SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Earliest Event Reported: April 20, 1995
BRUNO'S, INC.
(Exact Name of Registrant as Specified in its Charter)
Alabama
(State or Other Jurisdiction of Incorporation)
0-6544 63-0411801
(Commission File Number) (I.R.S. Employer Identification No.)
800 Lakeshore Parkway
Birmingham, Alabama 35211
(Address of Principal Executive Offices/Zip Code)
(205) 940-9400
(Registrant's Telephone Number)
<PAGE>
Item 2. Acquisition of Assets.
On April 20, 1995, Bruno's, Inc. ("Bruno's") entered into an
Agreement and Plan of Merger (the "Agreement") with Crimson
Acquisition Corp. ("Crimson") providing for the merger of Bruno's
and Crimson.
The Agreement provides for Bruno's shareholders to elect to
receive either $12.50 in cash or to retain Bruno's common stock,
valued at $12.50 per share. This election is subject to
proration so that on consummation of the merger approximately 97%
of the outstanding Bruno's shares will be exchanged for cash and
approximately 3% will retained by existing shareholders.
Following the merger, the shareholders of Crimson will own
approximately 90% of Bruno's shares and Bruno's pre-merger
shareholders will own approximately 10% of Bruno's shares.
The Agreement provides that Crimson would be paid $30
Million plus out-of-pocket expenses in the event that a competing
transaction is consummated. The Agreement must be submitted to
the shareholders of Bruno's for approval at a special meeting of
shareholders to be called and is subject to the expiration of
antitrust regulatory waiting periods.
Bruno's and Crimson also entered into a Stock Option
Agreement on April 20, 1995, pursuant to which Bruno's granted
Crimson an option to purchase up to 19.9% of the outstanding
Common Stock of Bruno's for $12.50 per share.
Item 7. Financial Statements and Exhibits.
Exhibits.
10.1 Agreement and Plan of Merger dated as of
April 20, 1995, between Crimson Acquisition Corp., an
Alabama corporation, and Crimson, Inc., an Alabama
corporation.
10.2 Stock Option Agreement dated as of April 20,
1995, by and between Crimson Acquisition Corp., an
Alabama corporation, and Crimson, Inc., an Alabama
corporation.
2
<PAGE>
Signature
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
Date: April 27, 1995
BRUNO'S, INC.
By: /s/ Ronald G. Bruno
Ronald G. Bruno, Chief
Executive Officer and
Chairman of the Board
3
AGREEMENT AND PLAN OF MERGER
Dated as of April 20, 1995,
Between
CRIMSON ACQUISITION CORP.
And
BRUNO'S, INC.
TABLE OF CONTENTS Page
ARTICLE I
The Merger . . . . . . . . . . . 3
SECTION 1.01. The Merger . . . . . . . . . . . . . . . . . 3
SECTION 1.02. Closing . . . . . . . . . . . . . . . . . . 3
SECTION 1.03. Effective Time of the Merger . . . . . . . . 3
SECTION 1.04. Effects of the Merger . . . . . . . . . . . 4
SECTION 1.05. Articles of Incorporation; By-Laws;
Purposes . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 1.06. Directors . . . . . . . . . . . . . . . . . 4
SECTION 1.07. Officers . . . . . . . . . . . . . . . . . . 5
ARTICLE II
Effect of the Merger on the Capital Stock of the
Constituent Corporations . . . . . . . 5
SECTION 2.01. Effect on Capital Stock . . . . . . . . . . 5
SECTION 2.02. Company Common Stock Elections . . . . . . . 8
SECTION 2.03. Proration . . . . . . . . . . . . . . . . . 11
SECTION 2.04. Stock Plans . . . . . . . . . . . . . . . . 13
SECTION 2.05. Exchange of Certificates . . . . . . . . . . 15
ARTICLE III
Representations and Warranties . . . . . . 20
SECTION 3.01. Representations and Warranties of the
Company . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 3.02. Representations and Warranties of Newco . . 57
SECTION 3.03. Agreement to Deliver Article III Disclosure
Schedules . . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE IV
Covenants Relating to Conduct of Business Prior to Merger 61
SECTION 4.01. Conduct of Business of the Company . . . . . 61
-i-
Page
ARTICLE V
Additional Agreements . . . . . . . . 67
SECTION 5.01. Preparation of Form S-4 and Proxy
Statement; Stockholder Meeting . . . . . . . . . . . . 67
SECTION 5.02. Access to Information; Confidentiality . . . 69
SECTION 5.03. Best Efforts . . . . . . . . . . . . . . . . 71
SECTION 5.04. Benefit Matters . . . . . . . . . . . . . . 75
SECTION 5.05. Indemnification . . . . . . . . . . . . . . 77
SECTION 5.06. Public Announcements . . . . . . . . . . . . 79
SECTION 5.07. Affiliates . . . . . . . . . . . . . . . . . 80
SECTION 5.08. No Solicitation. . . . . . . . . . . . . . . 80
SECTION 5.09. Resignation of Directors . . . . . . . . . . 82
SECTION 5.10. Certain Agreements . . . . . . . . . . . . . 83
SECTION 5.11. Stop Transfer . . . . . . . . . . . . . . . 83
SECTION 5.12. Golf Tournament . . . . . . . . . . . . 83
ARTICLE VI
Conditions Precedent . . . . . . . . 84
SECTION 6.01. Conditions to Each Party's Obligation To
Effect the Merger . . . . . . . . . . . . . . . . . . 84
SECTION 6.02. Conditions to Obligations of Newco . . . . . 85
SECTION 6.03. Conditions to Obligation of the Company . . 88
ARTICLE VII
Termination, Amendment and Waiver . . . . . 89
SECTION 7.01. Termination . . . . . . . . . . . . . . . . 89
SECTION 7.02. Effect of Termination . . . . . . . . . . . 92
SECTION 7.03. Amendment . . . . . . . . . . . . . . . . . 92
SECTION 7.04. Extension; Waiver . . . . . . . . . . . . . 92
SECTION 7.05. Procedure for Termination, Amendment,
Extension or Waiver . . . . . . . . . . . . . . . . . 93
-ii-
Page
ARTICLE VIII
General Provisions . . . . . . . . . 93
SECTION 8.01. Nonsurvival of Representations and
Warranties . . . . . . . . . . . . . . . . . . . . . . 93
SECTION 8.02. Fees and Expenses . . . . . . . . . . . . . 93
SECTION 8.03. Notices . . . . . . . . . . . . . . . . . . 97
SECTION 8.04. Definitions . . . . . . . . . . . . . . . . 98
SECTION 8.05. Interpretation . . . . . . . . . . . . . . . 99
SECTION 8.06. Counterparts . . . . . . . . . . . . . . . . 99
SECTION 8.07. Entire Agreement; No Third-Party
Beneficiaries . . . . . . . . . . . . . . . . . . . . 100
SECTION 8.08. GOVERNING LAW . . . . . . . . . . . . . . . 100
SECTION 8.09. Assignment . . . . . . . . . . . . . . . . . 100
SECTION 8.10. Enforcement . . . . . . . . . . . . . . . . 100
SCHEDULES
Disclosure Schedule
EXHIBIT
Exhibit A Amendments to Articles of Incorporation of
the Company
Exhibit B Form of Affiliate Letter
-iii-
AGREEMENT AND PLAN OF MERGER dated as of April 20, 1995 between
CRIMSON ACQUISITION CORP., an Alabama corporation ("Newco"),
and BRUNO'S, INC., an Alabama corporation (the "Company").
WHEREAS, the respective Boards of Directors of the
Company and Newco have determined that the merger of Newco with
and into the Company (the "Merger"), upon the terms and subject
to the conditions set forth in this Agreement, would be fair and
in the best interests of their respective stockholders, and such
Boards of Directors have approved such Merger, pursuant to which
each share of common stock, par value $.01 per share, of the
Company ("Company Common Stock") issued and outstanding
immediately prior to the Effective Time of the Merger (as defined
in Section 1.03) will be converted into either (A) the right to
retain at the election of the holder thereof and subject to the
terms hereof, common stock, par value $.01 per share, of the
Company or (B) the right to receive cash, other than (a) shares
of Company Common Stock owned, directly or indirectly, by the
Company or any subsidiary (as defined in Section 8.04) of the
Company or by Parent, Newco or any subsidiary of Parent and (b)
Dissenting Shares (as defined in Section 2.01(e));
WHEREAS, the Merger and this Agreement require the vote
of two-thirds of the shares of the Company Common Stock for the
approval thereof (the "Company Stockholder Approval");
WHEREAS, Newco is a wholly owned subsidiary of BI
Associates L.P. ("Parent");
WHEREAS, Newco is unwilling to enter into this Agreement
unless, contemporaneously with the execution and delivery of this
Agreement, (i) the Company grants to Newco (or its designee) an
option (the "Option") to purchase up to 15,541,570 shares of
Company Common Stock (subject to adjustment) pursuant to the
-1-
Stock Option Agreement, dated as of the date hereof (the "Option
Agreement"), between Newco and the Company and (ii) certain
beneficial and record stockholders of the Company enter into
agreements (collectively, the "Stockholders Agreement") providing
for certain actions relating to the transactions contemplated by
this Agreement; and in order to induce Newco to enter into this
Agreement, the Company has (a) agreed to grant Newco (or its
designee) the Option and to enter into, execute and deliver the
Option Agreement and (b) approved the entering into by Newco and
such stockholders of the Stockholders Agreement, and such
stockholders have agreed to enter into, execute and deliver the
Stockholders Agreement;
WHEREAS, Newco and the Company desire to make certain
representations, warranties, covenants and agreements in
connection with the Merger and also to prescribe various
conditions to the Merger; and
WHEREAS, it is intended that the Merger be recorded as a
recapitalization for financial reporting purposes.
NOW, THEREFORE, in consideration of the representations,
warranties, covenants and agreements contained in this Agreement,
the parties agree as follows:
ARTICLE I
The Merger
SECTION 1.01. The Merger. Upon the terms and subject to
the conditions set forth in this Agreement, and in accordance
with the Alabama Business Corporation Act (the "ABCA"), Newco
shall be merged with and into the Company at the Effective Time
of the Merger. Upon the Effective Time of the Merger, the
separate existence of Newco shall cease, and the Company shall
-2-
continue as the surviving corporation and shall continue under
the name "Bruno's, Inc."
SECTION 1.02. Closing. Unless this Agreement shall have
been terminated and the transactions herein contemplated shall
have been abandoned pursuant to Section 7.01 and subject to the
satisfaction or waiver of the conditions set forth in Article VI,
the closing of the Merger (the "Closing") will take place at
10:00 a.m. on the second business day after satisfaction of the
conditions set forth in Section 6.01 (or as soon as practicable
thereafter following satisfaction or waiver of the conditions set
forth in Sections 6.02 and 6.03) (the "Closing Date"), at the
offices of Simpson Thacher & Bartlett, 425 Lexington Avenue,
New York, New York 10017, unless another date, time or place is
agreed to in writing by the parties hereto.
SECTION 1.03. Effective Time of the Merger. As soon as
practicable following the satisfaction or waiver of the
conditions set forth in Article VI, the parties shall file
articles of merger or other appropriate documents (in any such
case, the "Articles of Merger") executed in accordance with the
relevant provisions of the ABCA and shall make all other filings
or recordings required under the ABCA. The Merger shall become
effective at such time as the Articles of Merger are duly filed
with the Secretary of State of the State of Alabama, or at such
other time as is permissible in accordance with the ABCA and as
Newco and the Company shall agree should be specified in the
Articles of Merger (the time the Merger becomes effective being
the "Effective Time of the Merger").
-3-
SECTION 1.04. Effects of the Merger. The Merger shall
have the effects set forth in Section 10-2B-11.06 of the ABCA (or
any successor provision).
