensation
Name/Position Year Salary Bonus sation Stock Awards Shares Sharing (1) (2)
- - -------------------------------------------- ---- -------- ------- ------- ------------ ------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ronald G. Bruno, 1995 $325,000 $162,500 -0- -0- 50,000 $3,000 -0-
Chairman of Board and CEO 1994 300,000 45,000 -0- -0- 50,000 11,617 -0-
1993 305,769 45,000 -0- -0- 50,000 7,015 51,607
Paul F. Garrison, 1995 $290,000 $145,000 -0- -0- 25,000 $3,000 $358,998
President & Chief Operating Officer 1994 260,381 39,250 -0- -0- 25,000 10,709 38,624
1993 259,904 38,250 -0- -0- 25,000 5,963 235,841
1995 $255,000 $127,500 -0- -0- 25,000 $3,000 $29,028
Glenn J. Griffin, 1994 235,000 35,250 -0- -0- 25,000 10,122 7,838
Executive Vice President, CFO, Treasurer 1993 239,520 35,250 -0- -0- 25,000 5,495 70,077
Kenneth J. Bruno, 1995 $177,000 $88,500 -0- -0- 25,000 $3,000 $6,147
Executive Vice President 1994 165,000 24,750 -0- -0- 25,000 7,590 4,090
1993 150,000 22,500 -0- -0- 25,000 3,450 23,976
R. Michael Conley 1995 $135,000 $67,500 -0- -0- 17,500 $3,000 $5,377
Secretary 1994 $110,000 $16,500 -0- -0- 17,500 5,060 4,725
1993 90,000 $13,500 -0- -0- 17,500 2,070 17,153
</TABLE>
(1) The amounts listed in this column represent the Company's
contributions under its Profit Sharing Plan.
(2) The amounts listed in this column represent the amounts accrued by the
Company under Employment and Deferred Compensation Agreements to
provide future deferred compensation benefits for its executives.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Company, whose members are
listed below, is composed entirely of non-employee Directors. The
Committee reviews and approves all compensation arrangements for executive
officers and, in that regard, has developed compensation policies for the
executives which seek to enhance the profitability of the Company with an
appropriate balance between long-term and short-term profitability goals
and to assure the ability of the Company to attract and retain executive
employees with competitive compensation. Actions by the Committee are
reported to the Board and, in appropriate cases, ratified by the Board
prior to implementation.
The compensation program of the Company seeks specifically to
motivate the executives of the Company to achieve objectives which benefit
the Company within their respective areas of responsibility, with
particular emphasis on continued growth in revenues, expense control,
operating efficiency, and the ultimate realization of profits for the
Company, approximately equal weight being given to each of these criteria
in evaluating performance.
The Company has sought to align the interests of the executives
with the interests of the shareholders through a stock option plan, a
restricted stock bonus plan, and an incentive bonus plan based on the
Company's profitability.
Base salary levels for the Company's executive officers,
including the Chief Executive Officer, are set so that the overall cash
compensation package for executive officers, including bonus
<PAGE>
38
opportunity, compares favorably to companies with which the Company
competes for executive talent. In determining salaries, the Compensation
Committee also takes into account a number of factors, which primarily
include individual experience and performance, the officer's level of
responsibility, the cost of living and historical salary levels. The
measures of individual performance considered include, to the extent
applicable to an individual executive officer, a number of quantitative and
qualitative factors such as the Company's historical and recent financial
performance, the individual's achievement of particular nonfinancial goals
within his or her responsibility, and other contributions made by the
officer to the Company's success. The Compensation Committee has not found
it practicable to, and has not attempted to, assign relative weights to the
specific factors considered in determining base salary levels, and the
specific factors used may vary among officers. As is typical for most
companies, payment of base salary amounts generally is not conditioned upon
the achievement of any specific, pre-determined performance targets.
In addition to base salary, each executive, including the CEO,
may earn an incentive equal to approximately 50% of base pay under the
Company's incentive bonus plan under which bonuses are based on the degree
to which the Company achieves earnings per share objectives established by
the Committee at the beginning of each year. Except for the incentive
bonus program, the compensation policies of the Company are general and
subjective both as to salary and as to the other components of the
compensation program.
The Company's compensation program also includes benefits
typically offered to executives of similar businesses to promote management
stability, consisting of a profit sharing plan, deferred compensation
agreements and control change agreements.
The fiscal 1995 compensation of Ronald G. Bruno, the Company's
Chief Executive Officer, was based on factors applicable to the Company's
executive officers, discussed above, as well as certain subjective factors,
including the leadership provided by him in his role as CEO. The salaries
of all of the executives are set based on a review of salaries paid by
other retail supermarket chains of a similar size to that of the Company
for executives of similar experience and skills. It uses compensation
surveys of supermarket retailers as a competitive reference but does not
determine its compensation practices according to survey salaries.
Legislation enacted in 1993 imposes new limits on the tax
deductibility of executive compensation. The Committee's policy is to
maximize the tax deductibility of executive compensation to the extent
consistent with its responsibility to effectively compensate executives
based on performance.
Compensation Committee (as of July 1, 1995)
Richard Cohn
Bart Starr
Judy Merritt
Stock Option Grants
The Company maintains an Employee Incentive Stock Option Plan for
its employees. Options granted to employees under the Employee Incentive
Stock Option Plan vested as a result of the Merger. The following table
shows information concerning options to purchase Common Stock granted
with respect to fiscal 1995 to the named executive officers pursuant
to the Company's Employee Incentive Stock Option Plan.
<PAGE>
39
Option Grants in Last Fiscal Year
<TABLE><CAPTION>
Potential Realizable Value
at Assumed Annual Rates
% of Total of Stock Price
Options Appreciation for
Granted to Option Terms(2)
Employees Excercise or ----------------------
Options in Base Price Expiration
Name Granted(#)(1) Fiscal Year ($/Share) Date 5%($) 10%($)
- - ---------------- ------------- ----------- ------------ ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Ronald Bruno 50,000 11.09% $9.375 2/9/05 $295,000 $747,000
Paul F. Garrison 25,000 5.55% $9.375 2/9/05 147,000 374,000
Glenn J. Griffin 25,000 5.55% $9.375 2/9/05 147,000 374,000
Kenneth J. Bruno 25,000 5.55% $9.375 2/9/05 147,000 374,000
R. Michael Conley 17,500 3.88% $9.375 2/9/05 103,000 261,000
</TABLE>
(1) All options outstanding were issued under the Company's Employee
Incentive Stock Option Plan.
(2) Based upon the market price on the date of grant and an annual
appreciation at the rate stated of such market price through the
expiration date of such options. The dollar amounts under these
columns are the result of calculations at the 5% and 10% rates set by
the Securities and Exchange Commission and therefore are not intended
to forecast possible future appreciation, if any, of the Company's
stock price. The Company did not use an alternative formula for a
grant date valuation, as the Company is not aware of any formula which
will determine with reasonable accuracy a present value based on
future unknown or volatile factors.
Aggregated Option Exercises and Option Values
The following table shows information concerning the exercise of
stock options during fiscal year 1995 by each of the named executive
officers and the fiscal year-end value of unexercised options. No options
were exercised by the named executive officers during the 1995 fiscal year.
<TABLE><CAPTION>
Aggregated Option Exercises in Last Fiscal Year and FY-End Option Values
Value of Value of
Number of Number of Unexercised Unexercised
Shares Unexercised Unexercised In-the-Money In-the-Money
Acquired Value Options at Options at Options at Options at
on Exercise Realized FY-End (#) FY-End (#) FY-End ($) FY-End ($)
Name (Number) (Dollars) Exercisable(1) Unexercisable(1) Exercisable Unexercisable
- - ----------------- ----------- -------- -------------- ---------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Ronald Bruno 0 0 62,486 87,514 $226,000 $255,000
Paul F. Garrison 0 0 50,000 25,000 184,000 56,000
Glenn J. Griffin 0 0 50,000 25,000 184,000 56,000
Kenneth J. Bruno 0 0 50,000 25,000 184,000 56,000
R. Michael Conley 0 0 35,000 17,500 129,000 39,000
</TABLE>
(1) All options outstanding were issued under the Company's Employee
Incentive Stock Option Plan.
Profit Sharing and 401(k) Retirement Plan
The Company maintains a profit sharing and deferred retirement
plan pursuant to Section 401(k) of the Internal Revenue Code of 1986, as
amended. All employees who are not eligible to participate in a union-
sponsored or co-sponsored qualified retirement plan will participate after
one year of service and attainment of age 21.
A separate salary reduction account and matching employer
contribution account are maintained for each plan participant.
Participants make contributions to their salary reduction account on a
payroll deduction basis. The Company makes matching contributions, on a
dollar-for-dollar basis, up to two percent (2%) of compensation, to the
employee's matching employer contribution account. The
<PAGE>
40
Company may also make contributions to the employees' discretionary
contribution account on a discretionary basis in an amount determined
annually by the Board of Directors.
All contributions are paid to AmSouth Bank of Alabama, N.A., as
Trustee, to hold, invest and reinvest the funds. All accounts are vested
at death, retirement or disability. Upon termination of service,
discretionary accounts are not vested until the fifth year of service.
Subject to certain time and amount restrictions and tax penalties,
participants may make early withdrawals from their salary reduction
accounts. The total of employer and employee contributions for each
participant, annually, cannot exceed the lesser of 25% of compensation or
$30,000.
A participant will be entitled to receive a distribution of his
vested accounts upon termination of employment, including retirement,
disability or death. Payment will be made in the form of either a lump sum
or installments paid over a period of 15 years. A participant's interest
in the Company's discretionary contributions begins to vest in the fourth
year and becomes 100% vested after the participant completes five (5) years
of service or upon death, disability or normal retirement. All other
contributions (whether made by the Company or the participant) are fully
vested at all times.
Other Agreements with Officers and Directors
The five executive officers of the Company during the fiscal year
ended July 1, 1995, Ronald G. Bruno, Paul F. Garrison, Glenn J. Griffin,
Kenneth J. Bruno, and R. Michael Conley (the "Executive Officers"), along
with 14 other employees of the Company, are parties to Employment
Continuity Agreements (the "Employment Continuity Agreements") with the
Company which provide for lump sum cash payments equal to three times, in
the case of Ronald G. Bruno, two times, in the case of the other Executive
Officers, and one time, in the case of the other employees, the sum of his
annual base salary at the time of termination, plus his incentive
compensation bonus for the year preceding termination. Benefits under the
Employment Continuity Agreements are payable if a covered employee's
employment is terminated by the employee for "good reason" or by the
Company without "cause" within one year following a "change of control."
The Executive Officers are also parties to Employment and Deferred
Compensation Agreements (the "Deferred Compensation Agreements") with the
Company. The Deferred Compensation Agreements provide for monthly payments
of retirement benefits to such persons equal to 5% of the average annual
compensation for the three fiscal years ended immediately prior to the
initial payment date for a period of 180 months upon the earlier of
retirement after age 65, retirement after 25 years of service, disability,
death or the occurrence of an event which would entitle the employee to
receive benefits under his Employment Continuity Agreement.
Paul F. Garrison, Glenn J. Griffin and R. Michael Conley have continued
in the employ of the Company following the Merger in order to accomplish in
an orderly fashion the transition of ownership of the Company contemplated
by the Merger Agreement. Ronald G. Bruno remained in the employ of the
Company after the Merger until the appointment of William J. Bolton as Chief
Executive Officer. Kenneth J. Bruno resigned in late September 1995. In
general, if any such employee remains in the employ of the Company for at
least one year following the August 18, 1995 (or such shorter period as may
be determined by the Board of Directors of the Company following the Merger),
such employee will be entitled to receive, on the earlier of (i) the
thirtieth day after such employee's replacement has commenced employment
and (ii) one year following August 18, 1995 (the "Date of Payment"), any
amounts that would have been payable to him under the terms of his Employment
Continuity Agreement as of the end of the fiscal year ending on July 1, 1995
if he had been terminated by the Company without Good Cause (as defined in
the Employment Continuity Agreement) together with the retirement benefit
that would have been payable to him under the terms of the relevant Deferred
Compensation Agreement; provided that commencing on August 18, 1995 and
continuing during the post-Merger employment period with respect to the
remaining Executive Officers, each of such Executive Officers shall receive
from the Company a monthly salary based on 13 pay periods equal to the total
base salary and bonus to which such employee was entitled for the fiscal
year ended July 1, 1995, divided by 13 (provided that no further bonus or
incentive compensation shall be payable for such periods). In connection
with its approval of the Merger,
<PAGE>
41
the Board of Directors of the Company has approved the payment to the
Executive Officers of a lump sum payment, on termination of employment, of
the benefits payable under the Deferred Compensation Agreements based on a
discount rate of 8% per annum.
The following table reflects the estimated value of the payments,
based upon certain assumptions with respect to annual compensation, to
which the Executive Officers will be entitled under the Employment
Continuity Agreements and the Deferred Compensation Agreements as of the
end of the fiscal year ended July 1, 1995 and the stock options which
vested as a consequence of the Merger.
Employment Deferred Value of Options
Name Continuity Compensation(1) to Vest
---- ---------- ---------------- ----------------
Ronald G. Bruno . . . . . $895,000 $2,077,000 $255,000
Paul F. Garrison . . . . 818,000 1,813,000 56,000
Glenn J. Griffin . . . . 722,000 1,628,000 56,000
Kenneth J. Bruno . . . . 257,000 1,102,000 56,000
R. Michael Conley . . . . 405,000 759,000 39,000
_____________________
(1) Present value of 180 month payout based on a discount rate of 8% per
annum.
The estimated total amount of all such payments to Executive Officers
is $10,746,000.
Shares of Bruno's Common Stock held by officers and Directors of the
Company on the date of the Merger were converted into the right to receive
the same consideration as shares of Bruno's Common Stock held by other
shareholders. Company stock options held by officers and Directors of the
Company were treated in the same manner as Company stock options held by
other shareholders, except that no such officers of Directors were entitled
to a cash payment of the excess of $12.00 over the exercise price per share
subject to such Company stock option.
Company stock options held by the five Directors of the Company at the
time of the Merger who were not employed by the Company (Benny M. LaRussa,
Jr., Richard Cohn, Judy M. Merritt, J. Mason Davis, Jr. and Bart Starr),
which had not as yet vested, vested as a result of the Merger, providing a
benefit above the exercise price of those options of approximately $77,500
to each of such non-employee Directors for an aggregate gain of
approximately $387,500.
Pursuant to the Merger Agreement, the Company agreed for six years
after August 18, 1995 to indemnify all former Directors and officers of the
Company and its subsidiaries and, subject to certain limitations, maintain
for six years the directors' and officers' insurance and indemnification
policy in effect on the date of the Merger.
Employment Contract with William Bolton
On August 21, 1995, William J. Bolton succeeded Ronald G. Bruno
as the Company's Chairman and Chief Executive Officer. The Company and Mr.
Bolton have entered into an employment agreement pursuant to which Mr.
Bolton will (i) receive a signing bonus of $300,000, (ii) receive an annual
base salary of $400,000 for three years commencing on September 1, 1995,
(iii) receive an annual bonus, subject to the attainment of certain performance
goals, in an amount not to exceed 100% of his base salary, (iv) purchase
$1,000,000 of Bruno's Common Stock at $12.00 per share, to be partially
funded by a loan from the Company, (v) participate in incentive
compensation plans of the Company and (vi) receive relocation expenses.
The Company has also agreed to grant Mr. Bolton options to purchase, at a
price of $12.00 per share, up to 250,000 shares of Bruno's Common Stock,
which shall become exercisable at a rate of 20% per year, subject, with
respect to half of such options, to the attainment of certain annual and
cumulative performance goals.
<PAGE>
42
Compensation of Directors
During the fiscal year ended July 1, 1995, the Company paid each
non-employee director of the Company a director's fee of $2,500 per quarter
plus $1,000 for each Board of Directors and Committee meeting attended.
The Audit Committee and the Compensation Committee are the only committees
of the Board of Directors.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the
beneficial ownership of Common Stock as of September 26, 1995, by
(i) each director, (ii) the chief executive officers and each of the other
most highly compensated executive officers of the Company, (iii) all
executive officers and directors as a group and (iv) the Company's
principal stockholders. Other than as set forth in the table below, there
are no persons known to the Company to beneficially own more than 5% of the
Common Stock.
Name and Address Amount & Nature of Percentage of
of Beneficial Owner Beneficial Ownership Common Stock
------------------- -------------------- ------------
KKR Associates . . 30,833,333(1)(2) 88%
9 West 57th Street
New York, NY 10019
William J. Bolton . --- (3) -----
P.O. Box 2486
Birmingham, AL 35201
Paul F. Garrison . 5,388(4) *
P.O. Box 2486
Birmingham, AL 35201
Glenn J. Griffin . 6,772(5) *
P.O. Box 2486
Birmingham, AL 35201
R. Michael Conley . 3,197 *
P.O. Box 2486
Birmingham, AL 35201
Henry R. Kravis . . ----- -----
9 West 57th Street
New York, NY 10019
George R. Roberts . ----- -----
2800 Sand Hill Road
Suite 200
Menlo Park, CA 94025
Paul E. Raether . . ----- -----
9 West 57th Street
New York, NY 10019
James H. Greene, Jr. ----- -----
2800 Sand Hill Road
Suite 200
Menlo Park, CA 94025
Ronald G. Bruno . . 92,787(6) *
Two Perimeter Park South
Suite 300 East
B'ham, AL 35243
<PAGE>
43
Name and Address Amount & Nature of Percentage of
of Beneficial Owner Beneficial Ownership Common Stock
------------------- -------------------- ------------
Robert G. Tobin ----- -----
1385 Hancock Street
Quincy, MA 02169
Nils P. Brous . . . ----- -----
9 West 57th Street
New York, NY 10019
All executive officers and 108,144 *
directors as a group (11
persons) . . . . . . . .
___________________________
* Owns less than 1% of the total outstanding Common Stock.
(1) Shares of Common Stock shown as owned by KKR Associates are owned of
record by limited partnerships affiliated with KKR (the "Common Stock
Partnerships") of which KKR Associates is the sole general partner and
as to which it possesses sole voting and investment power. Messrs.
Kravis, Roberts, Raether and Green (all of whom are directors of the
Company) and Robert I. MacDonnell, Michael W. Michelson, Saul A. Fox,
Michael T. Tokarz, Perry Golkin, Clifton S. Robbins, Scott M. Stuart
and Edward A. Gilhuly, as the general partners of KKR Associates, may
be deemed to share beneficial ownership of such shares. Nils Brous
is a limited partner of KKR Associates. Robert G. Tobin is a limited
partner of one of the Common Stock Partnerships. Each of these
individuals disclaims beneficial ownership of any shares owned by KKR
Associates.
(2) Includes 10 million shares that will be issued by the Company upon
exercise of the Warrants.
(3) See "Employment Contract with William Bolton."
(4) Includes 2,422 shares owned directly by Paul F. Garrison, 59 shares
held jointly with his wife, and 782 shares owned by his wife.
(5) Includes 4,580 shares owned directly by Glenn J. Griffin, 45 shares
owned by his wife, and 22 shares held as custodian for minors.
(6) Includes 31,892 shares owned directly by Ronald G. Bruno, 284 shares
owned jointly with his wife, 177 shares owned by his wife, 206 shares
held as a Trustee for his minor son, 5,668 shares held as co-executor
of the Estate of Angelo Bruno, and 50,310 shares held as co-trustee
for various family members.
Item 13. Certain Relationships and Related Transactions
KKR will render during the current fiscal year management,
consulting and financial services to the Company and its subsidiaries for
fees that have not yet been determined. Such fee will be no less favorable
than that which could be obtained for comparable services from unaffiliated
third parties. Messrs. Kravis, Roberts, Raether and Greene are general
partners of KKR and Mr. Brous is an executive of KKR.
The Common Stock Partnerships hold an aggregate of 20,833,333
million shares of Common Stock as well as Warrants to acquire 10 million
additional shares to be issued upon exercise of the Warrants. These shares
of Common Stock and the Warrants were acquired in connection with the
Merger on August 18, 1995 in exchange for shares of stock of Crimson
Acquisition Corp. owned by the Common Stock Partnerships. The Warrants are
exercisable at a price of $12.00 per share, subject to adjustment. The
general partner of the Common Stock Partnerships is KKR Associates, a New
York limited
<PAGE>
44
partnership of which Henry R. Kravis, George R. Roberts, Paul E. Raether,
Robert I. MacDonnell, Michael W. Michelson, Saul A. Fox, James H. Greene,
Jr., Michael T. Tokarz, Perry Golkin, Clifton S. Robbins, Scott H. Stuart
and Edward A. Gilhuly are the general partners. KKR Associates has sole
voting and investment power with respect to such shares.
The Common Stock Partnerships have the right, under certain
circumstances and subject to certain conditions, to require the Company to
register under the Securities Act of 1933, as amended, shares of Common
Stock and Warrants held by them. The Common Stock Partnerships have both
demand and "piggyback" registration rights. Under the agreements providing
for registration rights, the Company will pay all expenses in connection
with any such registration. The Company expects to grant certain senior
managers certain "piggyback" registration rights with respect to certain
shares of Common Stock to be acquired by such senior managers.
Joseph S. Bruno, the former Chairman Emeritus of the Company, is a
director of Big B, Inc., as is Richard Cohn, a former director of the
Company. During the fiscal year ended July 1, 1995, the Company received
lease payments of $524,000 under standard commercial leases relating to 16
locations. Future minimum lease payments under operating leases having
initial or non-cancelable lease terms in excess of one year payable to the
Company by Big B, Inc. are $2,900,000.
During the fiscal year ended July 1, 1995, the Company purchased
$342,277 of inventory from C&M Food Distributors, Inc., a corporation which
is owned by Benny M. LaRussa, Jr., a former director of the Company, and
his children.
<PAGE>
45
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
The following is an index of the financial statements, schedules and
exhibits included in this Report or Incorporated herein by reference:
(a) 1. Financial Statements:
Consolidated Balance Sheets as of July 1, 1995 and July 2, 1994.
Consolidated Statements of Income for Fiscal Years Ended July 1, 1995,
July 2, 1994 and July 3, 1993.
Consolidated Statements of Shareholders' Investment for Fiscal Years
Ended July 1, 1995, July 2, 1994 and July 3, 1993.
Consolidated Statements of Cash Flows for Fiscal Years Ended July 1,
1995, July 2, 1994 and July 3, 1993.
Notes to Consolidated Financial Statements
Report of Independent Public Accountants
Management's Report
Unaudited Quarterly Financial Data
2. Schedules to Financial Statements
None
3. Exhibits
The following is an index of the exhibits included in this Annual Report
on Form 10-K or incorporated herein by reference:
2.1 Agreement and Plan of Merger dated as of April 20, 1995 between
Crimson Acquisition Corp. and Bruno's, Inc., as amended on May 18,
1995 (incorporated by reference to Exhibit 10.1 to the Current
Report on Form 8-K dated April 27, 1995 and Exhibit 10.1 to the
Current Report on Form 8-K/A dated May 18, 1995).
3.1 Amended and Restated Articles of Incorporation of the Company.
3.2 By-Laws of the Company.
4.1 Indenture, dated as of August 18, 1995, between the Company and
Marine Midland Bank, as Trustee (incorporated by reference to
Exhibit 4.2 to the Current Report on Form 8-K/A dated August 24,
1995).
4.2 First Supplemental Indenture, dated as of August 18, 1995, between
the Issuer and Marine Midland Bank, as Trustee, relating to the
issuance and sale of $400,000,000 aggregate principal amount of 10-
1/2% Senior Subordinated Notes due 2005 (incorporated by reference
to Exhibit 4.7 to the Current Report on Form 8-K/A dated August 24,
1995).
<PAGE>
46
4.3 Warrant, dated August 18, 1995, to purchase 9,917,400 shares of
Common Stock of the Company.
4.4 Warrant, dated August 18, 1995, to purchase 82,600 shares of Common
Stock of the Company.
4.5 Registration Rights Agreement, dated August 18, 1995, among Crimson
Acquisition Corp., Crimson Associates, L.P. and KKR Partners II,
L.P.
10.1 Amended and Restated Group Term Life Insurance Plan of Bruno's, Inc.,
dated March 15, 1984 (incorporated by reference to Exhibit 10(h) of
the Company's Annual Report on Form 10-K, dated August 27, 1985).
10.2 Second Amended and Restated Bruno's, Inc. Employee Stock Option Plan
dated October 20, 1989 (incorporated by reference to Exhibit 28 of
Amendment No. 2 to the Form S-8 Registration Statement (No. 2-81642)
of the Company).
10.3 Bruno's, Inc. Profit Sharing Retirement Plan (incorporated by
reference to Exhibit 10(h) of the Company's Annual Report on Form 10-
K, dated August 9, 1989).
10.4 Form of Restricted Stock Bonus Plan of Bruno's, Inc. (incorporated by
reference to Exhibit 10(o) of the Company's Annual Report on Form 10-
K, dated September 30, 1988).
10.5 Joint Venture Agreement for PM Associates between SSS Enterprises,
Inc. and Metropolitan Life Insurance Company (incorporated by
reference to Exhibit 10.2 to Form S-1 (No. 33-12239) of Piggly Wiggly
Southern, Inc.).
10.6 Note Purchase Agreement dated as of September 1, 1993, between the
Company and the various purchasers listed on annex 1 thereto
(incorporated by reference to Exhibit 10(r) to the Company's Annual
Report on Form 10-K, dated September 29, 1993).
10.7 Bruno's Inc. Employee Incentive Stock Option Plan, approved by the
Company's Board of Directors on May 6, 1993 (incorporated by reference
to Exhibit 10(s) to the Company's Annual Report on Form 10-K, dated
September 29, 1993).
10.8 Employment and Deferred Compensation Agreement, dated July 22, 1994,
between the Company and Ronald G. Bruno (incorporated by reference to
Exhibit 10(h) to the Company's Annual Report on Form 10-K, dated
September 29, 1994).
10.9 Employment and Deferred Compensation Agreement, dated July 22, 1994,
between the Company and Paul F. Garrison (incorporated by reference to
Exhibit 10(i) to the Company's Annual Report on Form 10-K, dated
September 29, 1994).
10.10 Employment and Deferred Compensation Agreement, dated July 22,
1994, between the Company and Glenn J. Griffin (incorporated by
reference to Exhibit 10(j) to the Company's Annual Report on Form
10-K, dated September 29, 1994).
10.11 Employment and Deferred Compensation Agreement, dated July 22,
1994, between the Company and Kenneth J. Bruno (incorporated by
reference to Exhibit 10(k) to the Company's Annual Report on Form
10-K, dated September 29, 1994).
10.12 Employment and Deferred Compensation Agreement, dated July 22,
1994, between the Company and R. Michael Conley (incorporated by
reference to Exhibit 10(l) to the Company's Annual Report on Form
10-K, dated September 29, 1994).
10.13 Employment Continuity Agreement, dated July 22, 1994, between the
Company and Ronald G. Bruno (incorporated by reference to Exhibit
10(m) to the Company's Annual Report on Form 10-K, dated September
29, 1994).
<PAGE>
47
10.14 Employment Continuity Agreement, dated July 22, 1994, between the
Company and Paul F. Garrison (incorporated by reference to Exhibit
10(n) to the Company's Annual Report on Form 10-K, dated September
29, 1994).
10.15 Employment Continuity Agreement, dated July 22, 1994, between the
Company and Glenn J. Griffin (incorporated by reference to Exhibit
10(o) to the Company's Annual Report on Form 10-K, dated September
29, 1994).
10.16 Employment Continuity Agreement, dated July 22, 1994, between the
Company and Kenneth J. Bruno (incorporated by reference to Exhibit
10(p) to the Company's Annual Report on Form 10-K, dated September
29, 1994).
10.17 Employment Continuity Agreement, dated July 22, 1994, between the
Company and R. Michael Conley (incorporated by reference to Exhibit
10(q) to the Company's Annual Report on Form 10-K, dated September
29, 1994).
10.18 Credit Agreement, dated as of August 18, 1995, among the Issuer,
the several lenders from time to time parties thereto and Chemical
Bank, as Administrative Agent (incorporated by reference to Exhibit
10.1 to the Current Report on Form 8-K/A dated August 24, 1995).
10.19 Amendment to 1994 Employment and Deferred Compensation Agreement,
dated June 9, 1995, by and between the Company and Ronald G. Bruno
(incorporated by reference to Exhibit 10.1 to the Current Report on
Form 8-K dated June 22, 1995).
10.20 Amendment to 1994 Employment and Deferred Compensation Agreement,
dated June 9, 1995, by and between the Company and Paul F. Garrison
(incorporated by reference to Exhibit 10.2 to the Current Report on
Form 8-K dated June 22, 1995).
10.21 Amendment to 1994 Employment and Deferred Compensation Agreement,
dated June 9, 1995, by and between the Company and Glenn J. Griffin
(incorporated by reference to Exhibit 10.3 to the Current Report on
Form 8-K dated June 22, 1995).
10.22 Amendment to 1994 Employment and Deferred Compensation Agreement,
dated June 9, 1995, by and between the Company and Kenneth J. Bruno
(incorporated by reference to Exhibit 10.4 to the Current Report on
Form 8-K dated June 22, 1995).
10.23 Amendment to 1994 Employment and Deferred Compensation Agreement,
dated June 9, 1995, by and between the Company and R. Michael Conley
(incorporated by reference to Exhibit 10.5 ot the Current Report on
Form 8-K dated June 22, 1995).
10.24 Amendment to Employment Continuity Agreement, dated June 9, 1995, by
and between the Company and Ronald G. Bruno (incorporated by
reference to Exhibit 10.6 to the Current Report on Form 8-K dated
June 22, 1995).
10.25 Amendment to Employment Continuity Agreement, dated June 9, 1995, by
and between the Company and Paul F. Garrison (incorporated by
reference to Exhibit 10.7 to the Current Report on Form 8-K dated
June 22, 1995).
10.26 Amendment to Employment Continuity Agreement, dated June 9, 1995, by
and between the Company and Glenn J. Griffin (incorporated by
reference to Exhibit 10.8 to the Current Report on Form 8-K dated
June 22, 1995).
10.27 Amendment to Employment Continuity Agreement, dated June 9, 1995, by
and between the Company and Kenneth J. Bruno (incorporated by
reference to Exhibit 10.9 to the Current Report on Form 8-K dated
June 22, 1995).
10.28 Amendment to Employment Continuity Agreement, dated June 9, 1995, by
and between the Company and R. Michael Conley (incorporated by
reference to Exhibit 10.10 to the Current Report on Form 8-K dated
June 22, 1995).
10.29 Employment Agreement, dated August 21, 1995, between the Company
and William J. Bolton.
16 Letter re Change in Certifying Accountant.
22 List of Subsidiaries.
23 Consent of Arthur Andersen LLP.
27 Financial Data Schedule.
<PAGE>
(b) Reports on Form 8-K:
During the quarter ended July 1, 1995, the following reports on Form 8-K
were filed by the Company:
Current Report on Form 8-K dated April 27, 1995, as amended by the
Current Report on Form 8-K/A dated May 30, 1995 (execution of the
Merger Agreement and the First Amendment thereto).
Current Report on Form 8-K dated May 18, 1995 (extension of the Merger
Agreement diligence period).
Current Report on Form 8-K dated June 12, 1995, as amended by each of
the Current Reports on Form 8-K/A dated July 17, 1995 and August 14,
1995 (post-Merger pro forma financial statements).
Current Report on Form 8-K dated June 22, 1995 (amendments to executive
compensation agreements).
Current Report on Form 8-K dated July 28, 1995 (announcement of the
Merger, delisting of Common Stock, employment of William J. Bolton).
<PAGE>
48
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Bruno's, Inc. has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
BRUNO'S, INC.
(Registrant)
By WILLIAM J. BOLTON
---------------------------------
(William J. Bolton,
Chairman of the Board and
Chief Executive Officer)
By GLENN J. GRIFFIN
---------------------------------
(Glenn J. Griffin,
Executive Vice President, Chief Financial Officer,
Treasurer, Assistant Secretary and Director
(Principal Financial and Accounting 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
Company and in the capacities and on the dates indicated.
Signature Capacity Date
------------- ------------ ------
WILLIAM J. BOLTON Director, Chairman of Sept. 28, 1995
------------------------ the Board and President
(William J. Bolton) (Principal Executive Officer)
HENRY R. KRAVIS Director Sept. 28, 1995
------------------------
(Henry R. Kravis)
GEORGE R. ROBERTS Director Sept. 28, 1995
------------------------
(George R. Roberts)
PAUL E. RAETHER Director Sept. 28, 1995
------------------------
(Paul E. Raether)
<PAGE>
49
Signature Capacity Date
------------- ------------ ------
JAMES H. GREENE, JR. Director Sept. 28, 1995
------------------------
(James H. Greene, Jr.)
NILS P. BROUS Director Sept. 28, 1995
------------------------
(Nils P. Brous)
RONALD G. BRUNO Director Sept. 28, 1995
------------------------
(Ronald G. Bruno)
ROBERT G. TOBIN Director Sept. 28, 1995
------------------------
(Robert G. Tobin)
PAUL F. GARRISON President and Sept. 28, 1995
------------------------ Chief Operating Officer
(Paul F. Garrison)
GLENN J. GRIFFIN Executive Vice President, Sept. 28, 1995
------------------------ Chief Financial Officer,
(Glenn J. Griffin) Treasurer and Assistant
Secretary (Principal
Financial and
Accounting Officer)
R. MICHAEL CONLEY Secretary and Sept. 28, 1995
------------------------ General Counsel
(R. Michael Conley)
<PAGE>
EXHIBIT INDEX
-------------
EXHIBIT
NO. DESCRIPTION
- - ------- ------------
2.1 Agreement and Plan of Merger dated as of April 20, 1995 between
Crimson Acquisition Corp. and Bruno's, Inc., as amended on May 18,
1995 (incorporated by reference to Exhibit 10.1 to the Current
Report on Form 8-K dated April 27, 1995 and Exhibit 10.1 to the
Current Report on Form 8-K/A dated May 18, 1995).
3.1 Amended and Restated Articles of Incorporation of the Company.
3.2 By-Laws of the Company.
4.1 Indenture, dated as of August 18, 1995, between the Company and
Marine Midland Bank, as Trustee (incorporated by reference to
Exhibit 4.2 to the Current Report on Form 8-K/A dated August 24,
1995).
4.2 First Supplemental Indenture, dated as of August 18, 1995, between
the Issuer and Marine Midland Bank, as Trustee, relating to the
issuance and sale of $400,000,000 aggregate principal amount of 10-
1/2% Senior Subordinated Notes due 2005 (incorporated by reference
to Exhibit 4.7 to the Current Report on Form 8-K/A dated August 24,
1995).
4.3 Warrant, dated August 18, 1995, to purchase 9,917,400 shares of
Common Stock of the Company.
4.4 Warrant, dated August 18, 1995, to purchase 82,600 shares of Common
Stock of the Company.
4.5 Registration Rights Agreement, dated August 18, 1995, among Crimson
Acquisition Corp., Crimson Associates, L.P. and KKR Partners II,
L.P.
10.1 Amended and Restated Group Term Life Insurance Plan of Bruno's, Inc.,
dated March 15, 1984 (incorporated by reference to Exhibit 10(h) of
the Company's Annual Report on Form 10-K, dated August 27, 1985).
10.2 Second Amended and Restated Bruno's, Inc. Employee Stock Option Plan
dated October 20, 1989 (incorporated by reference to Exhibit 28 of
Amendment No. 2 to the Form S-8 Registration Statement (No. 2-81642)
of the Company).
10.3 Bruno's, Inc. Profit Sharing Retirement Plan (incorporated by
reference to Exhibit 10(h) of the Company's Annual Report on Form 10-
K, dated August 9, 1989).
10.4 Form of Restricted Stock Bonus Plan of Bruno's, Inc. (incorporated by
reference to Exhibit 10(o) of the Company's Annual Report on Form 10-
K, dated September 30, 1988).
10.5 Joint Venture Agreement for PM Associates between SSS Enterprises,
Inc. and Metropolitan Life Insurance Company (incorporated by
reference to Exhibit 10.2 to Form S-1 (No. 33-12239) of Piggly Wiggly
Southern, Inc.).
10.6 Note Purchase Agreement dated as of September 1, 1993, between the
Company and the various purchasers listed on annex 1 thereto
(incorporated by reference to Exhibit 10(r) to the Company's Annual
Report on Form 10-K, dated September 29, 1993).
10.7 Bruno's Inc. Employee Incentive Stock Option Plan, approved by the
Company's Board of Directors on May 6, 1993 (incorporated by reference
to Exhibit 10(s) to the Company's Annual Report on Form 10-K, dated
September 29, 1993).
<PAGE>
EXHIBIT INDEX
-------------
EXHIBIT
NO. DESCRIPTION
- - ------- ------------
10.8 Employment and Deferred Compensation Agreement, dated July 22, 1994,
between the Company and Ronald G. Bruno (incorporated by reference to
Exhibit 10(h) to the Company's Annual Report on Form 10-K, dated
September 29, 1994).