SECTION 1.05. Articles of Incorporation; By-Laws;
Purposes. (a) The Articles of Incorporation of the Company, as
in effect immediately prior to the Effective Time of the Merger,
shall be amended so as to read in its entirety in the form set
forth as Exhibit A hereto, and, as so amended, until thereafter
further amended as provided therein and under the ABCA, it shall
be the articles of incorporation of the Company following the
Merger.
(b) The By-laws of Newco as in effect at the Effective
Time of the Merger shall be the By-laws of the Company following
the Merger until thereafter changed or amended as provided
therein or by applicable law.
SECTION 1.06. Directors. The directors of Newco at the
Effective Time of the Merger shall be the directors of the
Company following the Merger, until the earlier of their
resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
SECTION 1.07. Officers. The officers of Newco at the
Effective Time of the Merger shall be the officers of the Company
following the Merger, until the earlier of their resignation or
removal or until their respective successors are duly elected and
qualified, as the case may be.
-4-
ARTICLE II
Effect of the Merger on the Capital Stock of the
Constituent Corporations
SECTION 2.01. Effect on Capital Stock. As of the
Effective Time of the Merger, by virtue of the Merger and without
any action on the part of the holder of any shares of Company
Common Stock or any shares of capital stock of Newco:
(a) Common Stock of Newco. Each share of common stock
of Newco issued and outstanding immediately prior to the
Effective Time of the Merger shall be converted into a number
of shares of the common stock, par value $.01 per share, of
the Company following the Merger equal to the quotient of (i)
21,600,000 divided by (ii) the number of shares of common
stock of Newco outstanding immediately prior to the Effective
Time of the Merger.
(b) Cancellation of Treasury Stock and Parent-Owned
Company Common Stock. Each share of Company Common Stock that
is owned by the Company or by any subsidiary of the Company,
and each share of Company Common Stock that is owned by
Parent, Newco or any subsidiary of Parent shall automatically
be cancelled and retired and shall cease to exist, and no
cash, Company Common Stock or other consideration shall be
delivered or deliverable in exchange therefor.
(c) Conversion (or Retention) of Company Common Stock.
Except as otherwise provided herein and subject to Section
2.03, each issued and outstanding share of Company Common
Stock shall be converted into the following (the "Merger
Consideration"):
(i) for each such share of Company Common Stock
with respect to which an election to retain Company
-5-
Common Stock has been effectively made and not revoked or
lost, pursuant to Sections 2.02(c), (d) and (e)
("Electing Shares"), the right to retain one fully paid
and nonassessable share of Company Common Stock (a
"Non-Cash Election Share"); and
(ii) for each such share of Company Common Stock
(other than Electing Shares), the right to receive in
cash from the Company following the Merger an amount
equal to $12.50 (the "Cash Election Price").
(d) Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, shares of Company Common Stock
issued and outstanding immediately prior to the Effective Time
of the Merger held by a holder (if any) who has the right to
demand payment for and an appraisal of such shares in
accordance with Article 13 of the ABCA (or any successor
provision) ("Dissenting Shares") shall not be converted into a
right to receive Merger Consideration or any cash in lieu of
fractional shares of Common Stock unless such holder fails to
perfect or otherwise loses such holder's right to such payment
or appraisal, if any. If, after the Effective Time of the
Merger, such holder fails to perfect or loses any such right
to appraisal, each such share of such holder shall be treated
as a share (other than an Electing Share) that had been
converted as of the Effective Time of the Merger into the
right to receive Merger Consideration in accordance with this
Section 2.01. The Company shall give prompt notice to Newco
of any demands received by the Company for appraisal of shares
of Company Common Stock, and Newco shall have the right to
participate in and direct all negotiations and proceedings
-6-
with respect to such demands. The Company shall not, except
with the prior written consent of Newco, make any payment with
respect to, or settle or offer to settle, any such demands.
(e) Cancellation and Retirement of Company Common Stock.
As of the Effective Time of the Merger, all shares of Company
Common Stock (other than shares referred to in Section 2.01(b)
and 2.01(c)(i)) issued and outstanding immediately prior to
the Effective Time of the Merger, shall no longer be
outstanding and shall automatically be cancelled and retired
and shall cease to exist, and each holder of a certificate
representing any such shares of Company Common Stock shall, to
the extent such certificate represents such shares, cease to
have any rights with respect thereto, except the right to
receive cash, including cash in lieu of fractional shares of
Company Common Stock to be issued or paid in consideration
therefor upon surrender of such certificate in accordance with
Section 2.05.
SECTION 2.02. Company Common Stock Elections. (a) Each
person who, on or prior to the Election Date referred to in (c)
below, is a record holder of shares of Company Common Stock will
be entitled, with respect to all or any portion of his shares, to
make an unconditional election (a "Non-Cash Election") on or
prior to such Election Date to retain Non-Cash Election Shares,
on the basis hereinafter set forth.
(b) Prior to the mailing of the Proxy Statement (as
defined in Section 3.01(d)), Newco shall appoint a bank or trust
company to act as exchange agent (the "Exchange Agent") for the
payment of the Merger Consideration.
-7-
(c) Newco shall prepare and mail a form of election,
which form shall be subject to the reasonable approval of the
Company (the "Form of Election"), with the Proxy Statement to the
record holders of Company Common Stock as of the record date for
the Stockholders Meeting (as defined in Section 5.01(c)), which
Form of Election shall be used by each record holder of shares of
Company Common Stock who wishes to elect to retain Non-Cash
Election Shares for any or all shares of Company Common Stock
held, subject to the provisions of Section 2.03 hereof, by such
holder. The Company will use its best efforts to make the Form
of Election and the Proxy Statement available to all persons who
become holders of Company Common Stock during the period between
such record date and the Election Date referred to below. Any
such holder's election to retain Non-Cash Election Shares shall
have been properly made only if the Exchange Agent shall have
received at its designated office, by 5:00 p.m., New York City
time on the business day (the "Election Date") next preceding the
date of the Stockholders Meeting, a Form of Election properly
completed and signed and accompanied by certificates for the
shares of Company Common Stock to which such Form of Election
relates, duly endorsed in blank or otherwise in form acceptable
for transfer on the books of the Company (or by an appropriate
guarantee of delivery of such certificates as set forth in such
Form of Election from a firm which is a member of a registered
national securities exchange or of the National Association of
Securities Dealers, Inc. or a commercial bank or trust company
having an office or correspondent in the United States, provided
such certificates are in fact delivered to the Exchange Agent
-8-
within five NASDAQ trading days after the date of execution of
such guarantee of delivery).
(d) Any Form of Election may be revoked by the
stockholder submitting it to the Exchange Agent only by written
notice received by the Exchange Agent (i) prior to 5:00 p.m,
New York City time on the Election Date or (ii) after the date of
the Proxy Statement, if (and to the extent that) the Exchange
Agent is legally required to permit revocations and the Effective
Time of the Merger shall not have occurred prior to such date.
In addition, all Forms of Election shall automatically be revoked
if the Exchange Agent is notified in writing by Newco and the
Company that the Merger has been abandoned. If a Form of
Election is revoked, the certificate or certificates (or
guarantees of delivery, as appropriate) for the shares of Company
Common Stock to which such Form of Election relates shall be
promptly returned to the stockholder submitting the same to the
Exchange Agent.
(e) The determination of the Exchange Agent shall be
binding whether or not elections to retain Non-Cash Election
Shares have been properly made or revoked pursuant to this
Section 2.02 with respect to shares of Company Common Stock and
when elections and revocations were received by it. If the
Exchange Agent determines that any election to retain Non-Cash
Election Shares was not properly made with respect to shares of
Company Common Stock, such shares shall be treated by the
Exchange Agent as shares which were not Electing Shares at the
Effective Time of the Merger, and such shares shall be exchanged
in the Merger for cash pursuant to Section 2.01(c)(ii). The
Exchange Agent shall also make all computations as to the
-9-
allocation and the proration contemplated by Section 2.03, and
any such computation shall be conclusive and binding on the
holders of shares of Company Common Stock. The Exchange Agent
may, with the mutual agreement of Newco and the Company, make
such rules as are consistent with this Section 2.02 for the
implementation of the elections provided for herein as shall be
necessary or desirable fully to effect such elections.
SECTION 2.03. Proration.
(a) Notwithstanding anything in this Agreement to the
contrary, the aggregate number of shares of Company Common Stock
to be converted into the right to retain Company Common Stock at
the Effective Time of the Merger (the "Non-Cash Election Number")
shall be equal to (i) 2,413,000 (excluding for this purpose any
shares of Company Common Stock to be cancelled pursuant to
Section 2.01(b)) plus (ii) a number of shares equal to the number
of record holders of Company Common Stock immediately prior to
the Effective Time of the Merger.
(b) If the number of Electing Shares exceeds the
Non-Cash Election Number, then each Electing Share shall be
converted into the right to retain Non-Cash Election Shares or
receive cash in accordance with the terms of Section 2.01(c) in
the following manner:
(i) A proration factor (the "Non-Cash Proration Factor")
shall be determined by dividing the Non-Cash Election Number
by the total number of Electing Shares.
(ii) The number of Electing Shares covered by each
Non-Cash Election to be converted into the right to retain
Non-Cash Election Shares shall be determined by multiplying
-10-
the Non-Cash Proration Factor by the total number of Electing
Shares covered by such Non-Cash Election.
(iii) All Electing Shares, other than those shares
converted into the right to receive Non-Cash Election Shares
in accordance with Section 2.03(b)(ii), shall be converted
into cash (on a consistent basis among shareholders who made
the election referred to in Section 2.01(c)(i), pro rata to
the number of shares as to which they made such election) as
if such shares were not Electing Shares in accordance with the
terms of Section 2.01(c)(ii).
(c) If the number of Electing Shares is less than the
Non-Cash Election Number, then:
(i) all Electing Shares shall be converted into the
right to retain Company Common Stock in accordance with the
terms of Section 2.01(c)(i);
(ii) additional shares of Company Common Stock other than
Electing Shares shall be converted into the right to retain
Non-Cash Election Shares in accordance with the terms of
2.01(c) in the following manner:
(1) a proration factor (the "Cash Proration
Factor") shall be determined by dividing (x) the
difference between the Non-Cash Election Number and the
number of Electing Shares, by (y) the total number of
shares of Company Common Stock other than Electing
Shares; and
(2) the number of shares of Company Common Stock in
addition to Electing Shares to be converted into the
right to retain Non-Cash Election Shares shall be
determined by multiplying the Cash Proration Factor by
-11-
the total number of shares other than Electing Shares;
and
(iii) subject to Section 2.01(d), shares of Company Common
Stock subject to clause (ii) of this paragraph (c) shall be
converted into the right to retain Non-Cash Election Shares in
accordance with Section 2.01(c)(i) (on a consistent basis
among shareholders who held shares of Company Common Stock as
to which they did not make the election referred to in Section
2.01(c)(i), pro rata to the number of shares as to which they
did not make such election).