10.9 Employment and Deferred Compensation Agreement, dated July 22, 1994,
between the Company and Paul F. Garrison (incorporated by reference to
Exhibit 10(i) to the Company's Annual Report on Form 10-K, dated
September 29, 1994).
10.10 Employment and Deferred Compensation Agreement, dated July 22,
1994, between the Company and Glenn J. Griffin (incorporated by
reference to Exhibit 10(j) to the Company's Annual Report on Form
10-K, dated September 29, 1994).
10.11 Employment and Deferred Compensation Agreement, dated July 22,
1994, between the Company and Kenneth J. Bruno (incorporated by
reference to Exhibit 10(k) to the Company's Annual Report on Form
10-K, dated September 29, 1994).
10.12 Employment and Deferred Compensation Agreement, dated July 22,
1994, between the Company and R. Michael Conley (incorporated by
reference to Exhibit 10(l) to the Company's Annual Report on Form
10-K, dated September 29, 1994).
10.13 Employment Continuity Agreement, dated July 22, 1994, between the
Company and Ronald G. Bruno (incorporated by reference to Exhibit
10(m) to the Company's Annual Report on Form 10-K, dated September
29, 1994).
10.14 Employment Continuity Agreement, dated July 22, 1994, between the
Company and Paul F. Garrison (incorporated by reference to Exhibit
10(n) to the Company's Annual Report on Form 10-K, dated September
29, 1994).
10.15 Employment Continuity Agreement, dated July 22, 1994, between the
Company and Glenn J. Griffin (incorporated by reference to Exhibit
10(o) to the Company's Annual Report on Form 10-K, dated September
29, 1994).
10.16 Employment Continuity Agreement, dated July 22, 1994, between the
Company and Kenneth J. Bruno (incorporated by reference to Exhibit
10(p) to the Company's Annual Report on Form 10-K, dated September
29, 1994).
10.17 Employment Continuity Agreement, dated July 22, 1994, between the
Company and R. Michael Conley (incorporated by reference to Exhibit
10(q) to the Company's Annual Report on Form 10-K, dated September
29, 1994).
10.18 Credit Agreement, dated as of August 18, 1995, among the Issuer,
the several lenders from time to time parties thereto and Chemical
Bank, as Administrative Agent (incorporated by reference to Exhibit
10.1 to the Current Report on Form 8-K/A dated August 24, 1995).
10.19 Amendment to 1994 Employment and Deferred Compensation Agreement,
dated June 9, 1995, by and between the Company and Ronald G. Bruno
(incorporated by reference to Exhibit 10.1 to the Current Report on
Form 8-K dated June 22, 1995).
10.20 Amendement to 1994 Employment and Deferred Compensation Agreement,
dated June 9, 1995, by and between the Company and Paul F. Garrison
(incorporated by reference to Exhibit 10.2 to the Current Report on
Form 8-K dated June 22, 1995).
10.21 Amendment to 1994 Employment and Deferred Compensation Agreement,
dated June 9, 1995, by and between the Company and Glenn J. Griffin
(incorporated by reference to Exhibit 10.3 to the Current Report on
Form 8-K dated June 22, 1995).
<PAGE>
EXHIBIT INDEX
-------------
EXHIBIT
NO. DESCRIPTION
- - ------- ------------
10.22 Amendment to 1994 Employment and Deferred Compensation Agreement,
dated June 9, 1994, by and between the Company and Kenneth J. Bruno
(incorporated by reference to Exhibit 10.4 to the Current Report on
Form 8-K dated June 22, 1995).
10.23 Amendment to 1994 Employment and Deferred Compensation Agreement,
dated June 9, 1995, by and between the Company and R. Michael Conley
(incorporated by reference to Exhibit 10.5 ot the Current Report on
Form 8-K dated June 22, 1995).
10.24 Amendment to Employment Continuity Agreement, dated June 9, 1995, by
and between the Company and Ronald G. Bruno (incorporated by
reference to Exhibit 10.6 to the Current Report on Form 8-K dated
June 22, 1995).
10.25 Amendment to Employment Continuity Agreement, dated June 9, 1995, by
and between the Company and Paul F. Garrison (incorporated by
reference to Exhibit 10.7 to the Current Report on Form 8-K dated
June 22, 1995).
10.26 Amendment to Employment Continuity Agreement, dated June 9, 1995, by
and between the Company and Glenn J. Griffin (incorporated by
reference to Exhibit 10.8 to the Current Report on Form 8-K dated
June 22, 1995).
10.27 Amendment to Employment Continuity Agreement, dated June 9, 1995, by
and between the Company and Kenneth J. Bruno (incorporated by
reference to Exhibit 10.9 to the Current Report on Form 8-K dated
June 22, 1995).
10.28 Amendment to Employment Continuity Agreement, dated June 9, 1995, by
and between the Company and R. Michael Conley (incorporated by
reference to Exhibit 10.10 to the Current Report on Form 8-K dated
June 22, 1995).
10.29 Employment Agreement, dated August 21, 1995, between the Company
and William J. Bolton.
16 Letter re Change in Certifying Accountant.
22 List of Subsidiaries.
23 Consent of Arthur Andersen LLP.
27 Financial Data Schedule.
Exhibit 3.1
-----------
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
BRUNO'S, INC.
A. The Articles of Incorporation of the Corporation shall be
amended and restated as set forth below:
1. The name of the Corporation is Bruno's, Inc.
2. The duration of the Corporation is perpetual.
3. The purpose or purposes for which the Corporation is
organized are the transaction of any or all lawful business for which
corporations may be incorporated under the Alabama Business
Corporation Act, including, but not limited to, acquiring, purchasing,
investing in or engaging in a business combination or joint venture
with, however any of the foregoing may be structured, any corporation,
partnership, limited liability company or other entity engaged, in
whole or in part, in the manufacturing, marketing, distribution,
provision or sale of clothing, food, pharmaceuticals, consumer goods
and services, or other goods or services; following any such
transaction, to engage in any business theretofore conducted by any
business entity which was party to any such transaction; and to engage
in any financing or other transactions necessary, appropriate or
convenient to effect any of the purposes for which the Corporation is
organized.
4. The total number of shares of capital stock that the
Corporation is authorized to issue is 60,000,000 shares of Common
Stock, par value $0.01 each.
5. The registered office and registered agent of the
Corporation is The Corporation Company, 60 Commerce Street,
Montgomery, AL 36104.
<PAGE>
2
6. (a) The names and addresses of the current individuals who
are to serve as the directors of the Corporation are as follows:
Paul E. Raether
9 West 57th Street
New York, New York 10019
James H. Greene, Jr.
9 West 57th Street
New York, New York 10019
Nils P. Brous
9 West 57th Street
New York, New York 10019
Ronald G. Bruno
1156 Cheval Lane
Birmingham, Alabama 35216
Henry R. Kravis
9 West 57th Street
New York, New York 10019
George R. Roberts
2800 Sand Hill Road, Suite 200
Menlo Park, California
Michael T. Tokarz
9 West 57th Street
New York, New York 10019
Perry Golkin
9 West 57th Street
New York, New York 10019
Such persons shall serve as directors of the Corporation until the
first annual meeting of shareholders of the Corporation and until
their successors are elected and shall qualify.
(b) The number of directors of the Corporation shall consist of
not less than three nor more than fifteen persons, the exact
number of persons within such minimum and maximum
limitations being fixed from time to time by the Board of
Directors of the Corporation pursuant to resolutions adopted
by a majority of the persons constituting the Board of
Directors at the time such resolutions are adopted. The
Board of Directors shall have the power to fill all
vacancies occurring on the Board of Directors, including,
without limitation, any vacancies resulting from an
<PAGE>
3
increase in the number of directors within the minimum and
maximum limitations on the number of directors of the
Corporation set forth in this Article 6.
7. The name and address of the incorporators are as follows:
Joseph Bruno
729-10th Avenue, West
Birmingham, Alabama
Angelo J. Bruno
1229 Bush Circle
Birmingham, Alabama
Lee J. Bruno
928-5th Place, West
Birmingham, Alabama
Anthony J. Bruno
1606-27th Street, North
Birmingham, Alabama
Sam Bruno
1000-53rd Street, South
Birmingham, Alabama
8. The Board of Directors of the Corporation, acting by
majority vote, may alter, amend or repeal the By-Laws of the
Corporation.
9. Every person who is or was a director or an officer of the
Corporation shall be indemnified by the Corporation to the fullest
extent allowed by law, including the indemnification permitted by
Section 10-2B-8.58 of the Alabama Business Corporation Act, against
all liabilities and expenses imposed upon or incurred by that person
in connection with any proceeding in which that person may be made, or
threatened to be made, a party, or in which that person may become
involved by reason of that person being or having been a director or
an officer of or of serving or having served in any capacity with any
other enterprise at the request of the Corporation, whether or not
that person is a director or an officer or continues to serve the
other enterprise at the time the liabilities or expenses are imposed
or incurred. During the pendency of any such proceeding, the
Corporation shall, to the fullest extent permitted by law, promptly
advance expenses that are incurred, from time to time, by a director
or an officer in connection with the proceeding, subject to the
receipt by the Corporation of a written affirmation and a written
undertaking as required by law.
10. A director of the Corporation shall not be liable to the
Corporation or its shareholders for money damages for any action
taken, or failure to take action, as a director, except for (i) the
amount of a financial benefit received by such director to
<PAGE>
4
which such director is not entitled; (ii) an intentional infliction of
harm by such director on the Corporation or its shareholders; (iii) a
violation of Section 10-2B-8.33 of the Alabama Business Corporation
Act or any successor provision to such section; (iv) an intentional
violation by such director of criminal law; or (v) a breach of such
director's duty of loyalty to the Corporation or its shareholders. If
the Alabama Business Corporation Act, or any successor statute
thereto, is hereafter amended to authorize the further elimination or
limitation of the liability of a director of a corporation, then the
liability of a director of the Corporation, in addition to the
limitations on liability provided herein, shall be limited to the
fullest extent permitted by the Alabama Business Corporation Act, as
amended, or any successor statute thereto. Any repeal or modification
of this provision by the shareholders of the Corporation shall be
prospective only and shall not adversely affect any limitation on the
liability of a director of the Corporation existing at the time of
such repeal or modification.
11. No shareholder shall have a preemptive right to purchase
shares of any class of capital stock of the Corporation, including
treasury shares.
B. The foregoing Amended and Restated Articles of Incorporation
were adopted by the shareholders of the Corporation on August 18, 1995, in
the manner prescribed by the Alabama Business Corporation Act.
The Common Stock of the Corporation, par value $.01 per share,
was the only voting group entitled to vote on such Amended and Restated
Articles of Incorporation. As of the record date for the meeting of
shareholders at which said amendment was adopted, there were 77,503,341
shares of such Common Stock outstanding, and the holders of such shares
were entitled to cast one vote per share, or an aggregate of 77,503,341
votes. There were 64,018,453 votes entitled to be cast by the holders of
the Common Stock of the Corporation indisputably represented at the
meeting.
The total number of votes cast for the adoption of such Amended
and Restated Articles of Incorporation by the holders of the Common Stock
of the Corporation was 62,173,383, and the total number of votes cast
against the adoption of such Amended and Restated Articles of Incorporation
by the holders of the Common Stock of the Corporation was 1,203,312, and
the number of votes cast for the adoption of said Amended and Restated
Articles of Incorporation was sufficient for approval of the Amended and
Restated Articles of Incorporation by the holders of the Common Stock of
the Corporation.
Exhibit 3.2
-----------
BY-LAWS
OF
CRIMSON ACQUISITION CORP.
ARTICLE I
OFFICES
1.1. Registered Office and Agent. -- The registered office of
the Corporation in the State of Alabama is at 60 Commerce Street,
Montgomery, AL 36104. The registered agent of the Corporation at that
office is The Corporation Company.
1.2. Places of Business. -- Places of business or offices may
be established at any time by the board of directors (the board) at any
place or places where the Corporation is qualified to do business or where
qualification is not required.
ARTICLE II
SHAREHOLDERS
2.1. Annual Meeting. - The annual meeting of shareholders shall
be held upon not less than ten nor more than sixty days written notice of
the time, place and purposes of the meeting. The meeting shall be held at
the time and at the place determined by the board. At the meeting, the
shareholders shall elect directors and transact any other business that
properly comes before the meeting.
2.2. Special Meetings. -- A special meeting of shareholders may
be called for any purpose by the president or the board. The meeting shall
be held at the time and at the place determined by the president or the
board. A special meeting shall be held upon not less than ten nor more
than sixty
<PAGE>
days written notice of the time, place, and purposes of the meeting.
2.3. Action Without Meeting. -- The shareholders may act without
a meeting by written consent or consents pursuant to the Alabama Business
Corporation Act Sec. 10-2B-7.04. The written consent or consents shall be
filed in the minute book.
2.4. Quorum. -- Shares entitled to vote as a separate voting
group may take action on a matter at a meeting only if a quorum of those
shares exists with respect to that matter. Unless the articles of
incorporation or the Alabama Business Corporation Act provide otherwise, a
majority of the votes entitled to be cast on the matter by the voting group
constitutes a quorum of that voting group for action on that matter, but in
no event shall a quorum consist of less than one-third of the votes
entitled to be cast on the matter by the voting group. Once a share is
represented for any purpose at a meeting, it is, unless established to the
contrary, presumed present for quorum purposes for the remainder of the
meeting. If a quorum is present when a vote is taken, action on a matter
(other than the election of directors) by a voting group is approved if the
votes cast within the voting group favoring the action exceed the votes
cast opposing the action, unless the Constitution of Alabama as the same
may be amended from time to time, the articles of incorporation, or the
Alabama Business Corporation Act require a greater number of affirmative
votes. An amendment of articles of incorporation adding, changing, or
deleting a quorum or voting requirement for a voting group greater than
specified must meet the same quorum requirement and be adopted by the same
vote and voting groups required to take action under the quorum and voting
<PAGE>
3
requirements then in effect or proposed to be adopted, whichever is
greater.
2.5. Presiding Officer. -- The president shall preside at all
shareholder meetings unless the board of directors designates another
person to preside.
ARTICLE III
BOARD OF DIRECTORS
3.1. Number and Term of Office -- The number of directors that
shall constitute the board of directors shall be not less than one nor more
than fifteen, the actual number to be determined by the shareholders or, if
the articles of incorporation so provide, by the board. After shares are
issued, only the shareholders may change the minimum and maximum number of
directors, but no decrease shall have the effect of shortening the term of
any incumbent director. The first board of directors shall consist of
three members. Directors shall be elected by the shareholders at each
annual meeting and shall hold office until the next annual meeting of
shareholders and until their successors shall have been elected and
qualified.
3.2. Regular Meetings. -- A regular meeting of the board shall
be held without notice immediately following and at the same place as the
annual shareholders' meeting for the purpose of electing officers and
conducting any other business that may come before the meeting. The board
may decide to have additional regular meetings that may be held without
notice.
3.3. Special Meetings. -- A special meeting of the board may be
called for any purpose at any time by the president
<PAGE>
4
or by two directors. The meeting shall be held upon not less than one
hours notice if given by telegram, orally (either by telephone or in
person), or by facsimile transmission, upon not less than three days notice
if given by overnight courier delivery service, or upon not less than five
days notice if given by depositing the notice in the United States mails,
first class postage prepaid. The notice shall be effective upon the first
to occur of the following: (i) when received, (ii) when communicated in a
comprehensible manner, if given orally, (iii) on the date shown on the
return receipt signed on behalf of the addressee, if sent by registered or
certified mail, return receipt requested, or (iv) five days after its
deposit in the United States mail, as evidenced by the postmark, if mailed
postpaid and correctly addressed. The notice shall specify the time and
place, and may, but need not, specify the purposes, of the meeting.
3.4. Action Without Meeting. -- The board may act without a
meeting if, prior or subsequent to the action, each member of the board
consents in writing to the action. The written consent or consents shall
be filed in the minute book.
3.5. Use of Communications Equipment. -- Any director may
participate in a meeting of the board by means of conference telephone or
any other means of communication by which all persons participating in the
meeting are able to hear each other.
3.6. Quorum. -- The presence at a meeting of persons entitled to
cast a majority of the votes of the entire board shall constitute a quorum
for the transaction of business.
<PAGE>
5
3.7. Votes Required. -- Any action approved by a majority of the
votes of directors present at a meeting at which a quorum is present shall
be the act of the board.
3.8. Vacancies in Board of Directors. -- Unless the articles of
incorporation provide otherwise, if a vacancy occurs on a board:
1. The Shareholders may fill the vacancy, whether resulting
from an increase in the number of directors or otherwise; or
2. The board may fill the vacancy, except that the directors
shall have the power to fill a vacancy resulting from an increase in
the number of directors only if expressly provided for in the articles
of incorporation; or
3. If the directors remaining in office constitute fewer than a
quorum of the board, they may fill the vacancy, if it is one that the
directors are authorized to fill, by the affirmative vote of a
majority of all the directors remaining in office.
If the vacant office was held by a director elected by a voting
group of shareholders, only the holders of shares of that voting group are
entitled to vote to fill the vacancy if it is filled by the shareholders.
A vacancy that will occur at a specific later date (by reason of a
resignation effective at a later date as provided by the Alabama Business
Corporation Act or otherwise) may be filled before the vacancy occurs but
the new director may not take office until the vacancy occurs.
ARTICLE IV
<PAGE>
6
WAIVERS OF NOTICE
Any notice required by these by-laws, by the articles of
incorporation, or by the Alabama Business Corporation Act may be waived in
writing by any person entitled to notice. The waiver, or waivers, may be
executed either before or after the event with respect to which the notice
is waived. A director's or shareholder's attendance at or participation in
a meeting (i) waives objection to lack of any required notice or defective
notice of the meeting unless such person at the beginning of the meeting
(or promptly upon arrival) objects to holding the meeting or transacting
business at the meeting and, in the case of a board meeting, the director
does not thereafter vote for or assent to action taken at the meeting; and
(ii) waives objection to consideration of a particular matter at the
meeting that is not within the purpose or purposes described in the meeting
notice, unless the person objects to considering the matter before action
is taken on the matter.
<PAGE>
7
ARTICLE V
OFFICERS
5.1. Election. -- At its regular meeting following the annual
meeting of shareholders, the board shall elect a president, a treasurer, a
secretary, and it may elect any other officers, including one or more vice
presidents, as it shall deem necessary. One person may hold two or more
offices. Each officer shall serve at the pleasure of the board and shall
be subject to removal at any time, with or without cause.
5.2. Duties and Authority of President. -- The president shall
be chief executive officer of the Corporation. Subject only to the
authority of the board, the president shall have general charge and
supervision over, and responsibility for, the business and affairs of the
Corporation. Unless otherwise directed by the board, all other officers
shall be subject to the authority and supervision of the president. The
president may enter into and execute in the name of the Corporation
contracts or other instruments in the regular course of business or
contracts or other instruments not in the regular course of business which
are authorized, either generally or specifically, by the board. The
president shall have the general powers and duties of management usually
vested in the office of president of a business corporation.
5.3. Duties and Authority of Vice Presidents. -- Each vice
president shall perform the duties and have the authority that may be
delegated to him or her from time to time by the president or by the board.
In the absence of the president, or
<PAGE>
8
in the event of the president's death, inability, or refusal to act (unless
the board determines otherwise) the vice president designated as successor
for these purposes by the board or, if there is none, the most senior vice
president, shall perform the duties and be vested with the authority of the
president.
5.4. Duties and Authority of Treasurer. -- The treasurer shall
have custody of the funds and securities of the corporation and shall keep
or cause to be kept regular books of account for the Corporation. The
treasurer shall perform such other duties and possess such other powers as
are incident to the office of treasurer or as shall be assigned to him or
her by the president or the board.
5.5. Duties and Authority of Secretary. -- The secretary shall
cause notices of all meetings to be served as prescribed in these by-laws
and shall keep or cause to be kept the minutes of all meetings and written
consents of the shareholders and the board. The secretary shall perform
such other duties and possess such other powers as are incident to the
office of secretary or as shall be assigned to him or her by the president
or the board.
ARTICLE VI
AMENDMENTS TO AND EFFECT OF BY-LAWS
6.1. Force and Effect of By-Laws. -- These by-laws are subject
to the provisions of the Alabama Business Corporation Act and the
Corporation's articles of incorporation, as each may be amended from time
to time. If any provision in these by-laws is inconsistent with a
provision in that Act or the articles of
<PAGE>
9
incorporation, the provision of that Act or the articles of incorporation
shall govern.
6.2. Amendments to By-Laws. (a) Subject to any additional
limitations contained in the articles of incorporation or the Alabama
Business Corporation Act, these by-laws may be amended or repealed by the
shareholders or the board; provided, however, that the board may not amend
or repeal (i) the bylaws if the articles of incorporation or the Alabama
Business Corporation Act reserve this power exclusively to the shareholders
in whole or in part; (ii) any by-law provision which prohibits the board
from amending or repealing such provision; or (iii) any by-law provision
that fixes a greater quorum or voting requirement for the board if such
provision was originally adopted by the shareholders.
(b) In addition to the limitations contained in Section 2(a)
above, the adoption or amendment of a bylaw provision that adds, changes,
or deletes a greater quorum or voting requirement for shareholders or the
board, as the case may be, must meet the same quorum requirement and be
adopted by the same vote and voting groups required to take action under
the quorum and voting requirement then in effect or proposed to be adopted,
whichever is greater.
Exhibit 4.3
WARRANT
To Purchase Common Stock of
Bruno's, Inc.
Issuance Date: August 18, 1995
Number of Shares of Common Stock:
9,917,400 (subject to adjustment)
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. EXERCISE OF WARRANT . . . . . . . . . . . . . . . . . . . . 7
2.1 Manner of Exercise . . . . . . . . . . . . . . . . . . . . . 7
2.2 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . 8
2.3 Fractional Shares . . . . . . . . . . . . . . . . . . . . . . 9
2.4 Continued Validity . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3. TRANSFER, DIVISION AND COMBINATION, ADDITIONAL WARRANTS . 9
3.1 Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.2 Division and Combination . . . . . . . . . . . . . . . . . . 10
3.3 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.4 Maintenance of Books . . . . . . . . . . . . . . . . . . . . 10
SECTION 4. ADJUSTMENTS . . . . . . . . . . . . . . . . . . . . . . . . 10
4.1 Stock Dividends, Subdivisions and Combinations . . . . . . . 10
4.2 Certain Other Dividends; Distributions . . . . . . . . . . . 11
4.3 Issuance of Additional Shares of Common Stock . . . . . . . . 12
4.4 Issuance of Convertible Securities, Warrants or Other
Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.5 Superseding Adjustment . . . . . . . . . . . . . . . . . . . 14
4.6 Adjustment of Number of Shares of Warrant Stock . . . . . . . 15
4.7 Other Provisions Applicable to Adjustments Under this
Section . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.8 Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets . . . . . . . . . . . . . . . . . . 17
4.9 Other Action Affecting Common Stock . . . . . . . . . . . . . 18
SECTION 5. NOTICES TO WARRANT HOLDERS . . . . . . . . . . . . . . . . 19
5.1 Notice of Adjustments . . . . . . . . . . . . . . . . . . . . 19
5.2 Notice of Certain Corporate Action . . . . . . . . . . . . . 20
SECTION 6. NO IMPAIRMENT . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 7. COMMON STOCK; RESERVATION AND AUTHORIZATION OF
REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL
AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS . . . . 21
SECTION 9. RESTRICTIONS ON TRANSFERABILITY . . . . . . . . . . . . . . 21
9.1 Restrictive Legend . . . . . . . . . . . . . . . . . . . . . 21
<PAGE>
Page
----
9.2 Restriction on Transfers . . . . . . . . . . . . . . . . . . 22
9.3 Listing on Securities Exchange or NASDAQ . . . . . . . . . . 22
[9.4 Covenant Regarding Consents . . . . . . . . . . . . . . . . 23
SECTION 10. REGISTRATION RIGHTS . . . . . . . . . . . . . . . . . . . 23
10.1 Incidental Registrations . . . . . . . . . . . . . . . . . . 23
10.2 Registration on Request . . . . . . . . . . . . . . . . . . 24
10.3 Registration Procedures . . . . . . . . . . . . . . . . . . 27
10.5 Rule 144 . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.7 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 11. LOSS OR MUTILATION . . . . . . . . . . . . . . . . . . . . 34
SECTION 12. OFFICE OF THE COMPANY . . . . . . . . . . . . . . . . . . 35
SECTION 13. FINANCIAL AND BUSINESS INFORMATION . . . . . . . . . . . . 35
13.1 Filings . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 14. LIMITATION OF LIABILITY . . . . . . . . . . . . . . . . . 35
SECTION 15. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . 35
15.1 Nonwaiver and Expenses . . . . . . . . . . . . . . . . . . . 35
15.2 Notice Generally . . . . . . . . . . . . . . . . . . . . . . 36
15.3 Successors and Assigns . . . . . . . . . . . . . . . . . . . 36
15.4 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . 36
15.5 Severability . . . . . . . . . . . . . . . . . . . . . . . . 37
15.6 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . 37
15.7 GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE . . . . . . 37
15.8 MUTUAL WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . 37
EXHIBIT A SUBSCRIPTION FORM
EXHIBIT B ASSIGNMENT FORM
<PAGE>
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS. THIS WARRANT AND THE SECURITIES ISSUABLE
UPON EXERCISE HEREOF MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, EXCHANGED,
MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF OR ENCUMBERED
WITHOUT COMPLIANCE WITH THE PROVISIONS OF, AND ARE OTHERWISE RESTRICTED BY
THE PROVISIONS OF, THE SECURITIES ACT OF 1933, AS AMENDED, THE RULES AND
REGULATIONS THEREUNDER AND THIS WARRANT.
WARRANT
-------
To Purchase 9,917,400 Shares of
Common Stock (subject to adjustment) of
BRUNO'S, INC.
THIS IS TO CERTIFY THAT, for value received, Crimson Associates,
L.P., a Delaware limited partnership (the "Partnership"), or its registered
assigns, is the owner of nine million nine hundred seventeen thousand four
hundred (9,917,400) Warrants (as hereinafter defined), which entitle the
Holder, at any time prior to the Expiration Date (as hereinafter defined),
to purchase from BRUNO'S, INC., an Alabama corporation (the "Company"),
nine million nine hundred seventeen thousand four hundred (9,917,400)
shares of Common Stock (as hereinafter defined and subject to adjustment as
provided herein), in whole or in part, including fractional parts, all on
the terms and conditions and pursuant to the provisions hereinafter set
forth.
SECTION 1. DEFINITIONS
As used in this Warrant, the following terms have the respective
meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares of
---------------------------------
Common Stock issued by the Company after the Issuance Date, other than
the Warrant Stock.
"Affiliate" shall mean, as to any Person, (i) any other Person
---------
directly or indirectly controlling, controlled by, or under common
control with such Person or (ii) any director, officer or partner of
such Person or any Person specified in clause (i) above.
"Aggregate Exercise Price" shall mean, with respect to the
------------------------
exercise of all or a portion of the Warrant, the
<PAGE>
2
Exercise Price multiplied by the number of shares of Warrant Stock
purchased upon such exercise.
"Business Day" shall mean any day that is not a Saturday or
------------
Sunday or a day on which banks are required or permitted to be closed
in the State of New York or the State of Alabama.
"Commission" shall mean the Securities and Exchange Commission or
----------
any other federal agency then administering the Securities Act and
other federal securities laws.
"Common Stock" shall mean the collective reference to the common
------------
stock of the Company, par value $.01 per share, as constituted on the
Issuance Date, and any capital stock into which such Common Stock may
thereafter be changed, and shall also include (i) capital stock of the
Company of any other class (regardless of how denominated) issued to
the holders of shares of Common Stock upon any reclassification
thereof in which all such shares are converted into a new class of
capital stock and (ii) shares of common stock of any successor or
acquiring corporation (as defined in Section 4.8) received by or
distributed to the holders of Common Stock of the Company in the
circumstances contemplated by Section 4.8.
"Convertible Securities" shall mean evidences of indebtedness,
----------------------
shares of stock or other securities which are convertible into or
exchangeable for, with or without payment of additional consideration
in cash or property, Additional Shares of Common Stock, either
immediately or upon the occurrence of a specified date or a specified
event.
"Demand Party" shall mean (a) the Partnership or (b) any other
------------
Holder or Holders, including, without limitation, any present or
future general or limited partner of the Partnership, or any general
or limited partner of any general or limited partner thereof, that may
become an assignee of such Partnership's rights hereunder; provided
--------
that to be a Demand Party under this clause (b), a Holder or Holders
must either individually or in aggregate with all other Holders with
whom it is acting together to demand registration own at least 1% of
the total number of Registrable Securities (whether in the form of
Warrants or Warrant Stock).
"Effective Time of the Merger" shall mean the time the Articles
----------------------------
of Merger in respect of the Merger are duly filed with the Secretary
of State of the State of Alabama or at such other time as shall be
specified in such Articles of Merger.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended, or any similar federal statute, and the
<PAGE>
3
rules and regulations of the Commission thereunder, all as the same
shall be in effect from time to time.
"Exercise Period" shall mean the period during which this Warrant
---------------
is exercisable pursuant to Section 2.1.
"Exercise Price" shall mean $12.00, as the same may be adjusted
--------------
from time to time pursuant to the terms hereof.
"Expiration Date" shall mean the date which is the tenth
---------------
anniversary of the Issuance Date.
"Fair Market Value" shall mean, as of any exercise date or other
-----------------
relevant date, the average for the second Trading Day preceding such
date of the high and low reported sales prices regular way of one
share of Common Stock on such Trading Day or, in case no such reported
sale takes place on such Trading Day, the average of the reported
closing bid and asked prices regular way of a share of Common Stock on
such Trading Day, in either case on the principal national securities
exchange in the United States on which the shares of Common Stock are
listed or admitted to trading, or if not listed or admitted to trading
on any national securities exchange on such Trading Day, on the
National Association of Securities Dealers Automated Quotations
National Market System, or if the shares of Common Stock are not
listed or admitted to trading on any national securities exchange or
quoted on such National Market System on such Trading Day, the average
of the closing bid and asked prices of a share of Common Stock in the
over-the-counter market on such Trading Day as furnished by any New
York Stock Exchange member firm selected from time to time by the
Company. If the Common Stock is not quoted or listed by any such
organization, exchange or market, the Fair Market Value of the Common
Stock as of such exercise or other relevant date shall be determined
in good faith by the Board of Directors of the Company.
"fair value" shall mean, with respect to the valuation of (i) any
----------
evidences of indebtedness, shares of stock, other securities or
property or warrants or other subscription or purchase rights
distributable pursuant to Section 4.2 and (ii) consideration, and
assets and businesses pursuant to Section 4.7(a) (collectively, the
items listed in clauses (i) and (ii) are the "Valuation Properties"),
--------------------
the fair value (as determined in good faith by the Board of Directors
of the Company and, if required by the Majority Holders, supported by
an opinion from an investment banking firm acceptable to the Majority
Holders, which approval shall not be unreasonably withheld, of such
Valuation Properties.
"Fully Diluted Outstanding" shall mean, when used with reference
-------------------------
to Common Stock, at any date as of which the number of shares thereof
is to be determined, all shares of Common Stock Outstanding at such
date, all shares of Common
<PAGE>
4
Stock issuable in respect of Convertible Securities outstanding at
such date, and all shares of Common Stock issuable in respect of this
Warrant outstanding on such date and all shares of Common Stock
issuable in respect of other options or warrants to purchase shares of
Common Stock outstanding (or contractually required to be issued by
the Company) on such date.
"GAAP" shall mean generally accepted accounting principles in the
----
United States of America as from time to time in effect.
"Holder" shall mean the Person in whose name this Warrant is
------
registered on the books of the Company maintained for such purpose or
the Person holding any Warrant Stock, including, without limitation in
each case, transferees thereof.
"Issuance Date" shall mean the date upon which this Warrant is
-------------
originally issued, which shall be the date on which the Effective Time
of the Merger shall occur.
"Majority Holders" shall mean the Holders of Warrants exercisable
----------------
for in excess of 50% of the aggregate number of shares of Common Stock
then receivable upon exercise of all Warrants.
"Merger" shall mean the merger of Crimson Acquisition Corp., an
------
Alabama corporation, which is a subsidiary of the Partnership, with
and into the Company, pursuant to the Agreement and Plan of Merger,
dated as of April 20, 1995, and as amended as of May 18, 1995.
"NASD" shall mean the National Association of Securities Dealers,
----
Inc., or any successor entity thereto.
"NASDAQ" shall mean the National Association of Securities
------
Dealers Automatic Quotation System.
"Other Property" shall have the meaning set forth in Section 4.8.
--------------
"Outstanding" shall mean, when used with reference to Common
-----------
Stock, at any date as of which the number of shares thereof is to be
determined, all issued shares of Common Stock, except shares then
owned or held by or for the account of the Company or any Subsidiary,
and shall include all shares issuable in respect of outstanding scrip
or any certificates representing fractional interests in shares of
Common Stock.
"Permitted Issuances" shall mean the issuance of shares of Common
-------------------
Stock upon exercise of rights to acquire shares of Common Stock
exercisable pursuant to options held by employees or directors under
stock option plans which may
<PAGE>
5
from time to time be adopted by the Company after the Issuance Date.
"Person" shall mean any individual, sole proprietorship,
------
partnership, joint venture, trust, incorporated organization,
association, corporation, institution, public benefit corporation,
entity or government (whether federal, state, county, city, municipal
or otherwise, including, without limitation, any instrumentality,
division, agency, body or department thereof).
"Registrable Securities" shall mean (i) the Warrants and (ii) the
----------------------
Warrant Stock. As to any particular Registrable Securities, once
issued, such securities shall cease to be Registrable Securities when
(i) a registration statement with respect to the sale by the Holder of
such securities shall have become effective under the Securities Act
and such securities shall have been disposed of in accordance with
such registration statement, (ii) such securities shall have been
distributed to the public pursuant to Rule 144 (or any successor
provision) under the Securities Act, (iii) such securities shall have
been otherwise transferred, new certificates for such securities not
bearing a legend restricting further transfer shall have been
delivered by the Company and subsequent disposition of such securities
shall not require registration or qualification of such securities
under the Securities Act or any state securities or blue sky law then
in force, or (iv) such securities shall have ceased to be Outstanding.
"Registration Expenses" shall mean any and all expenses incident
---------------------
to performance of or compliance with Section 10 of this Agreement,
including, without limitation, (i) all Commission and stock exchange
or NASD registration and filing fees (including, if applicable, the
fees and expenses of any "qualified independent underwriter," as such
term is defined in Schedule E to the By-laws of the NASD, and of its
counsel), (ii) all fees and expenses of complying with securities or
blue sky laws (including fees and disbursements of counsel for the
underwriters in connection with blue sky qualifications of the
Registrable Securities), (iii) all printing, messenger and delivery
expenses, (iv) all fees and expenses incurred in connection with the
listing of the Registrable Securities on any securities exchange
pursuant to clause (viii) of Section 10.3 and all rating agency fees,
(v) the fees and disbursements of counsel for the Company and of its
independent public accountants, including the expenses of any special
audits and/or "cold comfort" letters required by or incident to such
performance and compliance, (vi) the reasonable fees and disbursements
of counsel selected pursuant to Section 10.6 hereof by the Holders of
the Registrable Securities being registered to represent such Holders
in connection with each such registration, (vii) any fees and
<PAGE>
6
disbursements of underwriters customarily paid by the issuers or
sellers of securities, including liability insurance if the Company so
desires or if the underwriters so require, and the reasonable fees and
expenses of any special experts retained in connection with the
requested registration, but excluding underwriting discounts and
commissions and certain transfer taxes, if any, and (viii) other
reasonable out-of-pocket expenses of Holders (provided that such
--------
expenses shall not include expenses of counsel other than those
provided for in clause (vi) above).
"Responsible Officer" shall mean the chief executive officer of
-------------------
the Company, the president of the Company or the chief financial
officer of the Company.
"Securities Act" shall mean the Securities Act of 1933, as
--------------
amended, or any similar federal statute, and the rules and regulations
of the Commission thereunder, all as the same shall be in effect at
the time.
"Subsidiary" shall mean any corporation of which an aggregate of
----------
more than 50% of the outstanding stock having ordinary voting power to
elect a majority of the board of directors of such corporation
(irrespective of whether, at the time, stock of any other class or
classes of such corporation shall have or might have voting power by
reason of the happening of any contingency) is at the time, directly
or indirectly, owned legally or beneficially by the Company and/or one
or more Subsidiaries of the Company.
"Tender Offer" shall mean any public offer to substantially all
------------
holders of Common Stock to purchase at least 50% of the Common Stock
at the time outstanding.