SECTION 2.04. Stock Plans. (a) As soon as practicable
following the date of this Agreement, the Board of Directors of
the Company (or, if appropriate, any committee administering the
Stock Plans (as defined below)) shall adopt such resolutions or
take such other actions as may be required to effect the
following:
(i) cause written notification of the Merger to be given
to each holder of a Company Stock Option (as defined below) by
the Board of Directors as provided in the Stock Plans (as
defined below) to the effect that each such holder of a
Company Stock Option (as defined below) may exercise such
Company Stock Option no later than thirty days from the date
of such notification (the "Exercise Period"), it being
understood that (x) with respect to any person, unless
exercised within the Exercise Period (or cancelled in exchange
for a cash payment pursuant to clause (y) of paragraph (ii)
below) each Company Stock Option shall expire at the end of
the Exercise Period and (y) with respect to any person subject
to Section 16(a) of the Securities Exchange Act of 1934
-12-
("Exchange Act"), no such person shall be entitled to a cash
payment in the manner described in clause (y) of paragraph
(ii) below; and
(ii) adjust the terms of all outstanding employee or
director stock options to purchase shares of Company Common
Stock ("Company Stock Options") granted under any stock option
or stock purchase plan, program or arrangement of the Company,
including without limitation, the Employee Incentive Stock
Option Plan, the Second Amended and Restated Employee Stock
Option Plan and the Non-Employee Director Stock Option Plan
(collectively, the "Stock Plans"), to provide that, at the
Effective Time of the Merger (x) each Company Stock Option
outstanding immediately prior to the Effective Time of the
Merger shall vest as a consequence of the Merger and (y) with
respect to any person not subject to Section 16(a) of the
Securities Exchange Act of 1934 ("Exchange Act"), each Company
Stock Option having an exercise price of less than $12.50,
shall be cancelled in exchange for a payment from the Company
after the Merger (subject to any applicable withholding taxes)
equal to the product of (1) the total number of shares of
Company Common Stock subject to such Company Stock Option and
(2) the excess of $12.50 over the exercise price per share of
Company Common Stock subject to such Company Stock Option,
payable in cash immediately following the Effective Time of
the Merger;
(iii) except as provided herein or as otherwise agreed to
by the parties, the Stock Plans and any other plan, program or
arrangement providing for the issuance or grant of any other
interest in respect of the capital stock of the Company or any
-13-
subsidiary shall terminate as of the Effective Time of the
Merger, and the Company shall ensure that following the
Effective Time of the Merger no holder of a Company Stock
Option nor any participant in any Stock Plan shall have any
right thereunder to acquire equity securities of the Company
following the Merger.
(b) The Company hereby represents and warrants that upon
taking of the actions specified above, immediately following the
Effective Time of the Merger no holder of a Company Stock Option
nor any participant in any Stock Plan shall have the right
thereunder to acquire equity securities of the Company after the
Merger.
SECTION 2.05. Exchange of Certificates. (a) Exchange
Agent. As soon as reasonably practicable as of or after the
Effective Time of the Merger, the Company shall deposit with the
Exchange Agent, for the benefit of the holders of shares of
Company Common Stock, for exchange in accordance with this
Article II, the cash portion of Merger Consideration.
(b) Exchange Procedures. As soon as practicable after
the Effective Time of the Merger, each holder of an outstanding
certificate or certificates which prior thereto represented
shares of Company Common Stock shall, upon surrender to the
Exchange Agent of such certificate or certificates and acceptance
thereof by the Exchange Agent, be entitled to a certificate or
certificates representing the number of full shares of Company
Common Stock, if any, to be retained by the holder thereof
pursuant to this Agreement and the amount of cash, if any, into
which the number of shares of Company Common Stock previously
represented by such certificate or certificates surrendered shall
-14-
have been converted pursuant to this Agreement. The Exchange
Agent shall accept such certificates upon compliance with such
reasonable terms and conditions as the Exchange Agent may impose
to effect an orderly exchange thereof in accordance with normal
exchange practices. After the Effective Time of the Merger,
there shall be no further transfer on the records of the Company
or its transfer agent of certificates representing shares of
Company Common Stock which have been converted, in whole or in
part, pursuant to this Agreement into the right to receive cash,
and if such certificates are presented to the Company for
transfer, they shall be cancelled against delivery of cash and,
if appropriate, certificates for retained Company Common Stock.
If any certificate for such retained Company Common Stock is to
be issued in, or if cash is to be remitted to, a name other than
that in which the certificate for Company Common Stock
surrendered for exchange is registered, it shall be a condition
of such exchange that the certificate so surrendered shall be
properly endorsed, with signature guaranteed, or otherwise in
proper form for transfer and that the person requesting such
exchange shall pay to the Company or its transfer agent any
transfer or other taxes required by reason of the issuance of
certificates for such retained Company Common Stock in a name
other than that of the registered holder of the certificate
surrendered, or establish to the satisfaction of the Company or
its transfer agent that such tax has been paid or is not
applicable. Until surrendered as contemplated by this Section
2.05(b), each certificate for shares of Company Common Stock
shall be deemed at any time after the Effective Time of the
Merger to represent only the right to receive upon such surrender
-15-
the Merger Consideration as contemplated by Section 2.01. No
interest will be paid or will accrue on any cash payable as
Merger Consideration or in lieu of any fractional shares of
retained Company Common Stock.
(c) Distributions with Respect to Unexchanged Shares.
No dividends or other distributions with respect to retained
Company Common Stock with a record date after the Effective Time
of the Merger shall be paid to the holder of any unsurrendered
certificate for shares of Company Common Stock with respect to
the shares of retained Company Common Stock represented thereby
and no cash payment in lieu of fractional shares shall be paid to
any such holder pursuant to Section 2.05(e) until the surrender
of such certificate in accordance with this Article II. Subject
to the effect of applicable laws, following surrender of any such
certificate, there shall be paid to the holder of the certificate
representing whole shares of retained Company Common Stock issued
in connection therewith, without interest, (i) at the time of
such surrender or as promptly after the sale of the Excess Shares
(as defined in Section 2.05(e)) as practicable, the amount of any
cash payable in lieu of a fractional share of retained Company
Common Stock to which such holder is entitled pursuant to Section
2.05(e) and the proportionate amount of dividends or other
distributions with a record date after the Effective Time of the
Merger theretofore paid with respect to such whole shares of
retained Company Common Stock, and (ii) at the appropriate
payment date, the proportionate amount of dividends or other
distributions with a record date after the Effective Time of the
Merger but prior to such surrender and a payment date subsequent
-16-
to such surrender payable with respect to such whole shares of
retained Company Common Stock.
(d) No Further Ownership Rights in Company Common Stock
Exchanged For Cash. All cash paid upon the surrender for
exchange of certificates representing shares of Company Common
Stock in accordance with the terms of this Article II (including
any cash paid pursuant to Section 2.05(e)) shall be deemed to
have been issued (and paid) in full satisfaction of all rights
pertaining to the shares of Company Common Stock exchanged for
cash theretofore represented by such certificates.
(e) No Fractional Shares. (i) No certificates or scrip
representing fractional shares of retained Company Common Stock
shall be issued in connection with the Merger, and such
fractional share interests will not entitle the owner thereof to
vote or to any rights of a stockholder of the Company after the
Merger; and
(ii) Notwithstanding any other provision of this
Agreement, each holder of shares of Company Common Stock
exchanged pursuant to the Merger who would otherwise have been
entitled to receive a fraction of a share of retained Company
Common Stock (after taking into account all shares of Company
Common Stock delivered by such holder) shall receive, in lieu
thereof, a cash payment (without interest) representing such
holder's proportionate interest in the net proceeds from the sale
by the Exchange Agent (following the deduction of applicable
transaction costs), on behalf of all such holders, of the shares
(the "Excess Shares") of retained Company Common Stock
representing such fractions. Such sale shall be made as soon as
practicable after the Effective Time of the Merger.
-17-
(f) Termination of Exchange Fund. Any portion of the
Merger Consideration deposited with the Exchange Agent pursuant
to this Section 2.05 (the "Exchange Fund") which remains
undistributed to the holders of the certificates representing
shares of Company Common Stock for six months after the Effective
Time of the Merger shall be delivered to the Company, upon
demand, and any holders of shares of Company Common Stock prior
to the Merger who have not theretofore complied with this Article
II shall thereafter look only to the Company and only as general
creditors thereof for payment of their claim for cash, if any,
retained Company Common Stock, if any, any cash in lieu of
fractional shares of retained Company Common Stock and any
dividends or distributions with respect to retained Company
Common Stock to which such holders may be entitled.
(g) No Liability. None of Newco or the Company or the
Exchange Agent shall be liable to any person in respect of any
shares of retained Company Common Stock (or dividends or
distributions with respect thereto) or cash from the Exchange
Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. If any certificates
representing shares of Company Common Stock shall not have been
surrendered prior to one year after the Effective Time of the
Merger (or immediately prior to such earlier date on which any
cash, if any, any cash in lieu of fractional shares of retained
Company Common Stock or any dividends or distributions with
respect to retained Company Common Stock in respect of such
certificate would otherwise escheat to or become the property of
any Governmental Entity (as defined in Section 3.01(d))), any
such cash, dividends or distributions in respect of such
-18-
certificate shall, to the extent permitted by applicable law,
become the property of the Company, free and clear of all claims
or interest of any person previously entitled thereto.
(h) Investment of Exchange Fund. The Exchange Agent
shall invest any cash included in the Exchange Fund, as directed
by the Company, on a daily basis. Any interest and other income
resulting from such investments shall be paid to the Company.
ARTICLE III
Representations and Warranties
SECTION 3.01. Representations and Warranties of the
Company. The Company represents and warrants to Newco as
follows:
(a) Organization, Standing and Corporate Power. Each of
the Company and each of its Subsidiaries (as defined in
Section 3.01(b)) is duly organized, validly existing and in
good standing under the laws of the jurisdiction in which it
is incorporated and has the requisite corporate power and
authority to carry on its business as now being conducted.
Each of the Company and each of its Subsidiaries is duly
qualified or licensed to do business and is in good standing
in each jurisdiction in which the nature of its business or
the ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such
jurisdictions where the failure to be so qualified or licensed
(individually or in the aggregate) would not have a Material
Adverse Effect (as defined in Section 8.04) with respect to
the Company. Attached as Section 3.01(a) of the disclosure
schedule ("Disclosure Schedule") delivered to Newco by the
Company at the time of execution of this Agreement are
-19-
complete and correct copies of the Articles of Incorporation,
as amended, and By-laws, as amended, of the Company. The
Company has delivered to Newco complete and correct copies of
the articles of incorporation (or other organizational
documents) and by-laws of each of its Subsidiaries, in each
case as amended to the date of this Agreement.
(b) Subsidiaries. The only direct or indirect
subsidiaries of the Company (other than subsidiaries of the
Company that would not constitute in the aggregate a
"Significant Subsidiary" within the meaning of Rule 1-02 of
Regulation S-X of the Securities and Exchange Commission (the
"SEC")) are those listed in Section 3.01(b) of the Disclosure
Schedule (the "Subsidiaries"). All the outstanding shares of
capital stock of each such Subsidiary have been validly issued
and are fully paid and nonassessable and are owned (of record
and beneficially) by the Company, by another Subsidiary
(wholly owned) of the Company or by the Company and another
such Subsidiary (wholly owned), free and clear of all pledges,
claims, liens, charges, encumbrances and security interests of
any kind or nature whatsoever (collectively, "Liens"). Except
for the ownership interests set forth in Section 3.01(b) of
the Disclosure Schedule, the Company does not own, directly or
indirectly, any capital stock or other ownership interest in
any corporation, partnership, business association, joint
venture or other entity.
(c) Capital Structure. The authorized capital stock of
the Company consists of (i) 200,000,000 shares of Company
Common Stock, par value $.01 per share, and (ii) no shares of
preferred stock. Subject to any Permitted Changes (as defined
-20-
in Section 4.01(a)(ii)) there are: (i) 78,098,341 shares of
Company Common Stock issued and outstanding (including shares
held in the treasury of the Company); (ii) 595,000 shares of
Company Common Stock held in the treasury of the Company;
(iii) 3,689,817 shares of Company Common Stock reserved for
issuance upon exercise of authorized but unissued Company
Stock Options pursuant to the Stock Plans; (iv) 1,242,917
shares of Company Common Stock issuable upon exercise of
outstanding Company Stock Options (with an average exercise
price of $8.36); and (v) 15,541,570 shares of Company Common
Stock reserved for issuance upon exercise of the Option.
Except as set forth above, no shares of capital stock or other
equity securities of the Company are issued, reserved for
issuance or outstanding. All outstanding shares of capital
stock of the Company are, and all shares which may be issued
pursuant to the Stock Plans will be, when issued, duly
authorized, validly issued, fully paid and nonassessable and
not subject to preemptive rights. There are no outstanding
bonds, debentures, notes or other indebtedness or other
securities of the Company having the right to vote (or
convertible into, or exchangeable for, securities having the
right to vote) on any matters on which stockholders of the
Company may vote. Except as set forth above and except for
the Option, there are no outstanding securities, options,
warrants, calls, rights, commitments, agreements, arrangements
or undertakings of any kind to which the Company or any of its
subsidiaries is a party or by which any of them is bound
obligating the Company or any of its subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold,
-21-
additional shares of capital stock or other equity or voting
securities of the Company or of any of its subsidiaries or
obligating the Company or any of its subsidiaries to issue,
grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement, arrangement or
undertaking. The only outstanding indebtedness for borrowed
money of the Company and its subsidiaries is (i) $100 million
in principal amount of 6.62% Series A Senior Notes Due
September 15, 2003 (the "Series A Senior Notes") issued
pursuant to the Note Purchase Agreement, dated as of
September 1, 1993 (the "Note Purchase Agreement"), (ii) $100
million in aggregate principal amount of 7.09% of Series B
Senior Notes Due September 15, 2008 (the "Series B Senior
Notes," and together with the Series A Senior Notes, the
"Senior Notes") issued pursuant to the Note Purchase
Agreement, (iii) $19.7 million of capitalized leases as of
December 31, 1994 disclosed in Section 3.01(c) of the
Disclosure Schedule and (iv) other indebtedness not exceeding
$2 million. Other than the Senior Notes and any loans and
other extensions of credit under the Credit Agreement dated as
of August 28, 1992 among the Company, Wachovia Bank of
Georgia, N.A. and the banks parties thereto (the "Credit
Agreement"), each of which is prepayable in full in accordance
with its terms, no indebtedness for borrowed money of the
Company or its subsidiaries contains any restriction upon the
incurrence of indebtedness for borrowed money by the Company
or any of its subsidiaries or restricts the ability of the
Company or any of its subsidiaries to grant any Liens on its
properties or assets. Other than the Company Stock Options,
-22-
the Option and the Stockholders Agreement and other than as
disclosed in Section 3.01(c) of the Disclosure Schedule, (i)
there are no outstanding contractual obligations, commitments,
understandings or arrangements of the Company or any of its
subsidiaries to repurchase, redeem or otherwise acquire or
make any payment in respect of any shares of capital stock of
the Company or any of its subsidiaries and (ii) to the
knowledge of the Company, there are no irrevocable proxies
with respect to shares of capital stock of the Company or any
subsidiary of the Company except for proxies granted in favor
of Ronald G. Bruno by Ann Bruno, Alan Bruno, David Bruno and
Suzanne Bowness. Sections 1 and 2 of the Stockholders
Agreement Disclosure Schedules (as defined in the Stockholders
Agreement), which set forth the record and, to the knowledge
of the Company, beneficial ownership of, and voting power in
respect of, the capital stock of the Company with respect to
the signatories to the Stockholders Agreement, are accurate in
all material respects. Except as set forth above, there are
no agreements or arrangements pursuant to which the Company is
or could be required to register shares of Company Common
Stock or other securities under the Securities Act of 1933, as
amended (the "Securities Act") or other agreements or
arrangements with or among any securityholders of the Company
with respect to securities of the Company.
(d) Authority; Noncontravention. The Company has the
requisite corporate and other power and authority to enter
into this Agreement and the Option Agreement and, subject to
the Company Stockholder Approval with respect to the
consummation of the Merger, to consummate the transactions
-23-
contemplated hereby and thereby. The execution and delivery
of this Agreement and the Option Agreement by the Company and
the consummation by the Company of the transactions
contemplated hereby and thereby have been duly authorized by
all necessary corporate action on the part of the Company,
subject, in the case of the Merger, to the Company Stockholder
Approval. Each of this Agreement and the Option Agreement has
been duly executed and delivered by the Company and
constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms.
Except for the Senior Notes, the Credit Agreement and except
as disclosed in Section 3.01(d) of the Disclosure Schedule,
the execution and delivery of each of this Agreement and the
Option Agreement do not, and the consummation of the trans-
actions contemplated by this Agreement and the Option
Agreement and compliance with the provisions hereof and
thereof will not, conflict with, or result in any breach or
violation of, or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination,
cancellation or acceleration of or "put" right with respect to
any obligation or to loss of a material benefit under, or
result in the creation of any Lien upon any of the properties
or assets of the Company or any of its subsidiaries under, (i)
the Articles of Incorporation, as amended, or By-laws, as
amended, of the Company or the comparable charter or
organizational documents of any of its subsidiaries, (ii) any
loan or credit agreement, note, note purchase agreement, bond,
mortgage, indenture, lease or other agreement, instrument,
permit, concession, franchise or license applicable to the
-24-
Company or any of its subsidiaries or their respective
properties or assets or (iii) subject to the governmental
filings and other matters referred to in the following
sentence, any judgment, order, decree, statute, law,
ordinance, rule, regulation or arbitration award applicable to
the Company or any of its subsidiaries or their respective
properties or assets, other than, in the case of clauses (ii)
and (iii), any such conflicts, breaches, violations, defaults,
rights, losses or Liens that individually or in the aggregate
could not have a Material Adverse Effect with respect to the
Company or could not prevent, hinder or materially delay the
ability of the Company to consummate the transactions
contemplated by this Agreement or the Option Agreement. No
consent, approval, order or authorization of, or registration,
declaration or filing with, or notice to, any Federal, state
or local government or any court, administrative agency or
commission or other governmental authority or agency, domestic
or foreign (a "Governmental Entity"), is required by or with
respect to the Company or any of its subsidiaries in
connection with the execution and delivery of this Agreement
or the Option Agreement by the Company or the consummation by
the Company of the transactions contemplated hereby or
thereby, except, with respect to this Agreement, for (i) the
filing of a premerger notification and report form by the
Company under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act"), (ii) the filing with the
SEC of (x) a proxy statement relating to the Company
Stockholder Approval (such proxy statement as amended or
supplemented from time to time, the "Proxy Statement"), (y)
-25-
the registration statement on Form S-4 to be filed with the
SEC by the Company in connection with the issuance of the
Common Stock of the Company following the Merger (the "Form S-
4") and (z) such reports under the Exchange Act as may be
required in connection with this Agreement and the
transactions contemplated by this Agreement, (iii) the filing
of the Articles of Merger with the Secretary of State of the
State of Alabama and appropriate documents with the relevant
authorities of other states in which the Company is qualified
to do business and (iv) such other consents, approvals,
orders, authorizations, registrations, declarations, filings
or notices as are set forth in Section 3.01(d) of the
Disclosure Schedule.
(e) SEC Documents; Undisclosed Liabilities. The Company
has filed all required reports, schedules, forms, statements
and other documents with the SEC since June 30, 1991
(collectively, and in each case including all exhibits and
schedules thereto and documents incorporated by reference
therein, the "SEC Documents"). As of their respective dates,
the SEC Documents complied in all material respects with the
requirements of the Securities Act, or the Exchange Act, as
the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such SEC Documents, and
none of the SEC Documents (including any and all financial
statements included therein) as of such dates contained any
untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
-26-
Except to the extent revised or superseded by a subsequent
filing with the SEC (a copy of which has been provided to
Newco prior to the date of this Agreement), none of the SEC
Documents filed by the Company since June 30, 1994 and prior
to the date of this Agreement (the "Recent SEC Documents")
contains any untrue statement of a material fact or omits to
state any material fact required to be stated therein or
necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading. The consolidated financial statements of the
Company included in all SEC Documents filed since June 30,
1994 (the "SEC Financial Statements") comply as to form in all
material respects with applicable accounting requirements and
the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with generally
accepted accounting principles (except, in the case of
unaudited consolidated quarterly statements, as permitted by
Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes
thereto) and fairly present the consolidated financial
position of the Company and its consolidated subsidiaries as
of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject,
in the case of unaudited quarterly statements, to normal
year-end audit adjustments). Except as set forth in the
Recent SEC Documents and except as disclosed in Section
3.01(e) of the Disclosure Schedule, at the date of the most
recent audited financial statements of the Company included in
the Recent SEC Documents, neither the Company nor any of its
-27-
subsidiaries had, and since such date neither the Company nor
any of such subsidiaries has incurred, any liabilities or
obligations of any nature (whether accrued, absolute,
contingent or otherwise) which, individually or in the
aggregate, could reasonably be expected to have a Material
Adverse Effect with respect to the Company.
(f) Information Supplied. None of the information
supplied or to be supplied by the Company for inclusion or
incorporation by reference in (i) the Form S-4 will, at the
time the Form S-4 is filed with the SEC, and at any time it is
amended or supplemented or at the time it becomes effective
under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein
not misleading, and (ii) the Proxy Statement will, at the date
it is first mailed to the Company's stockholders or at the
time of the Stockholders Meeting, contain any untrue statement
of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under
which they are made, not misleading. The Form S-4 will, as of
its effective date, and the prospectus contained therein will,
as of its date, comply as to form in all material respects
with the requirements of the Securities Act and the rules and
regulations promulgated thereunder. The Proxy Statement will
comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations
promulgated thereunder, except that no representation is made
by the Company with respect to statements made or incorporated
-28-
by reference therein based on information supplied in writing
by Newco specifically for inclusion in the Proxy Statement.
For purposes of this Agreement, the parties agree that
statements made and information in the Form S-4 and the Proxy
Statement relating to the Federal income tax consequences of
the transactions herein contemplated to holders of Company
Common Stock shall be deemed to be supplied by the Company and
not by Newco.
(g) Absence of Certain Changes or Events. Except as
disclosed in the Recent SEC Documents, since the date of the
most recent audited financial statements included in such
Recent SEC Documents, the Company has conducted its business
only in the ordinary course consistent with past practice, and
there is not and has not been: (i) any Material Adverse Change
with respect to the Company; (ii) any condition, event or
occurrence which, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect or
give rise to a Material Adverse Change with respect to the
Company; (iii) any event which, if it had taken place
following the execution of this Agreement, would not have been
permitted by Section 4.01 without the prior consent of Newco;
or (iv) any condition, event or occurrence which could
reasonably be expected to prevent, hinder or materially delay
the ability of the Company to consummate the transactions
contemplated by this Agreement or the Option Agreement.
(h) Litigation; Labor Matters; Compliance with Laws.
(x) Except as disclosed in the Recent SEC Documents,
there is (1) no suit, action or proceeding or
investigation pending, (2) to the knowledge of the
-29-
Company, no suit, action or proceeding or investigation
threatened against or affecting the Company or any of its
subsidiaries and (3) to the knowledge of the Company, no
basis for any such suit, action, proceeding or
investigation that, individually or in the aggregate,
could reasonably be expected to have a Material Adverse
Effect with respect to the Company or prevent, hinder or
materially delay the ability of the Company to consummate
the transactions contemplated by this Agreement or the
Option Agreement, nor is there any judgment, decree,
injunction, rule or order of any Governmental Entity or
arbitrator outstanding against the Company or any of its
subsidiaries having, or which in the future could have,
any such effect.