"Trading Day" shall mean each weekday other than any day on which
-----------
any Common Stock is not traded on any national securities exchange, on
NASDAQ or in the over-the-counter market.
"Transfer" shall mean any disposition of any Warrant or Warrant
--------
Stock or of any interest in either thereof, which would constitute a
sale or transfer of a beneficial interest thereof within the meaning
of the Securities Act (excluding any transfer to an Affiliate of the
Partnership).
"Warrant Stock" shall mean the shares of Common Stock received by
-------------
the Holders of the Warrants upon the exercise thereof, including any
such shares of Common Stock transferred to any transferee of such
Holder, other than a transferee who acquires such shares after the
same have been (i) publicly sold pursuant to a registration statement
under the Securities Act or (ii) transferred pursuant to Rule 144 of
the Exchange Act, provided that such securities cease to be
"restricted securities" within the meaning of Rule 144.
<PAGE>
7
"Warrants" shall mean this Warrant and all warrants issued upon
--------
transfer, division or combination of, or in substitution for, any
thereof, other than Warrants transferred to a transferee who acquires
such Warrants after the same have been (i) publicly sold pursuant to a
registration statement under the Securities Act or (ii) transferred
pursuant to Rule 144 of the Exchange Act, provided that such
securities cease to be "restricted securities" within the meaning of
Rule 144. All Warrants shall at all times be identical as to terms
and conditions and date, except as to the number of shares of Common
Stock for which they may be exercised.
SECTION 2. EXERCISE OF WARRANT
2.1 Manner of Exercise. At any time and from time to time from
------------------
and after the Issuance Date and until 5:00 P.M., New York time, on the
Expiration Date, Holder may exercise this Warrant, on any Business Day, for
all or any part of the number of shares of the Common Stock issuable
hereunder.
In order to exercise this Warrant, in whole or in part, Holder
shall deliver to the Company at its principal office at 800 Lakeshore
Parkway, Birmingham, Alabama 35211 or at the office or agency designated by
the Company pursuant to Section 12, (i) a written notice of Holder's
election to exercise this Warrant, which notice shall specify the number of
shares of Common Stock to which the exercise shall relate and (ii) this
Warrant. Such notice shall be substantially in the form of the
subscription form appearing at the end of this Warrant as Exhibit A (the
"Subscription Form"), duly executed by Holder or its agent or attorney.
-----------------
Upon receipt by the Company of (a) this Warrant and (b) the
Subscription Form with the appropriate box checked thereon, the Company
shall issue the number of shares of Common Stock set forth in the next
paragraph.
To the extent, if any, Holder, in its sole discretion, has
checked the box on the Subscription Form contemplating a cash exercise upon
payment of the Aggregate Exercise Price, then upon payment, by certified or
official bank check payable to the order of the Company, of the Aggregate
Exercise Price for the shares of Warrant Stock to be purchased pursuant to
the exercise of the Warrant, the Company shall, as promptly as practicable,
and in any event within two (2) Business Days thereafter, execute or cause
to be executed and deliver or cause to be delivered to Holder a certificate
or certificates representing the aggregate number of full shares of Common
Stock issuable upon such cash exercise. To the extent, if any, Holder, in
its sole discretion has checked the box on the Subscription Form by which
Holder elects not to pay the Aggregate Exercise Price, the Company shall,
as promptly as practicable, and in any event within two (2) Business Days
thereafter, execute or cause to be executed and deliver or cause to be
delivered to Holder a certificate or
<PAGE>
8
certificates representing the aggregate number of full shares of Common
Stock having an aggregate value equal to the difference between (x) the
then aggregate Fair Market Value of the number of shares of Common Stock
specified in the Subscription Form and (y) the then Aggregate Exercise
Price in respect of such number of shares.
In either case, the stock certificate or certificates so
delivered shall be in such denomination or denominations as such Holder
shall request in the Subscription Form and shall be registered in the name
of Holder or, subject to Section 9, such other name as shall be designated
in the Subscription Form.
This Warrant shall be deemed to have been exercised and such
certificate or certificates shall be deemed to have been issued, and Holder
or any other Person so designated to be named therein shall be deemed to
have become a holder of record of such shares for all purposes, as of the
date the notice is received by the Company.
If this Warrant shall have been exercised in part, the Company
shall, at the time of delivery of the certificate or certificates
representing Warrant Stock, deliver to Holder a new Warrant evidencing the
rights of Holder to receive the number of shares of Common Stock called for
by this Warrant less the number of shares issued pursuant to the
aforementioned cash exercise of this Warrant or less the relevant portion
of this Warrant surrendered in connection with the cashless exercise of
this Warrant, which new Warrant shall in all other respects be identical to
this Warrant, or, at the request of Holder, appropriate notation may be
made on this Warrant and the same returned to Holder. Notwithstanding any
provision herein to the contrary, the Company shall not be required to
register shares in the name of any Person who acquired this Warrant (or
part hereof) or any Warrant Stock otherwise than in accordance with this
Warrant.
2.2 Payment of Taxes. All shares of Common Stock issuable upon
----------------
the exercise of this Warrant pursuant to the terms hereof shall be validly
issued, fully paid and nonassessable and without any preemptive rights.
The Company shall pay all expenses in connection with, and all documentary,
stamp or similar issue or transfer taxes, if any, and all other taxes and
other governmental charges that may be imposed with respect to, the issue
or delivery of this Warrant, and all shares of Capital Stock issuable upon
the exercise of this Warrant, and shall indemnify and hold the Partnership,
its general and limited partners and its other Affiliates and the Company's
directors harmless from any taxes, interest and penalties which may become
payable by the Partnership, its general and limited partners or its other
Affiliates or any such directors as a result of the failure or delay by the
Company to pay such taxes. The Company shall not be required, however, to
pay any tax or other charge imposed in connection with any transfer
involved in the issue of any certificate for shares of Common Stock
issuable upon exercise
<PAGE>
9
of this Warrant in any name other than that of Holder and its Affiliates,
and in such case the Company shall not be required to issue or deliver any
stock certificate until such tax or other charge has been paid or it has
been established to the satisfaction of the Company that no such tax or
other charge is due.
2.3 Fractional Shares. The Company shall not be required to
-----------------
issue fractional shares of Common Stock on the exercise of Warrants. If
any fraction of a share of Common Stock would be issuable on the exercise
of any Warrant (or specified portion thereof), the Company shall pay to the
Holder of the Warrant an amount in cash equal to such fraction multiplied
by the then-current Fair Market Value per share of Common Stock. For the
purposes of this Section 2.3, the date as of which the Fair Market Value of
Common Stock shall be computed shall be the date on which notice is
received by the Company pursuant to Section 2.1.
2.4 Continued Validity. A Holder of shares of Warrant Stock
------------------
shall continue to be entitled with respect to such shares to all rights and
subject to all obligations to which it would have been entitled or subject
as Holder under Sections 9, 10, 13 and 15 of this Warrant.
SECTION 3. TRANSFER, DIVISION AND COMBINATION, ADDITIONAL
WARRANTS
3.1 Transfer. Subject to compliance with Section 9, transfer of
--------
this Warrant and all rights hereunder, in whole or in part, shall be
registered on the books of the Company to be maintained for such purpose,
upon surrender of this Warrant at the principal office of the Company
referred to in Section 2.1 or the office or agency designated by the
Company pursuant to Section 12, together with a written assignment of this
Warrant substantially in the form of Exhibit B hereto duly executed by
Holder or its agent or attorney and funds sufficient to pay any transfer
taxes payable pursuant to Section 2.2 upon the making of such transfer.
Upon such surrender and, if required, such payment, the Company shall,
subject to Section 9, execute and deliver a new Warrant or Warrants in the
name of the assignee or assignees and in the denomination specified in such
instrument of assignment, and shall issue to the assignor a new Warrant
evidencing the portion of this Warrant not so assigned, and this Warrant
shall promptly be cancelled. A Warrant, if properly assigned in compliance
with Section 9, may be exercised by a new Holder for the receipt of shares
of Common Stock without having a new Warrant issued. If requested by the
Company, a new Holder shall acknowledge in writing, in form reasonably
satisfactory to the Company, such Holder's continuing obligations under
Sections 9 and 15.
3.2 Division and Combination. Subject to Section 9, this
------------------------
Warrant may be divided or combined with other Warrants upon
<PAGE>
10
presentation hereof at the aforesaid office or agency of the Company,
together with a written notice specifying the names and denominations in
which new Warrants are to be issued, signed by Holder or its agent or
attorney. Subject to compliance with Section 3.1 and with Section 9, as to
any transfer which may be involved in such division or combination, the
Company shall execute and deliver a new Warrant or Warrants in exchange for
the Warrant or Warrants to be divided or combined in accordance with such
notice.
3.3 Expenses. The Company shall prepare, issue and deliver at
--------
its own expense (other than transfer taxes not payable by the Company
pursuant to Section 2.2) the new Warrant or Warrants under this Section 3.
3.4 Maintenance of Books. The Company agrees to maintain, at
--------------------
its aforesaid office or agency, books for the registration or transfer of
the Warrants.
SECTION 4. ADJUSTMENTS
The Exercise Price and the number of shares of Common Stock for
which this Warrant is exercisable shall be subject to adjustment as set
forth in this Section 4. The Company shall give each Holder notice of any
event described below which requires an adjustment pursuant to this Section
4 at the time of such event. At any time and from time to time, the
Company shall promptly, without any action required of the Holders, cause
the appropriate adjustment or adjustments (to the extent that more than one
event requiring an adjustment has occurred since the last adjustment made)
to be made pursuant to this Section 4 in respect of each Warrant
outstanding.
4.1 Stock Dividends, Subdivisions and Combinations. If at any
----------------------------------------------
time the Company shall:
(a) take a record of the holders of its Common Stock for the
purpose of entitling them to receive or set a record date for a
dividend payable in, or other distribution of, Additional Shares of
Common Stock;
(b) subdivide its outstanding shares of Common Stock into a
larger number of shares of Common Stock;
(c) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock; or
(d) issue any shares of its capital stock or other securities by
reclassification of the Common Stock (other than pursuant to Section
4.8 below);
then the Exercise Price shall be proportionately decreased in the case of
such a dividend or distribution of Additional Shares of Common Stock or
such a subdivision, or proportionately increased
<PAGE>
11
in the case of such a combination, or the kind of capital stock or other
securities of the Company which may be purchased shall be adjusted in the
case of such a reclassification of the Common Stock, each on the record
date for such dividend or distribution or effective date of such
subdivision, combination or reclassification, as the case may be, such that
the Holder shall be entitled to receive, upon exercise of this Warrant, the
aggregate number and kind of shares of Common Stock which, if the Warrant
had been fully exercised immediately prior to such date, it would have
owned upon such exercise and been entitled to receive by virtue of such
dividend, distribution, subdivision, combination or reclassification.
4.2 Certain Other Dividends; Distributions. If at any time the
--------------------------------------
Company shall:
(a) take a record of the holders of its Common Stock for the
purpose of entitling them to receive or set a record date for any
dividend or other distribution of any evidences of its indebtedness,
any shares of its stock (other than Common Stock), any shares of stock
of any Subsidiary or any other securities or property of any nature
whatsoever (other than regular quarterly cash dividends payable out of
consolidated earnings or earned surplus); or
(b) take a record of the holders of its Common Stock for the
purpose of entitling them to receive or set a record date for any
dividend or other distribution of any warrants or other rights to
subscribe for Convertible Securities or purchase any evidences of its
indebtedness, any shares of its stock or any other securities or
property of any nature whatsoever (other than regular quarterly cash
dividends payable out of consolidated earnings or earned surplus); or
(c) repurchase (including any repurchase by a Subsidiary of the
Company) shares of Common Stock for per share consideration that is
greater than the Fair Market Value of one share of Common Stock
immediately prior to such repurchase (in which event the aggregate
amount so paid in excess of the aggregate Fair Market Value of all the
Common Stock divided by the number of outstanding shares of Common
Stock prior to such repurchase shall be considered a distribution of
assets to all holders of Common Stock pursuant to this subsection);
then the Exercise Price shall be adjusted to equal the Exercise Price in
effect prior to such distribution or dividend multiplied by a fraction, (1)
the numerator of which shall be (A) the Fair Market Value per share of
Common Stock on such record date minus (B) the fair value of the amount
allocable to one share of Common Stock of any and all such evidences of
indebtedness, shares of stock, other securities or property or warrants or
other subscription or purchase rights so distributable, and (2) the
denominator of which shall be such Fair Market Value per share of Common
Stock. Such adjustments shall be made whenever such a
<PAGE>
12
record date is fixed. A reclassification of all of the Common Stock into
shares of Common Stock and shares of any other class of stock shall be
deemed a distribution by the Company to the holders of its Common Stock of
such shares of such other class of stock within the meaning of this Section
4.2 and, if the outstanding shares of Common Stock shall be changed into a
larger or smaller number of shares of Common Stock as a part of such
reclassification, such change shall be deemed a subdivision or combination,
as the case may be, of the outstanding shares of Common Stock within the
meaning of Section 4.1.
4.3 Issuance of Additional Shares of Common Stock. If at any
---------------------------------------------
time the Company shall (except as hereinafter provided) issue or sell any
Additional Shares of Common Stock, other than Permitted Issuances, for
consideration in an amount per Additional Share of Common Stock less than
the lesser of (x) the Exercise Price and (y) the Fair Market Value per
share of Common Stock on such issuance or sale date, then the Exercise
Price shall be adjusted to be the price determined by dividing
(i) an amount equal to the sum of (A) the number of Shares of
Common Stock outstanding immediately prior to such issuance or sale
multiplied by the Exercise Price in effect immediately prior to such
issuance or sale and (B) the consideration, if any, received by the
Company upon such issuance or sale, by
(ii) the total number of shares of Common Stock outstanding
immediately after such issuance or sale.
Expressed as a formula the foregoing calculation is:
adjusted Exercise Price equals:
CS(BEP) + NC
----------------
CS + NCS
where:
CS is the number of shares of Common Stock outstanding
immediately prior to such issuance or sale;
BEP is the Exercise Price in effect immediately prior to the
issuance or sale of such shares of Common Stock;
NC is the consideration, if any, received by the Company upon
such issuance or sale; and
NCS is the number of new shares of Common Stock issued or sold in
the transaction.
4.4 Issuance of Convertible Securities, Warrants or Other
-----------------------------------------------------
Rights. Except as provided in Section 4.2, if at any time the Company
- - ------
shall in any manner (whether directly or by assumption in a merger in which
the Company is the surviving
<PAGE>
13
corporation) issue or sell any warrants or other rights to subscribe for or
purchase any Additional Shares of Common Stock or any Convertible
Securities, other than Permitted Issuances, whether or not the rights to
exchange or convert thereunder are immediately exercisable, and the price
per share for which Common Stock is issuable upon the exercise of such
warrants or other rights or upon conversion or exchange of such Convertible
Securities (such price per share being computed as provided in Section
4.7(a) hereof) shall be less than the Exercise Price, then the Exercise
Price shall be adjusted as provided below (in the case of warrants or other
rights or Convertible Securities, on the basis that (i) the maximum number
of Additional Shares of Common Stock issuable pursuant to all such warrants
or other similar rights or necessary to effect the conversion or exchange
of all such Convertible Securities shall be deemed to have been issued and
outstanding, (ii) the price per share for such Additional Shares of Common
Stock shall be deemed to be the lowest possible price per share in any
range of prices per share at which such Additional Shares of Common Stock
are available to such holders and (iii) the Company shall be deemed to have
received all of the consideration payable therefor, if any, as of the date
of the actual issuance of such warrants or other similar rights). In such
event, the Exercise Price shall be adjusted to be the price determined by
dividing
(i) an amount equal to the sum of (A) the number of Shares of
Common Stock outstanding immediately prior to such issuance or sale
multiplied by the Exercise Price in effect immediately prior to such
issuance or sale and (B) the consideration, if any, received by the
Company upon such issuance or sale, by
(ii) the total number of shares of Common Stock outstanding
immediately after such issuance or sale.
Expressed as a formula the foregoing calculation is:
adjusted Exercise Price equals:
CS(BEP) + NC
----------------
CS + NCS
where:
CS is the number of shares of Common Stock outstanding
immediately prior to such issuance or sale;
BEP is the Exercise Price in effect immediately prior to the
issuance or sale of such shares of Common Stock;
NC is the consideration, if any, deemed received by the Company
upon such issuance or sale; and
NCS is the number of new shares of Common Stock deemed issued or
sold in the transaction.
<PAGE>
14
No further adjustments of the Exercise Price shall be made upon the actual
issue of such Common Stock upon exercise of such warrants or other similar
rights or upon the actual issue of such Common Stock upon such conversion
or exchange of such Convertible Securities. For the purposes of this
Section 4.4, the date as of which the Exercise Price of Common Stock shall
be computed shall be the earliest of (i) the date on which the Company
shall enter into a firm contract for the issuance of such warrants or other
similar rights or (ii) the date of actual issuance of such warrants or
other similar rights. Such adjustments shall be made upon the date of the
issuance or sale of such warrants or other similar rights.
4.5 Superseding Adjustment. If, at any time after any
----------------------
adjustment of the Exercise Price shall have been made pursuant to Section
4.4 as the result of any issuance of warrants, rights or Convertible
Securities, and either
(a) such warrants or rights, or the right of conversion or
exchange in such other Convertible Securities, shall expire, and all
or a portion of such warrants or rights, or the right of conversion or
exchange with respect to all or a portion of such other Convertible
Securities, as the case may be, shall not have been exercised; or
(b) the consideration per share for which shares of Common Stock
are issuable pursuant to such warrants or rights, or the terms of such
other Convertible Securities, shall be increased solely by virtue of
provisions therein contained for an automatic increase in such
consideration per share upon the occurrence of a specified date or
event;
then such previous adjustment shall be rescinded and annulled and the
Additional Shares of Common Stock which were deemed to have been issued by
virtue of the computation made in connection with the adjustment so
rescinded and annulled shall no longer be deemed to have been issued by
virtue of such computation. Thereupon, a recomputation shall be made of
the effect of such rights or options or other Convertible Securities on the
then outstanding Warrants, but not on any then outstanding Warrant Stock,
on the basis of
(c) treating the number of Additional Shares of Common Stock or
other property, if any, theretofore actually issued or issuable
pursuant to the previous exercise of any such warrants or rights or
any such right of conversion or exchange, as having been issued on the
date or dates of any such exercise and for the consideration actually
received and receivable therefor; and
(d) treating any such warrants or rights or any such other
Convertible Securities which then remain outstanding as having been
granted or issued immediately after the time of such increase of the
consideration per share for which
<PAGE>
15
shares of Common Stock or other property are issuable under such
warrants or rights or other Convertible Securities.
4.6 Adjustment of Number of Shares of Warrant Stock. Upon each
-----------------------------------------------
adjustment of the Exercise Price pursuant to any of the foregoing
provisions of this Section 4, this Warrant shall be deemed to evidence the
right to purchase, at the adjusted Exercise Price, that number of shares of
Common Stock obtained by multiplying the number of shares of Common Stock
covered by the Warrant immediately prior to such adjustment by the Exercise
Price in effect prior to such adjustment and dividing the product so
obtained by the Exercise Price in effect after such adjustment.
4.7 Other Provisions Applicable to Adjustments Under this
-----------------------------------------------------
Section. The following provisions shall be applicable to the making of
- - -------
adjustments of the number of shares of Common Stock for which this Warrant
is exercisable provided for in this Section 4:
(a) Computation of Consideration. To the extent that any
----------------------------
Additional Shares of Common Stock or any Convertible Securities or any
warrants or other rights to subscribe for or purchase any Additional
Shares of Common Stock or any Convertible Securities shall be issued
for cash consideration, the consideration received by the Company
therefor shall be the amount of the cash received by the Company
therefor, or, if such Additional Shares of Common Stock or Convertible
Securities are offered by the Company for subscription, the
subscription price, or, if such Additional Shares of Common Stock or
Convertible Securities are sold to underwriters or dealers for public
offering without a subscription offering, the initial public offering
price (in any such case subtracting any amounts paid or receivable for
accrued interest or accrued dividends, but not subtracting any
compensation, discounts or expenses paid or incurred by the Company
for and in the underwriting of, or otherwise in connection with, the
issuance thereof). To the extent that such issuance shall be for a
consideration other than cash, then, except as herein otherwise
expressly provided, the amount of such consideration shall be deemed
to be the fair value of such consideration at the time of such
issuance or, if such consideration is capital stock, the Fair Market
Value thereof at the time of issuance. In case any Additional Shares
of Common Stock or any Convertible Securities or any warrants or other
rights to subscribe for or purchase such Additional Shares of Common
Stock or Convertible Securities shall be issued in connection with any
merger in which the Company issues any securities, the amount of
consideration therefor shall be deemed to be the fair value (or, in
the case of capital stock, Fair Market Value) of such portion of the
assets and business of the nonsurviving corporation as the Board of
Directors of the Company in good faith, and, if required by the
Majority Holders, supported by an opinion of an
<PAGE>
16
investment banking firm acceptable to the Majority Holders (which
approval shall not be unreasonably withheld), shall determine to be
attributable to such Additional Shares of Common Stock, Convertible
Securities, warrants or other rights, as the case may be. The
consideration for any Additional Shares of Common Stock issuable
pursuant to any warrants or other rights to subscribe for or purchase
the same shall be the consideration received by the Company for
issuing such warrants or other rights plus the additional
consideration, if any, payable to the Company upon exercise of such
warrants or other rights. The consideration for any Additional Shares
of Common Stock issuable pursuant to the terms of any Convertible
Securities shall be the consideration, if any, received by the Company
for issuing warrants or other rights to subscribe for or purchase such
Convertible Securities, plus the consideration paid or payable to the
Company in respect of the subscription for or purchase of such
Convertible Securities, plus the additional consideration, if any,
payable to the Company upon the exercise of the right of conversion or
exchange in such Convertible Securities. In case of the issuance at
any time of any Additional Shares of Common Stock or Convertible
Securities in payment or satisfaction of any dividends upon any class
of stock other than Common Stock, the Company shall be deemed to have
received for such Additional Shares of Common Stock or Convertible
Securities a consideration equal to the amount of such dividend so
paid or satisfied.
(b) When Adjustments to Be Made. The adjustments required by
---------------------------
this Section 4 shall be made whenever and as often as required by this
Warrant or as requested by a Holder pursuant to this Section 4, except
that any adjustment of the number of shares of Common Stock for which
this Warrant is exercisable that would otherwise be required may be
postponed (except in the case of a subdivision or combination of
shares of the Common Stock, as provided for in Section 4.1) up to, but
not beyond the date of exercise if such adjustment either by itself or
with other adjustments not previously made adds or subtracts less than
1% of the shares of Common Stock for which this Warrant is exercisable
immediately prior to the making of such adjustment. Any adjustment
representing a change of less than such minimum amount (except as
aforesaid) which is postponed shall be carried forward and made (i) as
soon as such adjustment, together with other adjustments required by
this Section 4 and not previously made, would result in an adjustment
in excess of 1% or (ii) if not made earlier, on the date of exercise.
For the purpose of any adjustment, any specified event shall be deemed
to have occurred at the close of business on the date of its
occurrence.
(c) Fractional Interests. In computing adjustments under this
--------------------
Section 4, fractional interests in Common Stock shall be rounded to
the nearest hundred-thousandth of a share.
<PAGE>
17
(d) When Adjustment Not Required. If the Company shall take a
----------------------------
record of the holders of its Common Stock for the purpose of entitling
them to receive a dividend or distribution or subscription or purchase
rights and shall, thereafter and before the distribution to
stockholders thereof, legally abandon its plan to pay or deliver such
dividend, distribution, subscription or purchase rights, then
thereafter no adjustment shall be required by reason of the taking of
such record and any such adjustment previously made in respect thereof
shall be rescinded and annulled.
(e) Escrow of Warrant Stock. If after any property becomes
-----------------------
distributable pursuant to this Section 4 by reason of the taking of
any record of the holders of Common Stock, but prior to the occurrence
of the event for which such record is taken, and Holder exercises this
Warrant, any Additional Shares of Common Stock issuable upon exercise
by reason of such adjustment shall be deemed the last shares of Common
Stock for which this Warrant is exercised (notwithstanding any other
provision to the contrary herein) and such shares or other property
shall be held in escrow for Holder by the Company to be issued to
Holder upon and to the extent that the event actually takes place and
the Company shall deliver to Holder a due bill or other appropriate
instrument evidencing Holder's right to receive such shares or other
property under such circumstances. Notwithstanding any other provision
to the contrary herein, if the event for which such record was taken
fails to occur or is rescinded, then such escrowed shares shall be
cancelled by the Company and escrowed property returned.
(f) Treasury Stock. The sale or other disposition of any issued
--------------
shares of Common Stock owned or held by or for the account of the
Company shall be deemed an issuance thereof and a repurchase thereof
and designation of such shares as treasury stock shall be deemed to be
a redemption thereof for the purposes of this Section.
4.8 Reorganization, Reclassification, Merger, Consolidation or
----------------------------------------------------------
Disposition of Assets. In case the Company shall reorganize its capital,
- - ---------------------
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where
there is a change in or distribution with respect to the Common Stock of
the Company), or sell, transfer or otherwise dispose of all or
substantially all its property, assets or business to another corporation
and, pursuant to the terms of such reorganization, reclassification,
merger, consolidation or disposition of all or substantially all its
assets, shares of common stock of the successor or acquiring corporation,
or any cash, shares of stock or other securities or property of any nature
whatsoever (including warrants or other subscription or purchase rights) in
addition to or in lieu of common stock of the successor or acquiring
corporation ("Other Property"), are to be received by or distributed to the
holders of Common Stock of the Company,
<PAGE>
18
then each Holder shall have the right thereafter to receive, upon exercise
of the Warrant, the number of shares of common stock of the successor or
acquiring corporation or of the Company, if it is the surviving
corporation, and/or Other Property receivable upon or as a result of such
reorganization, reclassification, merger, consolidation or disposition of
all or substantially all its assets by a holder of the number of shares of
Common Stock for which this Warrant is exercisable immediately prior to
such event. In case of any such reorganization, reclassification, merger,
consolidation or disposition of assets, the successor or acquiring
corporation (if other than the Company) shall expressly assume the due and
punctual observance and performance of each and every covenant and
condition of this Warrant to be performed and observed by the Company and
all the obligations and liabilities hereunder, subject to such
modifications as may be deemed appropriate (as determined by resolution of
the Board of Directors of the Company) in order to provide for adjustments
of shares of the Common Stock for which this Warrant is exercisable which
shall be as nearly equivalent as practicable to the adjustments provided
for in this Section 4. For purposes of this Section 4.8 "common stock of
the successor or acquiring corporation" shall include stock of such
corporation of any class which is not preferred as to dividends or assets
over any other class of stock of such corporation and which is not subject
to redemption and shall also include any evidences of indebtedness, shares
of stock or other securities which are convertible into or exchangeable for
any such stock, either immediately or upon the arrival of a specified date
or the happening of a specified event and any warrants or other rights to
subscribe for or purchase any such stock. The foregoing provisions of this
Section 4.8 shall similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or disposition of assets.
4.9 Other Action Affecting Common Stock. In case at any time or
-----------------------------------
from time to time the Company shall take any action in respect of its
Common Stock, other than any action described in this Section 4, then the
number of shares of Common Stock or other stock for which this Warrant is
exercisable shall be adjusted in such manner as may be equitable in the
circumstances. If the Company shall at any time and from time to time issue
or sell (i) any shares of any class of common stock other than Common
Stock, (ii) any evidences of its indebtedness, shares of stock or other
securities which are convertible into or exchangeable for such shares of
common stock, with or without the payment of additional consideration in
cash or property or (iii) any warrants or other rights to subscribe for or
purchase any such shares of common stock or any such evidences, shares of
stock or other securities, then in each such case such issuance or sale
shall be deemed to be of, or in respect of, Common Stock for purposes of
this Section 4; provided, however, that, without limiting the generality of
-------- -------
the foregoing, if the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend
payable in, or other distribution of, common stock other than Common Stock,
including shares of non-voting common stock, then the number of shares of
<PAGE>
19
Common Stock for which this Warrant is exercisable immediately after the
occurrence of any such event shall be adjusted to equal the aggregate
number of shares of such common stock and of Common Stock which a record
holder of the same number of shares of Common Stock for which this Warrant
is exercisable immediately prior to the occurrence of such event would own
or be entitled to receive after the happening of such event.
SECTION 5. NOTICES TO WARRANT HOLDERS
5.1 Notice of Adjustments. Whenever the number of shares of
---------------------
Common Stock for which this Warrant is exercisable, and the Exercise Price
payable therefor, shall be adjusted pursuant to Section 4, the Company
shall forthwith prepare a certificate to be executed by a member of the
Board of Directors or one of its executive officers, setting forth, in
reasonable detail, the event requiring the adjustment and the method by
which such adjustment was calculated (including a description of the basis
on which the Board of Directors of the Company determined the fair value of
any evidences of indebtedness, shares of stock, other securities or
property or warrants or other subscription or purchase rights), specifying
the number of shares of Common Stock for which this Warrant is exercisable
and (if such adjustment was made pursuant to Section 4.8 or 4.9) describing
the number and kind of any other shares of stock or Other Property for
which this Warrant is exercisable. In the event that (i) the Partnership,
if the Partnership shall then be a Holder of any Warrant, or (ii) the
Majority Holders shall challenge any of the calculations set forth in such
certificate within 20 days after the Company's notification thereof, the
Company shall retain a firm of independent certified public accountants of
national standing selected by the Company and, if the Partnership shall
then be a Holder of any Warrant, acceptable to the Partnership, to prepare
and execute a certificate verifying the method by which the adjustment was
calculated, the number of shares of Common Stock for which this Warrant is
exercisable and (if such adjustment was made pursuant to Section 4.8 or
4.9) describing the number and kind of any other shares of stock or Other
Property for which this Warrant is exercisable. The Company shall promptly
cause a signed copy of any certificate prepared pursuant to this Section
5.1 to be delivered to each Holder in accordance with Section 15.2. The
Company shall keep at its office or agency designated pursuant to Section
12 copies of all such certificates and cause the same to be available for
inspection at said office during normal business hours by any Holder or any
prospective purchaser of a Warrant designated by a Holder thereof.
5.2 Notice of Certain Corporate Action. The Holder of any
----------------------------------
Warrant shall be entitled to the same rights to receive notice of corporate
action as any holder of Common Stock.
<PAGE>
20
SECTION 6. NO IMPAIRMENT
The Company shall not by any action including, without
limitation, amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of this Warrant,
but will at all times in good faith assist in the carrying out of all such
terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of Holder against impairment. Without
limiting the generality of the foregoing, the Company will (a) take all
such action as may be necessary or appropriate in order that the Company
may validly and legally issue fully paid and nonassessable shares of Common
Stock upon the exercise of this Warrant, and (b) use its best efforts to
obtain all such authorizations, exemptions or consents from any public
regulatory body having jurisdiction thereof as may be necessary to enable
the Company to perform its obligations under this Warrant.
Upon the request of Holder, the Company will at any time during
the period this Warrant is outstanding acknowledge in writing, in form
satisfactory to Holder, the continuing validity of this Warrant and the
obligations of the Company hereunder.
SECTION 7. COMMON STOCK; RESERVATION AND
AUTHORIZATION OF REGISTRATION
WITH OR APPROVAL OF ANY
GOVERNMENTAL AUTHORITY
From and after the Issuance Date, the Company shall at all times
reserve and keep available for issuance upon the exercise of Warrants such
number of its authorized but unissued shares of Common Stock as will be
sufficient to permit the exercise in full of all outstanding Warrants. All
shares of Common Stock which shall be so issuable, when issued upon
exercise of any Warrant in accordance with the terms of such Warrant, shall
be duly and validly issued and fully paid and nonassessable, and not
subject to preemptive rights.
Before taking any action which would result in an adjustment in
the number of shares of Common Stock for which this Warrant is exercisable,
the Company shall obtain all such authorizations or exemptions thereof, or
consents thereto, as may be necessary from any public regulatory body or
bodies having
jurisdiction thereof.
If any shares of Common Stock required to be reserved for
issuance upon exercise of Warrants require registration or qualification
with any governmental authority under any federal or state law (otherwise
than as provided in Section 10) before such shares may be so issued, the
Company will in good faith and as expeditiously as possible and at its
expense endeavor to cause such shares to be duly registered.
<PAGE>
21
SECTION 8. TAKING OF RECORD; STOCK AND WARRANT
TRANSFER BOOKS
In the case of all dividends or other distributions by the
Company to the holders of its Common Stock with respect to which any
provision of Section 4 refers to the taking of a record of such holders,
the Company will in each such case take such a record and will take such
record as of the close of business on a Business Day. The Company will not
at any time close its stock transfer books or Warrant transfer books so as
to result in preventing or delaying the exercise or transfer of any
Warrant.
SECTION 9. RESTRICTIONS ON TRANSFERABILITY
9.1 Restrictive Legend. (a) Except as otherwise provided in
------------------
this Section 9, each certificate for Warrant Stock initially issued upon
the exercise of this Warrant, and each certificate for Warrant Stock issued
to any transferee of any such certificate, shall be stamped or otherwise
imprinted with a legend in substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS AND ARE SUBJECT TO THE CONDITIONS SPECIFIED IN A
CERTAIN WARRANT DATED AUGUST 18, 1995, ORIGINALLY ISSUED BY BRUNO'S,
INC. (THE "WARRANT"), AND MAY NOT BE TRANSFERRED, SOLD, ASSIGNED,
EXCHANGED, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
OR ENCUMBERED WITHOUT COMPLIANCE WITH THE PROVISIONS OF, AND ARE
OTHERWISE RESTRICTED BY THE PROVISIONS OF, THE SECURITIES ACT OF 1933,
AS AMENDED, AND THE RULES AND REGULATIONS THEREUNDER AND THE WARRANT.
A COPY OF THE FORM OF SAID WARRANT IS ON FILE WITH THE SECRETARY OF
BRUNO'S, INC. THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS
CERTIFICATE, AGREES TO BE BOUND BY THE PROVISIONS OF SUCH WARRANT."
(b) Except as otherwise provided in this Section 9, each Warrant
shall be stamped or otherwise imprinted with a legend in substantially the
following form:
"NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THIS WARRANT AND THE
SECURITIES ISSUABLE UPON EXERCISE HEREOF MAY NOT BE TRANSFERRED, SOLD,
ASSIGNED, EXCHANGED, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF OR ENCUMBERED WITHOUT COMPLIANCE WITH THE PROVISIONS OF,
AND ARE OTHERWISE RESTRICTED BY THE PROVISIONS OF, THE SECURITIES ACT
OF 1933, AS AMENDED, THE RULES AND REGULATIONS THEREUNDER AND THIS
WARRANT."
9.2 Restriction on Transfers. (a) Subject to Section 9.2(b)
------------------------
below, prior to any Transfer of any Warrants or any shares
<PAGE>
22
of Warrant Stock (other than a Transfer by a Holder to the Company), the
Holder of such Warrants or Warrant Stock shall deliver notice of such
Transfer to the Company. Upon the Company's receipt of such notice, such
Holder shall be entitled to Transfer such Warrants or such Warrant Stock in
compliance with the Securities Act. Each certificate, if any, evidencing
such shares of Warrant Stock issued upon such Transfer shall bear the
restrictive legend set forth in Section 9.1(a), and each Warrant issued
upon such Transfer shall bear the restrictive legend set forth in Section
9.1(b), unless such legend is not required in order to ensure compliance
with the Securities Act.
(b) Notwithstanding any other provision of this Warrant, the
restrictions imposed by this Section 9 upon transferability of the Warrants
and the Warrant Stock and the legend requirements of Section 9.1, shall
terminate as to any particular Warrant or share of Warrant Stock when and
so long as such security shall have been effectively registered under the
Securities Act and disposed of pursuant thereto. Whenever the restrictions
imposed by this Section 9 shall terminate as to this Warrant, as
hereinabove provided, the Holder hereof shall be entitled to receive from
the Company, at the expense of the Company, a new Warrant bearing the
following legend in place of the restrictive legend set forth hereon:
"THE RESTRICTIONS ON TRANSFERABILITY OF THIS WARRANT CONTAINED IN
SECTION 9 HEREOF TERMINATED ON ____________, ____, AND ARE OF NO
FURTHER FORCE AND EFFECT."
All Warrants issued upon registration of transfer, division or combination
of, or in substitution for, any Warrant or Warrants entitled to bear such
legend shall have a similar legend endorsed thereon. Whenever the
restrictions imposed by this Section 9 shall terminate as to any share of
Warrant Stock, as hereinabove provided, the Holder thereof shall be
entitled to receive from the Company, at the Company's expense, a new
certificate representing such Common Stock not bearing the restrictive
legend set forth in Section 9.1(a).
(c) Notwithstanding anything in this Warrant to the contrary, in
the event of a Tender Offer, the restrictive legends referred to in
paragraphs 9.1(a) and 9.1(b) may be omitted from any Warrants or Warrant
Stock sold by a Holder to the maker of the Tender Offer.
9.3 Listing on Securities Exchange or NASDAQ. If the Company
----------------------------------------
shall list any shares of Common Stock on any securities exchange or on
NASDAQ, it will, at its expense, list thereon, maintain and, when
necessary, increase such listing of, all shares of Common Stock issued or,
to the extent permissible under the applicable securities exchange or
NASDAQ rules, issuable upon the exercise of this Warrant so long as any
shares of Common Stock shall be so listed during any such Exercise Period.
<PAGE>
23
9.4 Covenant Regarding Consents. The Company hereby covenants
---------------------------
to use its best efforts upon request of one or more Holders to seek any
waivers or consents, or to take any other action required, to effectuate
the exercise of this Warrant by any Holder.
SECTION 10. REGISTRATION RIGHTS
10.1 Incidental Registrations. (a) Right to Include
------------------------ ----------------
Registrable Securities. If the Company at any time after the date hereof
- - ----------------------
proposes to register its Common Stock (or any security which is convertible
into or exchangeable or exercisable for Common Stock) under the Securities
Act (other than a registration on Form S-4 or S-8, or any successor or
other forms promulgated for similar purposes), whether or not for sale for
its own account, in a manner which would permit registration of Registrable
Securities for sale to the public under the Securities Act, it will, at
each such time, give prompt written notice to all Holders of Registrable
Securities of its intention to do so and of such Holders' rights under this
Section 10.1. Upon the written request of any such Holder made within 15
days after the receipt of any such notice (which request shall specify the
Registrable Securities intended to be disposed of by such Holder), the
Company will use its best efforts to effect the registration under the
Securities Act of all Registrable Securities which the Company has been so
requested to register by the Holders thereof, to the extent requisite to
permit the disposition of the Registrable Securities so to be registered;
provided that (i) if, at any time after giving written notice of its
- - --------
intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the
Company shall determine for any reason not to proceed with the proposed
registration of the securities to be sold by it, the Company may, at its
election, give written notice of such determination to each Holder of
Registrable Securities and, thereupon, shall be relieved of its obligation
to register any Registrable Securities in connection with such registration
(but not from its obligation to pay the Registration Expenses in connection
therewith), and (ii) if such registration involves an underwritten
offering, all Holders of Registrable Securities requesting to be included
in the Company's registration must sell their Registrable Securities to the
underwriters selected by the Company on the same terms and conditions as
apply to the Company, with such differences, including any with respect to
indemnification and liability insurance, as may be customary or appropriate
in combined primary and secondary offerings. If a registration requested
pursuant to this Section 10.1(a) involves an underwritten public offering,
any Holder of Registrable Securities requesting to be included in such
registration may elect, in writing prior to the effective date of the
registration statement filed in connection with such registration, not to
register such securities in connection with such registration. Nothing in
this Section 10.1 shall operate to
<PAGE>
24
limit the right of Holder to (i) request the registration of Warrant Stock
issuable upon exercise of Warrants held by such Holder notwithstanding the
fact that at the time of request, such Holder holds only Warrants or (ii)
request the registration at one time of both Warrants and Warrant Stock.
(b) Expenses. The Company will pay all Registration Expenses in
--------
connection with each registration of Registrable Securities requested
pursuant to this Section 10.1.
(c) Priority in Incidental Registrations. If a registration
------------------------------------
pursuant to this Section 10.1 involves an underwritten offering and the
managing underwriter advises the Company in writing that, in its opinion,
the number of securities requested to be included in such registration
exceeds the number which can be sold in such offering, so as to be likely
to have an adverse effect on the price, timing or distribution of the
Securities offered in such offering as contemplated by the Company (other
than the Registrable Securities), then the Company will include in such
registration (i) first, 100% of the securities the Company proposes to sell
and (ii) second, to the extent of the number of Registrable Securities
requested to be included in such registration which, in the opinion of such
managing underwriter, can be sold without having the adverse effect
referred to above, the number of Registrable Securities which the Holders
have requested to be included in such registration, such amount to be
allocated pro rata among all requesting Holders on the basis of the
relative number of shares of Registrable Securities then held by each such
Holder (provided that any shares thereby allocated to any such Holder that
exceed such Holder's request will be reallocated among the remaining
requesting Holders in like manner).
10.2 Registration on Request. (a) Request by the Demand Party.
----------------------- ---------------------------
At any time, upon the written request of the Demand Party requesting that
the Company effect the registration under the Securities Act of all or part
of such Demand Party's Registrable Securities and specifying the amount and
intended method of disposition thereof, the Company will promptly give
written notice of such requested registration to all other Holders of such
Registrable Securities, and thereupon will, as expeditiously as possible,
use its best efforts to effect the registration under the Securities Act
of:
(i) such Registrable Securities which the Company has been so
requested to register by the Demand Party; and
(ii) all other Registrable Securities as are to be registered at
the request of a Demand Party and which the Company has been requested
to register by any other Holder thereof by written request given to
the Company within 15 days after the giving of such written notice by
the Company (which request shall specify the amount and intended
method of disposition of such Registrable Securities),
<PAGE>
25
all to the extent necessary to permit the disposition (in accordance with
the intended method thereof as aforesaid) of the Registrable Securities so
to be registered; provided, that with respect to any Demand Party other
--------
than the Partnership or its Affiliates, the Company shall not be obligated
to effect any registration of Registrable Securities under this Section
10.2(a) unless such Demand Party requests that the Company register at
least 1% of the total number of Registrable Securities; and provided,
--------
further, that, unless Holders of a majority of the Registrable Securities
- - -------
held by Holders consent thereto in writing, the Company shall not be
obligated to file a registration statement relating to any registration
request under this Section 10.2(a) (x) within a period of nine months after
the effective date of any other registration statement relating to any
registration request under this Section 10.2(a) which was not effected on
Form S-3 (or any successor or similar short-form registration statement) or
relating to any registration effected under Section 10.1, or (y) if with
respect thereto the managing underwriter, the Commission, the Securities
Act or the rules and regulations thereunder, or the form on which the
registration statement is to be filed, would require the conduct of an
audit other than the regular audit conducted by the Company at the end of
its fiscal year, in which case the filing may be delayed until the
completion of such regular audit (unless the Holders of the Registrable
Securities to be registered agree to pay the expenses of the Company in
connection with such an audit other than the regular audit). Nothing in
this Section 10.2 shall operate to limit the right of Holder to (i) request
the registration of Warrant Stock issuable upon exercise of Warrants held
by such Holder notwithstanding the fact that at the time of request, such
Holder holds only Warrants or (ii) request the registration at one time of
both Warrants and Warrant Stock.
(b) Registration Statement Form. If any registration
---------------------------
requested pursuant to this Section 10.2 which is proposed by the Company to
be effected by the filing of a registration statement on Form S-3 (or any
successor or similar short-form registration statement) shall be in
connection with an underwritten public offering, and if the managing
underwriter shall advise the Company in writing that, in its opinion, the
use of another form of registration statement is of material importance to
the success of such proposed offering, then such registration shall be
effected on such other form.
(c) Expenses. The Company will pay all Registration Expenses in
--------
connection with the first six (6) registrations of each class or series of
Registrable Securities pursuant to this Section 10.2 upon the written
request of any of the Holders; provided, that any requested registration by
Holder of both Warrants and Warrant Stock at one time shall only count as
one registration. All expenses for any subsequent registrations of
Registrable Securities pursuant to this Section 10.2 shall be paid pro rata
by the Company and all other Persons (including the Holders) participating
in such registration on the basis of the relative number of Warrants or
shares of Warrant Stock, as the
<PAGE>
26
case may be, of each such person whose Registrable Securities are included
in such registration.
(d) Effective Registration Statement. A registration requested
--------------------------------
pursuant to this Section 10.2 will not be deemed to have been effected
unless it has become effective and all of the Registrable Securities
registered thereunder have been sold; provided that if, within 180 days
--------
after it has become effective, the offering of Registrable Securities
pursuant to such registration is interfered with by any stop order,
injunction or other order or requirement of the Commission or other
governmental agency or court, such registration will be deemed not to have
been effected.
(e) Selection of Underwriters. If a requested registration
-------------------------
pursuant to this Section 10.2 involves an underwritten offering, the
Holders of a majority of the Registrable Securities which are held by
Holders and which the Company has been requested to register shall have the
right to select the investment banker or bankers and managers to administer
the offering; provided, however, that such investment banker or bankers and
-------- -------
managers shall be reasonably satisfactory to the Company.
(f) Priority in Requested Registrations. If a requested
-----------------------------------
registration pursuant to this Section 10.2 involves an underwritten
offering and the managing underwriter advises the Company in writing that,
in its opinion, the number of securities requested to be included in such
registration (including securities of the Company which are not Registrable
Securities) exceeds the number which can be sold in such offering, the
Company will include in such registration only the Registrable Securities
requested to be included in such registration. In the event that the
number of Registrable Securities requested to be included in such
registration exceeds the number which, in the opinion of such managing
underwriter, can be sold, the number of such Registrable Securities to be
included in such registration shall be allocated pro rata among all
requesting Holders on the basis of the relative number of Registrable
Securities then held by each such Holder (provided that any shares thereby
allocated to any such Holder that exceed such Holder's request shall be
reallocated among the remaining requesting Holders in like manner). In the
event that the number of Registrable Securities requested to be included in
such registration is less than the number which, in the opinion of the
managing underwriter, can be sold, the Company may include in such
registration the securities the Company proposes to sell up to the number
of securities that, in the opinion of the underwriter, can be sold.
(g) Additional Rights. If the Company at any time grants to any
-----------------
other holders of capital stock any rights to request the Company to effect
the registration under the Securities Act of any such shares of capital
stock on terms more favorable to such holders than the terms set forth in
this Section 10.2, the terms of this Section 10.2 shall be deemed
<PAGE>
27
amended or supplemented to the extent necessary to provide the Holders such
more favorable rights and benefits.
10.3 Registration Procedures. If and whenever the Company is
-----------------------
required to use its best efforts to effect or cause the registration of any
Registrable Securities under the Securities Act as provided in this
Agreement, the Company will, as expeditiously as possible:
(i) prepare and, in any event within 120 days after the end of
the period within which a request for registration may be given to the
Company, file with the Commission a registration statement with
respect to such Registrable Securities and use its best efforts to
cause such registration statement to become effective, provided,
--------
however, that the Company may discontinue any registration of its
-------
securities which is being effected pursuant to Section 10.1 at any
time prior to the effective date of the registration statement
relating thereto;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for a period not in excess of 270 days and to
comply with the provisions of the Securities Act, the Exchange Act and
the rules and regulations of the Commission thereunder with respect to
the disposition of all securities covered by such registration
statement during such period in accordance with the intended methods
of disposition by the seller or sellers thereof set forth in such
registration statement; provided that before filing a registration
--------
statement or prospectus, or any amendments or supplements thereto, the
Company will furnish to counsel selected pursuant to Section 10.6
hereof by the Holders of the Registrable Securities covered by such
registration statement to represent such Holders, copies of all
documents proposed to be filed, which documents will be subject to the
review of such counsel;
(iii) furnish to each seller of such Registrable Securities such
number of copies of such registration statement and of each amendment
and supplement thereto (in each case including all exhibits filed
therewith, including any documents incorporated by reference), such
number of copies of the prospectus included in such registration
statement (including each preliminary prospectus and summary
prospectus), in conformity with the requirements of the Securities
Act, and such other documents as such seller may reasonably request in
order to facilitate the disposition of the Registrable Securities by
such seller;
(iv) use its best efforts to register or qualify such Registrable
Securities covered by such registration in such jurisdictions as each
seller shall reasonably request, and do any and all other acts and
things which may be reasonably
<PAGE>
28
necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned
by such seller, except that the Company shall not for any such purpose
be required to qualify generally to do business as a foreign
corporation in any jurisdiction where, but for the requirements of
this clause (iv), it would not be obligated to be so qualified, to
subject itself to taxation in any such jurisdiction or to consent to
general service of process in any such jurisdiction;
(v) use its best efforts to cause such Registrable Securities
covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof to consummate the
disposition of such Registrable Securities;
(vi) notify each seller of any such Registrable Securities
covered by such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act
within the appropriate period mentioned in clause (ii) of this Section
10.3, of the Company's becoming aware that the prospectus included in
such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then
existing, and at the request of any such seller, prepare and furnish
to such seller a reasonable number of copies of an amended or
supplemental prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Registrable Securities, such
prospectus shall not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light
of the circumstances then existing;
(vii) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable (but not more than
eighteen months) after the effective date of the registration
statement, an earnings statement which shall satisfy the provisions of
Section 11(a) of the Securities Act and the rules and regulations
promulgated thereunder;
(viii) (A) if such Registrable Securities are Warrant Stock, use
its best efforts to list such Registrable Securities on any securities
exchange on which the Common Stock is then listed if such Registrable
Securities are not already so listed and if such listing is then
permitted under the rules of such exchange; (B) if such Registrable
Securities are Warrants, upon the reasonable request of sellers of a
majority of such Registrable Securities, use
<PAGE>
29
its best efforts to list the Warrants and, if requested, the Warrant
Stock underlying the Warrants, notwithstanding that at the time of
request such sellers hold only Warrants, on any securities exchange so
requested, if such Registrable Securities are not already so listed,
and if such listing is then permitted under the rules of such
exchange; (C) and use its best efforts to provide a transfer agent and
registrar for such Registrable Securities covered by such registration
statement not later than the effective date of such registration
statement;
(ix) enter into such customary agreements (including an
underwriting agreement in customary form), which may include
indemnification provisions in favor of underwriters and other persons
in addition to, or in substitution for the provisions of Section 10.4
hereof, and take such other actions as sellers of a majority of such
Registrable Securities or the underwriters, if any, reasonably
requested in order to expedite or facilitate the disposition of such
Registrable Securities;
(x) obtain a "cold comfort" letter or letters from the Company's
independent public accounts in customary form and covering matters of
the type customarily covered by "cold comfort" letters as the seller
or sellers of a majority of shares of such Registrable Securities
shall reasonably request (provided that Registrable Securities
constitute at least 25% of the securities covered by such registration
statement);
(xi) make available for inspection by any seller of such
Registrable Securities covered by such registration statement, by any
underwriter participating in any disposition to be effected pursuant
to such registration statement and by any attorney, accountant or
other agent retained by any such seller or any such underwriter, all
pertinent financial and other records, pertinent corporate documents
and properties of the Company, and cause all of the Company's
officers, directors and employees to supply all information reasonably
requested by any such seller, underwriter, attorney, accountant or
agent in connection with such registration statement;
(xii) notify counsel (selected pursuant to Section 10.6 hereof)
for the Holders of Registrable Securities included in such
registration statement and the managing underwriter or agent,
immediately, and confirm the notice in writing (i) when the
registration statement, or any post-effective amendment to the
registration statement, shall have become effective, or any supplement
to the prospectus or any amendment prospectus shall have been filed,
(ii) of the receipt of any comments from the Commission, (iii) of any
request of the Commission to amend the registration statement or amend
or supplement the prospectus or for additional information, and (iv)
of the issuance by the
<PAGE>
30
Commission of any stop order suspending the effectiveness of the
registration statement or of any order preventing or suspending the
use of any preliminary prospectus, or of the suspension of the
qualification of the registration statement for offering or sale in
any jurisdiction, or of the institution or threatening of any
proceedings for any of such purposes;
(xiii) make every reasonable effort to prevent the issuance of any
stop order suspending the effectiveness of the registration statement
or of any order preventing or suspending the use of any preliminary
prospectus and, if any such order is issued, to obtain the withdrawal
of any such order at the earliest possible moment;
(xiv) if requested by the managing underwriter or agent or any
Holder of Registrable Securities covered by the registration
statement, promptly incorporate in a prospectus supplement or
post-effective amendment such information as the managing underwriter
or agent or such Holder reasonably requests to be included therein,
including, without limitation, with respect to the number of
Registrable Securities being sold by such Holder to such underwriter
or agent, the purchase price being paid therefor by such underwriter
or agent and with respect to any other terms of the underwritten
offering of the Registrable Securities to be sold in such offering;
and make all required filings of such prospectus supplement or
post-effective amendment as soon as practicable after being notified
of the matters incorporated in such prospectus supplement or post--
effective amendment;
(xv) cooperate with the Holders of Registrable Securities covered
by the registration statement and the managing underwriter or agent,
if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing
securities to be sold under the registration statement, and enable
such securities to be in such denominations and registered in such
names as the managing underwriter or agent, if any, or such Holders
may request;
(xvi) obtain for delivery to the Holders of Registrable Securities
being registered and to the underwriter or agent an opinion or
opinions from counsel for the Company in customary form and in form,
substance and scope reasonably satisfactory to such Holders,
underwriters or agents and their counsel; and
(xvii) cooperate with each seller of Registrable Securities and
each underwriter or agent participating in the disposition of such
Registrable Securities and their respective counsel in connection with
any filings required to be made with the NASD.
<PAGE>
31
The Company may require each seller of Registrable Securities as
to which any registration is being effected to furnish the Company with
such information regarding such seller and pertinent to the disclosure
requirements relating to the registration and the distribution of such
securities as the Company may from time to time reasonably request in
writing.
Each Holder of Registrable Securities agrees that, upon receipt
of any notice from the Company of the happening of any event of the kind
described in clause (vi) of this Section 10.3, such Holder will forthwith
discontinue disposition of Registrable Securities pursuant to the
registration statement covering such Registrable Securities until such
Holder's receipt of the copies of the supplemented or amended prospectus
contemplated by clause (vi) of this Section 10.3, and, if so directed by
the Company, such Holder will deliver to the Company (at the Company's
expense) all copies, other than permanent file copies then in such Holder's
possession, of the prospectus covering such Registrable Securities current
at the time of receipt of such notice. In the event the Company shall give
any such notice, the period mentioned in clause (ii) of this Section 10.3
shall be extended by the number of days during the period from and
including the date of the giving of such notice pursuant to clause (vi) of
this Section 10.3 and including the date when each seller of Registrable
Securities covered by such registration statement shall have received the
copies of the supplemented or amended prospectus contemplated by clause
(vi) of this Section 10.3.
10.4 Indemnification. (a) Indemnification by the Company. In
--------------- ------------------------------
the event of any registration of any securities of the Company under the
Securities Act pursuant to Section 10.1 or 10.2, the Company will, and it
hereby does, indemnify and hold harmless, to the extent permitted by law,
the seller of any Registrable Securities covered by such registration
statement, each affiliate of such seller and their respective directors and
officers or general and limited partners (including any director, officer,
affiliate, employee, agent and controlling Person of any of the foregoing),
each other Person who participates as an underwriter in the offering or
sale of such securities and each other Person, if any, who controls such
seller or any such underwriter within the meaning of the Securities Act
(collectively, the "Indemnified Parties"), against any and all losses,
-------------------
claims, damages or liabilities, joint or several, and expenses (including
reasonable attorney's fees and reasonable expenses of investigation) to
which such Indemnified Party may become subject under the Securities Act,
common law or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof, whether or not
such Indemnified Party is a party thereto) arise out of or are based upon
(a) any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such securities were
registered under the Securities Act, any preliminary, final or summary
prospectus contained therein, or any amendment or supplement thereto, or
(b) any omission or
<PAGE>
32
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein (in the case of a
prospectus, in light of the circumstances under which they were made) not
misleading, and the Company will reimburse such Indemnified Party for any
legal or any other expenses reasonably incurred by it in connection with
investigating or defending against any such loss, claim, liability, action
or proceeding; provided that the Company shall not be liable to any
--------
Indemnified Party in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense
arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in such registration
statement or amendment or supplement thereto or in any such preliminary,
final or summary prospectus in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by
such seller specifically stating that it is for use in the preparation
thereof. Such indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of such seller or any Indemnified
Party and shall survive the transfer of such securities by such seller.
(b) Indemnification by the Seller. The Company may require, as
-----------------------------
a condition to including any Registrable Securities in any registration
statement filed in accordance with Section 10.3 herein, that the Company
shall have received an undertaking reasonably satisfactory to it from the
prospective seller of such Registrable Securities or any underwriter to
indemnify and hold harmless (in the same manner and to the same extent as
set forth in subdivision (a) of this Section 10.4) the Company and all
other prospective sellers with respect to any untrue statement or alleged
untrue statement in or omission or alleged omission from such registration
statement, any preliminary, final or summary prospectus contained therein,
or any amendment or supplement, if such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by such seller or underwriter specifically stating
that it is for use in the preparation of such registration statement,
preliminary, final or summary prospectus or amendment or supplement, or a
document incorporated by reference into any of the foregoing. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any of the prospective
sellers, or any of their respective affiliates, directors, officers or
controlling Persons and shall survive the transfer of such securities by
such seller. In no event shall the liability of any selling Holder of
Registrable Securities hereunder be greater in amount than the dollar
amount of the proceeds received by such Holder upon the sale of the
Registrable Securities giving rise to such indemnification obligation.
(c) Notices of Claims, Etc. Promptly after receipt by an
----------------------
Indemnified Party hereunder of written notice of the commencement of any
action or proceeding with respect to which a
<PAGE>
33
claim for indemnification may be made pursuant to this Section 10.4, such
Indemnified Party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the
commencement of such action; provided that the failure of the Indemnified
--------
Party to give notice as provided herein shall not relieve the indemnifying
party of its obligations under the preceding subdivisions of this Section
10.4, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. In case any such action is
brought against an Indemnified Party, unless in such Indemnified Party's
reasonable judgment a conflict of interest between such Indemnified Party
and indemnifying parties may exist in respect of such claim, the
indemnifying party will be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying party similarly
notified to the extent that it may wish, with counsel reasonably
satisfactory to such Indemnified Party, and after notice from the
indemnifying party to such Indemnified Party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
Indemnified Party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party will consent to entry of any
judgment or enter into any settlement which does not include as an
unconditional term thereof, the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim
or litigation.
(d) Contribution. If the indemnification provided for in this
-------------
Section 10.4 from the indemnifying party is unavailable to an Indemnified
Party hereunder in respect of any losses, claims, damages, liabilities or
expenses referred to herein, then the indemnifying party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims,
damages, liabilities or expenses in such proportion as is appropriate to
reflect the relative fault of the indemnifying party and Indemnified
Parties in connection with the actions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of such indemnifying party
and Indemnified Parties shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged
untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied
by, such indemnifying party or Indemnified Parties, and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such action. The amount paid or payable by a party
under this Section 10.4 as a result of the losses, claims, damages,
liabilities and expenses referred to above shall be deemed to include any
legal or other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding.
<PAGE>
34
The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 10.4 were determined by pro rata
allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
(e) Other Indemnification. Indemnification similar to that
---------------------
specified in the preceding subdivisions of this Section 10.4 (with
appropriate modifications) shall be given by the Company and each seller of
Registrable Securities with respect to any required registration or other
qualification of securities under any federal or state law or regulation or
governmental authority other than the Securities Act.
(f) Non-Exclusivity. The obligations of the parties under this
---------------
Section 10.4 shall be in addition to any liability which any party may
otherwise have to any other party.
10.5 Rule 144. The Company covenants that it will file the
--------
reports required to be filed by it under the Securities Act and the
Exchange Act and the rules and regulations adopted by the Commission
thereunder (or, if the Company is not required to file such reports, it
will, upon the request of any Holder of Registrable Securities, make
publicly available such information), and it will take such further action
as any Holder of Registrable Securities may reasonably request, all to the
extent required from time to time to enable such Holder to sell Registrable
Securities without registration under the Securities Act within the
limitation of the exemptions provided by (i) Rule 144 under the Securities
Act, as such Rule may be amended from time to time, or (ii) any similar
rule or regulation hereafter adopted by the Commission. Upon the request
of any Holder of Registrable Securities, the Company will deliver to such
Holder a written statement as to whether it has complied with such
requirements. Notwithstanding anything contained in this Section 10.5, the
Company may, with the consent of the Partnership, deregister under Section
12 of the Exchange Act if it then is permitted to do so pursuant to the
Exchange Act and the rules and regulations thereunder.
10.6 Selection of Counsel. In connection with any registration
--------------------
of Registrable Securities pursuant to Sections 10.1 and 10.2 hereof, the
Holders of a majority of the Registrable Securities covered by any such
registration may select one counsel to represent all Holders of Registrable
Securities covered by such registration; provided, however, that in the
-------- -------
event that the counsel selected as provided above is also acting as counsel
to the Company in connection with such registration, the remaining Holders
shall be entitled to select one additional counsel to represent all such
remaining Holders.
<PAGE>
35
10.7 Holdback Agreement. If any such registration shall be in
------------------
connection with an underwritten public offering, each Holder of Registrable
Securities agrees not to effect any public sale or distribution, including
any sale pursuant to Rule 144 under the Securities Act, of any equity
securities of the Company, or of any security convertible into or
exchangeable or exercisable for any equity security of the Company (in each
case, other than as part of such underwritten public offering), within 7
days before, or such period not to exceed 180 days as the underwriting
agreement may require (or such lesser period as the managing underwriters
may permit) after, the effective date of such registration (except as part
of such registration), and the Company hereby also so agrees and agrees to
cause each other holder of any equity security, or of any security
convertible into or exchangeable or exercisable for any equity security, of
the Company purchased from the Company (at any time other than in a public
offering) to so agree.
10.8 Specific Performance. The parties hereto acknowledge and
--------------------
agree that irreparable damage would occur in the event that any of the
provisions of this Section 10 were not performed in accordance with their
specific terms or were otherwise breached. Accordingly, it is agreed that
they shall be entitled to an injunction or injunctions to prevent breaches
of the provisions of this Section 10 and to enforce specifically the terms
and provisions thereof in any court of competent jurisdiction in the United
States or any state thereof, in addition to any other remedy to which they
may be entitled at law or in equity.
SECTION 11. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of this Warrant and indemnity reasonably
satisfactory to it (it being understood that the written agreement of the
Partnership shall be sufficient indemnity) and in case of mutilation upon
surrender and cancellation hereof, the Company will execute and deliver in
lieu hereof a new Warrant of like tenor to such Holder (without expense to
the Holder); provided, in the case of mutilation, no indemnity shall be
--------
required if this Warrant in identifiable form is surrendered to the Company
for cancellation.
SECTION 12. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the Company
shall maintain an office or agency (which may be the principal executive
offices of the Company) where the Warrants may be presented for exercise,
registration of transfer, division or combination as provided in this
Warrant.
<PAGE>
36
SECTION 13. FINANCIAL AND BUSINESS INFORMATION
13.1 Filings. The Company will file on or before the required
-------
date (including any permitted extensions) all required regular or periodic
reports (pursuant to the Exchange Act) with the Commission and will deliver
to each Holder of a Warrant or Warrant Stock promptly upon their becoming
available one copy of each report, notice or proxy statement sent by the
Company to its stockholders generally, and of each regular or periodic
report (pursuant to the Exchange Act) and any registration statement,
prospectus or written communication (other than transmittal letters)
(pursuant to the Securities Act), filed by the Company with (i) the
Commission or (ii) any securities exchange on which shares of Common Stock
are listed.
SECTION 14. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by the
Holder hereof to receive shares of Common Stock, and no enumeration herein
of the rights or privileges of the Holder hereof, shall give rise to any
liability of such Holder for any value subsequently assigned to the Common
Stock or as a stockholder of the Company, whether such liability is
asserted by the Company or by creditors of the Company. Notwithstanding
any other provision of this Agreement, neither the general partner nor the
limited partners nor any future general or limited partner of the
Partnership shall have any personal liability for performance of any
obligation of the Partnership under this Agreement in excess of the
respective capital contribution of such general partner and limited
partners to such Partnership.
SECTION 15. MISCELLANEOUS
15.1 Nonwaiver and Expenses. No course of dealing or any delay
----------------------
or failure to exercise any right hereunder on the part of the Holder hereof
shall operate as a waiver of such right or otherwise prejudice such
Holder's rights, powers or remedies. If the Company fails to make, when
due, any payments provided for hereunder, or fails to comply with any other
provision of this Warrant, the Company shall pay to the Holder hereof such
amounts as shall be sufficient to cover any costs and expenses including,
but not limited to, reasonable attorneys' fees, including those of
appellate proceedings, incurred by such Holder in collecting any amounts
due pursuant hereto or in otherwise enforcing any of its rights, powers or
remedies hereunder.
15.2 Notice Generally. Any notice, demand, request, consent,
----------------
approval, declaration, delivery or other communication hereunder to be made
pursuant to the provisions of this Warrant shall be sufficiently given or
made if in writing and either delivered in person with receipt acknowledged
or sent by registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
<PAGE>
37
(a) If to any Holder, at its last known address appearing on the
books of the Company maintained for such purpose.
(b) If to the Company at:
Bruno's, Inc.
800 Lakeshore Parkway
Birmingham, Alabama 35211
Attn: Chief Financial Officer
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in
writing by the party entitled to receive such notice. Every notice,
demand, request, consent, approval, declaration, delivery or other
communication hereunder shall be deemed to have been duly given or served
on the date on which personally delivered, with receipt acknowledged, or
three (3) Business Days after the same shall have been deposited in the
United States mail. Failure or delay in delivering copies of any notice,
demand, request, approval, declaration, delivery or other communication to
the person designated above to receive a copy shall in no way adversely
affect the effectiveness of such notice, demand, request, approval,
declaration, delivery or other communication.
15.3 Successors and Assigns. Subject to the provisions of
----------------------
Sections 3.1, 9 and 11, this Warrant and the rights evidenced hereby shall
inure to the benefit of and be binding upon the successors of the Company
and the successors and assigns of the Holder hereof. The provisions of
this Warrant are intended to be for the benefit of all Holders from time to
time of this Warrant, and shall be enforceable by any such Holder.
Without limitation to the foregoing, in the event that the Partnership
distributes or otherwise transfers any shares of the Registrable Securities
to any of its present or future general or limited partners, the Company
hereby acknowledges that the registration rights granted pursuant to
Section 10 of this Agreement shall be transferred to such partner or
partners on a pro rata basis, and that at or after the time of any such
distribution or transfer, any such partner or group of partners may
designate a Person to act on its behalf in delivering any notices or making
any requests hereunder.
15.4 Amendment. This Warrant and all other Warrants may be
---------
modified or amended or the provisions hereof waived with the written
consent of the Company and holders of Warrants exercisable for in excess of
50% of the aggregate number of shares of Common Stock then receivable upon
exercise of all Warrants whether or not then exercisable, provided that no
--------
such Warrant may be modified or amended in a manner which is adverse to the
Partnership or any of its successors or assigns, so long as such Person
holds any Warrants or Warrant Stock, without the prior written consent of
such Person.
<PAGE>
38
15.5 Severability. Wherever possible, each provision of this
------------
Warrant shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Warrant shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Warrant.
15.6 Headings. The headings used in this Warrant are for the
--------
convenience of reference only and shall not, for any purpose, be deemed a
part of this Warrant.
15.7 GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE. IN ALL
------------------------------------------------
RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE,
THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY,
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK. THE COMPANY CONSENTS TO PERSONAL JURISDICTION, WAIVES ANY OBJECTION
AS TO JURISDICTION OR VENUE, AND AGREES NOT TO ASSERT ANY DEFENSE BASED ON
LACK OF JURISDICTION OR VENUE, IN THE COUNTY OF NEW YORK, STATE OF NEW
YORK. THE PARTIES AGREE TO SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE
COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS WARRANT CERTIFICATE AND THE WARRANTS EVIDENCED HEREBY.
SERVICE OF PROCESS ON THE COMPANY OR HOLDER IN ANY ACTION ARISING OUT OF OR
RELATING TO THIS AGREEMENT SHALL BE EFFECTIVE IF MAILED TO SUCH PARTY IN
ACCORDANCE WITH THE PROCEDURES AND REQUIREMENTS SET FORTH IN SECTION 15.2.
15.8 MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN
---------------------------
CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND
ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES
WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION
RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE
APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION
OF THE BENEFITS OF THE JUDICIAL SYSTEM, THE PARTIES HERETO WAIVE ALL RIGHT
TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR
DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed and its corporate seal to be impressed hereon.
Dated: August 18, 1995
BRUNO'S, INC.
By /s/ Ronald G. Bruno
--------------------------
Name: Ronald G. Bruno
Title: Chairman and Chief
Executive Officer
<PAGE>
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant
irrevocably exercises this Warrant for _______ shares of Common Stock of
Bruno's, Inc., all on the terms and conditions specified in this Warrant
and
/ / herewith tenders payment of the Aggregate Exercise Price for the
number of shares of Common Stock specified above to the order of
Bruno's, Inc. in the amount of $_________ in accordance with the
terms hereof;
The undersigned registered owner of this Warrant
irrevocably exercises this Warrant in respect of _______ shares of Common
Stock of Bruno's, Inc., all on the terms and conditions specified in this
Warrant and
/ / elects not to pay the Aggregate Exercise Price with respect to the
shares of Common Stock specified above and, in lieu thereof,
elects to surrender this Warrant (or the relevant portion thereof)
in exchange for such number of shares of Common Stock having an
aggregate value equal to the difference between (x) the aggregate
Fair Market Value of the number of shares of Common Stock
specified above and (y) the Aggregate Exercise Price in respect of
such number of shares.
<PAGE>
2
The undersigned requests that certificates for [all] [_________
of] the shares of Common Stock hereby received (and any securities or other
property issuable upon such exercise) be issued in the name of and
delivered to ______________________ _______________________________ whose
address is ________________________________________ [add any additional
names and addresses together with the number of shares of Common Stock (and
any securities or other property issuable upon such exercise) to be issued
to such person or entity)] and, if such shares of Common Stock shall not
include all of the shares of Common Stock issuable as provided in this
Warrant, that a new Warrant of like tenor and date for the balance of the
shares of Common Stock issuable hereunder be delivered to the undersigned.
______________________________
(Name of Registered Owner)
______________________________
(Signature of Registered Owner)
______________________________
(Street Address)
______________________________
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the name
as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatsoever.
<PAGE>
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this
Warrant hereby sells, assigns and transfers unto the Assignee named below
all of the rights of the undersigned under this Warrant, with respect to
the number of shares of Common Stock, adjusted as of the date of this
assignment as provided in the Warrant, set forth below:
No. of Shares of
Name and Address of Assignee Common Stock
- - ---------------------------- ----------------
and does hereby irrevocably constitute and appoint __________
__________________ attorney-in-fact to register such transfer on the books
of Bruno's, Inc. maintained for the purpose, with full power of
substitution in the premises.
Dated: _______________________________ Print
Name: _______________________________
Signature: __________________________
Witness: ____________________________
NOTICE: The signature on this subscription must correspond with the name
as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatsoever.
Exhibit 4.4
WARRANT
To Purchase Common Stock of
Bruno's, Inc.