(y) Except as disclosed in Section 3.01(h)(ii) of
the Disclosure Schedule, (1) neither the Company nor any
of its subsidiaries is a party to, or bound by, any
collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor
organization; (2) to the best knowledge of the Company,
neither the Company nor any of its subsidiaries is the
subject of any proceeding asserting that it or any
subsidiary has committed an unfair labor practice or
seeking to compel it to bargain with any labor
organization as to wages or conditions of employment; (3)
there is no strike, work stoppage or other labor dispute
involving it or any of its subsidiaries pending or, to
its knowledge, threatened; (4) no action, suit,
complaint, charge, arbitration, inquiry, proceeding or
-30-
investigation by or before any court, governmental
agency, administrative agency or commission brought by or
on behalf of any employee, prospective employee, former
employee, retiree, labor organization or other
representative of the Company's employees is pending or,
to the best knowledge of the Company, threatened against
the Company or any of its subsidiaries which could have a
Material Adverse Effect with respect to the Company; (5)
no grievance is pending or, to the best knowledge of the
Company, threatened against the Company or any of its
subsidiaries which could have a Material Adverse Effect
with respect to the Company; (6) neither the Company nor
any of its subsidiaries is a party to, or otherwise bound
by, any consent decree with, or citation by, any
government agency relating to employees or employment
practices; (7) to the best knowledge of the Company, the
Company and each subsidiary is in compliance with all
applicable laws, agreements, contracts, and policies
relating to employment, employment practices, wages,
hours, and terms and conditions of employment except for
failures so to comply, if any, that individually or in
the aggregate could not reasonably be expected to have a
Material Adverse Effect with respect to the Company; (8)
the Company has paid in full to all employees of the
Company and its subsidiaries all wages, salaries,
commissions, bonuses, benefits and other compensation due
to such employees or otherwise arising under any policy,
practice, agreement, plan, program, statute or other law;
and (9) the Company is not liable for any severance pay
-31-
or other payments to any employee or former employee
arising from the termination of employment under any
benefit or severance policy, practice, agreement, plan,
or program of the Company, nor to the best of its
knowledge will the Company have any liability which
exists or arises, or may be deemed to exist or arise,
under any applicable law or otherwise, as a result of or
in connection with the transactions contemplated
hereunder or as a result of the termination by the
Company of any persons employed by the Company or any of
its subsidiaries on or prior to the Effective Time of the
Merger.
(z) The conduct of the business of each of the
Company and each of its subsidiaries complies with all
statutes, laws, regulations, ordinances, rules,
judgments, orders, decrees or arbitration awards
applicable thereto, except for violations or failures so
to comply, if any, that, individually or in the
aggregate, could not reasonably be expected to have a
Material Adverse Effect with respect to the Company.
(i) Employee Benefit Plans. (1) Section 3.01(i) of the
Disclosure Schedule contains a true and complete list of each
"employee benefit plan" (within the meaning of section 3(3) of
the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), (including, without limitation,
multiemployer plans within the meaning of ERISA section
3(37)), stock purchase, stock option, severance, employment,
change-in-control, fringe benefit, collective bargaining,
bonus, incentive, deferred compensation and all other employee
-32-
benefit plans, agreements, programs, policies or other
arrangements relating to employment, benefits or entitlements,
whether or not subject to ERISA (including any funding
mechanism therefor now in effect or required in the future as
a result of the transaction contemplated by this Agreement or
otherwise), whether formal or informal, oral or written,
legally binding or not under which any employee or former
employee of the Company has any present or future right to
benefits or under which the Company has any present or future
liability. All such plans, agreements, programs, policies and
arrangements shall be collectively referred to as the "Company
Plans".
(2) With respect to each Company Plan, the Company will
deliver to Newco on the terms set forth in Section 3.03 hereof
a current, accurate and complete copy (or, to the extent no
such copy exists, an accurate description) thereof and, to the
extent applicable, (i) any related trust agreement, annuity
contract or other funding instrument; (ii) the most recent
determination letter; (iii) any summary plan description and
other written communications (or a description of any oral
communications) by the Company to its employees concerning the
extent of the benefits provided under a Company Plan; and
(iv) for the three most recent years (I) the Form 5500 and
attached schedules; (II) audited financial statements;
(III) actuarial valuation reports; and (IV) attorney's
response to an auditor's request for information.
(3) (i) Each Company Plan has been established and
administered in accordance with its terms, and in compliance
with the applicable provisions of ERISA, the Code and other
-33-
applicable laws, rules and regulations, in each case in all
material respects; (ii) each Company Plan which is intended to
be qualified within the meaning of Code section 401(a) is so
qualified and has received a favorable determination letter as
to its qualification and nothing has occurred, whether by
action or failure to act, which would cause the loss of such
qualification; (iii) with respect to any Company Plan, no
actions, suits or claims (other than routine claims for
benefits in the ordinary course) are pending or, to the best
knowledge of the Company, threatened, no facts or
circumstances exist which could give rise to any such actions,
suits or claims and the Company will promptly notify Buyer in
writing of any pending claims or, to the knowledge of the
Company, any threatened claims arising between the date hereof
and the Effective Time of the Merger; (iv) neither the Company
nor any other party has engaged in a prohibited transaction,
as such term is defined under Code section 4975 or ERISA
section 406, which would subject the Company or the Buyer to
any taxes, penalties or other liabilities under Code section
4975 or ERISA sections 409 or 502(i) (v) no event has occurred
and no condition exists that would subject the Company, either
directly or by reason of its affiliation with any member of
its Controlled Group (defined as any organization which is a
member of a controlled group of organizations within the
meaning of Code sections 414(b), (c), (m) or (o)), to any tax,
fine or penalty imposed by ERISA, the Code or other applicable
laws, rules and regulations including, but not limited to the
taxes imposed by Code sections 4971, 4972, 4977, 4979, 4980B,
4976(a) or the fine imposed by ERISA section 502(c); (vi) all
-34-
insurance premiums required to be paid with respect to Company
Plans as of the Effective Time of the Merger have been or will
be paid prior thereto and adequate reserves have been provided
for on the Company's balance sheet for any premiums (or
portions thereof) attributable to service on or prior to the
Effective Time of the Merger; (vii) for each Company Plan with
respect to which a Form 5500 has been filed, no material
change has occurred with respect to the matters covered by the
most recent Form since the date thereof; (viii) except as
disclosed in Section 3.01(i) of the Disclosure Schedule, all
contributions required to be made prior to the Effective Time
of the Merger under the terms of any Company Plan, the Code,
ERISA or other applicable laws, rules and regulations have
been or will be timely made and adequate reserves have been
provided for on the Company's balance sheet for all benefits
attributable to service on or prior to the Effective Time of
the Merger; (ix) no Company Plan provides for an increase in
benefits on or after the Effective Time of the Merger; and
(x) each Company Plan may be amended or terminated without
obligation or liability (other than those obligations and
liabilities for which specific assets have been set aside in a
trust or other funding vehicle or reserved for on the
Company's balance sheet or obligations under plans required by
contracts with labor unions).
(4) Except as disclosed in Section 3.01(i)(4) of the
Disclosure Schedule and except to the extent each of the
following, individually or in the aggregate, would not result
in a material liability to the Company, (i) no Company Plan
has incurred any "accumulated funding deficiency" as such term
-35-
is defined in ERISA section 302 and Code section 412 (whether
or not waived); (ii) no event or condition exists which could
be deemed a reportable event within the meaning of ERISA
section 4043 which could result in a liability to the Company
or any member of its Controlled Group and no condition exists
which could subject the Company or any member of its
Controlled Group to a fine under ERISA section 4071; (iii) as
of the Effective Time of the Merger, the Company and each
member of its Controlled Group have made all required premium
payments when due to the PBGC; (iv) neither the Company nor
any member of its Controlled Group is subject to any liability
to the PBGC for any plan termination occurring on or prior to
the Effective Time of the Merger; (v) no amendment has
occurred which has required or could require the Company or
any member of its Controlled Group to provide security
pursuant to Code section 401(a)(29); and (vi) neither the
Company nor any member of its Controlled Group has engaged in
a transaction which could subject it to liability under ERISA
section 4069.
(5) With respect to each of the Company Plans which is
not a multiemployer plan within the meaning of section
4001(a)(3) of ERISA but is subject to Title IV of ERISA, as of
the Effective Time of the Merger, except as disclosed in
Section 3.01(i) of the Disclosure Schedule, the assets of each
such Company Plan are at least equal in value to the present
value of the accrued benefits (vested and unvested) of the
participants in such Company Plan on a termination and
projected basis, based on the actuarial methods and
-36-
assumptions indicated in the most recent actuarial valuation
reports.
(6) Except as disclosed in Section 3.01(i)(6) of the
Disclosure Schedule, with respect to any multiemployer plan
(within the meaning of section 4001(a)(3) of ERISA) to which
the Company or any member of its Controlled Group has any
liability or contributes (or has at any time contributed or
had an obligation to contribute): (i) the Company and each
member of its Controlled Group has or will have, as of the
Effective Time of the Merger, made all contributions to each
such multiemployer plan required by the terms of such
multiemployer plan or any collective bargaining agreement;
(ii) neither the Company nor any member of its Controlled
Group has incurred any withdrawal liability under Title IV of
ERISA or would be subject to such liability if, as of the
Effective Time of the Merger, the Company or any member of its
Controlled Group were to engage in a complete withdrawal (as
defined in ERISA section 4203) or partial withdrawal (as
defined in ERISA section 4205) from any such multiemployer
plan; (iii) no such multiemployer plan is in reorganization or
insolvent (as those terms are defined in ERISA sections 4241
and 4245, respectively); and (iv) neither the Company nor any
member of its Controlled Group has engaged in a transaction
which could subject it to liability under ERISA section
4212(c).
(7) (i) Each Company Plan which is intended to meet the
requirements for tax-favored treatment under Subchapter B of
Chapter 1 of Subtitle A of the Code meets such requirements;
and (ii) the Company has received a favorable determination
-37-
from the Internal Revenue Service with respect to any trust
intended to be qualified within the meaning of Code section
501(c)(9).
(8) Section 3.01(i)(8) of the Disclosure Schedule sets
forth, on a plan by plan basis, the present value of benefits
payable presently or in the future to present or former
employees of the Company under each unfunded Company Plan.
(9) Except as set forth in Section 3.01(i)(9) of the
Disclosure Schedule, no Company Plan exists which could result
in the payment to any Company employee of any money or other
property or rights or accelerate or provide any other rights
or benefits to any Company employee as a result of the
transaction contemplated by this Agreement, whether or not
such payment would constitute a parachute payment within the
meaning of Code section 280G.
(j) Tax Returns and Tax Payments. Except as disclosed
in Section 3.01(j) of the Disclosure Schedule, the Company and
each of its subsidiaries, and any consolidated, combined,
unitary or aggregate group for Tax purposes of which the
Company or any of its subsidiaries is or has been a member (a
"Consolidated Group") has timely filed all Tax Returns
required to be filed by it, has paid all Taxes shown thereon
to be due and has provided adequate reserves in its financial
statements for any Taxes that have not been paid, whether or
not shown as being due on any returns. Except as disclosed in
Section 3.01(j) of the Disclosure Schedule, (i) No material
claim for unpaid Taxes has become a lien against the property
of the Company or any of its subsidiaries or is being asserted
against the Company or any of its subsidiaries; (ii) to the
-38-
best knowledge of the Company, no audit of any Tax Return of
the Company or any of its subsidiaries is being conducted by a
Tax authority; (iii) no extension of the statute of
limitations on the assessment of any Taxes has been granted by
the Company or any of its subsidiaries and is currently in
effect; (iv) no consent under Section 341(f) of the Code has
been filed with respect to the Company or any of its
subsidiaries; (v) neither the Company nor any of its
subsidiaries is a party to any agreement or arrangement that
would result, separately or in the aggregate, in the actual or
deemed payment by the Company or a subsidiary of any "excess
parachute payments" within the meaning of Section 280G of the
Code; (vi) no acceleration of the vesting schedule for any
property that is substantially unvested within the meaning of
the regulations under Section 83 of the Code will occur in
connection with the transactions contemplated by this
Agreement; (vii) none of the Company or its subsidiaries has
been at any time a member of any partnership or joint venture
or the holder of a beneficial interest in any trust for any
period for which the statute of limitations for any Tax has
not expired; (viii) none of the Company or its subsidiaries
has been a United States real property holding corporation
within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the
Code; (ix) none of the Company or its subsidiaries is doing
business in or engaged in a trade or business in any
jurisdiction in which it has not filed all required income or
franchise tax returns; (x) the Company and each of its
subsidiaries have made all payments of estimated Taxes
-39-
required to be made under Section 6655 of the Code and any
comparable state, local or foreign Tax provision; (xi) to the
best knowledge of the Company, all Taxes required to be
withheld, collected or deposited by or with respect to the
Company and each of its subsidiaries have been timely
withheld, collected or deposited, as the case may be, and, to
the extent required, have been paid to the relevant taxing
authority; (xii) neither the Company nor any of its
subsidiaries has issued or assumed (A) any obligations
described in Section 279(a) of the Code, (B) any applicable
high yield discount obligations, as defined in Section 163(i)
of the Code, or (C) any registration-required obligations,
within the meaning of Section 163(f)(2) of the Code, that is
not in registered form; (xiii) there are no requests for
information currently outstanding that could affect the Taxes
of the Company or any of its subsidiaries; (xiv) to the best
knowledge of the Company, there are no proposed reassessments
of any property owned by the Company or any of its
subsidiaries or other proposals that could increase the amount
of any Tax to which the Company or any such subsidiary would
be subject; and (xv) no power of attorney that is currently in
force has been granted with respect to any matter relating to
Taxes that could materially affect the Tax liability of the
Company or one of its subsidiaries. As used herein, "Taxes"
shall mean all taxes of any kind, including, without
limitation, those on or measured by or referred to as income,
gross receipts, sales, use, ad valorem, franchise, profits,
license, withholding, payroll, employment, excise, severance,
stamp, occupation, premium, value added, property or windfall
-40-
profits taxes, customs, duties or similar fees, assessments or
charges of any kind whatsoever, together with any interest and
any penalties, additions to tax or additional amounts imposed
by any governmental authority, domestic or foreign. As used
herein, "Tax Return" shall mean any return, report or
statement required to be filed with any governmental authority
with respect to Taxes.