Issuance Date: August 18, 1995
Number of Shares of Common Stock:
82,600 (subject to adjustment)
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. EXERCISE OF WARRANT . . . . . . . . . . . . . . . . . . . . 7
2.1 Manner of Exercise . . . . . . . . . . . . . . . . . . . . . 7
2.2 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . 8
2.3 Fractional Shares . . . . . . . . . . . . . . . . . . . . . . 9
2.4 Continued Validity . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3. TRANSFER, DIVISION AND COMBINATION, ADDITIONAL WARRANTS . 9
3.1 Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.2 Division and Combination . . . . . . . . . . . . . . . . . . 10
3.3 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.4 Maintenance of Books . . . . . . . . . . . . . . . . . . . . 10
SECTION 4. ADJUSTMENTS . . . . . . . . . . . . . . . . . . . . . . . . 10
4.1 Stock Dividends, Subdivisions and Combinations . . . . . . . 10
4.2 Certain Other Dividends; Distributions . . . . . . . . . . . 11
4.3 Issuance of Additional Shares of Common Stock . . . . . . . . 12
4.4 Issuance of Convertible Securities, Warrants or Other
Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.5 Superseding Adjustment . . . . . . . . . . . . . . . . . . . 14
4.6 Adjustment of Number of Shares of Warrant Stock . . . . . . . 15
4.7 Other Provisions Applicable to Adjustments Under this
Section . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.8 Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets . . . . . . . . . . . . . . . . . . 17
4.9 Other Action Affecting Common Stock . . . . . . . . . . . . . 18
SECTION 5. NOTICES TO WARRANT HOLDERS . . . . . . . . . . . . . . . . 19
5.1 Notice of Adjustments . . . . . . . . . . . . . . . . . . . . 19
5.2 Notice of Certain Corporate Action . . . . . . . . . . . . . 20
SECTION 6. NO IMPAIRMENT . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 7. COMMON STOCK; RESERVATION AND AUTHORIZATION OF
REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL
AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS . . . . 21
SECTION 9. RESTRICTIONS ON TRANSFERABILITY . . . . . . . . . . . . . . 21
9.1 Restrictive Legend . . . . . . . . . . . . . . . . . . . . . 21
<PAGE>
Page
----
9.2 Restriction on Transfers . . . . . . . . . . . . . . . . . . 22
9.3 Listing on Securities Exchange or NASDAQ . . . . . . . . . . 22
[9.4 Covenant Regarding Consents . . . . . . . . . . . . . . . . 23
SECTION 10. REGISTRATION RIGHTS . . . . . . . . . . . . . . . . . . . 23
10.1 Incidental Registrations . . . . . . . . . . . . . . . . . . 23
10.2 Registration on Request . . . . . . . . . . . . . . . . . . 24
10.3 Registration Procedures . . . . . . . . . . . . . . . . . . 27
10.5 Rule 144 . . . . . . . . . . . . . . . . . . . . . . . . . . 33
10.7 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 11. LOSS OR MUTILATION . . . . . . . . . . . . . . . . . . . . 34
SECTION 12. OFFICE OF THE COMPANY . . . . . . . . . . . . . . . . . . 35
SECTION 13. FINANCIAL AND BUSINESS INFORMATION . . . . . . . . . . . . 35
13.1 Filings . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 14. LIMITATION OF LIABILITY . . . . . . . . . . . . . . . . . 35
SECTION 15. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . 35
15.1 Nonwaiver and Expenses . . . . . . . . . . . . . . . . . . . 35
15.2 Notice Generally . . . . . . . . . . . . . . . . . . . . . . 36
15.3 Successors and Assigns . . . . . . . . . . . . . . . . . . . 36
15.4 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . 36
15.5 Severability . . . . . . . . . . . . . . . . . . . . . . . . 37
15.6 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . 37
15.7 GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE . . . . . . 37
15.8 MUTUAL WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . 37
EXHIBIT A SUBSCRIPTION FORM
EXHIBIT B ASSIGNMENT FORM
<PAGE>
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS. THIS WARRANT AND THE SECURITIES ISSUABLE
UPON EXERCISE HEREOF MAY NOT BE TRANSFERRED, SOLD, ASSIGNED, EXCHANGED,
MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF OR ENCUMBERED
WITHOUT COMPLIANCE WITH THE PROVISIONS OF, AND ARE OTHERWISE RESTRICTED BY
THE PROVISIONS OF, THE SECURITIES ACT OF 1933, AS AMENDED, THE RULES AND
REGULATIONS THEREUNDER AND THIS WARRANT.
WARRANT
-------
To Purchase 82,600 Shares of
Common Stock (subject to adjustment) of
BRUNO'S, INC.
THIS IS TO CERTIFY THAT, for value received, KKR Partners II,
L.P., a Delaware limited partnership (the "Partnership"), or its registered
assigns, is the owner of eighty two thousand six hundred (82,600) Warrants
(as hereinafter defined), which entitle the Holder, at any time prior to
the Expiration Date (as hereinafter defined), to purchase from BRUNO'S,
INC., an Alabama corporation (the "Company"), eighty two thousand six
hundred (82,600) shares of Common Stock (as hereinafter defined and subject
to adjustment as provided herein), in whole or in part, including
fractional parts, all on the terms and conditions and pursuant to the
provisions hereinafter set forth.
SECTION 1. DEFINITIONS
As used in this Warrant, the following terms have the respective
meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares of
---------------------------------
Common Stock issued by the Company after the Issuance Date, other than
the Warrant Stock.
"Affiliate" shall mean, as to any Person, (i) any other Person
---------
directly or indirectly controlling, controlled by, or under common
control with such Person or (ii) any director, officer or partner of
such Person or any Person specified in clause (i) above.
"Aggregate Exercise Price" shall mean, with respect to the
------------------------
exercise of all or a portion of the Warrant, the
<PAGE>
2
Exercise Price multiplied by the number of shares of Warrant Stock
purchased upon such exercise.
"Business Day" shall mean any day that is not a Saturday or
------------
Sunday or a day on which banks are required or permitted to be closed
in the State of New York or the State of Alabama.
"Commission" shall mean the Securities and Exchange Commission or
----------
any other federal agency then administering the Securities Act and
other federal securities laws.
"Common Stock" shall mean the collective reference to the common
------------
stock of the Company, par value $.01 per share, as constituted on the
Issuance Date, and any capital stock into which such Common Stock may
thereafter be changed, and shall also include (i) capital stock of the
Company of any other class (regardless of how denominated) issued to
the holders of shares of Common Stock upon any reclassification
thereof in which all such shares are converted into a new class of
capital stock and (ii) shares of common stock of any successor or
acquiring corporation (as defined in Section 4.8) received by or
distributed to the holders of Common Stock of the Company in the
circumstances contemplated by Section 4.8.
"Convertible Securities" shall mean evidences of indebtedness,
----------------------
shares of stock or other securities which are convertible into or
exchangeable for, with or without payment of additional consideration
in cash or property, Additional Shares of Common Stock, either
immediately or upon the occurrence of a specified date or a specified
event.
"Demand Party" shall mean (a) the Partnership or (b) any other
------------
Holder or Holders, including, without limitation, any present or
future general or limited partner of the Partnership, or any general
or limited partner of any general or limited partner thereof, that may
become an assignee of such Partnership's rights hereunder; provided
--------
that to be a Demand Party under this clause (b), a Holder or Holders
must either individually or in aggregate with all other Holders with
whom it is acting together to demand registration own at least 1% of
the total number of Registrable Securities (whether in the form of
Warrants or Warrant Stock).
"Effective Time of the Merger" shall mean the time the Articles
----------------------------
of Merger in respect of the Merger are duly filed with the Secretary
of State of the State of Alabama or at such other time as shall be
specified in such Articles of Merger.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended, or any similar federal statute, and the
<PAGE>
3
rules and regulations of the Commission thereunder, all as the same
shall be in effect from time to time.
"Exercise Period" shall mean the period during which this Warrant
---------------
is exercisable pursuant to Section 2.1.
"Exercise Price" shall mean $12.00, as the same may be adjusted
--------------
from time to time pursuant to the terms hereof.
"Expiration Date" shall mean the date which is the tenth
---------------
anniversary of the Issuance Date.
"Fair Market Value" shall mean, as of any exercise date or other
-----------------
relevant date, the average for the second Trading Day preceding such
date of the high and low reported sales prices regular way of one
share of Common Stock on such Trading Day or, in case no such reported
sale takes place on such Trading Day, the average of the reported
closing bid and asked prices regular way of a share of Common Stock on
such Trading Day, in either case on the principal national securities
exchange in the United States on which the shares of Common Stock are
listed or admitted to trading, or if not listed or admitted to trading
on any national securities exchange on such Trading Day, on the
National Association of Securities Dealers Automated Quotations
National Market System, or if the shares of Common Stock are not
listed or admitted to trading on any national securities exchange or
quoted on such National Market System on such Trading Day, the average
of the closing bid and asked prices of a share of Common Stock in the
over-the-counter market on such Trading Day as furnished by any New
York Stock Exchange member firm selected from time to time by the
Company. If the Common Stock is not quoted or listed by any such
organization, exchange or market, the Fair Market Value of the Common
Stock as of such exercise or other relevant date shall be determined
in good faith by the Board of Directors of the Company.
"fair value" shall mean, with respect to the valuation of (i) any
----------
evidences of indebtedness, shares of stock, other securities or
property or warrants or other subscription or purchase rights
distributable pursuant to Section 4.2 and (ii) consideration, and
assets and businesses pursuant to Section 4.7(a) (collectively, the
items listed in clauses (i) and (ii) are the "Valuation Properties"),
--------------------
the fair value (as determined in good faith by the Board of Directors
of the Company and, if required by the Majority Holders, supported by
an opinion from an investment banking firm acceptable to the Majority
Holders, which approval shall not be unreasonably withheld, of such
Valuation Properties.
"Fully Diluted Outstanding" shall mean, when used with reference
-------------------------
to Common Stock, at any date as of which the number of shares thereof
is to be determined, all shares of Common Stock Outstanding at such
date, all shares of Common
<PAGE>
4
Stock issuable in respect of Convertible Securities outstanding at
such date, and all shares of Common Stock issuable in respect of this
Warrant outstanding on such date and all shares of Common Stock
issuable in respect of other options or warrants to purchase shares of
Common Stock outstanding (or contractually required to be issued by
the Company) on such date.
"GAAP" shall mean generally accepted accounting principles in the
----
United States of America as from time to time in effect.
"Holder" shall mean the Person in whose name this Warrant is
------
registered on the books of the Company maintained for such purpose or
the Person holding any Warrant Stock, including, without limitation in
each case, transferees thereof.
"Issuance Date" shall mean the date upon which this Warrant is
-------------
originally issued, which shall be the date on which the Effective Time
of the Merger shall occur.
"Majority Holders" shall mean the Holders of Warrants exercisable
----------------
for in excess of 50% of the aggregate number of shares of Common Stock
then receivable upon exercise of all Warrants.
"Merger" shall mean the merger of Crimson Acquisition Corp., an
------
Alabama corporation, which is a subsidiary of the Partnership, with
and into the Company, pursuant to the Agreement and Plan of Merger,
dated as of April 20, 1995, and as amended as of May 18, 1995.
"NASD" shall mean the National Association of Securities Dealers,
----
Inc., or any successor entity thereto.
"NASDAQ" shall mean the National Association of Securities
------
Dealers Automatic Quotation System.
"Other Property" shall have the meaning set forth in Section 4.8.
--------------
"Outstanding" shall mean, when used with reference to Common
-----------
Stock, at any date as of which the number of shares thereof is to be
determined, all issued shares of Common Stock, except shares then
owned or held by or for the account of the Company or any Subsidiary,
and shall include all shares issuable in respect of outstanding scrip
or any certificates representing fractional interests in shares of
Common Stock.
"Permitted Issuances" shall mean the issuance of shares of Common
-------------------
Stock upon exercise of rights to acquire shares of Common Stock
exercisable pursuant to options held by employees or directors under
stock option plans which may
<PAGE>
5
from time to time be adopted by the Company after the Issuance Date.
"Person" shall mean any individual, sole proprietorship,
------
partnership, joint venture, trust, incorporated organization,
association, corporation, institution, public benefit corporation,
entity or government (whether federal, state, county, city, municipal
or otherwise, including, without limitation, any instrumentality,
division, agency, body or department thereof).
"Registrable Securities" shall mean (i) the Warrants and (ii) the
----------------------
Warrant Stock. As to any particular Registrable Securities, once
issued, such securities shall cease to be Registrable Securities when
(i) a registration statement with respect to the sale by the Holder of
such securities shall have become effective under the Securities Act
and such securities shall have been disposed of in accordance with
such registration statement, (ii) such securities shall have been
distributed to the public pursuant to Rule 144 (or any successor
provision) under the Securities Act, (iii) such securities shall have
been otherwise transferred, new certificates for such securities not
bearing a legend restricting further transfer shall have been
delivered by the Company and subsequent disposition of such securities
shall not require registration or qualification of such securities
under the Securities Act or any state securities or blue sky law then
in force, or (iv) such securities shall have ceased to be Outstanding.
"Registration Expenses" shall mean any and all expenses incident
---------------------
to performance of or compliance with Section 10 of this Agreement,
including, without limitation, (i) all Commission and stock exchange
or NASD registration and filing fees (including, if applicable, the
fees and expenses of any "qualified independent underwriter," as such
term is defined in Schedule E to the By-laws of the NASD, and of its
counsel), (ii) all fees and expenses of complying with securities or
blue sky laws (including fees and disbursements of counsel for the
underwriters in connection with blue sky qualifications of the
Registrable Securities), (iii) all printing, messenger and delivery
expenses, (iv) all fees and expenses incurred in connection with the
listing of the Registrable Securities on any securities exchange
pursuant to clause (viii) of Section 10.3 and all rating agency fees,
(v) the fees and disbursements of counsel for the Company and of its
independent public accountants, including the expenses of any special
audits and/or "cold comfort" letters required by or incident to such
performance and compliance, (vi) the reasonable fees and disbursements
of counsel selected pursuant to Section 10.6 hereof by the Holders of
the Registrable Securities being registered to represent such Holders
in connection with each such registration, (vii) any fees and
<PAGE>
6
disbursements of underwriters customarily paid by the issuers or
sellers of securities, including liability insurance if the Company so
desires or if the underwriters so require, and the reasonable fees and
expenses of any special experts retained in connection with the
requested registration, but excluding underwriting discounts and
commissions and certain transfer taxes, if any, and (viii) other
reasonable out-of-pocket expenses of Holders (provided that such
--------
expenses shall not include expenses of counsel other than those
provided for in clause (vi) above).
"Responsible Officer" shall mean the chief executive officer of
-------------------
the Company, the president of the Company or the chief financial
officer of the Company.
"Securities Act" shall mean the Securities Act of 1933, as
--------------
amended, or any similar federal statute, and the rules and regulations
of the Commission thereunder, all as the same shall be in effect at
the time.
"Subsidiary" shall mean any corporation of which an aggregate of
----------
more than 50% of the outstanding stock having ordinary voting power to
elect a majority of the board of directors of such corporation
(irrespective of whether, at the time, stock of any other class or
classes of such corporation shall have or might have voting power by
reason of the happening of any contingency) is at the time, directly
or indirectly, owned legally or beneficially by the Company and/or one
or more Subsidiaries of the Company.
"Tender Offer" shall mean any public offer to substantially all
------------
holders of Common Stock to purchase at least 50% of the Common Stock
at the time outstanding.
"Trading Day" shall mean each weekday other than any day on which
-----------
any Common Stock is not traded on any national securities exchange, on
NASDAQ or in the over-the-counter market.
"Transfer" shall mean any disposition of any Warrant or Warrant
--------
Stock or of any interest in either thereof, which would constitute a
sale or transfer of a beneficial interest thereof within the meaning
of the Securities Act (excluding any transfer to an Affiliate of the
Partnership).
"Warrant Stock" shall mean the shares of Common Stock received by
-------------
the Holders of the Warrants upon the exercise thereof, including any
such shares of Common Stock transferred to any transferee of such
Holder, other than a transferee who acquires such shares after the
same have been (i) publicly sold pursuant to a registration statement
under the Securities Act or (ii) transferred pursuant to Rule 144 of
the Exchange Act, provided that such securities cease to be
"restricted securities" within the meaning of Rule 144.
<PAGE>
7
"Warrants" shall mean this Warrant and all warrants issued upon
--------
transfer, division or combination of, or in substitution for, any
thereof, other than Warrants transferred to a transferee who acquires
such Warrants after the same have been (i) publicly sold pursuant to a
registration statement under the Securities Act or (ii) transferred
pursuant to Rule 144 of the Exchange Act, provided that such
securities cease to be "restricted securities" within the meaning of
Rule 144. All Warrants shall at all times be identical as to terms
and conditions and date, except as to the number of shares of Common
Stock for which they may be exercised.
SECTION 2. EXERCISE OF WARRANT
2.1 Manner of Exercise. At any time and from time to time from
------------------
and after the Issuance Date and until 5:00 P.M., New York time, on the
Expiration Date, Holder may exercise this Warrant, on any Business Day, for
all or any part of the number of shares of the Common Stock issuable
hereunder.
In order to exercise this Warrant, in whole or in part, Holder
shall deliver to the Company at its principal office at 800 Lakeshore
Parkway, Birmingham, Alabama 35211 or at the office or agency designated by
the Company pursuant to Section 12, (i) a written notice of Holder's
election to exercise this Warrant, which notice shall specify the number of
shares of Common Stock to which the exercise shall relate and (ii) this
Warrant. Such notice shall be substantially in the form of the
subscription form appearing at the end of this Warrant as Exhibit A (the
"Subscription Form"), duly executed by Holder or its agent or attorney.
-----------------
Upon receipt by the Company of (a) this Warrant and (b) the
Subscription Form with the appropriate box checked thereon, the Company
shall issue the number of shares of Common Stock set forth in the next
paragraph.
To the extent, if any, Holder, in its sole discretion, has
checked the box on the Subscription Form contemplating a cash exercise upon
payment of the Aggregate Exercise Price, then upon payment, by certified or
official bank check payable to the order of the Company, of the Aggregate
Exercise Price for the shares of Warrant Stock to be purchased pursuant to
the exercise of the Warrant, the Company shall, as promptly as practicable,
and in any event within two (2) Business Days thereafter, execute or cause
to be executed and deliver or cause to be delivered to Holder a certificate
or certificates representing the aggregate number of full shares of Common
Stock issuable upon such cash exercise. To the extent, if any, Holder, in
its sole discretion has checked the box on the Subscription Form by which
Holder elects not to pay the Aggregate Exercise Price, the Company shall,
as promptly as practicable, and in any event within two (2) Business Days
thereafter, execute or cause to be executed and deliver or cause to be
delivered to Holder a certificate or
<PAGE>
8
certificates representing the aggregate number of full shares of Common
Stock having an aggregate value equal to the difference between (x) the
then aggregate Fair Market Value of the number of shares of Common Stock
specified in the Subscription Form and (y) the then Aggregate Exercise
Price in respect of such number of shares.
In either case, the stock certificate or certificates so
delivered shall be in such denomination or denominations as such Holder
shall request in the Subscription Form and shall be registered in the name
of Holder or, subject to Section 9, such other name as shall be designated
in the Subscription Form.
This Warrant shall be deemed to have been exercised and such
certificate or certificates shall be deemed to have been issued, and Holder
or any other Person so designated to be named therein shall be deemed to
have become a holder of record of such shares for all purposes, as of the
date the notice is received by the Company.
If this Warrant shall have been exercised in part, the Company
shall, at the time of delivery of the certificate or certificates
representing Warrant Stock, deliver to Holder a new Warrant evidencing the
rights of Holder to receive the number of shares of Common Stock called for
by this Warrant less the number of shares issued pursuant to the
aforementioned cash exercise of this Warrant or less the relevant portion
of this Warrant surrendered in connection with the cashless exercise of
this Warrant, which new Warrant shall in all other respects be identical to
this Warrant, or, at the request of Holder, appropriate notation may be
made on this Warrant and the same returned to Holder. Notwithstanding any
provision herein to the contrary, the Company shall not be required to
register shares in the name of any Person who acquired this Warrant (or
part hereof) or any Warrant Stock otherwise than in accordance with this
Warrant.
2.2 Payment of Taxes. All shares of Common Stock issuable upon
----------------
the exercise of this Warrant pursuant to the terms hereof shall be validly
issued, fully paid and nonassessable and without any preemptive rights.
The Company shall pay all expenses in connection with, and all documentary,
stamp or similar issue or transfer taxes, if any, and all other taxes and
other governmental charges that may be imposed with respect to, the issue
or delivery of this Warrant, and all shares of Capital Stock issuable upon
the exercise of this Warrant, and shall indemnify and hold the Partnership,
its general and limited partners and its other Affiliates and the Company's
directors harmless from any taxes, interest and penalties which may become
payable by the Partnership, its general and limited partners or its other
Affiliates or any such directors as a result of the failure or delay by the
Company to pay such taxes. The Company shall not be required, however, to
pay any tax or other charge imposed in connection with any transfer
involved in the issue of any certificate for shares of Common Stock
issuable upon exercise
<PAGE>
9
of this Warrant in any name other than that of Holder and its Affiliates,
and in such case the Company shall not be required to issue or deliver any
stock certificate until such tax or other charge has been paid or it has
been established to the satisfaction of the Company that no such tax or
other charge is due.
2.3 Fractional Shares. The Company shall not be required to
-----------------
issue fractional shares of Common Stock on the exercise of Warrants. If
any fraction of a share of Common Stock would be issuable on the exercise
of any Warrant (or specified portion thereof), the Company shall pay to the
Holder of the Warrant an amount in cash equal to such fraction multiplied
by the then-current Fair Market Value per share of Common Stock. For the
purposes of this Section 2.3, the date as of which the Fair Market Value of
Common Stock shall be computed shall be the date on which notice is
received by the Company pursuant to Section 2.1.
2.4 Continued Validity. A Holder of shares of Warrant Stock
------------------
shall continue to be entitled with respect to such shares to all rights and
subject to all obligations to which it would have been entitled or subject
as Holder under Sections 9, 10, 13 and 15 of this Warrant.
SECTION 3. TRANSFER, DIVISION AND COMBINATION, ADDITIONAL
WARRANTS
3.1 Transfer. Subject to compliance with Section 9, transfer of
--------
this Warrant and all rights hereunder, in whole or in part, shall be
registered on the books of the Company to be maintained for such purpose,
upon surrender of this Warrant at the principal office of the Company
referred to in Section 2.1 or the office or agency designated by the
Company pursuant to Section 12, together with a written assignment of this
Warrant substantially in the form of Exhibit B hereto duly executed by
Holder or its agent or attorney and funds sufficient to pay any transfer
taxes payable pursuant to Section 2.2 upon the making of such transfer.
Upon such surrender and, if required, such payment, the Company shall,
subject to Section 9, execute and deliver a new Warrant or Warrants in the
name of the assignee or assignees and in the denomination specified in such
instrument of assignment, and shall issue to the assignor a new Warrant
evidencing the portion of this Warrant not so assigned, and this Warrant
shall promptly be cancelled. A Warrant, if properly assigned in compliance
with Section 9, may be exercised by a new Holder for the receipt of shares
of Common Stock without having a new Warrant issued. If requested by the
Company, a new Holder shall acknowledge in writing, in form reasonably
satisfactory to the Company, such Holder's continuing obligations under
Sections 9 and 15.
3.2 Division and Combination. Subject to Section 9, this
------------------------
Warrant may be divided or combined with other Warrants upon
<PAGE>
10
presentation hereof at the aforesaid office or agency of the Company,
together with a written notice specifying the names and denominations in
which new Warrants are to be issued, signed by Holder or its agent or
attorney. Subject to compliance with Section 3.1 and with Section 9, as to
any transfer which may be involved in such division or combination, the
Company shall execute and deliver a new Warrant or Warrants in exchange for
the Warrant or Warrants to be divided or combined in accordance with such
notice.
3.3 Expenses. The Company shall prepare, issue and deliver at
--------
its own expense (other than transfer taxes not payable by the Company
pursuant to Section 2.2) the new Warrant or Warrants under this Section 3.
3.4 Maintenance of Books. The Company agrees to maintain, at
--------------------
its aforesaid office or agency, books for the registration or transfer of
the Warrants.
SECTION 4. ADJUSTMENTS
The Exercise Price and the number of shares of Common Stock for
which this Warrant is exercisable shall be subject to adjustment as set
forth in this Section 4. The Company shall give each Holder notice of any
event described below which requires an adjustment pursuant to this Section
4 at the time of such event. At any time and from time to time, the
Company shall promptly, without any action required of the Holders, cause
the appropriate adjustment or adjustments (to the extent that more than one
event requiring an adjustment has occurred since the last adjustment made)
to be made pursuant to this Section 4 in respect of each Warrant
outstanding.
4.1 Stock Dividends, Subdivisions and Combinations. If at any
----------------------------------------------
time the Company shall:
(a) take a record of the holders of its Common Stock for the
purpose of entitling them to receive or set a record date for a
dividend payable in, or other distribution of, Additional Shares of
Common Stock;
(b) subdivide its outstanding shares of Common Stock into a
larger number of shares of Common Stock;
(c) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock; or
(d) issue any shares of its capital stock or other securities by
reclassification of the Common Stock (other than pursuant to Section
4.8 below);
then the Exercise Price shall be proportionately decreased in the case of
such a dividend or distribution of Additional Shares of Common Stock or
such a subdivision, or proportionately increased
<PAGE>
11
in the case of such a combination, or the kind of capital stock or other
securities of the Company which may be purchased shall be adjusted in the
case of such a reclassification of the Common Stock, each on the record
date for such dividend or distribution or effective date of such
subdivision, combination or reclassification, as the case may be, such that
the Holder shall be entitled to receive, upon exercise of this Warrant, the
aggregate number and kind of shares of Common Stock which, if the Warrant
had been fully exercised immediately prior to such date, it would have
owned upon such exercise and been entitled to receive by virtue of such
dividend, distribution, subdivision, combination or reclassification.
4.2 Certain Other Dividends; Distributions. If at any time the
--------------------------------------
Company shall:
(a) take a record of the holders of its Common Stock for the
purpose of entitling them to receive or set a record date for any
dividend or other distribution of any evidences of its indebtedness,
any shares of its stock (other than Common Stock), any shares of stock
of any Subsidiary or any other securities or property of any nature
whatsoever (other than regular quarterly cash dividends payable out of
consolidated earnings or earned surplus); or
(b) take a record of the holders of its Common Stock for the
purpose of entitling them to receive or set a record date for any
dividend or other distribution of any warrants or other rights to
subscribe for Convertible Securities or purchase any evidences of its
indebtedness, any shares of its stock or any other securities or
property of any nature whatsoever (other than regular quarterly cash
dividends payable out of consolidated earnings or earned surplus); or
(c) repurchase (including any repurchase by a Subsidiary of the
Company) shares of Common Stock for per share consideration that is
greater than the Fair Market Value of one share of Common Stock
immediately prior to such repurchase (in which event the aggregate
amount so paid in excess of the aggregate Fair Market Value of all the
Common Stock divided by the number of outstanding shares of Common
Stock prior to such repurchase shall be considered a distribution of
assets to all holders of Common Stock pursuant to this subsection);
then the Exercise Price shall be adjusted to equal the Exercise Price in
effect prior to such distribution or dividend multiplied by a fraction, (1)
the numerator of which shall be (A) the Fair Market Value per share of
Common Stock on such record date minus (B) the fair value of the amount
allocable to one share of Common Stock of any and all such evidences of
indebtedness, shares of stock, other securities or property or warrants or
other subscription or purchase rights so distributable, and (2) the
denominator of which shall be such Fair Market Value per share of Common
Stock. Such adjustments shall be made whenever such a
<PAGE>
12
record date is fixed. A reclassification of all of the Common Stock into
shares of Common Stock and shares of any other class of stock shall be
deemed a distribution by the Company to the holders of its Common Stock of
such shares of such other class of stock within the meaning of this Section
4.2 and, if the outstanding shares of Common Stock shall be changed into a
larger or smaller number of shares of Common Stock as a part of such
reclassification, such change shall be deemed a subdivision or combination,
as the case may be, of the outstanding shares of Common Stock within the
meaning of Section 4.1.
4.3 Issuance of Additional Shares of Common Stock. If at any
---------------------------------------------
time the Company shall (except as hereinafter provided) issue or sell any
Additional Shares of Common Stock, other than Permitted Issuances, for
consideration in an amount per Additional Share of Common Stock less than
the lesser of (x) the Exercise Price and (y) the Fair Market Value per
share of Common Stock on such issuance or sale date, then the Exercise
Price shall be adjusted to be the price determined by dividing
(i) an amount equal to the sum of (A) the number of Shares of
Common Stock outstanding immediately prior to such issuance or sale
multiplied by the Exercise Price in effect immediately prior to such
issuance or sale and (B) the consideration, if any, received by the
Company upon such issuance or sale, by
(ii) the total number of shares of Common Stock outstanding
immediately after such issuance or sale.
Expressed as a formula the foregoing calculation is:
adjusted Exercise Price equals:
CS(BEP) + NC
----------------
CS + NCS
where:
CS is the number of shares of Common Stock outstanding
immediately prior to such issuance or sale;
BEP is the Exercise Price in effect immediately prior to the
issuance or sale of such shares of Common Stock;
NC is the consideration, if any, received by the Company upon
such issuance or sale; and
NCS is the number of new shares of Common Stock issued or sold in
the transaction.
4.4 Issuance of Convertible Securities, Warrants or Other
-----------------------------------------------------
Rights. Except as provided in Section 4.2, if at any time the Company
- - ------
shall in any manner (whether directly or by assumption in a merger in which
the Company is the surviving
<PAGE>
13
corporation) issue or sell any warrants or other rights to subscribe for or
purchase any Additional Shares of Common Stock or any Convertible
Securities, other than Permitted Issuances, whether or not the rights to
exchange or convert thereunder are immediately exercisable, and the price
per share for which Common Stock is issuable upon the exercise of such
warrants or other rights or upon conversion or exchange of such Convertible
Securities (such price per share being computed as provided in Section
4.7(a) hereof) shall be less than the Exercise Price, then the Exercise
Price shall be adjusted as provided below (in the case of warrants or other
rights or Convertible Securities, on the basis that (i) the maximum number
of Additional Shares of Common Stock issuable pursuant to all such warrants
or other similar rights or necessary to effect the conversion or exchange
of all such Convertible Securities shall be deemed to have been issued and
outstanding, (ii) the price per share for such Additional Shares of Common
Stock shall be deemed to be the lowest possible price per share in any
range of prices per share at which such Additional Shares of Common Stock
are available to such holders and (iii) the Company shall be deemed to have
received all of the consideration payable therefor, if any, as of the date
of the actual issuance of such warrants or other similar rights). In such
event, the Exercise Price shall be adjusted to be the price determined by
dividing
(i) an amount equal to the sum of (A) the number of Shares of
Common Stock outstanding immediately prior to such issuance or sale
multiplied by the Exercise Price in effect immediately prior to such
issuance or sale and (B) the consideration, if any, received by the
Company upon such issuance or sale, by
(ii) the total number of shares of Common Stock outstanding
immediately after such issuance or sale.
Expressed as a formula the foregoing calculation is:
adjusted Exercise Price equals:
CS(BEP) + NC
----------------
CS + NCS
where:
CS is the number of shares of Common Stock outstanding
immediately prior to such issuance or sale;
BEP is the Exercise Price in effect immediately prior to the
issuance or sale of such shares of Common Stock;
NC is the consideration, if any, deemed received by the Company
upon such issuance or sale; and
NCS is the number of new shares of Common Stock deemed issued or
sold in the transaction.
<PAGE>
14
No further adjustments of the Exercise Price shall be made upon the actual
issue of such Common Stock upon exercise of such warrants or other similar
rights or upon the actual issue of such Common Stock upon such conversion
or exchange of such Convertible Securities. For the purposes of this
Section 4.4, the date as of which the Exercise Price of Common Stock shall
be computed shall be the earliest of (i) the date on which the Company
shall enter into a firm contract for the issuance of such warrants or other
similar rights or (ii) the date of actual issuance of such warrants or
other similar rights. Such adjustments shall be made upon the date of the
issuance or sale of such warrants or other similar rights.
4.5 Superseding Adjustment. If, at any time after any
----------------------
adjustment of the Exercise Price shall have been made pursuant to Section
4.4 as the result of any issuance of warrants, rights or Convertible
Securities, and either
(a) such warrants or rights, or the right of conversion or
exchange in such other Convertible Securities, shall expire, and all
or a portion of such warrants or rights, or the right of conversion or
exchange with respect to all or a portion of such other Convertible
Securities, as the case may be, shall not have been exercised; or
(b) the consideration per share for which shares of Common Stock
are issuable pursuant to such warrants or rights, or the terms of such
other Convertible Securities, shall be increased solely by virtue of
provisions therein contained for an automatic increase in such
consideration per share upon the occurrence of a specified date or
event;
then such previous adjustment shall be rescinded and annulled and the
Additional Shares of Common Stock which were deemed to have been issued by
virtue of the computation made in connection with the adjustment so
rescinded and annulled shall no longer be deemed to have been issued by
virtue of such computation. Thereupon, a recomputation shall be made of
the effect of such rights or options or other Convertible Securities on the
then outstanding Warrants, but not on any then outstanding Warrant Stock,
on the basis of
(c) treating the number of Additional Shares of Common Stock or
other property, if any, theretofore actually issued or issuable
pursuant to the previous exercise of any such warrants or rights or
any such right of conversion or exchange, as having been issued on the
date or dates of any such exercise and for the consideration actually
received and receivable therefor; and
(d) treating any such warrants or rights or any such other
Convertible Securities which then remain outstanding as having been
granted or issued immediately after the time of such increase of the
consideration per share for which
<PAGE>
15
shares of Common Stock or other property are issuable under such
warrants or rights or other Convertible Securities.
4.6 Adjustment of Number of Shares of Warrant Stock. Upon each
-----------------------------------------------
adjustment of the Exercise Price pursuant to any of the foregoing
provisions of this Section 4, this Warrant shall be deemed to evidence the
right to purchase, at the adjusted Exercise Price, that number of shares of
Common Stock obtained by multiplying the number of shares of Common Stock
covered by the Warrant immediately prior to such adjustment by the Exercise
Price in effect prior to such adjustment and dividing the product so
obtained by the Exercise Price in effect after such adjustment.
4.7 Other Provisions Applicable to Adjustments Under this
-----------------------------------------------------
Section. The following provisions shall be applicable to the making of
- - -------
adjustments of the number of shares of Common Stock for which this Warrant
is exercisable provided for in this Section 4:
(a) Computation of Consideration. To the extent that any
----------------------------
Additional Shares of Common Stock or any Convertible Securities or any
warrants or other rights to subscribe for or purchase any Additional
Shares of Common Stock or any Convertible Securities shall be issued
for cash consideration, the consideration received by the Company
therefor shall be the amount of the cash received by the Company
therefor, or, if such Additional Shares of Common Stock or Convertible
Securities are offered by the Company for subscription, the
subscription price, or, if such Additional Shares of Common Stock or
Convertible Securities are sold to underwriters or dealers for public
offering without a subscription offering, the initial public offering
price (in any such case subtracting any amounts paid or receivable for
accrued interest or accrued dividends, but not subtracting any
compensation, discounts or expenses paid or incurred by the Company
for and in the underwriting of, or otherwise in connection with, the
issuance thereof). To the extent that such issuance shall be for a
consideration other than cash, then, except as herein otherwise
expressly provided, the amount of such consideration shall be deemed
to be the fair value of such consideration at the time of such
issuance or, if such consideration is capital stock, the Fair Market
Value thereof at the time of issuance. In case any Additional Shares
of Common Stock or any Convertible Securities or any warrants or other
rights to subscribe for or purchase such Additional Shares of Common
Stock or Convertible Securities shall be issued in connection with any
merger in which the Company issues any securities, the amount of
consideration therefor shall be deemed to be the fair value (or, in
the case of capital stock, Fair Market Value) of such portion of the
assets and business of the nonsurviving corporation as the Board of
Directors of the Company in good faith, and, if required by the
Majority Holders, supported by an opinion of an
<PAGE>
16
investment banking firm acceptable to the Majority Holders (which
approval shall not be unreasonably withheld), shall determine to be
attributable to such Additional Shares of Common Stock, Convertible
Securities, warrants or other rights, as the case may be. The
consideration for any Additional Shares of Common Stock issuable
pursuant to any warrants or other rights to subscribe for or purchase
the same shall be the consideration received by the Company for
issuing such warrants or other rights plus the additional
consideration, if any, payable to the Company upon exercise of such
warrants or other rights. The consideration for any Additional Shares
of Common Stock issuable pursuant to the terms of any Convertible
Securities shall be the consideration, if any, received by the Company
for issuing warrants or other rights to subscribe for or purchase such
Convertible Securities, plus the consideration paid or payable to the
Company in respect of the subscription for or purchase of such
Convertible Securities, plus the additional consideration, if any,
payable to the Company upon the exercise of the right of conversion or
exchange in such Convertible Securities. In case of the issuance at
any time of any Additional Shares of Common Stock or Convertible
Securities in payment or satisfaction of any dividends upon any class
of stock other than Common Stock, the Company shall be deemed to have
received for such Additional Shares of Common Stock or Convertible
Securities a consideration equal to the amount of such dividend so
paid or satisfied.
(b) When Adjustments to Be Made. The adjustments required by
---------------------------
this Section 4 shall be made whenever and as often as required by this
Warrant or as requested by a Holder pursuant to this Section 4, except
that any adjustment of the number of shares of Common Stock for which
this Warrant is exercisable that would otherwise be required may be
postponed (except in the case of a subdivision or combination of
shares of the Common Stock, as provided for in Section 4.1) up to, but
not beyond the date of exercise if such adjustment either by itself or
with other adjustments not previously made adds or subtracts less than
1% of the shares of Common Stock for which this Warrant is exercisable
immediately prior to the making of such adjustment. Any adjustment
representing a change of less than such minimum amount (except as
aforesaid) which is postponed shall be carried forward and made (i) as
soon as such adjustment, together with other adjustments required by
this Section 4 and not previously made, would result in an adjustment
in excess of 1% or (ii) if not made earlier, on the date of exercise.
For the purpose of any adjustment, any specified event shall be deemed
to have occurred at the close of business on the date of its
occurrence.
(c) Fractional Interests. In computing adjustments under this
--------------------
Section 4, fractional interests in Common Stock shall be rounded to
the nearest hundred-thousandth of a share.
<PAGE>
17
(d) When Adjustment Not Required. If the Company shall take a
----------------------------
record of the holders of its Common Stock for the purpose of entitling
them to receive a dividend or distribution or subscription or purchase
rights and shall, thereafter and before the distribution to
stockholders thereof, legally abandon its plan to pay or deliver such
dividend, distribution, subscription or purchase rights, then
thereafter no adjustment shall be required by reason of the taking of
such record and any such adjustment previously made in respect thereof
shall be rescinded and annulled.
(e) Escrow of Warrant Stock. If after any property becomes
-----------------------
distributable pursuant to this Section 4 by reason of the taking of
any record of the holders of Common Stock, but prior to the occurrence
of the event for which such record is taken, and Holder exercises this
Warrant, any Additional Shares of Common Stock issuable upon exercise
by reason of such adjustment shall be deemed the last shares of Common
Stock for which this Warrant is exercised (notwithstanding any other
provision to the contrary herein) and such shares or other property
shall be held in escrow for Holder by the Company to be issued to
Holder upon and to the extent that the event actually takes place and
the Company shall deliver to Holder a due bill or other appropriate
instrument evidencing Holder's right to receive such shares or other
property under such circumstances. Notwithstanding any other provision
to the contrary herein, if the event for which such record was taken
fails to occur or is rescinded, then such escrowed shares shall be
cancelled by the Company and escrowed property returned.
(f) Treasury Stock. The sale or other disposition of any issued
--------------
shares of Common Stock owned or held by or for the account of the
Company shall be deemed an issuance thereof and a repurchase thereof
and designation of such shares as treasury stock shall be deemed to be
a redemption thereof for the purposes of this Section.
4.8 Reorganization, Reclassification, Merger, Consolidation or
----------------------------------------------------------
Disposition of Assets. In case the Company shall reorganize its capital,
- - ---------------------
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where
there is a change in or distribution with respect to the Common Stock of
the Company), or sell, transfer or otherwise dispose of all or
substantially all its property, assets or business to another corporation
and, pursuant to the terms of such reorganization, reclassification,
merger, consolidation or disposition of all or substantially all its
assets, shares of common stock of the successor or acquiring corporation,
or any cash, shares of stock or other securities or property of any nature
whatsoever (including warrants or other subscription or purchase rights) in
addition to or in lieu of common stock of the successor or acquiring
corporation ("Other Property"), are to be received by or distributed to
the holders of Common Stock of the Company,
<PAGE>
18
then each Holder shall have the right thereafter to receive, upon exercise
of the Warrant, the number of shares of common stock of the successor or
acquiring corporation or of the Company, if it is the surviving corporation,
and/or Other Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of all or
substantially all its assets by a holder of the number of shares of Common
Stock for which this Warrant is exercisable immediately prior to such
event. In case of any such reorganization, reclassification, merger,
consolidation or disposition of assets, the successor or acquiring
corporation (if other than the Company) shall expressly assume the due and
punctual observance and performance of each and every covenant and
condition of this Warrant to be performed and observed by the Company and
all the obligations and liabilities hereunder, subject to such
modifications as may be deemed appropriate (as determined by resolution of
the Board of Directors of the Company) in order to provide for adjustments
of shares of the Common Stock for which this Warrant is exercisable which
shall be as nearly equivalent as practicable to the adjustments provided
for in this Section 4. For purposes of this Section 4.8 "common stock of
the successor or acquiring corporation" shall include stock of such
corporation of any class which is not preferred as to dividends or assets
over any other class of stock of such corporation and which is not subject
to redemption and shall also include any evidences of indebtedness, shares
of stock or other securities which are convertible into or exchangeable for
any such stock, either immediately or upon the arrival of a specified date
or the happening of a specified event and any warrants or other rights to
subscribe for or purchase any such stock. The foregoing provisions of this
Section 4.8 shall similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or disposition of assets.
4.9 Other Action Affecting Common Stock. In case at any time or
-----------------------------------
from time to time the Company shall take any action in respect of its
Common Stock, other than any action described in this Section 4, then the
number of shares of Common Stock or other stock for which this Warrant is
exercisable shall be adjusted in such manner as may be equitable in the
circumstances. If the Company shall at any time and from time to time issue
or sell (i) any shares of any class of common stock other than Common
Stock, (ii) any evidences of its indebtedness, shares of stock or other
securities which are convertible into or exchangeable for such shares of
common stock, with or without the payment of additional consideration in
cash or property or (iii) any warrants or other rights to subscribe for or
purchase any such shares of common stock or any such evidences, shares of
stock or other securities, then in each such case such issuance or sale
shall be deemed to be of, or in respect of, Common Stock for purposes of
this Section 4; provided, however, that, without limiting the generality of
-------- -------
the foregoing, if the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend
payable in, or other distribution of, common stock other than Common Stock,
including shares of non-voting common stock, then the number of shares of
<PAGE>
19
Common Stock for which this Warrant is exercisable immediately after the
occurrence of any such event shall be adjusted to equal the aggregate
number of shares of such common stock and of Common Stock which a record
holder of the same number of shares of Common Stock for which this Warrant
is exercisable immediately prior to the occurrence of such event would own
or be entitled to receive after the happening of such event.
SECTION 5. NOTICES TO WARRANT HOLDERS
5.1 Notice of Adjustments. Whenever the number of shares of
---------------------
Common Stock for which this Warrant is exercisable, and the Exercise Price
payable therefor, shall be adjusted pursuant to Section 4, the Company
shall forthwith prepare a certificate to be executed by a member of the
Board of Directors or one of its executive officers, setting forth, in
reasonable detail, the event requiring the adjustment and the method by
which such adjustment was calculated (including a description of the basis
on which the Board of Directors of the Company determined the fair value of
any evidences of indebtedness, shares of stock, other securities or
property or warrants or other subscription or purchase rights), specifying
the number of shares of Common Stock for which this Warrant is exercisable
and (if such adjustment was made pursuant to Section 4.8 or 4.9) describing
the number and kind of any other shares of stock or Other Property for
which this Warrant is exercisable. In the event that (i) the Partnership,
if the Partnership shall then be a Holder of any Warrant, or (ii) the
Majority Holders shall challenge any of the calculations set forth in such
certificate within 20 days after the Company's notification thereof, the
Company shall retain a firm of independent certified public accountants of
national standing selected by the Company and, if the Partnership shall
then be a Holder of any Warrant, acceptable to the Partnership, to prepare
and execute a certificate verifying the method by which the adjustment was
calculated, the number of shares of Common Stock for which this Warrant is
exercisable and (if such adjustment was made pursuant to Section 4.8 or
4.9) describing the number and kind of any other shares of stock or Other
Property for which this Warrant is exercisable. The Company shall promptly
cause a signed copy of any certificate prepared pursuant to this Section
5.1 to be delivered to each Holder in accordance with Section 15.2. The
Company shall keep at its office or agency designated pursuant to Section
12 copies of all such certificates and cause the same to be available for
inspection at said office during normal business hours by any Holder or any
prospective purchaser of a Warrant designated by a Holder thereof.
5.2 Notice of Certain Corporate Action. The Holder of any
----------------------------------
Warrant shall be entitled to the same rights to receive notice of corporate
action as any holder of Common Stock.
<PAGE>
20
SECTION 6. NO IMPAIRMENT
The Company shall not by any action including, without
limitation, amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of this Warrant,
but will at all times in good faith assist in the carrying out of all such
terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of Holder against impairment. Without
limiting the generality of the foregoing, the Company will (a) take all
such action as may be necessary or appropriate in order that the Company
may validly and legally issue fully paid and nonassessable shares of Common
Stock upon the exercise of this Warrant, and (b) use its best efforts to
obtain all such authorizations, exemptions or consents from any public
regulatory body having jurisdiction thereof as may be necessary to enable
the Company to perform its obligations under this Warrant.
Upon the request of Holder, the Company will at any time during
the period this Warrant is outstanding acknowledge in writing, in form
satisfactory to Holder, the continuing validity of this Warrant and the
obligations of the Company hereunder.
SECTION 7. COMMON STOCK; RESERVATION AND
AUTHORIZATION OF REGISTRATION
WITH OR APPROVAL OF ANY
GOVERNMENTAL AUTHORITY
From and after the Issuance Date, the Company shall at all times
reserve and keep available for issuance upon the exercise of Warrants such
number of its authorized but unissued shares of Common Stock as will be
sufficient to permit the exercise in full of all outstanding Warrants. All
shares of Common Stock which shall be so issuable, when issued upon
exercise of any Warrant in accordance with the terms of such Warrant, shall
be duly and validly issued and fully paid and nonassessable, and not
subject to preemptive rights.
Before taking any action which would result in an adjustment in
the number of shares of Common Stock for which this Warrant is exercisable,
the Company shall obtain all such authorizations or exemptions thereof, or
consents thereto, as may be necessary from any public regulatory body or
bodies having
jurisdiction thereof.
If any shares of Common Stock required to be reserved for
issuance upon exercise of Warrants require registration or qualification
with any governmental authority under any federal or state law (otherwise
than as provided in Section 10) before such shares may be so issued, the
Company will in good faith and as expeditiously as possible and at its
expense endeavor to cause such shares to be duly registered.
<PAGE>
21
SECTION 8. TAKING OF RECORD; STOCK AND WARRANT
TRANSFER BOOKS
In the case of all dividends or other distributions by the
Company to the holders of its Common Stock with respect to which any
provision of Section 4 refers to the taking of a record of such holders,
the Company will in each such case take such a record and will take such
record as of the close of business on a Business Day. The Company will not
at any time close its stock transfer books or Warrant transfer books so as
to result in preventing or delaying the exercise or transfer of any
Warrant.
SECTION 9. RESTRICTIONS ON TRANSFERABILITY
9.1 Restrictive Legend. (a) Except as otherwise provided in
------------------
this Section 9, each certificate for Warrant Stock initially issued upon
the exercise of this Warrant, and each certificate for Warrant Stock issued
to any transferee of any such certificate, shall be stamped or otherwise
imprinted with a legend in substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS AND ARE SUBJECT TO THE CONDITIONS SPECIFIED IN A
CERTAIN WARRANT DATED AUGUST 18, 1995, ORIGINALLY ISSUED BY BRUNO'S,
INC. (THE "WARRANT"), AND MAY NOT BE TRANSFERRED, SOLD, ASSIGNED,
EXCHANGED, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
OR ENCUMBERED WITHOUT COMPLIANCE WITH THE PROVISIONS OF, AND ARE
OTHERWISE RESTRICTED BY THE PROVISIONS OF, THE SECURITIES ACT OF 1933,
AS AMENDED, AND THE RULES AND REGULATIONS THEREUNDER AND THE WARRANT.
A COPY OF THE FORM OF SAID WARRANT IS ON FILE WITH THE SECRETARY OF
BRUNO'S, INC. THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS
CERTIFICATE, AGREES TO BE BOUND BY THE PROVISIONS OF SUCH WARRANT."
(b) Except as otherwise provided in this Section 9, each Warrant
shall be stamped or otherwise imprinted with a legend in substantially the
following form:
"NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THIS WARRANT AND THE
SECURITIES ISSUABLE UPON EXERCISE HEREOF MAY NOT BE TRANSFERRED, SOLD,
ASSIGNED, EXCHANGED, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF OR ENCUMBERED WITHOUT COMPLIANCE WITH THE PROVISIONS OF,
AND ARE OTHERWISE RESTRICTED BY THE PROVISIONS OF, THE SECURITIES ACT
OF 1933, AS AMENDED, THE RULES AND REGULATIONS THEREUNDER AND THIS
WARRANT."
9.2 Restriction on Transfers. (a) Subject to Section 9.2(b)
------------------------
below, prior to any Transfer of any Warrants or any shares
<PAGE>
22
of Warrant Stock (other than a Transfer by a Holder to the Company), the
Holder of such Warrants or Warrant Stock shall deliver notice of such
Transfer to the Company. Upon the Company's receipt of such notice, such
Holder shall be entitled to Transfer such Warrants or such Warrant Stock in
compliance with the Securities Act. Each certificate, if any, evidencing
such shares of Warrant Stock issued upon such Transfer shall bear the
restrictive legend set forth in Section 9.1(a), and each Warrant issued
upon such Transfer shall bear the restrictive legend set forth in Section
9.1(b), unless such legend is not required in order to ensure compliance
with the Securities Act.
(b) Notwithstanding any other provision of this Warrant, the
restrictions imposed by this Section 9 upon transferability of the Warrants
and the Warrant Stock and the legend requirements of Section 9.1, shall
terminate as to any particular Warrant or share of Warrant Stock when and
so long as such security shall have been effectively registered under the
Securities Act and disposed of pursuant thereto. Whenever the restrictions
imposed by this Section 9 shall terminate as to this Warrant, as
hereinabove provided, the Holder hereof shall be entitled to receive from
the Company, at the expense of the Company, a new Warrant bearing the
following legend in place of the restrictive legend set forth hereon:
"THE RESTRICTIONS ON TRANSFERABILITY OF THIS WARRANT CONTAINED IN
SECTION 9 HEREOF TERMINATED ON ____________, ____, AND ARE OF NO
FURTHER FORCE AND EFFECT."
All Warrants issued upon registration of transfer, division or combination
of, or in substitution for, any Warrant or Warrants entitled to bear such
legend shall have a similar legend endorsed thereon. Whenever the
restrictions imposed by this Section 9 shall terminate as to any share of
Warrant Stock, as hereinabove provided, the Holder thereof shall be
entitled to receive from the Company, at the Company's expense, a new
certificate representing such Common Stock not bearing the restrictive
legend set forth in Section 9.1(a).
(c) Notwithstanding anything in this Warrant to the contrary, in
the event of a Tender Offer, the restrictive legends referred to in
paragraphs 9.1(a) and 9.1(b) may be omitted from any Warrants or Warrant
Stock sold by a Holder to the maker of the Tender Offer.
9.3 Listing on Securities Exchange or NASDAQ. If the Company
----------------------------------------
shall list any shares of Common Stock on any securities exchange or on
NASDAQ, it will, at its expense, list thereon, maintain and, when
necessary, increase such listing of, all shares of Common Stock issued or,
to the extent permissible under the applicable securities exchange or
NASDAQ rules, issuable upon the exercise of this Warrant so long as any
shares of Common Stock shall be so listed during any such Exercise Period.
<PAGE>
23
9.4 Covenant Regarding Consents. The Company hereby covenants
---------------------------
to use its best efforts upon request of one or more Holders to seek any
waivers or consents, or to take any other action required, to effectuate
the exercise of this Warrant by any Holder.
SECTION 10. REGISTRATION RIGHTS
10.1 Incidental Registrations. (a) Right to Include
------------------------ ----------------
Registrable Securities. If the Company at any time after the date hereof
- - ----------------------
proposes to register its Common Stock (or any security which is convertible
into or exchangeable or exercisable for Common Stock) under the Securities
Act (other than a registration on Form S-4 or S-8, or any successor or
other forms promulgated for similar purposes), whether or not for sale for
its own account, in a manner which would permit registration of Registrable
Securities for sale to the public under the Securities Act, it will, at
each such time, give prompt written notice to all Holders of Registrable
Securities of its intention to do so and of such Holders' rights under this
Section 10.1. Upon the written request of any such Holder made within 15
days after the receipt of any such notice (which request shall specify the
Registrable Securities intended to be disposed of by such Holder), the
Company will use its best efforts to effect the registration under the
Securities Act of all Registrable Securities which the Company has been so
requested to register by the Holders thereof, to the extent requisite to
permit the disposition of the Registrable Securities so to be registered;
provided that (i) if, at any time after giving written notice of its
- - --------
intention to register any securities and prior to the effective date of the
registration statement filed in connection with such registration, the
Company shall determine for any reason not to proceed with the proposed
registration of the securities to be sold by it, the Company may, at its
election, give written notice of such determination to each Holder of
Registrable Securities and, thereupon, shall be relieved of its obligation
to register any Registrable Securities in connection with such registration
(but not from its obligation to pay the Registration Expenses in connection
therewith), and (ii) if such registration involves an underwritten
offering, all Holders of Registrable Securities requesting to be included
in the Company's registration must sell their Registrable Securities to the
underwriters selected by the Company on the same terms and conditions as
apply to the Company, with such differences, including any with respect to
indemnification and liability insurance, as may be customary or appropriate
in combined primary and secondary offerings. If a registration requested
pursuant to this Section 10.1(a) involves an underwritten public offering,
any Holder of Registrable Securities requesting to be included in such
registration may elect, in writing prior to the effective date of the
registration statement filed in connection with such registration, not to
register such securities in connection with such registration. Nothing in
this Section 10.1 shall operate to
<PAGE>
24
limit the right of Holder to (i) request the registration of Warrant Stock
issuable upon exercise of Warrants held by such Holder notwithstanding the
fact that at the time of request, such Holder holds only Warrants or (ii)
request the registration at one time of both Warrants and Warrant Stock.
(b) Expenses. The Company will pay all Registration Expenses in
--------
connection with each registration of Registrable Securities requested
pursuant to this Section 10.1.
(c) Priority in Incidental Registrations. If a registration
------------------------------------
pursuant to this Section 10.1 involves an underwritten offering and the
managing underwriter advises the Company in writing that, in its opinion,
the number of securities requested to be included in such registration
exceeds the number which can be sold in such offering, so as to be likely
to have an adverse effect on the price, timing or distribution of the
Securities offered in such offering as contemplated by the Company (other
than the Registrable Securities), then the Company will include in such
registration (i) first, 100% of the securities the Company proposes to sell
and (ii) second, to the extent of the number of Registrable Securities
requested to be included in such registration which, in the opinion of such
managing underwriter, can be sold without having the adverse effect
referred to above, the number of Registrable Securities which the Holders
have requested to be included in such registration, such amount to be
allocated pro rata among all requesting Holders on the basis of the
relative number of shares of Registrable Securities then held by each such
Holder (provided that any shares thereby allocated to any such Holder that
exceed such Holder's request will be reallocated among the remaining
requesting Holders in like manner).
10.2 Registration on Request. (a) Request by the Demand Party.
----------------------- ---------------------------
At any time, upon the written request of the Demand Party requesting that
the Company effect the registration under the Securities Act of all or part
of such Demand Party's Registrable Securities and specifying the amount and
intended method of disposition thereof, the Company will promptly give
written notice of such requested registration to all other Holders of such
Registrable Securities, and thereupon will, as expeditiously as possible,
use its best efforts to effect the registration under the Securities Act
of:
(i) such Registrable Securities which the Company has been so
requested to register by the Demand Party; and
(ii) all other Registrable Securities as are to be registered at
the request of a Demand Party and which the Company has been requested
to register by any other Holder thereof by written request given to
the Company within 15 days after the giving of such written notice by
the Company (which request shall specify the amount and intended
method of disposition of such Registrable Securities),
<PAGE>
25
all to the extent necessary to permit the disposition (in accordance with
the intended method thereof as aforesaid) of the Registrable Securities so
to be registered; provided, that with respect to any Demand Party other
--------
than the Partnership or its Affiliates, the Company shall not be obligated
to effect any registration of Registrable Securities under this Section
10.2(a) unless such Demand Party requests that the Company register at
least 1% of the total number of Registrable Securities; and provided,
--------
further, that, unless Holders of a majority of the Registrable Securities
- - -------
held by Holders consent thereto in writing, the Company shall not be
obligated to file a registration statement relating to any registration
request under this Section 10.2(a) (x) within a period of nine months after
the effective date of any other registration statement relating to any
registration request under this Section 10.2(a) which was not effected on
Form S-3 (or any successor or similar short-form registration statement) or
relating to any registration effected under Section 10.1, or (y) if with
respect thereto the managing underwriter, the Commission, the Securities
Act or the rules and regulations thereunder, or the form on which the
registration statement is to be filed, would require the conduct of an
audit other than the regular audit conducted by the Company at the end of
its fiscal year, in which case the filing may be delayed until the
completion of such regular audit (unless the Holders of the Registrable
Securities to be registered agree to pay the expenses of the Company in
connection with such an audit other than the regular audit). Nothing in
this Section 10.2 shall operate to limit the right of Holder to (i) request
the registration of Warrant Stock issuable upon exercise of Warrants held
by such Holder notwithstanding the fact that at the time of request, such
Holder holds only Warrants or (ii) request the registration at one time of
both Warrants and Warrant Stock.
(b) Registration Statement Form. If any registration
---------------------------
requested pursuant to this Section 10.2 which is proposed by the Company to
be effected by the filing of a registration statement on Form S-3 (or any
successor or similar short-form registration statement) shall be in
connection with an underwritten public offering, and if the managing
underwriter shall advise the Company in writing that, in its opinion, the
use of another form of registration statement is of material importance to
the success of such proposed offering, then such registration shall be
effected on such other form.
(c) Expenses. The Company will pay all Registration Expenses in
--------
connection with the first six (6) registrations of each class or series of
Registrable Securities pursuant to this Section 10.2 upon the written
request of any of the Holders; provided, that any requested registration by
Holder of both Warrants and Warrant Stock at one time shall only count as
one registration. All expenses for any subsequent registrations of
Registrable Securities pursuant to this Section 10.2 shall be paid pro rata
by the Company and all other Persons (including the Holders) participating
in such registration on the basis of the relative number of Warrants or
shares of Warrant Stock, as the
<PAGE>
26
case may be, of each such person whose Registrable Securities are included
in such registration.
(d) Effective Registration Statement. A registration requested
--------------------------------
pursuant to this Section 10.2 will not be deemed to have been effected
unless it has become effective and all of the Registrable Securities
registered thereunder have been sold; provided that if, within 180 days
--------
after it has become effective, the offering of Registrable Securities
pursuant to such registration is interfered with by any stop order,
injunction or other order or requirement of the Commission or other
governmental agency or court, such registration will be deemed not to have
been effected.
(e) Selection of Underwriters. If a requested registration
-------------------------
pursuant to this Section 10.2 involves an underwritten offering, the
Holders of a majority of the Registrable Securities which are held by
Holders and which the Company has been requested to register shall have the
right to select the investment banker or bankers and managers to administer
the offering; provided, however, that such investment banker or bankers and
-------- -------
managers shall be reasonably satisfactory to the Company.
(f) Priority in Requested Registrations. If a requested
-----------------------------------
registration pursuant to this Section 10.2 involves an underwritten
offering and the managing underwriter advises the Company in writing that,
in its opinion, the number of securities requested to be included in such
registration (including securities of the Company which are not Registrable
Securities) exceeds the number which can be sold in such offering, the
Company will include in such registration only the Registrable Securities
requested to be included in such registration. In the event that the
number of Registrable Securities requested to be included in such
registration exceeds the number which, in the opinion of such managing
underwriter, can be sold, the number of such Registrable Securities to be
included in such registration shall be allocated pro rata among all
requesting Holders on the basis of the relative number of Registrable
Securities then held by each such Holder (provided that any shares thereby
allocated to any such Holder that exceed such Holder's request shall be
reallocated among the remaining requesting Holders in like manner). In the
event that the number of Registrable Securities requested to be included in
such registration is less than the number which, in the opinion of the
managing underwriter, can be sold, the Company may include in such
registration the securities the Company proposes to sell up to the number
of securities that, in the opinion of the underwriter, can be sold.
(g) Additional Rights. If the Company at any time grants to any
-----------------
other holders of capital stock any rights to request the Company to effect
the registration under the Securities Act of any such shares of capital
stock on terms more favorable to such holders than the terms set forth in
this Section 10.2, the terms of this Section 10.2 shall be deemed
<PAGE>
27
amended or supplemented to the extent necessary to provide the Holders such
more favorable rights and benefits.
10.3 Registration Procedures. If and whenever the Company is
-----------------------
required to use its best efforts to effect or cause the registration of any
Registrable Securities under the Securities Act as provided in this
Agreement, the Company will, as expeditiously as possible:
(i) prepare and, in any event within 120 days after the end of
the period within which a request for registration may be given to the
Company, file with the Commission a registration statement with
respect to such Registrable Securities and use its best efforts to
cause such registration statement to become effective, provided,
--------
however, that the Company may discontinue any registration of its
-------
securities which is being effected pursuant to Section 10.1 at any
time prior to the effective date of the registration statement
relating thereto;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for a period not in excess of 270 days and to
comply with the provisions of the Securities Act, the Exchange Act and
the rules and regulations of the Commission thereunder with respect to
the disposition of all securities covered by such registration
statement during such period in accordance with the intended methods
of disposition by the seller or sellers thereof set forth in such
registration statement; provided that before filing a registration
--------
statement or prospectus, or any amendments or supplements thereto, the
Company will furnish to counsel selected pursuant to Section 10.6
hereof by the Holders of the Registrable Securities covered by such
registration statement to represent such Holders, copies of all
documents proposed to be filed, which documents will be subject to the
review of such counsel;
(iii) furnish to each seller of such Registrable Securities such
number of copies of such registration statement and of each amendment
and supplement thereto (in each case including all exhibits filed
therewith, including any documents incorporated by reference), such
number of copies of the prospectus included in such registration
statement (including each preliminary prospectus and summary
prospectus), in conformity with the requirements of the Securities
Act, and such other documents as such seller may reasonably request in
order to facilitate the disposition of the Registrable Securities by
such seller;
(iv) use its best efforts to register or qualify such Registrable
Securities covered by such registration in such jurisdictions as each
seller shall reasonably request, and do any and all other acts and
things which may be reasonably
<PAGE>
28
necessary or advisable to enable such seller to consummate the
disposition in such jurisdictions of the Registrable Securities owned
by such seller, except that the Company shall not for any such purpose
be required to qualify generally to do business as a foreign
corporation in any jurisdiction where, but for the requirements of
this clause (iv), it would not be obligated to be so qualified, to
subject itself to taxation in any such jurisdiction or to consent to
general service of process in any such jurisdiction;
(v) use its best efforts to cause such Registrable Securities
covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof to consummate the
disposition of such Registrable Securities;
(vi) notify each seller of any such Registrable Securities
covered by such registration statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act
within the appropriate period mentioned in clause (ii) of this Section
10.3, of the Company's becoming aware that the prospectus included in
such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then
existing, and at the request of any such seller, prepare and furnish
to such seller a reasonable number of copies of an amended or
supplemental prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Registrable Securities, such
prospectus shall not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light
of the circumstances then existing;
(vii) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable (but not more than
eighteen months) after the effective date of the registration
statement, an earnings statement which shall satisfy the provisions of
Section 11(a) of the Securities Act and the rules and regulations
promulgated thereunder;
(viii) (A) if such Registrable Securities are Warrant Stock, use
its best efforts to list such Registrable Securities on any securities
exchange on which the Common Stock is then listed if such Registrable
Securities are not already so listed and if such listing is then
permitted under the rules of such exchange; (B) if such Registrable
Securities are Warrants, upon the reasonable request of sellers of a
majority of such Registrable Securities, use
<PAGE>
29
its best efforts to list the Warrants and, if requested, the Warrant
Stock underlying the Warrants, notwithstanding that at the time of
request such sellers hold only Warrants, on any securities exchange so
requested, if such Registrable Securities are not already so listed,
and if such listing is then permitted under the rules of such
exchange; (C) and use its best efforts to provide a transfer agent and
registrar for such Registrable Securities covered by such registration
statement not later than the effective date of such registration
statement;
(ix) enter into such customary agreements (including an
underwriting agreement in customary form), which may include
indemnification provisions in favor of underwriters and other persons
in addition to, or in substitution for the provisions of Section 10.4
hereof, and take such other actions as sellers of a majority of such
Registrable Securities or the underwriters, if any, reasonably
requested in order to expedite or facilitate the disposition of such
Registrable Securities;
(x) obtain a "cold comfort" letter or letters from the Company's
independent public accounts in customary form and covering matters of
the type customarily covered by "cold comfort" letters as the seller
or sellers of a majority of shares of such Registrable Securities
shall reasonably request (provided that Registrable Securities
constitute at least 25% of the securities covered by such registration
statement);
(xi) make available for inspection by any seller of such
Registrable Securities covered by such registration statement, by any
underwriter participating in any disposition to be effected pursuant
to such registration statement and by any attorney, accountant or
other agent retained by any such seller or any such underwriter, all
pertinent financial and other records, pertinent corporate documents
and properties of the Company, and cause all of the Company's
officers, directors and employees to supply all information reasonably
requested by any such seller, underwriter, attorney, accountant or
agent in connection with such registration statement;
(xii) notify counsel (selected pursuant to Section 10.6 hereof)
for the Holders of Registrable Securities included in such
registration statement and the managing underwriter or agent,
immediately, and confirm the notice in writing (i) when the
registration statement, or any post-effective amendment to the
registration statement, shall have become effective, or any supplement
to the prospectus or any amendment prospectus shall have been filed,
(ii) of the receipt of any comments from the Commission, (iii) of any
request of the Commission to amend the registration statement or amend
or supplement the prospectus or for additional information, and (iv)
of the issuance by the
<PAGE>
30
Commission of any stop order suspending the effectiveness of the
registration statement or of any order preventing or suspending the
use of any preliminary prospectus, or of the suspension of the
qualification of the registration statement for offering or sale in
any jurisdiction, or of the institution or threatening of any
proceedings for any of such purposes;
(xiii) make every reasonable effort to prevent the issuance of any
stop order suspending the effectiveness of the registration statement
or of any order preventing or suspending the use of any preliminary
prospectus and, if any such order is issued, to obtain the withdrawal
of any such order at the earliest possible moment;
(xiv) if requested by the managing underwriter or agent or any
Holder of Registrable Securities covered by the registration
statement, promptly incorporate in a prospectus supplement or
post-effective amendment such information as the managing underwriter
or agent or such Holder reasonably requests to be included therein,
including, without limitation, with respect to the number of
Registrable Securities being sold by such Holder to such underwriter
or agent, the purchase price being paid therefor by such underwriter
or agent and with respect to any other terms of the underwritten
offering of the Registrable Securities to be sold in such offering;
and make all required filings of such prospectus supplement or
post-effective amendment as soon as practicable after being notified
of the matters incorporated in such prospectus supplement or post--
effective amendment;
(xv) cooperate with the Holders of Registrable Securities covered
by the registration statement and the managing underwriter or agent,
if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing
securities to be sold under the registration statement, and enable
such securities to be in such denominations and registered in such
names as the managing underwriter or agent, if any, or such Holders
may request;
(xvi) obtain for delivery to the Holders of Registrable Securities
being registered and to the underwriter or agent an opinion or
opinions from counsel for the Company in customary form and in form,
substance and scope reasonably satisfactory to such Holders,
underwriters or agents and their counsel; and
(xvii) cooperate with each seller of Registrable Securities and
each underwriter or agent participating in the disposition of such
Registrable Securities and their respective counsel in connection with
any filings required to be made with the NASD.
<PAGE>
31
The Company may require each seller of Registrable Securities as
to which any registration is being effected to furnish the Company with
such information regarding such seller and pertinent to the disclosure
requirements relating to the registration and the distribution of such
securities as the Company may from time to time reasonably request in
writing.
Each Holder of Registrable Securities agrees that, upon receipt
of any notice from the Company of the happening of any event of the kind
described in clause (vi) of this Section 10.3, such Holder will forthwith
discontinue disposition of Registrable Securities pursuant to the
registration statement covering such Registrable Securities until such
Holder's receipt of the copies of the supplemented or amended prospectus
contemplated by clause (vi) of this Section 10.3, and, if so directed by
the Company, such Holder will deliver to the Company (at the Company's
expense) all copies, other than permanent file copies then in such Holder's
possession, of the prospectus covering such Registrable Securities current
at the time of receipt of such notice. In the event the Company shall give
any such notice, the period mentioned in clause (ii) of this Section 10.3
shall be extended by the number of days during the period from and
including the date of the giving of such notice pursuant to clause (vi) of
this Section 10.3 and including the date when each seller of Registrable
Securities covered by such registration statement shall have received the
copies of the supplemented or amended prospectus contemplated by clause
(vi) of this Section 10.3.
10.4 Indemnification. (a) Indemnification by the Company. In
--------------- ------------------------------
the event of any registration of any securities of the Company under the
Securities Act pursuant to Section 10.1 or 10.2, the Company will, and it
hereby does, indemnify and hold harmless, to the extent permitted by law,
the seller of any Registrable Securities covered by such registration
statement, each affiliate of such seller and their respective directors and
officers or general and limited partners (including any director, officer,
affiliate, employee, agent and controlling Person of any of the foregoing),
each other Person who participates as an underwriter in the offering or
sale of such securities and each other Person, if any, who controls such
seller or any such underwriter within the meaning of the Securities Act
(collectively, the "Indemnified Parties"), against any and all losses,
-------------------
claims, damages or liabilities, joint or several, and expenses (including
reasonable attorney's fees and reasonable expenses of investigation) to
which such Indemnified Party may become subject under the Securities Act,
common law or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof, whether or not
such Indemnified Party is a party thereto) arise out of or are based upon
(a) any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such securities were
registered under the Securities Act, any preliminary, final or summary
prospectus contained therein, or any amendment or supplement thereto, or
(b) any omission or
<PAGE>
32
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein (in the case of a
prospectus, in light of the circumstances under which they were made) not
misleading, and the Company will reimburse such Indemnified Party for any
legal or any other expenses reasonably incurred by it in connection with
investigating or defending against any such loss, claim, liability, action
or proceeding; provided that the Company shall not be liable to any
--------
Indemnified Party in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense
arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in such registration
statement or amendment or supplement thereto or in any such preliminary,
final or summary prospectus in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by
such seller specifically stating that it is for use in the preparation
thereof. Such indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of such seller or any Indemnified
Party and shall survive the transfer of such securities by such seller.
(b) Indemnification by the Seller. The Company may require, as
-----------------------------
a condition to including any Registrable Securities in any registration
statement filed in accordance with Section 10.3 herein, that the Company
shall have received an undertaking reasonably satisfactory to it from the
prospective seller of such Registrable Securities or any underwriter to
indemnify and hold harmless (in the same manner and to the same extent as
set forth in subdivision (a) of this Section 10.4) the Company and all
other prospective sellers with respect to any untrue statement or alleged
untrue statement in or omission or alleged omission from such registration
statement, any preliminary, final or summary prospectus contained therein,
or any amendment or supplement, if such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by such seller or underwriter specifically stating
that it is for use in the preparation of such registration statement,
preliminary, final or summary prospectus or amendment or supplement, or a
document incorporated by reference into any of the foregoing. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any of the prospective
sellers, or any of their respective affiliates, directors, officers or
controlling Persons and shall survive the transfer of such securities by
such seller. In no event shall the liability of any selling Holder of
Registrable Securities hereunder be greater in amount than the dollar
amount of the proceeds received by such Holder upon the sale of the
Registrable Securities giving rise to such indemnification obligation.
(c) Notices of Claims, Etc. Promptly after receipt by an
----------------------
Indemnified Party hereunder of written notice of the commencement of any
action or proceeding with respect to which a
<PAGE>
33
claim for indemnification may be made pursuant to this Section 10.4, such
Indemnified Party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the
commencement of such action; provided that the failure of the Indemnified
--------
Party to give notice as provided herein shall not relieve the indemnifying
party of its obligations under the preceding subdivisions of this Section
10.4, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. In case any such action is
brought against an Indemnified Party, unless in such Indemnified Party's
reasonable judgment a conflict of interest between such Indemnified Party
and indemnifying parties may exist in respect of such claim, the
indemnifying party will be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying party similarly
notified to the extent that it may wish, with counsel reasonably
satisfactory to such Indemnified Party, and after notice from the
indemnifying party to such Indemnified Party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
Indemnified Party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party will consent to entry of any
judgment or enter into any settlement which does not include as an
unconditional term thereof, the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim
or litigation.
(d) Contribution. If the indemnification provided for in this
-------------
Section 10.4 from the indemnifying party is unavailable to an Indemnified
Party hereunder in respect of any losses, claims, damages, liabilities or
expenses referred to herein, then the indemnifying party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims,
damages, liabilities or expenses in such proportion as is appropriate to
reflect the relative fault of the indemnifying party and Indemnified
Parties in connection with the actions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of such indemnifying party
and Indemnified Parties shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged
untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied
by, such indemnifying party or Indemnified Parties, and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such action. The amount paid or payable by a party
under this Section 10.4 as a result of the losses, claims, damages,
liabilities and expenses referred to above shall be deemed to include any
legal or other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding.
<PAGE>
34
The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 10.4 were determined by pro rata
allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
(e) Other Indemnification. Indemnification similar to that
---------------------
specified in the preceding subdivisions of this Section 10.4 (with
appropriate modifications) shall be given by the Company and each seller of
Registrable Securities with respect to any required registration or other
qualification of securities under any federal or state law or regulation or
governmental authority other than the Securities Act.
(f) Non-Exclusivity. The obligations of the parties under this
---------------
Section 10.4 shall be in addition to any liability which any party may
otherwise have to any other party.