(k) Properties. (i) Owned Real Property. Section
3.01(k)(i) of the Disclosure Schedule sets forth, by address,
owner and usage, all of the real property owned by the
Company, any of its subsidiaries or any partnerships, joint
ventures or other business organizations (collectively the
"Ventures") of which the Company or its subsidiaries are party
(collectively, the "Owned Real Property"). Except as
disclosed in Section 3.01(k)(ii) of the Disclosure Schedule,
each of the Company, its subsidiaries and the Ventures have
good and sufficient, valid and marketable title to the Owned
Real Property free and clear of all Liens and other
encumbrances that, individually or in the aggregate could
reasonably be expected to have a Material Adverse Effect with
respect to the Company. Except as set forth in Section
3.01(k)(ii) of the Disclosure Schedule, there are (a) no
outstanding contracts for any improvements to the Owned Real
Property which have not been fully paid that, individually or
in the aggregate could reasonably be expected to have a
Material Adverse Effect with respect to the Company, (b) no
expenses of any kind (including brokerage and leasing
commissions) pertaining to the Owned Real Property which have
not been fully paid and (c) no outstanding contracts for the
-41-
sale of any of the Owned Real Property, except those contracts
the property in respect of which is not in excess of $100,000
individually.
(ii) Leased Real Property. Section 3.01(k)(iii) of
the Disclosure Schedule sets forth, by address, owner and usage,
a true and complete list of all real property agreements
(including any amendments thereto) pursuant to which the Company,
its subsidiaries or any Venture lease, sublease or otherwise
occupy any real property (the "Real Property Leases"). Pursuant
to the Real Property Leases, the Company, its subsidiaries or a
Venture, as the case may be, have validly existing and
enforceable leasehold, subleasehold or occupancy interests in the
property leased thereunder in each case fee from defaults and
events which with the passage of time would constitute a default
except in either instance for defaults which individually or in
the aggregate, would not be material and adverse to the financial
condition, business or operations of the Company, its
subsidiaries or the Venture, as the case may be.
(iii) Third Party Leases. Section 3.01(k)(iv) of the
Disclosure Schedule sets forth, by address, owner and usage, a
true and complete list of all real property agreements (including
any amendments thereto) pursuant to which the Company, any of its
subsidiaries or any Venture leases, subleases or otherwise
permits any third party to occupy any Owned Real Property or
Leased Real Property (collectively, the "Third Party Leases").
Each of the Third Party Leases is in full force and effect and in
each case free from defaults and events which with the passage of
time would constitute a default (by landlord or tenant
thereunder) except in either instance for defaults which
-42-
individually or in the aggregate, would not have a Material
Adverse Effect with respect to the Company. Except as set forth
in Section 3.01(k)(iv) of the Disclosure Schedule, none of the
Third Party Leases grant any options or other rights to the
tenant thereunder to purchase any of the Owned Real Property or
Leased Real Property.
(iv) Development Agreements. Section 3.01(k)(v) of
the Disclosure Schedule sets forth a true and complete list of
all agreements (including any amendments thereto; as amended, the
"Development Agreements") pursuant to which (i) any third party
has been given the right (exclusive or otherwise) to develop any
real property for the Company, any of its subsidiaries or any
Venture or (ii) the Company, any of its subsidiaries or any
Venture has agreed to develop, construct or occupy in the future
(whether by lease or other occupancy agreement) any real
property. Except as set forth in Section 3.01(k)(v) of the
Disclosure Schedule, each of the Development Agreements is in
full force and effect and in each case free from defaults and
events which with the passage of time would constitute a default
thereunder.
(v) Permits. Each of the Company, its subsidiaries
and the Ventures has all permits (including, without limitation,
any and all beer, wine and/or liquor licenses) necessary to own
or operate its Owned Real Property and Leased Real Property, and
no such permits will be required, as a result of the Merger or
the other transactions contemplated hereby, to be issued after
the Closing in order to permit the Company following the Merger
to continue to own or operate such Properties, other than any
such permits which are ministerial in nature or the absence of
-43-
which would not have a Material Adverse Effect with respect to
the Company.
(vi) Violations/Condemnation. Except as set forth
in Section 3.01(k)(vi) of the Disclosure Schedule, neither the
Company, its subsidiaries nor any Venture has received, with
respect to any Owned Real Property or Leased Real Property, any
written notice of default or any written notice of noncompliance
with respect to applicable state, federal and local laws and
regulations relating to zoning, building, fire, use restriction
or safety or health codes which have not been remedied in all
respects which could have a Material Adverse Effect. There is no
pending or to the knowledge of the Company, its subsidiaries or
any Venture, threatened condemnation or other governmental taking
of any of the Owned Real Property or Leased Real Property.
(l) Environmental Matters. Except as disclosed in
Section 3.01(l) of the Disclosure Schedule, which disclosed
items of non-compliance could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect with respect to the Company, (i) the Company and its
subsidiaries hold and formerly held, and, to the best
knowledge of the Company, are, and have been, in compliance
with, all Environmental Permits, and the Company and its
subsidiaries are, and have been, otherwise in compliance with
all applicable Environmental Laws and there are no
circumstances that might prevent or interfere with such
compliance in the future;
(ii) None of the Company or its subsidiaries has received
any Environmental Claim, and none of the Company or its
subsidiaries is aware after reasonable inquiry, of any
-44-
threatened material Environmental Claim or of any
circumstances, conditions or events that could reasonably be
expected to give rise to a material Environmental Claim,
against the Company or any of its subsidiaries;
(iii) None of the Company or its subsidiaries has entered
into or agreed to any consent decree, order or agreement under
any Environmental Law, and none of the Company or its
subsidiaries is subject to any material judgment, decree,
order or other material requirement relating to compliance
with any Environmental Law or to investigation, cleanup,
remediation or removal of regulated substances under any
Environmental Law;
(iv) To the best knowledge of the Company, there are no
(A) underground storage tanks, (B) polychlorinated biphenyls,
(C) asbestos or asbestos-containing materials, (D) urea-
formaldehyde insulation, (E) sumps, (F) surface impoundments,
(G) landfills, (H) sewers or septic systems or (I) Hazardous
Materials present at any facility currently or formerly owned,
leased, operated or otherwise used by the Company or any of
its subsidiaries that could reasonably be expected to give
rise to liability of the Company or any of its subsidiaries
under any Environmental Laws;
(v) There are no past (including, without limitation,
with respect to assets or businesses formerly owned, leased or
operated by the Company or any of its subsidiaries) or present
actions, activities, events, conditions or circumstances,
including without limitation the release, threatened release,
emission, discharge, generation, treatment, storage or
disposal of Hazardous Materials, that could reasonably be
-45-
expected to give rise to liability of the Company or any of
its subsidiaries under any Environmental Laws or any contract
or agreement;
(vi) No modification, revocation, reissuance,
alteration, transfer, or amendment of the Environmental
Permits, or any review by, or approval of, any third party of
the Environmental Permits is required in connection with the
execution or delivery of this Agreement or the consummation of
the transactions contemplated hereby or the continuation of
the business of the Company or its subsidiaries following such
consummation;
(vii) Hazardous Materials have not been generated,
transported, treated, stored, disposed of, released or
threatened to be released at, on, from or under any of the
properties or facilities currently or formerly owned, leased
or otherwise used by the Company or any of its subsidiaries,
in violation of or in a manner or to a location that could
give rise to liability under any Environmental Laws;
(viii) to the best knowledge of the Company, the Company
and its subsidiaries have not assumed, contractually or by
operation of law, any liabilities or obligations under any
Environmental Laws;
(ix) the Company and its subsidiaries have accrued or
otherwise provided, in accordance with general accepted
accounting principles, for all damages, liabilities, penalties
or costs that they may incur in connection with any claim
pending or threatened against them, or any requirement that is
or may be applicable to them, under any Environmental Laws,
-46-
and such accrual or other provision is reflected in the
Company's most recent consolidated financial statements.
(x) For purposes of this Agreement, the following terms
shall have the following meanings:
"Environmental Claim" means any written or oral
notice, claim, demand, action, suit, complaint,
proceeding or other communication by any person alleging
liability or potential liability (including without
limitation liability or potential liability for
investigatory costs, cleanup costs, governmental response
costs, natural resource damages, property damage,
personal injury, fines or penalties) arising out of,
relating to, based on or resulting from (i) the presence,
discharge, emission, release or threatened release of any
Hazardous Materials at any location, whether or not
owned, leased or operated by the Company or any of its
subsidiaries or (ii) circumstances forming the basis of
any violation or alleged violation of any Environmental
Law or Environmental Permit or (iii) otherwise relating
to obligations or liabilities under any Environmental
Laws.
"Environmental Permits" means all permits, licenses,
registrations and other governmental authorizations
required for the Company and the operations of the
Company's and its subsidiaries' facilities and otherwise
to conduct its business under Environmental Laws.
"Environmental Laws" means all applicable federal,
state and local statutes, rules, regulations, ordinances,
orders, decrees and common law relating in any manner to
-47-
contamination, pollution or protection of human health or
the environment, including without limitation the
Comprehensive Environmental Response, Compensation and
Liability Act, the Solid Waste Disposal Act, the Clean
Air Act, the Clean Water Act, the Toxic Substances
Control Act, the Occupational Safety and Health Act, the
Emergency Planning and Community-Right-to-Know Act, the
Safe Drinking Water Act, all as amended, and similar
state laws.
"Hazardous Materials" means all hazardous or toxic
substances, wastes, materials or chemicals, petroleum
(including crude oil or any fraction thereof) and
petroleum products, asbestos and asbestos-containing
materials, pollutants, contaminants and all other
materials, substances and forces, including but not
limited to electromagnetic fields, regulated pursuant to,
or that could form the basis of liability under, any
Environmental Law.
(m) Material Contract Defaults. Neither the Company nor
any of its subsidiaries is, or has received any notice or has
any knowledge that any other party is, in default in any
respect under any material contract, agreement, commitment,
arrangement, lease, policy or other instrument to which it or
any of its subsidiaries is a party or by which it or any such
subsidiary is bound ("Material Contracts"), except for those
defaults which could not reasonably be expected, either
individually or in the aggregate, to have a Material Adverse
Effect with respect to the Company; and there has not occurred
-48-
any event that with the lapse of time or the giving of notice
or both would constitute such a material default.
(n) Brokers. No broker, investment banker, financial
advisor or other person, other than The Robinson-Humphrey
Company, Inc., the fees and expenses of which will be paid by
the Company (pursuant to a fee agreement, a copy of which has
been provided to Newco), is entitled to any broker's,
finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of
the Company.