10.5 Rule 144. The Company covenants that it will file the
--------
reports required to be filed by it under the Securities Act and the
Exchange Act and the rules and regulations adopted by the Commission
thereunder (or, if the Company is not required to file such reports, it
will, upon the request of any Holder of Registrable Securities, make
publicly available such information), and it will take such further action
as any Holder of Registrable Securities may reasonably request, all to the
extent required from time to time to enable such Holder to sell Registrable
Securities without registration under the Securities Act within the
limitation of the exemptions provided by (i) Rule 144 under the Securities
Act, as such Rule may be amended from time to time, or (ii) any similar
rule or regulation hereafter adopted by the Commission. Upon the request
of any Holder of Registrable Securities, the Company will deliver to such
Holder a written statement as to whether it has complied with such
requirements. Notwithstanding anything contained in this Section 10.5, the
Company may, with the consent of the Partnership, deregister under Section
12 of the Exchange Act if it then is permitted to do so pursuant to the
Exchange Act and the rules and regulations thereunder.
10.6 Selection of Counsel. In connection with any registration
--------------------
of Registrable Securities pursuant to Sections 10.1 and 10.2 hereof, the
Holders of a majority of the Registrable Securities covered by any such
registration may select one counsel to represent all Holders of Registrable
Securities covered by such registration; provided, however, that in the
-------- -------
event that the counsel selected as provided above is also acting as counsel
to the Company in connection with such registration, the remaining Holders
shall be entitled to select one additional counsel to represent all such
remaining Holders.
<PAGE>
35
10.7 Holdback Agreement. If any such registration shall be in
------------------
connection with an underwritten public offering, each Holder of Registrable
Securities agrees not to effect any public sale or distribution, including
any sale pursuant to Rule 144 under the Securities Act, of any equity
securities of the Company, or of any security convertible into or
exchangeable or exercisable for any equity security of the Company (in each
case, other than as part of such underwritten public offering), within 7
days before, or such period not to exceed 180 days as the underwriting
agreement may require (or such lesser period as the managing underwriters
may permit) after, the effective date of such registration (except as part
of such registration), and the Company hereby also so agrees and agrees to
cause each other holder of any equity security, or of any security
convertible into or exchangeable or exercisable for any equity security, of
the Company purchased from the Company (at any time other than in a public
offering) to so agree.
10.8 Specific Performance. The parties hereto acknowledge and
--------------------
agree that irreparable damage would occur in the event that any of the
provisions of this Section 10 were not performed in accordance with their
specific terms or were otherwise breached. Accordingly, it is agreed that
they shall be entitled to an injunction or injunctions to prevent breaches
of the provisions of this Section 10 and to enforce specifically the terms
and provisions thereof in any court of competent jurisdiction in the United
States or any state thereof, in addition to any other remedy to which they
may be entitled at law or in equity.
SECTION 11. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of this Warrant and indemnity reasonably
satisfactory to it (it being understood that the written agreement of the
Partnership shall be sufficient indemnity) and in case of mutilation upon
surrender and cancellation hereof, the Company will execute and deliver in
lieu hereof a new Warrant of like tenor to such Holder (without expense to
the Holder); provided, in the case of mutilation, no indemnity shall be
--------
required if this Warrant in identifiable form is surrendered to the Company
for cancellation.
SECTION 12. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the Company
shall maintain an office or agency (which may be the principal executive
offices of the Company) where the Warrants may be presented for exercise,
registration of transfer, division or combination as provided in this
Warrant.
<PAGE>
36
SECTION 13. FINANCIAL AND BUSINESS INFORMATION
13.1 Filings. The Company will file on or before the required
-------
date (including any permitted extensions) all required regular or periodic
reports (pursuant to the Exchange Act) with the Commission and will deliver
to each Holder of a Warrant or Warrant Stock promptly upon their becoming
available one copy of each report, notice or proxy statement sent by the
Company to its stockholders generally, and of each regular or periodic
report (pursuant to the Exchange Act) and any registration statement,
prospectus or written communication (other than transmittal letters)
(pursuant to the Securities Act), filed by the Company with (i) the
Commission or (ii) any securities exchange on which shares of Common Stock
are listed.
SECTION 14. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by the
Holder hereof to receive shares of Common Stock, and no enumeration herein
of the rights or privileges of the Holder hereof, shall give rise to any
liability of such Holder for any value subsequently assigned to the Common
Stock or as a stockholder of the Company, whether such liability is
asserted by the Company or by creditors of the Company. Notwithstanding
any other provision of this Agreement, neither the general partner nor the
limited partners nor any future general or limited partner of the
Partnership shall have any personal liability for performance of any
obligation of the Partnership under this Agreement in excess of the
respective capital contribution of such general partner and limited
partners to such Partnership.
SECTION 15. MISCELLANEOUS
15.1 Nonwaiver and Expenses. No course of dealing or any delay
----------------------
or failure to exercise any right hereunder on the part of the Holder hereof
shall operate as a waiver of such right or otherwise prejudice such
Holder's rights, powers or remedies. If the Company fails to make, when
due, any payments provided for hereunder, or fails to comply with any other
provision of this Warrant, the Company shall pay to the Holder hereof such
amounts as shall be sufficient to cover any costs and expenses including,
but not limited to, reasonable attorneys' fees, including those of
appellate proceedings, incurred by such Holder in collecting any amounts
due pursuant hereto or in otherwise enforcing any of its rights, powers or
remedies hereunder.
15.2 Notice Generally. Any notice, demand, request, consent,
----------------
approval, declaration, delivery or other communication hereunder to be made
pursuant to the provisions of this Warrant shall be sufficiently given or
made if in writing and either delivered in person with receipt acknowledged
or sent by registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
<PAGE>
37
(a) If to any Holder, at its last known address appearing on the
books of the Company maintained for such purpose.
(b) If to the Company at:
Bruno's, Inc.
800 Lakeshore Parkway
Birmingham, Alabama 35211
Attn: Chief Financial Officer
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in
writing by the party entitled to receive such notice. Every notice,
demand, request, consent, approval, declaration, delivery or other
communication hereunder shall be deemed to have been duly given or served
on the date on which personally delivered, with receipt acknowledged, or
three (3) Business Days after the same shall have been deposited in the
United States mail. Failure or delay in delivering copies of any notice,
demand, request, approval, declaration, delivery or other communication to
the person designated above to receive a copy shall in no way adversely
affect the effectiveness of such notice, demand, request, approval,
declaration, delivery or other communication.
15.3 Successors and Assigns. Subject to the provisions of
----------------------
Sections 3.1, 9 and 11, this Warrant and the rights evidenced hereby shall
inure to the benefit of and be binding upon the successors of the Company
and the successors and assigns of the Holder hereof. The provisions of
this Warrant are intended to be for the benefit of all Holders from time to
time of this Warrant, and shall be enforceable by any such Holder.
Without limitation to the foregoing, in the event that the Partnership
distributes or otherwise transfers any shares of the Registrable Securities
to any of its present or future general or limited partners, the Company
hereby acknowledges that the registration rights granted pursuant to
Section 10 of this Agreement shall be transferred to such partner or
partners on a pro rata basis, and that at or after the time of any such
distribution or transfer, any such partner or group of partners may
designate a Person to act on its behalf in delivering any notices or making
any requests hereunder.
15.4 Amendment. This Warrant and all other Warrants may be
---------
modified or amended or the provisions hereof waived with the written
consent of the Company and holders of Warrants exercisable for in excess of
50% of the aggregate number of shares of Common Stock then receivable upon
exercise of all Warrants whether or not then exercisable, provided that no
--------
such Warrant may be modified or amended in a manner which is adverse to the
Partnership or any of its successors or assigns, so long as such Person
holds any Warrants or Warrant Stock, without the prior written consent of
such Person.
<PAGE>
38
15.5 Severability. Wherever possible, each provision of this
------------
Warrant shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Warrant shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Warrant.
15.6 Headings. The headings used in this Warrant are for the
--------
convenience of reference only and shall not, for any purpose, be deemed a
part of this Warrant.
15.7 GOVERNING LAW; CONSENT TO JURISDICTION AND VENUE. IN ALL
------------------------------------------------
RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE,
THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY,
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK. THE COMPANY CONSENTS TO PERSONAL JURISDICTION, WAIVES ANY OBJECTION
AS TO JURISDICTION OR VENUE, AND AGREES NOT TO ASSERT ANY DEFENSE BASED ON
LACK OF JURISDICTION OR VENUE, IN THE COUNTY OF NEW YORK, STATE OF NEW
YORK. THE PARTIES AGREE TO SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE
COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS WARRANT CERTIFICATE AND THE WARRANTS EVIDENCED HEREBY.
SERVICE OF PROCESS ON THE COMPANY OR HOLDER IN ANY ACTION ARISING OUT OF OR
RELATING TO THIS AGREEMENT SHALL BE EFFECTIVE IF MAILED TO SUCH PARTY IN
ACCORDANCE WITH THE PROCEDURES AND REQUIREMENTS SET FORTH IN SECTION 15.2.
15.8 MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN
---------------------------
CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND
ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES
WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION
RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE
APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION
OF THE BENEFITS OF THE JUDICIAL SYSTEM, THE PARTIES HERETO WAIVE ALL RIGHT
TO TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR
DEFEND ANY RIGHTS OR REMEDIES UNDER THIS AGREEMENT.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed and its corporate seal to be impressed hereon.
Dated: August 18, 1995
BRUNO'S, INC.
By /s/ Ronald G. Bruno
--------------------------
Name: Ronald G. Bruno
Title: Chairman and Chief
Executive Officer
<PAGE>
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant
irrevocably exercises this Warrant for _______ shares of Common Stock of
Bruno's, Inc., all on the terms and conditions specified in this Warrant
and
/ / herewith tenders payment of the Aggregate Exercise Price for the
number of shares of Common Stock specified above to the order of
Bruno's, Inc. in the amount of $_________ in accordance with the
terms hereof;
The undersigned registered owner of this Warrant
irrevocably exercises this Warrant in respect of _______ shares of Common
Stock of Bruno's, Inc., all on the terms and conditions specified in this
Warrant and
/ / elects not to pay the Aggregate Exercise Price with respect to the
shares of Common Stock specified above and, in lieu thereof,
elects to surrender this Warrant (or the relevant portion thereof)
in exchange for such number of shares of Common Stock having an
aggregate value equal to the difference between (x) the aggregate
Fair Market Value of the number of shares of Common Stock
specified above and (y) the Aggregate Exercise Price in respect of
such number of shares.
<PAGE>
2
The undersigned requests that certificates for [all] [_________
of] the shares of Common Stock hereby received (and any securities or other
property issuable upon such exercise) be issued in the name of and
delivered to ______________________ _______________________________ whose
address is ________________________________________ [add any additional
names and addresses together with the number of shares of Common Stock (and
any securities or other property issuable upon such exercise) to be issued
to such person or entity)] and, if such shares of Common Stock shall not
include all of the shares of Common Stock issuable as provided in this
Warrant, that a new Warrant of like tenor and date for the balance of the
shares of Common Stock issuable hereunder be delivered to the undersigned.
______________________________
(Name of Registered Owner)
______________________________
(Signature of Registered Owner)
______________________________
(Street Address)
______________________________
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the name
as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatsoever.
<PAGE>
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this
Warrant hereby sells, assigns and transfers unto the Assignee named below
all of the rights of the undersigned under this Warrant, with respect to
the number of shares of Common Stock, adjusted as of the date of this
assignment as provided in the Warrant, set forth below:
No. of Shares of
Name and Address of Assignee Common Stock
- - ---------------------------- ----------------
and does hereby irrevocably constitute and appoint __________
__________________ attorney-in-fact to register such transfer on the books
of Bruno's, Inc. maintained for the purpose, with full power of
substitution in the premises.
Dated: _______________________________ Print
Name: _______________________________
Signature: __________________________
Witness: ____________________________
NOTICE: The signature on this subscription must correspond with the name
as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatsoever.
Exhibit 4.5
REGISTRATION RIGHTS AGREEMENT
-----------------------------
REGISTRATION RIGHTS AGREEMENT, dated as of August 18,
1995, among Crimson Acquisition Corp., an Alabama corporation,
Crimson Associates, L.P., a Delaware limited partnership
("Crimson Associates"), and KKR Partners II, L.P., a Delaware
------------------
limited partnership ("KKR Partners II" and, together with Crimson
---------------
Associates, the "Common Stock Partnerships").
-------------------------
RECITALS
--------
Pursuant to an Agreement and Plan of Merger, dated as
of April 20, 1995, as amended as of May 18, 1995 (as amended, the
"Merger Agreement"), among Bruno's, Inc. ("Bruno's") and the
---------------- -------
Company (as defined below), the Company will be merged with and
into Bruno's on August 18, 1995 (the "Merger"). As a result of
------
the Merger, each outstanding share of common stock, par value
$.01 per share (the "Common Stock") of the Company, all 1,000 of
which shares are owned collectively by the Common Stock
Partnerships, will be converted into (i) a number of shares of
common stock, par value $.01 per share, of Bruno's equal to the
quotient of (A) 20,833,333 divided by (B) the number of shares of
Common Stock outstanding immediately prior to the Effective Time
of the Merger, and (ii) a number of warrants equal to the
quotient of (A) 10,000,000 divided by (B) the number of shares of
Common Stock outstanding immediately prior to the Effective Time
of the Merger (the "Warrants"). At the Effective Time of the
--------
Merger, Bruno's shall succeed by merger to all of the rights and
obligations of the Company, including those set forth herein, as
well as to all of the other property and assets of the Company.
Pursuant to a Stock Sale and Equity Contribution
Agreement, dated as of August 18, 1995 (the "Equity Contribution
-------------------
Agreement"), among the Company and the Common Stock Partnerships,
---------
the Common Stock Partnerships made equity contributions of $250
million in the aggregate to the Company. Upon the merger of the
Company with and into Bruno's, such $250 million will be received
by Bruno's as an equity contribution by the Common Stock
Partnerships.
AGREEMENT
---------
1. Definitions. As used in this Agreement, the
-----------
following capitalized terms shall have the following respective
meanings:
"Common Stock": the common stock, par value $.01 per
------------
share, of Crimson Acquisition Corp. and its successors,
including, without limitation, the common stock of Bruno's
into which the Common Stock may be converted by Merger.
<PAGE>
"Common or Common Equivalent Registrable Securities":
--------------------------------------------------
Registrable Securities which are (i) Common Stock or (ii)
securities that are convertible into or exchangeable or
exercisable for Common Stock (other than the Warrants).
"Company": Crimson Acquisition Corp. and its
-------
successors, including, without limitation, Bruno's, Inc. as
successor by Merger.
"Demand Party": (a) Crimson Associates, (b) KKR
------------
Partners II or (c) any other Holder or Holders, including,
without limitation, any present or future general or limited
partner of either Common Stock Partnership, or any general
or limited partner of any general or limited partner
thereof, that may become an assignee of such Common Stock
Partnership's rights hereunder; provided that to be a Demand
--------
Party under this clause (c), a Holder or Holders must either
individually or in aggregate with all other Holders with
whom it is acting together to demand registration own at
least 1% of the total number of Registrable Securities.
"Exchange Act": The Securities Exchange Act of 1934,
------------
as amended, or any similar federal statute then in effect,
and a reference to a particular section thereof shall be
deemed to include a reference to the comparable section, if
any, of any such similar federal statute.
"Holder": Each Common Stock Partnership and any other
------
holder of Registrable Securities (including any direct or
indirect transferees of a Common Stock Partnership) who
agrees in writing to be bound by the provisions of this
Agreement.
"Person": Any individual, partnership, joint venture,
------
corporation, trust, unincorporated organization or
government or any department or agency thereof.
"Registrable Securities": Any Common Stock acquired by
----------------------
a Common Stock Partnership from the Company or any affiliate
of the Company, whether as a result of the Merger or upon
the conversion of any convertible security (other than the
Warrants) or otherwise, and any Common Stock or convertible
security which may be issued or distributed in respect
thereof by way of stock dividend or stock split or other
distribution, recapitalization or reclassification. As to
any particular Registrable Securities, once issued, such
Registrable Securities shall cease to be Registrable
Securities when (i) a registration statement with respect to
the sale by the Holder of such securities shall have become
effective under the Securities Act and such securities shall
have been disposed of in accordance with such registration
statement, (ii) such securities shall have been distributed
to the public pursuant to Rule 144 (or any successor
provision) under the Securities Act, (iii) such securities
-2-
<PAGE>
shall have been otherwise transferred, new certificates for
such securities not bearing a legend restricting further
transfer shall have been delivered by the Company and
subsequent disposition of such securities shall not require
registration or qualification of such securities under the
Securities Act or any state securities or blue sky law then
in force, or (iv) such securities shall have ceased to be
outstanding.
"Registration Expenses": Any and all expenses incident
---------------------
to performance of or compliance with this Agreement,
including, without limitation, (i) all SEC and stock
exchange or National Association of Securities Dealers, Inc.
(the "NASD") registration and filing fees (including, if
----
applicable, the fees and expenses of any "qualified
independent underwriter," as such term is defined in
Schedule E to the By-laws of the NASD, and of its counsel),
(ii) all fees and expenses of complying with securities or
blue sky laws (including fees and disbursements of counsel
for the underwriters in connection with blue sky
qualifications of the Registrable Securities), (iii) all
printing, messenger and delivery expenses, (iv) all fees and
expenses incurred in connection with the listing of the
Registrable Securities on any securities exchange pursuant
to clause (viii) of Section 4 and all rating agency fees,
(v) the fees and disbursements of counsel for the Company
and of its independent public accountants, including the
expenses of any special audits and/or "cold comfort" letters
required by or incident to such performance and compliance,
(vi) the reasonable fees and disbursements of counsel
selected pursuant to Section 7 hereof by the Holders of the
Registrable Securities being registered to represent such
Holders in connection with each such registration, (vii) any
fees and disbursements of underwriters customarily paid by
the issuers or sellers of securities, including liability
insurance if the Company so desires or if the underwriters
so require, and the reasonable fees and expenses of any
special experts retained in connection with the requested
registration, but excluding underwriting discounts and
commissions and transfer taxes, if any, and (viii) other
reasonable out-of-pocket expenses of Holders (provided that
--------
such expenses shall not include expenses of counsel other
than those provided for in clause (vi) above).
"Securities Act": The Securities Act of 1933, as
--------------
amended, or any similar federal statute then in effect, and
a reference to a particular section thereof shall be deemed
to include a reference to the comparable section, if any, of
any such similar federal statute.
"SEC": The Securities and Exchange Commission or any
---
other federal agency at the time administering the
Securities Act or the Exchange Act.
-3-
<PAGE>
2. Incidental Registrations. (a) Right to Include
------------------------ ----------------
Common or Common Equivalent Registrable Securities. If the
--------------------------------------------------
Company at any time after the date hereof proposes to register
its Common Stock (or any security which is convertible into or
exchangeable or exercisable for Common Stock) under the
Securities Act (other than a registration on Form S-4 or S-8, or
any successor or other forms promulgated for similar purposes),
whether or not for sale for its own account, in a manner which
would permit registration of Common or Common Equivalent
Registrable Securities for sale to the public under the
Securities Act, it will, at each such time, give prompt written
notice to all Holders of Common or Common Equivalent Registrable
Securities of its intention to do so and of such Holders' rights
under this Section 2. Upon the written request of any such
Holder made within 15 days after the receipt of any such notice
(which request shall specify the Common or Common Equivalent
Registrable Securities intended to be disposed of by such
Holder), the Company will use its best efforts to effect the
registration under the Securities Act of all Common or Common
Equivalent Registrable Securities which the Company has been so
requested to register by the Holders thereof, to the extent
requisite to permit the disposition of the Common or Common
Equivalent Registrable Securities so to be registered; provided
--------
that (i) if, at any time after giving written notice of its
intention to register any securities and prior to the effective
date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to
proceed with the proposed registration of the securities to be
sold by it, the Company may, at its election, give written notice
of such determination to each Holder of Common or Common
Equivalent Registrable Securities and, thereupon, shall be
relieved of its obligation to register any Common or Common
Equivalent Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration
Expenses in connection therewith), and (ii) if such registration
involves an underwritten offering, all Holders of Common or
Common Equivalent Registrable Securities requesting to be
included in the Company's registration must sell their Common or
Common Equivalent Registrable Securities to the underwriters
selected by the Company on the same terms and conditions as apply
to the Company, with such differences, including any with respect
to indemnification and liability insurance, as may be customary
or appropriate in combined primary and secondary offerings. If a
registration requested pursuant to this Section 2(a) involves an
underwritten public offering, any Holder of Common or Common
Equivalent Registrable Securities requesting to be included in
such registration may elect, in writing prior to the effective
date of the registration statement filed in connection with such
registration, not to register such securities in connection with
such registration. Nothing in this Section 2(a) shall operate to
limit the right of Holder to (i) request the registration of
Common Stock issuable upon conversion or exercise of convertible
securities held by such Holder notwithstanding the fact that at
the time of request such Holder holds only convertible securities
-4-
<PAGE>
or (ii) request the registration at one time of both Common Stock
and securities convertible into Common Stock.
(b) Expenses. The Company will pay all Registration
--------
Expenses in connection with each registration of Common or Common
Equivalent Registrable Securities requested pursuant to this
Section 2.
(c) Priority in Incidental Registrations. If a
------------------------------------
registration pursuant to this Section 2 involves an underwritten
offering and the managing underwriter advises the Company in
writing that, in its opinion, the number of securities requested
to be included in such registration exceeds the number which can
be sold in such offering, so as to be likely to have an adverse
effect on the price, timing or distribution of the Securities
offered in such offering as contemplated by the Company (other
than the Common or Common Equivalent Registrable Securities),
then the Company will include in such registration (i) first,
100% of the securities the Company proposes to sell and (ii)
second, to the extent of the number of Common or Common
Equivalent Registrable Securities requested to be included in
such registration which, in the opinion of such managing
underwriter, can be sold without having the adverse effect
referred to above, the number of Common or Common Equivalent
Registrable Securities which the Holders have requested to be
included in such registration, such amount to be allocated pro
rata among all requesting Holders on the basis of the relative
number of shares of Common or Common Equivalent Registrable
Securities then held by each such Holder (provided that any
shares thereby allocated to any such Holder that exceed such
Holder's request will be reallocated among the remaining
requesting Holders in like manner).
3. Registration on Request. (a) Request by the
----------------------- --------------
Demand Party. At any time, upon the written request of the
------------
Demand Party requesting that the Company effect the registration
under the Securities Act of all or part of such Demand Party's
Registrable Securities and specifying the amount and intended
method of disposition thereof, the Company will promptly give
written notice of such requested registration to all other
Holders of such Registrable Securities, and thereupon will, as
expeditiously as possible, use its best efforts to effect the
registration under the Securities Act of:
(i) such Registrable Securities (including, if such
request relates to a security which is convertible into
shares of Common Stock, the shares of Common Stock issuable
upon such conversion) which the Company has been so
requested to register by the Demand Party; and
(ii) all other Registrable Securities of the same class
or series as are to be registered at the request of a Demand
Party and which the Company has been requested to register
by any other Holder thereof by written request given to the
-5-
<PAGE>
Company within 15 days after the giving of such written
notice by the Company (which request shall specify the
amount and intended method of disposition of such
Registrable Securities),
all to the extent necessary to permit the disposition (in
accordance with the intended method thereof as aforesaid) of the
Registrable Securities so to be registered; provided, that with
--------
respect to any Demand Party other than a Common Stock
Partnership, the Company shall not be obligated to effect any
registration of Registrable Securities under this Section 3(a)
unless such Demand Party requests that the Company register at
least 1% of the total number of Registrable Securities; and
provided, further, that, unless Holders of a majority of the
-------- -------
shares of Registrable Securities held by Holders consent thereto
in writing, the Company shall not be obligated to file a
registration statement relating to any registration request under
this Section 3(a) (x) within a period of nine months after the
effective date of any other registration statement relating to
any registration request under this Section 3(a) which was not
effected on Form S-3 (or any successor or similar short-form
registration statement) or relating to any registration effected
under Section 2, or (y) if with respect thereto the managing
underwriter, the SEC, the Securities Act or the rules and
regulations thereunder, or the form on which the registration
statement is to be filed, would require the conduct of an audit
other than the regular audit conducted by the Company at the end
of its fiscal year, in which case the filing may be delayed until
the completion of such regular audit (unless the Holders of the
Registrable Securities to be registered agree to pay the expenses
of the Company in connection with such an audit other than the
regular audit). Nothing in this Section 3 shall operate to limit
the right of Holder to (i) request the registration of Common
Stock issuable upon conversion or exercise of convertible
securities held by such Holder notwithstanding the fact that at
the time of request such Holder holds only convertible securities
or (ii) request the registration at one time of both Common Stock
and securities convertible into Common Stock.
(b) Registration Statement Form. If any registration
---------------------------
requested pursuant to this Section 3 which is proposed by the
Company to be effected by the filing of a registration statement
on Form S-3 (or any successor or similar short-form registration
statement) shall be in connection with an underwritten public
offering, and if the managing underwriter shall advise the
Company in writing that, in its opinion, the use of another form
of registration statement is of material importance to the
success of such proposed offering, then such registration shall
be effected on such other form.
(c) Expenses. The Company will pay all Registration
--------
Expenses in connection with the first six (6) registrations of
each class or series of Registrable Securities pursuant to this
Section 3 upon the written request of any of the Holders,
-6-
<PAGE>
provided that, for purposes hereof, a request to register Common
--------
Stock into which a convertible security is convertible in
conjunction with a registration of such convertible security
shall be deemed to be one request for registration of a class or
series of Registrable Securities. All expenses for any
subsequent registrations of Registrable Securities pursuant to
this Section 3 shall be paid pro rata by the Company and all
other Persons (including the Holders) participating in such
registration on the basis of the relative number of shares of
Common Stock of each such person whose Registrable Securities are
included in such registration.
(d) Effective Registration Statement. A registration
--------------------------------
requested pursuant to this Section 3 will not be deemed to have
been effected unless it has become effective and all of the
Registrable Securities registered thereunder have been sold;
provided that if, within 180 days after it has become effective,
--------
the offering of Registrable Securities pursuant to such
registration is interfered with by any stop order, injunction or
other order or requirement of the SEC or other governmental
agency or court, such registration will be deemed not to have
been effected.
(e) Selection of Underwriters. If a requested
-------------------------
registration pursuant to this Section 3 involves an underwritten
offering, the Holders of a majority of the shares of Registrable
Securities which are held by Holders and which the Company has
been requested to register shall have the right to select the
investment banker or bankers and managers to administer the
offering; provided, however, that such investment banker or
-------- -------
bankers and managers shall be reasonably satisfactory to the
Company.
(f) Priority in Requested Registrations. If a
-----------------------------------
requested registration pursuant to this Section 3 involves an
underwritten offering and the managing underwriter advises the
Company in writing that, in its opinion, the number of securities
requested to be included in such registration (including
securities of the Company which are not Registrable Securities)
exceeds the number which can be sold in such offering, the
Company will include in such registration only the Registrable
Securities requested to be included in such registration. In the
event that the number of Registrable Securities requested to be
included in such registration exceeds the number which, in the
opinion of such managing underwriter, can be sold, the number of
such Registrable Securities to be included in such registration
shall be allocated pro rata among all requesting Holders on the
basis of the relative number of shares of Registrable Securities
then held by each such Holder (provided that any shares thereby
allocated to any such Holder that exceed such Holder's request
shall be reallocated among the remaining requesting Holders in
like manner). In the event that the number of Registrable
Securities requested to be included in such registration is less
than the number which, in the opinion of the managing
-7-
<PAGE>
underwriter, can be sold, the Company may include in such
registration the securities the Company proposes to sell up to
the number of securities that, in the opinion of the underwriter,
can be sold.
(g) Additional Rights. If the Company at any time
-----------------
grants to any other holders of Common Stock any rights to request
the Company to effect the registration under the Securities Act
of any such shares of Common Stock on terms more favorable to
such holders than the terms set forth in this Section 3, the
terms of this Section 3 shall be deemed amended or supplemented
to the extent necessary to provide the Holders such more
favorable rights and benefits.
4. Registration Procedures. If and whenever the
-----------------------
Company is required to use its best efforts to effect or cause
the registration of any Registrable Securities under the
Securities Act as provided in this Agreement, the Company will,
as expeditiously as possible:
(i) prepare and, in any event within 120 days after
the end of the period within which a request for
registration may be given to the Company, file with the SEC
a registration statement with respect to such Registrable
Securities and use its best efforts to cause such
registration statement to become effective, provided,
--------
however, that the Company may discontinue any registration
-------
of its securities which is being effected pursuant to
Section 2 at any time prior to the effective date of the
registration statement relating thereto;
(ii) prepare and file with the SEC such amendments and
supplements to such registration statement and the
prospectus used in connection therewith as may be necessary
to keep such registration statement effective for a period
not in excess of 270 days and to comply with the provisions
of the Securities Act, the Exchange Act and the rules and
regulations of the SEC thereunder with respect to the
disposition of all securities covered by such registration
statement during such period in accordance with the intended
methods of disposition by the seller or sellers thereof set
forth in such registration statement; provided that before
--------
filing a registration statement or prospectus, or any
amendments or supplements thereto, the Company will furnish
to counsel selected pursuant to Section 7 hereof by the
Holders of the Registrable Securities covered by such
registration statement to represent such Holders, copies of
all documents proposed to be filed, which documents will be
subject to the review of such counsel;
(iii) furnish to each seller of such Registrable
Securities such number of copies of such registration
statement and of each amendment and supplement thereto (in
each case including all exhibits filed therewith, including
-8-
<PAGE>
any documents incorporated by reference), such number of
copies of the prospectus included in such registration
statement (including each preliminary prospectus and summary
prospectus), in conformity with the requirements of the
Securities Act, and such other documents as such seller may
reasonably request in order to facilitate the disposition of
the Registrable Securities by such seller;
(iv) use its best efforts to register or qualify such
Registrable Securities covered by such registration in such
jurisdictions as each seller shall reasonably request, and
do any and all other acts and things which may be reasonably
necessary or advisable to enable such seller to consummate
the disposition in such jurisdictions of the Registrable
Securities owned by such Seller, except that the Company
shall not for any such purpose be required to qualify
generally to do business as a foreign corporation in any
jurisdiction where, but for the requirements of this clause
(iv), it would not be obligated to be so qualified, to
subject itself to taxation in any such jurisdiction or to
consent to general service of process in any such
jurisdiction;
(v) use its best efforts to cause such Registrable
Securities covered by such registration statement to be
registered with or approved by such other governmental
agencies or authorities as may be necessary to enable the
seller or sellers thereof to consummate the disposition of
such Registrable Securities;
(vi) notify each seller of any such Registrable
Securities covered by such registration statement, at any
time when a prospectus relating thereto is required to be
delivered under the Securities Act within the appropriate
period mentioned in clause (ii) of this Section 4, of the
Company's becoming aware that the prospectus included in
such registration statement, as then in effect, includes an
untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of
the circumstances then existing, and at the request of any
such seller, prepare and furnish to such seller a reasonable
number of copies of an amended or supplemental prospectus as
may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus
shall not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading
in the light of the circumstances then existing;
(vii) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make
available to its security holders, as soon as reasonably
practicable (but not more than eighteen months) after the
-9-
<PAGE>
effective date of the registration statement, an earnings
statement which shall satisfy the provisions of Section
11(a) of the Securities Act and the rules and regulations
promulgated thereunder;
(viii) (A) if such Registrable Securities are Common
Stock (including Common Stock issuable upon conversion of a
convertible security), use its best efforts to list such
Registrable Securities on any securities exchange on which
the Common Stock is then listed if such Registrable
Securities are not already so listed and if such listing is
then permitted under the rules of such exchange; (B) if such
Registrable Securities are convertible securities, upon the
reasonable request of sellers of a majority of shares of
such Registrable Securities, use its best efforts to list
the convertible securities and, if requested, the Common
Stock underlying the convertible securities, notwithstanding
that at the time of request such sellers hold only
convertible securities, on any securities exchange so
requested, if such Registrable Securities are not already so
listed, and if such listing is then permitted under the
rules of such exchange; (C) and use its best efforts to
provide a transfer agent and registrar for such Registrable
Securities covered by such registration statement not later
than the effective date of such registration statement;
(ix) enter into such customary agreements (including an
underwriting agreement in customary form), which may include
indemnification provisions in favor of underwriters and
other persons in addition to, or in substitution for the
provisions of Section 5 hereof, and take such other actions
as sellers of a majority of shares of such Registrable
Securities or the underwriters, if any, reasonably requested
in order to expedite or facilitate the disposition of such
Registrable Securities;
(x) obtain a "cold comfort" letter or letters from the
Company's independent public accounts in customary form and
covering matters of the type customarily covered by "cold
comfort" letters as the seller or sellers of a majority of
shares of such Registrable Securities shall reasonably
request (provided that Registrable Securities constitute at
least 25% of the securities covered by such registration
statement);
(xi) make available for inspection by any seller of
such Registrable Securities covered by such registration
statement, by any underwriter participating in any
disposition to be effected pursuant to such registration
statement and by any attorney, accountant or other agent
retained by any such seller or any such underwriter, all
pertinent financial and other records, pertinent corporate
documents and properties of the Company, and cause all of
the Company's officers, directors and employees to supply
-10-
<PAGE>
all information reasonably requested by any such seller,
underwriter, attorney, accountant or agent in connection
with such registration statement;
(xii) notify counsel (selected pursuant to Section 7
hereof) for the Holders of Registrable Securities included
in such registration statement and the managing underwriter
or agent, immediately, and confirm the notice in writing (i)
when the registration statement, or any post-effective
amendment to the registration statement, shall have become
effective, or any supplement to the prospectus or any
amendment prospectus shall have been filed, (ii) of the
receipt of any comments from the SEC, (iii) of any request
of the SEC to amend the registration statement or amend or
supplement the prospectus or for additional information, and
(iv) of the issuance by the SEC of any stop order suspending
the effectiveness of the registration statement or of any
order preventing or suspending the use of any preliminary
prospectus, or of the suspension of the qualification of the
registration statement for offering or sale in any
jurisdiction, or of the institution or threatening of any
proceedings for any of such purposes;
(xiii) make every reasonable effort to prevent the
issuance of any stop order suspending the effectiveness of
the registration statement or of any order preventing or
suspending the use of any preliminary prospectus and, if any
such order is issued, to obtain the withdrawal of any such
order at the earliest possible moment;
(xiv) if requested by the managing underwriter or agent
or any Holder of Registrable Securities covered by the
registration statement, promptly incorporate in a prospectus
supplement or post-effective amendment such information as
the managing underwriter or agent or such Holder reasonably
requests to be included therein, including, without
limitation, with respect to the number of Registrable
Securities being sold by such Holder to such underwriter or
agent, the purchase price being paid therefor by such
underwriter or agent and with respect to any other terms of
the underwritten offering of the Registrable Securities to
be sold in such offering; and make all required filings of
such prospectus supplement or post-effective amendment as
soon as practicable after being notified of the matters
incorporated in such prospectus supplement or post-effective
amendment;
(xv) cooperate with the Holders of Registrable
Securities covered by the registration statement and the
managing underwriter or agent, if any, to facilitate the
timely preparation and delivery of certificates (not bearing
any restrictive legends) representing securities to be sold
under the registration statement, and enable such securities
to be in such denominations and registered in such names as
-11-
<PAGE>
the managing underwriter or agent, if any, or such Holders
may request;
(xvi) obtain for delivery to the Holders of Registrable
Securities being registered and to the underwriter or agent
an opinion or opinions from counsel for the Company in
customary form and in form, substance and scope reasonably
satisfactory to such Holders, underwriters or agents and
their counsel; and
(xvii) cooperate with each seller of Registrable
Securities and each underwriter or agent participating in
the disposition of such Registrable Securities and their
respective counsel in connection with any filings required
to be made with the NASD.
The Company may require each seller of Registrable
Securities as to which any registration is being effected to
furnish the Company with such information regarding such seller
and pertinent to the disclosure requirements relating to the
registration and the distribution of such securities as the
Company may from time to time reasonably request in writing.
Each Holder of Registrable Securities agrees that, upon
receipt of any notice from the Company of the happening of any
event of the kind described in clause (vi) of this Section 4,
such Holder will forthwith discontinue disposition of Registrable
Securities pursuant to the registration statement covering such
Registrable Securities until such Holder's receipt of the copies
of the supplemented or amended prospectus contemplated by clause
(vi) of this Section 4, and, if so directed by the Company, such
Holder will deliver to the Company (at the Company's expense) all
copies, other than permanent file copies then in such Holder's
possession, of the prospectus covering such Registrable
Securities current at the time of receipt of such notice. In the
event the Company shall give any such notice, the period
mentioned in clause (ii) of this Section 4 shall be extended by
the number of days during the period from and including the date
of the giving of such notice pursuant to clause (vi) of this
Section 4 and including the date when each seller of Registrable
Securities covered by such registration statement shall have
received the copies of the supplemented or amended prospectus
contemplated by clause (vi) of this Section 4.
5. Indemnification. (a) Indemnification by the
--------------- ----------------------
Company. In the event of any registration of any securities of
-------
the Company under the Securities Act pursuant to Section 2 or 3,
the Company will, and it hereby does, indemnify and hold
harmless, to the extent permitted by law, the seller of any
Registrable Securities covered by such registration statement,
each affiliate of such seller and their respective directors and
officers or general and limited partners (including any director,
officer, affiliate, employee, agent and controlling Person of any
of the foregoing), each other Person who participates as an
-12-
<PAGE>
underwriter in the offering or sale of such securities and each
other Person, if any, who controls such seller or any such
underwriter within the meaning of the Securities Act
(collectively, the "Indemnified Parties"), against any and all
-------------------
losses, claims, damages or liabilities, joint or several, and
expenses (including reasonable attorney's fees and reasonable
expenses of investigation) to which such Indemnified Party may
become subject under the Securities Act, common law or otherwise,
insofar as such losses, claims, damages or liabilities (or
actions or proceedings in respect thereof, whether or not such -
Indemnified Party is a party thereto) arise out of or are based
upon (a) any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which
such securities were registered under the Securities Act, any
preliminary, final or summary prospectus contained therein, or
any amendment or supplement thereto, or (b) any omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein (in
the case of a prospectus, in light of the circumstances under
which they were made) not misleading, and the Company will
reimburse such Indemnified Party for any legal or any other
expenses reasonably incurred by it in connection with
investigating or defending against any such loss, claim,
liability, action or proceeding; provided that the Company shall
--------
not be liable to any Indemnified Party in any such case to the
extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of or is
based upon any untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement
or amendment or supplement thereto or in any such preliminary,
final or summary prospectus in reliance upon and in conformity
with written information furnished to the Company through an
instrument duly executed by such seller specifically stating that
it is for use in the preparation thereof. Such indemnity shall
remain in full force and effect regardless of any investigation
made by or on behalf of such seller or any Indemnified Party and
shall survive the transfer of such securities by such seller.
(b) Indemnification by the Seller. The Company may
-----------------------------
require, as a condition to including any Registrable Securities
in any registration statement filed in accordance with Section 4
herein, that the Company shall have received an undertaking
reasonably satisfactory to it from the prospective seller of such
Registrable Securities or any underwriter to indemnify and hold
harmless (in the same manner and to the same extent as set forth
in subdivision (a) of this Section 5) the Company and all other
prospective sellers with respect to any untrue statement or
alleged untrue statement in or omission or alleged omission from
such registration statement, any preliminary, final or summary
prospectus contained therein, or any amendment or supplement, if
such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with
written information furnished to the Company through an
instrument duly executed by such seller or underwriter
-13-
<PAGE>
specifically stating that it is for use in the preparation of
such registration statement, preliminary, final or summary
prospectus or amendment or supplement, or a document incorporated
by reference into any of the foregoing. Such indemnity shall
remain in full force and effect regardless of any investigation
made by or on behalf of the Company or any of the prospective
sellers, or any of their respective affiliates, directors,
officers or controlling Persons and shall survive the transfer of
such securities by such seller. In no event shall the liability
of any selling Holder of Registrable Securities hereunder be
greater in amount than the dollar amount of the proceeds received
by such Holder upon the sale of the Registrable Securities giving
rise to such indemnification obligation.
(c) Notices of Claims, Etc. Promptly after receipt by
----------------------
an indemnified party hereunder of written notice of the
commencement of any action or proceeding with respect to which a
claim for indemnification may be made pursuant to this Section 5,
such Indemnified Party will, if a claim in respect thereof is to
be made against an indemnifying party, give written notice to the
latter of the commencement of such action; provided that the
--------
failure of the Indemnified Party to give notice as provided
herein shall not relieve the indemnifying party of its
obligations under the preceding subdivisions of this Section 5,
except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice. In case any such
action is brought against an Indemnified Party, unless in such
Indemnified Party's reasonable judgment a conflict of interest
between such Indemnified Party and indemnifying parties may exist
in respect of such claim, the indemnifying party will be entitled
to participate in and to assume the defense thereof, jointly with
any other indemnifying party similarly notified to the extent
that it may wish, with counsel reasonably satisfactory to such
Indemnified Party, and after notice from the indemnifying party
to such Indemnified Party of its election so to assume the
defense thereof, the indemnifying party will not be liable to
such Indemnified Party for any legal or other expenses
subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation. No
indemnifying party will consent to entry of any judgment or enter
into any settlement which does not include as an unconditional
term thereof, the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to
such claim or litigation.
(d) Contribution. If the indemnification provided for
-------------
in this Section 5 from the indemnifying party is unavailable to
an Indemnified Party hereunder in respect of any losses, claims,
damages, liabilities or expenses referred to herein, then the
indemnifying party, in lieu of indemnifying such Indemnified
Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages,
liabilities or expenses in such proportion as is appropriate to
reflect the relative fault of the indemnifying party and
-14-
<PAGE>
Indemnified Parties in connection with the actions which resulted
in such losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The relative
fault of such indemnifying party and Indemnified Parties shall be
determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to
information supplied by, such indemnifying party or Indemnified
Parties, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action.
The amount paid or payable by a party under this Section 5(d) as
a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include any legal or other
fees or expenses reasonably incurred by such party in connection
with any investigation or proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 5(d) were
determined by pro rata allocation or by any other method of
allocation which does not take account of the equitable
considerations referred to in the immediately preceding
paragraph. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall
be entitled to contribution from any Person who was not guilty of
such fraudulent misrepresentation.
(e) Other Indemnification. Indemnification similar to
---------------------
that specified in the preceding subdivisions of this Section 5
(with appropriate modifications) shall be given by the Company
and each seller of Registrable Securities with respect to any
required registration or other qualification of securities under
any federal or state law or regulation or governmental authority
other than the Securities Act.
(f) Non-Exclusivity. The obligations of the parties
---------------
under this Section 5 shall be in addition to any liability which
any party may otherwise have to any other party.
6. Rule 144. The Company covenants that it will file
--------
the reports required to be filed by it under the Securities Act
and the Exchange Act and the rules and regulations adopted by the
SEC thereunder (or, if the Company is not required to file such
reports, it will, upon the request of any Holder of Registrable
Securities, make publicly available such information), and it
will take such further action as any Holder of Registrable
Securities may reasonably request, all to the extent required
from time to time to enable such Holder to sell shares of
Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by (i) Rule
144 under the Securities Act, as such Rule may be amended from
time to time, or (ii) any similar rule or regulation hereafter
adopted by the SEC. Upon the request of any Holder of
Registrable Securities, the Company will deliver to such Holder a
-15-
<PAGE>
written statement as to whether it has complied with such
requirements. Notwithstanding anything contained in this Section
6, the Company may deregister under Section 12 of the Exchange
Act if it then is permitted to do so pursuant to the Exchange Act
and the rules and regulations thereunder.
7. Selection of Counsel. In connection with any
--------------------
registration of Registrable securities pursuant to Sections 2 and
3 hereof, the Holders of a majority of the Registrable Securities
covered by any such registration may select one counsel to
represent all Holders of Registrable Securities covered by such
registration; provided, however, that in the event that the
-------- -------
counsel selected as provided above is also acting as counsel to
the Company in connection with such registration, the remaining
Holders shall be entitled to select one additional counsel to
represent all such remaining Holders.
8. Miscellaneous. (a) Other Investors. The Company
------------- ---------------
may enter into agreements with other purchasers of Common Stock
who are then employees of the Company (or its successor) or any
of its subsidiaries, making them parties hereto (and thereby
giving them all, or a portion, of the rights, preferences and
privileges of an original party hereto) with respect to
additional shares of Common Stock (the "Supplemental
------------
Agreements"); provided, however, that pursuant to any such
----------
Supplemental Agreement, such purchaser expressly agrees to be
bound by all of the terms, conditions and obligations of this
Agreement as if such purchaser were an original party hereto.
All shares of Common Stock issued or issuable pursuant to such
Supplemental Agreements shall be deemed to be Registrable
Securities.
(b) Holdback Agreement. If any such registration
------------------
shall be in connection with an underwritten public offering, each
Holder of Registrable Securities agrees not to effect any public
sale or distribution, including any sale pursuant to Rule 144
under the Securities Act, of any equity securities of the
Company, or of any security convertible into or exchangeable or
exercisable for any equity security of the Company (in each case,
other than as part of such underwritten public offering), within
7 days before or such period not to exceed 180 days as the
underwriting agreement may require (or such lesser period as the
managing underwriters may permit) after the effective date of
such registration (except as part of such registration), and the
Company hereby also so agrees and agrees to cause each other
holder of any equity security, or of any security convertible
into or exchangeable or exercisable for any equity security, of
the Company purchased from the Company (at any time other than in
a public offering) to so agree.
(c) Amendments and Waivers. This Agreement may be
----------------------
amended and the Company may take any action herein prohibited, or
omit to perform any act herein required to be performed by it,
only if the Company shall have obtained the written consent to
-16-
<PAGE>
such amendment, action or omission to act, of the Holders of a
majority of the Registrable Securities then outstanding;
provided, however, that no amendment, waiver or consent to the
-------- -------
departure from the terms and provisions of this Agreement that is
adverse to either Common Stock Partnership or any of their
respective successors and assigns shall be effective as against
any such Person for so long as such Person holds any Registrable
Securities unless consented to in writing by such Person. Each
Holder of any Registrable Securities at the time or thereafter
outstanding shall be bound by any consent authorized by this
Section 8(c), whether or not such Registrable Securities shall
have been marked to indicate such consent.
(d) Successors, Assigns and Transferees. This
-----------------------------------
Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and assigns.
In addition, and whether or not any express assignment shall have
been made, the provisions of this Agreement which are for the
benefit of the parties hereto other than the Company shall also
be for the benefit of and enforceable by any subsequent Holder of
any Registrable Securities, subject to the provisions contained
herein. Without limitation to the foregoing, in the event that
either Common Stock Partnership distributes or otherwise
transfers any shares of the Registrable Securities to any of its
present or future general or limited partners, the Company hereby
acknowledges that the registration rights granted pursuant to
this Agreement shall be transferred to such partner or partners
on a pro rata basis, and that at or after the time of any such
distribution or transfer, any such partner or group of partners
may designate a Person to act on its behalf in delivering any
notices or making any requests hereunder.
(e) Notices. All notices and other communications
-------
provided for hereunder shall be in writing and shall be sent by
first class mail, telex, telecopier or hand delivery:
(i) (A) if to the Company prior to the Merger, to:
Crimson Acquisition Corp.
9 West 57th Street
New York, New York 10019
Attention: Paul E. Raether/James H. Greene, Jr.
(B) if to the Company following the Merger, to:
Bruno's, Inc.
800 Lakeshore Parkway
Birmingham, Alabama 35211
Attention: General Counsel
-17-
<PAGE>
(ii) if to either Common Stock Partnership, to:
c/o KKR Associates
9 West 57th Street
New York, New York 10019
Attention: Paul E. Raether/James H. Greene, Jr.
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: David J. Sorkin, Esq
(iii) if to any other holder of Registrable Securities,
to the address of such other holder as shown in the stock
record book of the Company, or to such other address as any
of the above shall have designated in writing to all of the
other above.
All such notices and communications shall be deemed to
have been given or made (1) when delivered by hand, (2) five
business days after being deposited in the mail, postage prepaid,
(3) when telexed answer-back received or (4) when telecopied,
receipt acknowledged.
(f) Descriptive Headings. The headings in this
--------------------
Agreement are for convenience of reference only and shall not
limit or otherwise affect the meaning of terms contained herein.
(g) Severability. In the event that any one or more
-------------
of the provisions, paragraphs, words, clauses, phrases or
sentences contained herein, or the application thereof in any
circumstances, is held invalid, illegal or unenforceable in any
respect for any reason, the validity, legality and enforceability
of any such provision, paragraph, word, clause, phrase or
sentence in every other respect and of the remaining provisions,
paragraphs, words, clauses, phrases or sentences hereof shall not
be in any way impaired, it being intended that all rights, powers
and privileges of the parties hereto shall be enforceable to the
fullest extent permitted by law.
(h) Counterparts. This Agreement may be executed in
------------
counterparts, and by different parties on separate counterparts,
each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same
instrument.
(i) Governing Law; Submission to Jurisdiction. This
-----------------------------------------
Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York applicable to
contracts made and to be performed therein. The parties to this
Agreement hereby agree to submit to the jurisdiction of the
courts of the State of New York, the courts of the United States
-18-
<PAGE>
of America for the Southern District of New York, and appellate
courts from any thereof in any action or proceeding arising out
of or relating to this Agreement.
(j) Specific Performance. The parties hereto
--------------------
acknowledge and agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were
otherwise breached. Accordingly, it is agreed that they shall be
entitled to an injunction or injunctions to prevent breaches of
the provision of this Agreement and to enforce specifically the
terms and provisions hereof in any court of competent
jurisdiction in the United States or any state thereof, in
addition to any other remedy to which they may be entitled at law
or in equity.
-19-
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has
executed this Agreement or caused this Agreement to be duly
executed on its behalf as of the date first written above.
CRIMSON ACQUISITION CORP.
By: /s/ Paul E. Raether
------------------------------
Title: Chief Executive Officer
CRIMSON ASSOCIATES, L.P.
By: KKR ASSOCIATES,
its General Partner
By:/s/ Paul E. Raether
----------------------
General Partner
KKR PARTNERS II, L.P.
By: KKR ASSOCIATES,
its General Partner
By:/s/ Paul E. Raether
----------------------
General Partner
-20-
<PAGE>
ACKNOWLEDGEMENT
The undersigned authorized officer of Bruno's, Inc. is aware of
this Registration Rights Agreement and acknowledges that Bruno's,
Inc. will be bound by the terms hereof as successor to Crimson
Acquisition Corp. by merger.
BRUNO'S, INC.
By /s/ Ronald G. Bruno
--------------------------
Name: Ronald G. Bruno
Title: Chairman and Chief
Executive Officer
-21-
Exhibit 10.29
-------------
EMPLOYMENT AGREEMENT
AGREEMENT, made August 17, 1995, by and between BRUNO'S INC., a
Delaware corporation (the "Company") and WILLIAM J. BOLTON ("Executive").
RECITALS
--------
In order to induce Executive to serve as the Chairman of the
Board and Chief Executive officer of the Company, the Company desires to
provide Executive with compensation and other benefits on the terms and
conditions set forth in this Agreement.
Executive is willing to accept such employment and perform
services for the Company, on the terms and conditions hereinafter set
forth.
It is therefore hereby agreed by and between the parties as
follows:
1. Employment.
----------
1.1 Subject to the terms and conditions of this Agreement, the
Company agrees to employ Executive during the term hereof as its Chairman
of the Board and Chief Executive Officer. In his capacity as the Chairman
of the Board and Chief Executive Officer of the Company, Executive shall
report to the Board of Directors of the Company (the "Board") and shall
have the customary powers, responsibilities and authorities of chief
executive officers of corporations of the size, type and nature of the
Company, as it exists from time to time, as are assigned by the Board.
1.2 Subject to the terms and conditions of this Agreement,
Executive hereby accepts employment as the Chairman of the Board and Chief
Executive officer of the Company commencing
<PAGE>
as soon as possible after the date hereof but in no event later than
September 1, 1995, and agrees to devote his full working time and efforts
(except for permitted vacation periods and reasonable periods of illness
and other incapacity), to the best of his ability, experience and talent,
to the performance of services, duties and responsibilities in connection
therewith. Executive shall perform such duties and exercise such powers,
commensurate with his position, as the Chairman of the Board and Chief
Executive officer of the Company as the Board shall from time to time
delegate to him on such terms and conditions and subject to such
restrictions as such Board may reasonably from time to time impose. The
Company hereby agrees to take all reasonable and necessary corporate action
to ensure that Executive is elected to the Board of Directors.
1.3 Nothing in this Agreement shall preclude Executive from
engaging, so long as, in the reasonable determination of such Board, such
activities do not interfere with his duties and responsibilities hereunder,
in charitable and community affairs, from managing any passive investment
made by him in publicly traded equity securities or other property
(provided that no such investment may exceed 1% of the equity of any
entity, without the prior approval of such Board of Directors) or from
serving, subject to the prior approval of such Board of Directors, as a
member of boards of directors or as a trustee of any other corporation,
association or entity. For purposes of the preceding sentence, any
approval of the Board required therein shall not be unreasonably withheld.
<PAGE>
2. Term of Employment. Executive's term of employment under
------------------
this Agreement shall commence as soon as possible after August 21, 1995 but
in any event no later than September 1, 1995 and, subject to the terms
hereof, shall terminate (the "Termination Date") on the earlier of
(i) August 31, 1998 or (ii) termination of Executive's employment pursuant
to this Agreement; provided, however, that any termination of employment by
-------- -------
Executive (other than for death, Permanent Disability or Good Reason) may
only be made upon 90 days prior written notice to the Company and any
termination of employment by Executive for Good Reason may only be made
upon 30 days prior written notice to the Company.
3. Compensation.
------------
3.1 Salary. The Company shall pay Executive a base
------
salary ("Base Salary") at the rate of $400,000 per annum for the period
commencing on the beginning of Executive's term of employment hereunder and
ending on the Termination Date. Base Salary shall be payable in accordance
with the ordinary payroll practices of the Company. Any increase in Base
salary shall be in the discretion of the Board and, as so increased, shall
constitute "Base Salary" hereunder.
3.2 Annual Bonus. In addition to his Base Salary, Executive
------------
shall be paid an annual bonus (the "Bonus") during the term of his
employment hereunder with a target amount equal to not less than 50% of
Base Salary (the "Target Bonus") and a maximum amount equal to 100% of Base
salary based on performance criteria attached hereto as Exhibit 1.
- 3 -
<PAGE>
3.3 Supplemental Payment. Upon the execution of this Agreement
--------------------
by the Company and Executive, the Company, or an affiliate of the Company
on behalf of the Company, shall pay $300,000 to Executive by check or any
other method of payment acceptable to Executive and the Company.
3.4 Compensation Plans and Programs. Executive shall be
-------------------------------
eligible to participate in any compensation plan or program maintained by
the Company in which other senior executives of the Company participate on
terms comparable to those applicable to such other senior executives.
3.5 Relocation and Payment of Relocation Expenses. Executive
---------------------------------------------
agrees that he and his family shall relocate to the Birmingham, Alabama
area no later than August 31, 1996. To assist the Executive with his
relocation to the Birmingham, Alabama area, the Company agrees to provide
Executive with the benefits and reimbursements set forth on Schedule A
hereto to the extent actually incurred by Executive in connection with his
relocation from the greater Chicago metropolitan area to the Birmingham,
Alabama area.
4. Employee Benefits.
-----------------
4.1 Employee Benefit Programs, Plans and Practices. The Company
----------------------------------------------
shall provide Executive during the term of his employment hereunder with
coverage under all employee pension and welfare benefit programs, plans and
practices (commensurate with his positions in the Company and to the extent
permitted under any employee benefit plan) in accordance with the terms
thereof, which the Company makes available to its senior executives.
- 4 -
<PAGE>
4.2 Vacation and Fringe Benefits. While employed hereunder,
----------------------------
Executive shall be entitled to no less than twenty-five (25) business days
paid vacation in each calendar year, which shall be taken at such times as
are consistent with Executive's responsibilities hereunder. In addition,
while employed hereunder, Executive shall be entitled to the perquisites
and other fringe benefits made available to senior executives of the
company, commensurate with his position with the Company.
5. Expenses. Executive is authorized to incur reasonable
--------
expenses in carrying out his duties and responsibilities under this
Agreement, including, without limitation, expenses for travel (including
reasonable travel expenses for Executive's spouse for relevant industry
meetings) and similar items related to such duties and responsibilities.
The Company will reimburse Executive for all such expenses upon
presentation by Executive from time to time of appropriately itemized and
approved (consistent with the Company's policy) accounts of such
expenditures.
6. Termination of Employment.
-------------------------
6.1 Termination Not for Cause or for Good Reason. (a) The
--------------------------------------------
Company may terminate Executive's employment at any time for any reason.
If Executive's employment is terminated by the Company other than for Cause
(as defined in section 6.4 hereof) or as a result of Executive's death or
Permanent Disability (as defined in section 6.2 hereof) or if Executive
terminates his employment for Good Reason (as defined in Section 6.1 (c)
hereof)
- 5 -
<PAGE>
prior to the August 31, 1998, Executive shall receive such payments, if
any, under applicable plans or programs, including but not limited to those
referred to in Section 3.4 and 4.1 hereof, to which he is entitled pursuant
to the terms of such plans or programs. In addition, Executive shall be
entitled to receive an amount (the "Termination Amount") in lieu of any
Bonus in respect of all or any portion of the fiscal year in which such
termination occurs and any other cash compensation (other than the Vacation
Payment and the Compensation Payment, as defined below), which Termination
Amount shall be payable in eighteen monthly installments at the beginning
of each month following such termination of employment. The Termination
Amount shall consist of the greater of (i) an amount equal to the
Executive's Base Salary for eighteen months at its then current monthly
rate plus 1.5 times the amount of Executive's Target Bonus for the year in
which his termination occurs or (ii) the amount of Base Salary plus Target
Bonus which Executive would have received for the remaining term of this
Agreement. In addition, Executive shall be entitled to receive a cash lump
sum payment in respect of accrued but unused vacation days (the "Vacation
Payment") and to compensation earned but not yet paid (including any
deferred Bonus payments ) (the "Compensation Payment"), and to continued
coverage for 18 months under any employee medical, disability and life
insurance plans in accordance with the respective terms thereof.
(b) The Vacation Payment and the Compensation Payment shall be
paid by the Company to Executive within 30 days after
- 6 -
<PAGE>
the termination of Executive's employment by check payable to the order of
Executive or by wire transfer to an account specified by Executive.
(c) For purposes of this Agreement, "Good Reason" shall mean any
of the following (which occur without Executive's express prior written
consent):
(i) any material breach by the Company of any provision of
this Agreement, including any material reduction by the Company
of Executive's duties, authority, support or responsibilities
(except in connection with the termination of Executive's
employment for Cause, as a result of Permanent Disability, as a
result of Executive's death or by Executive other than for Good
Reason);
(ii) the Board requiring that Executive perform his duties
and responsibilities for the Company at a location other than
Birmingham, Alabama area; or
(iii) a reduction by the Company in Executive's employee
benefits or Base Salary, other than a reduction in Base Salary
which is part of a general cost reduction affecting at least
ninety percent (90%) of the officers of the Company which does
not exceed twenty percent (20%) of Executive's Base Salary.
6.2 Permanent Disability. If the Executive becomes disabled to
--------------------
an extent which entitles him to long-term benefits under the Company's
long-term disability benefit plan applicable to senior executive officers
as in effect on the date hereof ("Permanent Disability"), the Company or
Executive may terminate Executive's employment on written notice thereof,
and Executive shall receive or commence receiving, as soon as practicable:
(i) amounts payable pursuant to the terms of a disability
insurance policy or similar arrangement which the Company
maintains during the term hereof;
(ii) the Target Bonus in respect of the fiscal year in which
his termination occurs, prorated by a fraction, the numerator of
which is the number of days
- 7 -
<PAGE>
of the fiscal year until termination and the denominator of which is
365;
(iii) the Vacation Payment and the Compensation Payment;and
(iv) such payments under applicable plans or programs,
including but not limited to those referred to in Section 3.4 and
4.1 hereof, to which he is entitled pursuant to the terms of such
plans or programs.
6.3 Death. In the event of Executive's death during the term of
-----
his employment hereunder, Executive's estate or designated beneficiaries
shall receive or commence receiving, as soon as practicable:
(i) the Target Bonus in respect of the fiscal year in which
his death occurs, prorated by a fraction, the numerator of which
is the number of days of the fiscal year until hisdeath and the
denominator of which is 365;
(ii) any death benefits provided under the employee benefit
programs, plans and practices referred to in Section 4.1 hereof,
in accordance with their terms;
(iii) the Vacation Payment and the Compensation Payment; and
(iv) such payments under applicable plans or programs,
including but not limited to those referred to in Section 3.4 and
4.1 hereof, to which Executive's estate or designated
beneficiaries are entitled pursuant to the terms of such plans or
programs.
6.4 Voluntary Termination by Executive; Discharge for Cause.
-------------------------------------------------------
(a) The Company shall have the right to terminate the employment of
Executive for Cause. In the event that Executive's employment is
terminated by the Company for Cause or by Executive other than for Good
Reason or other than as a result of the Executive's Permanent Disability or
death, prior to August 31, 1998, Executive shall only be entitled to
receive the
- 8 -
<PAGE>
Compensation Payment and the Vacation Payment. Executive shall not be
entitled, among other things, to the payment of any Bonus in respect of all
or any portion of the fiscal year in which such termination occurs. After
the termination of Executive's employment under this Section 6.4. the
obligations of the Company under this Agreement to make any further
payments, or provide any benefits specified herein, to Executive shall
thereupon cease and terminate.
(b) As used herein, the term "Cause" shall be limited to
(i) willful malfeasance or willful misconduct by Executive in connection
with his employment, (ii) willful, substantial and continuing refusal by
Executive to perform his duties hereunder or any lawful direction of the
Board of Directors of the Company as required under Section 1.3, which
continues beyond ten days after a written demand for substantial
performance is delivered to Executive by the Company, (iii) any breach of
the provisions of Section 13 of this Agreement by Executive or any other
material breach of this Agreement by Executive which continues beyond ten
days after a written demand for substantial performance is delivered to
Executive by the Company or (iv) the indictment of Executive of (a) any
felony or (b) a misdemeanor involving moral turpitude; provided, however,
-------- -------
that in the event Executive is subsequently found not guilty or the charges
against Executive are dismissed, any amounts that would have been due
Executive hereunder if he had been terminated without Cause shall be paid
to Executive on the same basis as if a Termination without Cause has
occurred on the date he was actually
- 9 -
<PAGE>
terminated. Termination of Executive pursuant to this Section 6.4 shall be
made by delivery to Executive of a copy of a resolution duly adopted by the
affirmative vote of not less than a majority of the Directors at a meeting
of the Board of Directors of the Company called and held for the purpose
(after 30 days prior written notice to Executive and reasonable opportunity
for Executive to be heard before the Board prior to such vote), finding
that in the reasonable judgment of such Board, Executive was guilty of
conduct set forth in any of clauses (i) through (iv) above and specifying
the particulars thereof.
6.5 Expiration of Agreement. In the event of Executive's
-----------------------
termination of employment by the Company without Cause following the
expiration of the term of this Agreement Executive shall receive an amount
equal to 1.5 times the sum of (i) the Executive's Base Salary at its then
current annual rate and (ii) the amount of Executive's Target Bonus for the
year in which his termination occurs, payable in 18 monthly installments at
the beginning of each month following such termination of employment. In
addition, Executive shall be entitled receive a lump sum payment equal to
the sum of (i) the Vacation Payment and (ii) the Compensation Payment as
soon as practicable following such termination.
7. Stock Arrangements. As soon as practicable after the
------------------
execution of this agreement, Executive and the Company shall enter into the
Common Stock Subscription Agreement (the "Subscription Agreement") on terms
and conditions mutually
- 10 -
<PAGE>
acceptable to the parties and Executive shall purchase $1 million of
Company common stock (the "Purchase Stock"). In order to enable Executive
to make such purchase, the Company shall lend to Executive an amount (the
"Loan") equal to the excess of $1 million over the net after tax proceeds
of the sale of the American Stores Company stock owned by Executive. The
Loan shall accrue interest at the applicable federal rate as in existence
at the time the loan is made and principal and interest shall be due upon
any sale, transfer or other disposition of the Purchase Stock whether
pursuant to the Subscription Agreement or otherwise.
8. Mitigation of Damages. Executive shall not be required to
---------------------
mitigate damages or the amount of any payment provided for under this
Agreement by seeking other employment or otherwise after the termination of
his employment hereunder.
9. Notices. All notices or communications hereunder shall be
-------
in writing, addressed as follows:
To the Company:
c/o Kohlberg Kravis
Roberts & Co.
9 West 57th Street
New York, New York 10019
with a copy to:
Alvin H. Brown, Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
To Executive:
Mr. William J. Bolton
732 Brighton Lane
La Grange, IL 60525
- 11 -
<PAGE>
with a copy to:
Howard G. Krane, Esq.
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Any such notice or communication shall be delivered by hand or by courier
or sent certified or registered mail, return receipt requested, postage
prepaid, addressed as above (or to such other address as such party may
designate in a notice duly delivered as described above), and the third
business day after the actual date of mailing shall constitute the time at
which notice was given.
10. Separability; Legal Fees. If any provision of this
------------------------
Agreement shall be declared to be invalid or unenforceable, in whole or in
part, such invalidity or unenforceability shall not affect the remaining
provisions hereof which shall remain in full force and effect. Except to
the extent expressly provided otherwise in the next sentence, each party
shall bear the costs of any legal fees and other fees and expenses which
may be incurred in respect of enforcing its respective rights under this
Agreement. The Company shall pay the reasonable fees and disbursements
(not in excess of $35,000) of Executive's legal counsel in connection with
the negotiation and execution of this Agreement and the other documents
contemplated hereby; provided, however, that no such payment shall be made
-------- -------
without reasonable substantiation of the amounts. In addition, the Company
shall pay any costs and fees associated with any legal action brought
against Executive by American Stores Company for breach of the
- 12 -
<PAGE>
non-competition clause contained in the employment agreement between
Executive and American Stores Company as in effect immediately prior to
Executive's commencement of employment hereunder.
11. Assignment. This contract shall be binding upon and inure
----------
to the benefit of the heirs and representatives of Executive and the
assigns and successors of the Company, but neither this Agreement nor any
rights or obligations hereunder shall be assignable or otherwise subject to
hypothecation by Executive (except by will or by operation of the laws of
intestate succession) or by the Company, except that the Company may assign
this Agreement to any successor (whether by merger, purchase or otherwise)
to all or substantially all of the stock, assets or businesses of the
Company, if such successor expressly agrees to assume the obligations of
the Company hereunder.
12. Amendment. This Agreement may only be amended by written
---------
agreement of the parties hereto.
13. Nondisclosure of Confidential Information; Non-competition.
----------------------------------------------------------
(a) Executive shall not, without the prior written consent of the Company,
use, divulge, disclose or make accessible to any other person, firm,
partnership, corporation or other entity any Confidential Information
pertaining to the business of the Company or any of its affiliates, except
(i) while employed by the Company, in the business of and for the benefit
of the company, or (ii) when required to do so by a court of competent
jurisdiction, by any governmental agency having supervisory authority over
the business of the Company, or by any
- 13 -
<PAGE>
administrative body or legislative body (including a committee thereof)
with jurisdiction to order Executive to divulge, disclose or make
accessible such information. For purposes of this Section 13(a),
"Confidential Information" shall mean non-public information concerning the
financial data, strategic business plans, product development (or other
proprietary product data), customer lists, marketing plans and other non-
public, proprietary and confidential information of the Company, its
subsidiaries, Kohlberg Kravis Roberts & Co. or any affiliate of Kohlberg
Kravis & Roberts & Co. principally engaged in the retail grocery business
(the "Restricted Group") or customers, that, in any case, is not otherwise
available to the public (other than by Executive's breach of the terms
hereof).
(b) During the period of his employment hereunder and for 18
months thereafter Executive agrees that, without the prior written consent
of the Company, (A) he will not, directly or indirectly, either as
principal, manager, agent, consultant, officer, stockholder, partner,
investor, lender or employee or in any other capacity, carry on, be engaged
in or have any financial interest in, any business in Competition (as
defined in Section 13(c)) with the business of the Restricted Group and
(B) he shall not, on his own behalf or on behalf of any person, firm or
company, directly or indirectly, solicit or offer employment to any person
who has been employed by the Restricted Group at any time during the 12
months immediately preceding such solicitation.
- 14 -
<PAGE>
(c) For purposes of this section 13, a business shall be deemed
to be in "Competition" with the Restricted Group if it is principally
engaged in the retail grocery business within the same geographic area in
which the Restricted Group conducts such business. Nothing in this Section
13 shall be construed so as to preclude Executive from investing in any
publicly or privately held company, provided Executive's beneficial
ownership of any class of such company's securities does not exceed 1% of
the outstanding securities of such class.
(d) Executive and the Company agree that this covenant not to
compete is a reasonable covenant under the circumstances, and further agree
that if in the opinion of any court of competent jurisdiction such
restraint is not reasonable in any respect, such court shall have the
right, power and authority to excise or modify such provision or provisions
of this covenant as to the court shall appear not reasonable and to enforce
the remainder of the covenant as so amended. Executive agrees that any
breach of the covenants contained in this section 13 would irreparably
injure the Company. Accordingly, Executive agrees that the Company may, in
addition to pursuing any other remedies it may have in law or in equity,
obtain an injunction against Executive from any court having jurisdiction
over the matter restraining any further violation of this Agreement by
Executive and cease making any payments otherwise required by this
Agreement; provided, however, that in the event a court of competent
-------- -------
jurisdiction, which recognizes the validity of the provisions of this
section 13, finds the Executive not to be in
- 15 -
<PAGE>
violation of the provisions of this section 13, then the Company shall pay
to Executive, in a lump sum, all amounts that would have been payable to
Executive hereunder through the date of such determination and continue
making any other payments due with respect to periods of time subsequent to
such determination in accordance with the provisions of this Agreement.
14. Beneficiaries; References. Executive shall be entitled to
-------------------------
select (and change, to the extent permitted under any applicable law) a
beneficiary or beneficiaries to receive any compensation or benefit payable
hereunder following Executive's death, and may change such election, in
either case by giving the Company written notice thereof. In the event of
Executive's death or a judicial determination of his incompetence,
reference in this Agreement to Executive shall be deemed, where
appropriate, to refer to his beneficiary, estate or other legal
representative. Any reference to the masculine gender in this Agreement
shall include, where appropriate, the feminine.
15. Survivorship. The respective rights and obligations of the
------------
parties hereunder shall survive any termination of this Agreement to the
extent necessary to the intended preservation of such rights and
obligations. The provisions of this section 15 are in addition to the
survivorship provisions of any other section of this Agreement.
16. Governing Law. This Agreement shall be construed,
-------------
interpreted and governed in accordance with the laws of the state of
Alabama, without reference to rules relating to conflicts of law.
- 16 -
<PAGE>
17. Effect on Prior Agreements. This Agreement contains the
--------------------------
entire understanding between the parties hereto and supersedes in all
respects any prior or other agreement or understanding between the Company
or any affiliate of the company and Executive other than the Common Stock
Subscription Agreement referred to in Section 7 hereof.
18. Withholding. The Company shall be entitled to withhold from
-----------
payment any amount of withholding required by law.
19. Survival. Notwithstanding the expiration of the term of
--------
this Agreement, the provisions of section 6.5 and Section 13 hereunder
shall remain in effect as long as is necessary to give effect thereto.
20. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which will be deemed an original.
BRUNO'S INC.
By /s/ Paul E. Raether
--------------------------
Name: Paul E. Raether
Title:
/s/ William J. Bolton
-----------------------------
William J. Bolton
- 17 -
[ARTHUR ANDERSEN LETTERHEAD]
Exhibit 16
----------
September 29, 1995
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Dear Sirs:
We have read Item 9 of Bruno's, Inc.'s Form 10-K dated September 29, 1995
and are in agreement with the statements contained in the first two
paragraphs of Item 9.
Yours very truly,
Arthur Andersen LLP
Exhibit 22
----------
LIST OF BRUNO'S, INC. SUBSIDIARIES
A.F. Stores, Inc.
BR Air, Inc.
Food Max of Georgia, Inc.
Food Max of Mississippi, Inc.
Food Max of Tennessee, Inc.
Georgia Sales Company
Bruno's Food Stores, Inc.
PWS Holding Corporation
SSS Enterprises, Inc.
Exhibit 23
----------
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our report dated August 18, 1995, included in this form 10-K, into
the Company's previously filed Registration Statements File Nos. 2-81642
and 33-60161.
Arthur Andersen LLP
Birmingham, Alabama
September 27, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the financial
statements of Bruno's Inc. for the year ended July 1, 1995, and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-01-1995
<PERIOD-START> JUL-03-1994
<PERIOD-END> JUL-01-1995
<CASH> 25,916
<SECURITIES> 0
<RECEIVABLES> 30,125
<ALLOWANCES> 0
<INVENTORY> 249,766
<CURRENT-ASSETS> 324,599
<PP&E> 791,352
<DEPRECIATION> 274,978
<TOTAL-ASSETS> 895,641
<CURRENT-LIABILITIES> 183,179
<BONDS> 200,642
<COMMON> 781
0
0
<OTHER-SE> 429,033
<TOTAL-LIABILITY-AND-EQUITY> 895,641
<SALES> 2,869,569
<TOTAL-REVENUES> 2,869,569
<CGS> 2,196,556
<TOTAL-COSTS> 2,196,556
<OTHER-EXPENSES> 74,815
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,784
<INCOME-PRETAX> 53,262
<INCOME-TAX> 19,920
<INCOME-CONTINUING> 33,342
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33,342
<EPS-PRIMARY> 0.43
<EPS-DILUTED> 0.43
</TABLE>