(o) Opinion of Financial Advisor. The Company has
received the opinion of The Robinson-Humphrey Company, Inc.
dated the date of this Agreement, to the effect that the
consideration to be received in the Merger by the Company's
stockholders is fair to the holders of the Company Common
Stock from a financial point of view, a signed copy of which
opinion has been delivered to Newco.
(p) Board Recommendation. The Board of Directors of the
Company, at a meeting duly called and held, has by unanimous
vote of those directors present (who constituted 100% of the
directors then in office) (i) determined that this Agreement
and the transactions contemplated hereby, including the
Merger, and the Option Agreement and the Stockholders
Agreement and the transactions contemplated thereby, taken
together, are fair to and in the best interests of the
stockholders of the Company, (ii) determined, in accordance
with Section 10-2B-6.40 of the ABCA, that the transactions
contemplated by this Agreement are in compliance with Section
-49-
10-2B-6.40 of the ABCA and (iii) resolved to recommend that
the holders of the shares of Company Common Stock approve this
Agreement and the transactions contemplated herein, including
the Merger.
(q) Required Company Vote. The Company Stockholder
Approval, being the affirmative vote of two-thirds of the
shares of the Company Common Stock, is the only vote of the
holders of any class or series of the Company's securities
necessary to approve this Agreement, the Merger and the other
transactions contemplated hereby. There is no vote of the
holders of any class or series of the Company's securities
necessary to approve the Option Agreement or the Stockholders
Agreement.
(r) State Takeover Statutes. No state takeover statute
or similar statute or regulation of the State of Alabama (and,
to the knowledge of the Company after due inquiry, of any
other state or jurisdiction) applies or purports to apply to
this Agreement, the Merger, the Option Agreement, the
Stockholders Agreement or any of the other transactions
contemplated hereby or thereby. No provision of the articles
of organization, by-laws or other governing instruments of the
Company or any of its subsidiaries would, directly or
indirectly, restrict or impair the ability of Newco or its
affiliates to vote, or otherwise to exercise the rights of a
stockholder with respect to, securities of the Company and its
subsidiaries that may be acquired or controlled by Newco or
its affiliates or permit any stockholder to acquire securities
of the Company on a basis not available to Newco in the event
that Newco were to acquire securities of the Company, and
-50-
neither the Company nor any of its subsidiaries has any rights
plan, preferred stock or similar arrangement which have any of
the aforementioned consequences.
(s) Trade names. (i) The Company or its subsidiaries
(A) except as set forth in Section 3.01(s) of the Disclosure
Schedule, owns (in each case, free and clear of any Liens) all
rights to all trade names (other than "Piggly Wiggly" used by
the Company and each of its subsidiaries, including, without
limitation, the exclusive right to use the names "Bruno's",
"Food World", "Food Max", and "Food Fair" and any variations
thereof used by the Company or its subsidiaries, in each case
in the states in which the stores to which such names relate
are located, (B) the Company possesses a valid, subsisting and
enforceable exclusive license to use the name "Piggly Wiggly"
in the states in which the stores to which such name relates
are located and (C) the Company owns (free and clear of any
Liens) all rights to the name "Food Max" in the United States
irrespective of store location. Except as disclosed in
Section 3.01(s) of the Disclosure Schedule, no other person
has a United States trademark registration in effect, or to
the best knowledge of the Company, a United States trademark
application pending, in respect of any of such trade names.
To the best knowledge of the Company, except as disclosed in
Section 3.01(s) of the Disclosure Schedule, no other person
has the right to use any such trade names in any of the
following states: Alabama, Arkansas, Florida, Georgia,
Louisiana, Mississippi, North Carolina, South Carolina and
Tennessee. To the best knowledge of the Company, except as
disclosed in Section 3.01(s) of the Disclosure Schedule, (i)
-51-
the use of trade names by the Company and its subsidiaries
does not infringe on the rights of any person, (ii) no person
is infringing on any right of the Company or any of its
subsidiaries with respect to any of the Company's trade names,
(iii) there is no decree, undertaking or agreement limiting
the scope of the Company's right to use any of its trade names
and (iv) the Company has not granted any license to any person
for the use of the Company's trade names.
(t) Senior Notes Make-Whole Amount. The Make-Whole
Amount (as defined in the Note Purchase Agreement) in respect
of the Senior Notes to be paid in connection with any offer to
prepay the Senior Notes upon a Change in Control (as defined
in the Note Purchase Agreement) equals zero.
SECTION 3.02. Representations and Warranties of Newco.
Newco represents and warrants to the Company as follows:
(a) Organization, Standing and Corporate Power. Newco
is duly organized, validly existing and in good standing under
the laws of the jurisdiction in which it is incorporated and
has the requisite corporate power and authority to carry on
its business as now being conducted. Newco is duly qualified
or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such
jurisdictions where the failure to be so qualified or licensed
(individually or in the aggregate) would not have a material
adverse effect with respect to Newco. Newco has delivered to
the Company complete and correct copies of its certificate of
incorporation (or other organizational documents) and by-laws.
-52-
(b) Subsidiaries. Newco has no direct or indirect
subsidiaries.
(c) Capital Structure. The authorized capital stock of
Newco consists of 1,000 shares of common stock, par value $.01
per share, all of which have been validly issued, are fully
paid and nonassessable and are owned by Parent, free and clear
of any Lien.
(d) Authority; Noncontravention. Newco has all
requisite corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated by
this Agreement. The execution and delivery of this Agreement
by Newco and the consummation by Newco of the transactions
contemplated by this Agreement have been duly authorized by
all necessary corporate action on the part of Newco. This
Agreement has been duly executed and delivered by and
constitutes a valid and binding obligation of Newco,
enforceable against Newco in accordance with its terms. The
execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated by this
Agreement and compliance with the provisions of this Agreement
will not, conflict with, or result in any breach or violation
of, or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination,
cancellation or acceleration of or "put" right with respect to
any obligation or to loss of a material benefit under, or
result in the creation of any Lien upon any of the properties
or assets of Newco under, (i) the certificate of incorporation
or by-laws of Newco, (ii) any loan or credit agreement, note,
bond, mortgage, indenture, lease or other agreement,
-53-
instrument, permit, concession, franchise or license
applicable to Newco or its properties or assets or (iii)
subject to the governmental filings and other matters referred
to in the following sentence, any judgment, order, decree,
statute, law, ordinance, rule, regulation or arbitration award
applicable to Newco or its properties or assets, other than,
in the case of clauses (ii) and (iii), any such conflicts,
breaches, violations, defaults, rights, losses or Liens that
individually or in the aggregate could not have a material
adverse effect with respect to Newco or could not prevent,
hinder or materially delay the ability of Newco to consummate
the transactions contemplated by this Agreement. No consent,
approval, order or authorization of, or registration,
declaration or filing with, or notice to, any Governmental
Entity is required by or with respect to Newco in connection
with the execution and delivery of this Agreement by Newco or
the consummation by Newco of any of the transactions
contemplated by this Agreement, except for (i) the filing of a
premerger notification and report form under the HSR Act, (ii)
the filing with the SEC of (y) the Proxy Statement and the
Form S-4 and (z) such reports under the Exchange Act as may be
required in connection with this Agreement, the Option
Agreement, the Stockholders Agreement and the transactions
contemplated hereby and thereby, (iii) the filing of the
Articles of Merger with the Secretary of State of the State of
Alabama and appropriate documents with the relevant
authorities of other states in which the Company is qualified
to do business and (iv) such other consents, approvals,
orders, authorizations, registrations, declarations, filings
-54-
or notices as may be required under the "takeover" or "blue
sky" laws of various states.
(e) Brokers. No broker, investment banker, financial
advisor or other person, other than Salomon Brothers Inc, the
fees and expenses of which will be paid by Newco or its
affiliates, is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection
with the transactions contemplated by this Agreement based
upon arrangements made by or on behalf of Newco to its
affiliates.
(f) Interim Operations of Newco. Newco was formed on
April 14, 1995 solely for the purpose of engaging in the
transactions contemplated hereby, has engaged in no other
business activities and has conducted its operations only as
contemplated hereby.
SECTION 3.03. Agreement to Deliver Article III
Disclosure Schedules. The Company hereby agrees to deliver to
Newco those sections of the Disclosure Schedule specifically
referenced in this Article III, and the information described in
Section 3.01(i)(2), no later than May 1, 1995, provided that
information to be included in Sections 3.01(a), 3.01(b), 3.01(c)
(other than the list of capitalized leases referenced in clause
(iii) of the seventh sentence of Section 3.01(c)), 3.01(d) and
3.01(e) of the Disclosure Schedule shall be delivered at or prior
to the time of the signing of this Agreement. Any section of the
Disclosure Schedule other than in respect of matters referenced
in this Article III shall be delivered to Newco at or prior to
the time of the signing of this Agreement.
-55-
ARTICLE IV
Covenants Relating to Conduct of Business Prior to Merger
SECTION 4.01. Conduct of Business of the Company. (a)
Conduct of Business by the Company. During the period from the
date of this Agreement to the Effective Time of the Merger
(except as otherwise specifically required by the terms of this
Agreement), the Company shall, and shall cause its subsidiaries
to, act and carry on their respective businesses in the usual,
regular and ordinary course of business consistent with past
practice and use its and their respective best efforts to
preserve intact their current business organizations, keep
available the services of their current officers and employees
and preserve their relationships with customers, suppliers,
licensors, licensees, advertisers, distributors and others having
business dealings with them to the end that their goodwill and
ongoing businesses shall be unimpaired at the Effective Time of
the Merger. Without limiting the generality of the foregoing,
during the period from the date of this Agreement to the
Effective Time of the Merger, the Company shall not, and shall
not permit any of its subsidiaries to, without the prior consent
of Newco:
(i) (x) declare, set aside or pay any dividends on, or
make any other distributions in respect of, any of its capital
stock, other than dividends and distributions by a direct or
indirect wholly owned subsidiary of the Company to its parent,
and except that the Company may declare and pay one regular
quarterly cash dividend in May, 1995 not in excess of $.065
per share of Company Common Stock (with usual record and
payment dates and in accordance with its past dividend
-56-
policy), (y) split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for
shares of its capital stock, or (z) purchase, redeem or
otherwise acquire any shares of capital stock of the Company
or any of its subsidiaries or any other securities thereof or
any rights, warrants or options to acquire any such shares or
other securities, except, in the case of clause (z), for the
acquisition of shares of Company Common Stock from holders of
Company Stock Options in full or partial payment of the
exercise price payable by such holder upon exercise of Company
Stock Options outstanding on the date of this Agreement;
(ii) authorize for issuance, issue, deliver, sell, pledge
or otherwise encumber any shares of its capital stock or the
capital stock of any of its subsidiaries, any other voting
securities or any securities convertible into, or any rights,
warrants or options to acquire, any such shares, voting
securities or convertible securities or any other securities
or equity equivalents (including without limitation stock
appreciation rights) (other than (x) the issuance of Company
Common Stock upon the exercise of Company Stock Options
outstanding on the date of this Agreement and in accordance
with their present terms and (y) pursuant to the Option (such
issuances pursuant to clauses (x) and (y), together with the
acquisitions of shares of Company Common Stock permitted under
clause (i)(z) above, being referred to herein as "Permitted
Changes");
(iii) amend its articles of organization, by-laws or other
comparable charter or organizational documents;
-57-
(iv) acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of
the stock or assets of, or by any other manner, any business
or any corporation, partnership, joint venture, association or
other business organization or division thereof;
(v) other than as specifically permitted by Section
4.01(a)(v) of the Disclosure Schedule, sell, lease, license,
mortgage or otherwise encumber or subject to any Lien or
otherwise dispose of any of its properties or assets other
than any such properties or assets the value of which do not
exceed $200,000 individually and $2,000,000 in the aggregate,
except sales of inventory and entering into leases for new
store sites, in each case in the ordinary course of business
consistent with past practice;
(vi) (y) incur any indebtedness for borrowed money or
guarantee any such indebtedness of another person, issue or
sell any debt securities or warrants or other rights to
acquire any debt securities of the Company or any of its
subsidiaries, guarantee any debt securities of another person,
enter into any "keep well" or other agreement to maintain any
financial statement condition of another person or enter into
any arrangement having the economic effect of any of the
foregoing, except for short-term borrowings and for lease
obligations, in each case incurred in the ordinary course of
business consistent with past practice, or (z) make any loans,
advances or capital contributions to, or investments in, any
other person, other than to the Company or any direct or
indirect wholly owned subsidiary of the Company;
-58-
(vii) acquire or agree to acquire any assets that are
material, individually or in the aggregate, to the Company and
its subsidiaries taken as a whole, or make or agree to make
any capital expenditures except capital expenditures which,
individually or in the aggregate, do not exceed the amount
budgeted therefor in the Company's annual capital expenditures
budget for 1995 previously provided to Newco;
(viii) pay, discharge or satisfy any claims (including
claims of stockholders), liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise),
except for the payment, discharge or satisfaction, (x) of
liabilities or obligations in the ordinary course of business
consistent with past practice or in accordance with their
terms as in effect on the date hereof or (y) claims settled or
compromised to the extent permitted by Section 4.01(a)(xii),
or waive, release, grant, or transfer any rights of material
value or modify or change in any material respect any existing
license, lease, contract or other document, other than in the
ordinary course of business consistent with past practice;
(ix) adopt a plan of complete or partial liquidation or
resolutions providing for or authorizing such a liquidation or
a dissolution, merger, consolidation, restructuring,
recapitalization or reorganization;
(x) enter into any new collective bargaining agreement
or any successor collective bargaining agreement to any
collective bargaining agreement disclosed in Section
3.01(h)(ii) of the Disclosure Schedule; provided that with
respect to the successor agreement to the collective
bargaining agreement set forth in Section 4.01(a)(x) of the
-59-
Disclosure Schedule, the parties shall consult with each other
on an ongoing basis with respect to the negotiation thereof
and shall mutually agree upon the terms thereof (unless such
successor agreement shall not have been entered into on or
before September 30, 1995, in which event the Company shall be
entitled to enter into a successor agreement thereto without
the consent of Newco);
(xi) change any material accounting principle used by it;
(xii) settle or compromise any litigation (whether or not
commenced prior to the date of this Agreement) other than
settlements or compromises of litigation where the amount paid
(after giving effect to insurance proceeds actually received)
in settlement or compromise does not exceed $300,000, provided
that the aggregate amount paid in connection with the
settlement or compromise of all such litigation matters shall
not exceed $1,000,000; or
(xiii) authorize any of, or commit or agree to take any of,
the foregoing actions.
(b) Changes in Employment Arrangements. Neither the
Company nor any of its subsidiaries shall (except as may be
required in order to give effect to the requirements of Section
2.04) adopt or amend (except as may be required by law) any
bonus, profit sharing, compensation, stock option, pension,
retirement, deferred compensation, employment or other employee
benefit plan, agreement, trust, fund or other arrangement
(including any Company Plan) for the benefit or welfare of any
employee, director or former director or employee or, other than
increases for individuals (other than officers and directors) in
the ordinary course of business consistent with past practice,
-60-
increase the compensation or fringe benefits of any director,
employee or former director or employee or pay any benefit not
required by any existing plan, arrangement or agreement; provided
that the Executive Compensation Plan for the fiscal year ending
July 1, 1995 may be adjusted to the extent described in
Section 4.01(b) of the Disclosure Schedule or as provided in
Section 5.04.
(c) Severance. Neither the Company nor any of its
subsidiaries shall grant any new or modified severance or
termination arrangement or increase or accelerate any benefits
payable under its severance or termination pay policies in effect
on the date hereof.
(d) WARN. Neither the Company nor any of its
subsidiaries shall effectuate a "plant closing" or "mass layoff",
as those terms are defined in the Worker Adjustment and
Retraining Notification Act of 1988 ("WARN"), affecting in whole
or in part any site of employment, facility, operating unit or
employee of the Company or any subsidiary, without notifying
Newco or its affiliates in advance and without complying with the
notice requirements and other provisions of WARN.
(e) Tax Elections. Except in the ordinary course of
business and consistent with past practice, neither the Company
nor any of its subsidiaries shall make any tax election or settle
or compromise any federal, state, local or foreign Tax liability.
-61-
ARTICLE V
Additional Agreements
SECTION 5.01. Preparation of Form S-4 and Proxy
Statement; Stockholder Meeting.
(a) Promptly following the date of this Agreement, the
Company shall prepare the Proxy Statement, and the Company shall
prepare and file with the SEC the Form S-4, in which the Proxy
Statement will be included. The Company shall use its best
efforts as promptly as practicable to have the Form S-4 declared
effective under the Securities Act as promptly as practicable
after such filing. The Company will use its best efforts to
cause the Proxy Statement to be mailed to the Company's
stockholders as promptly as practicable after the Form S-4 is
declared effective under the Securities Act. The Company shall
also take any action required to be taken under any applicable
state securities laws in connection with the registration and
qualification in connection with the Merger of Common Stock of
the Company following the Merger. The information provided and
to be provided by Newco and the Company, respectively, for use in
the Form S-4 shall, at the time the Form S-4 becomes effective
and on the date of the Stockholders Meeting referred to below, be
true and correct in all material respects and shall not omit to
state any material fact required to be stated therein or
necessary in order to make such information not misleading, and
the Company and Newco each agree to correct any information
provided by it for use in the Form S-4 which shall have become
false or misleading.
(b) The Company will immediately notify Newco and its
affiliates of (i) the effectiveness of the Form S-4, (ii) the
-62-
receipt of any comments from the SEC and (iii) any request by the
SEC for any amendment to the Form S-4 or for additional
information. All filings with the SEC, including the Form S-4
and any amendment thereto, and all mailings to the Company's
stockholders in connection with the Merger, including the Proxy
Statement, shall be subject to the prior review, comment and
approval of Newco. No such filing or mailing shall be made
without the prior consent of Newco.
(c) The Company will, as promptly as practicable
following the date of this Agreement and in consultation with
Newco, duly call, give notice of, convene and hold a meeting of
its stockholders (the "Stockholders Meeting") for the purpose of
approving this Agreement and the transactions contemplated by
this Agreement, including, without limitation, the incurrence of
any indebtedness to be funded contemporaneous with or after the
Closing, to the extent required by Alabama law. The Company
will, through its Board of Directors, recommend to its
stockholders approval of the foregoing matters, as set forth in
Section 3.01(p). Such recommendation, together with a copy of
the opinion referred to in Section 3.01(o) shall be included in
the Proxy Statement. The Company will use its best efforts to
hold such meetings as soon as practicable after the date hereof.
(d) The Company will cause its transfer agent to make
stock transfer records relating to the Company available to the
extent reasonably necessary to effectuate the intent of this
Agreement.
SECTION 5.02. Access to Information; Confidentiality.
(a) The Company shall, and shall cause its subsidiaries,
officers, employees, counsel, financial advisors and other
-63-
representatives to, afford to Newco and its representatives and
to potential financing sources reasonable access during normal
business hours, in a manner initially coordinated with the chief
executive officer of the Company, and thereafter coordinated with
those persons designated by the chief executive officer, during
the period prior to the Effective Time of the Merger to its
properties, books, contracts, commitments, personnel and records
and, during such period, the Company shall, and shall cause its
subsidiaries, officers, employees and representatives to, furnish
promptly to Newco (i) a copy of each report, schedule,
registration statement and other document filed by it during such
period pursuant to the requirements of Federal or state
securities laws and (ii) all other information concerning its
business, properties, financial condition, operations and
personnel as Newco may from time to time reasonably request.
Newco shall use reasonable efforts to conduct its initial
interviews with personnel of the Company and its subsidiaries
prior to the Section 7.01(h) Date (as defined herein). Except as
required by law, each of the Company and Newco will hold, and
will cause its respective directors, officers, employees,
accountants, counsel, financial advisors and other
representatives and affiliates to hold, any nonpublic information
in confidence to the extent required by, and in accordance with,
the provisions of the letter dated December 20, 1994, between
Kohlberg Kravis Roberts & Co. ("KKR & Co.") and the Company (the
"Confidentiality Agreement").
(b) No investigation pursuant to this Section 5.02 shall
affect any representations or warranties of the parties herein or
the conditions to the obligations of the parties hereto.
-64-
SECTION 5.03. Best Efforts. (a) Upon the terms and
subject to the conditions set forth in this Agreement, each of
the parties agrees to use its best efforts to take, or cause to
be taken, all actions, and to do, or cause to be done, and to
assist and cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate and make effective,
in the most expeditious manner practicable, the Merger and the
other transactions contemplated by this Agreement. Newco and the
Company will use their best efforts and cooperate with one
another (i) in promptly determining whether any filings are
required to be made or consents, approvals, waivers, licenses
(including, without limitation, all beer, wine and/or liquor
licenses), permits or authorizations are required to be obtained
(or, which if not obtained, would result in an event of default,
termination or acceleration of any agreement or any put right
under any agreement) under any applicable law or regulation or
from any governmental authorities or third parties, including
parties to loan agreements or other debt instruments, in
connection with the transactions contemplated by this Agreement,
including the Merger, the Option Agreement, and the Stockholders
Agreement and (ii) in promptly making any such filings, in
furnishing information required in connection therewith and in
timely seeking to obtain any such consents, approvals, permits or
authorizations.
Newco and the Company shall mutually cooperate in order
to facilitate the achievement of the benefits reasonably
anticipated from the Merger.
(b) The Company shall make, subject to the condition
that the transactions contemplated herein and therein actually
-65-
occur, any undertakings (including undertakings to make
divestitures, provided that such divestitures need not themselves
be made until after the transactions contemplated hereby actually
occur) required in order to comply with the antitrust
requirements or laws of any governmental entity, including the
HSR Act, in connection with the transactions contemplated by this
Agreement, the Stockholders Agreement and the Option Agreement;
provided that no such divestiture or undertaking shall be made
unless acceptable to Newco.
(c) The Company shall cooperate with any reasonable
requests of Newco or the SEC related to the recording of the
Merger as a recapitalization for financial reporting purposes,
including, without limitation, to assist Newco and its affiliates
with any presentation to the SEC with regard to such recording
and to include appropriate disclosure with regard to such
recording in all filings with the SEC and all mailings to
stockholders made in connection with the Merger. In furtherance
of the foregoing, the Company shall provide to Newco for the
prior review of Newco's advisors any description of the
transactions contemplated by this Agreement which is meant to be
disseminated.
(d) Each of the parties agrees to cooperate with each
other in taking, or causing to be taken, all actions necessary to
delist the Company Common Stock from NASDAQ, provided that such
delisting shall not be effective until after the Effective Time
of the Merger. The parties also acknowledge that it is Newco's
intent that the Common Stock following the Merger will not be
quoted on NASDAQ or listed on any national securities exchange.
-66-
(e) The Company agrees to provide, and will cause its
subsidiaries and its and their respective officers and employees
to provide, all necessary cooperation in connection with the
arrangement of any financing to be consummated contemporaneous
with or at or after the Closing in respect of the transactions
contemplated by this Agreement, including without limitation, the
execution and delivery of any commitment letters, underwriting or
placement agreements, pledge and security documents, other
definitive financing documents, or other requested certificates
or documents, including a certificate of the chief financial
officer of the Company with respect to solvency matters, as may
be requested by Newco. The parties acknowledge that the payment
of any fees by the Company in connection with any commitment
letters shall either be subject to the occurrence of the Closing
or shall be applied against (and therefore shall not exceed) the
applicable expense reimbursement limitations set forth in Section
8.02(a) hereof. In addition, in conjunction with the obtaining
of any such financing, the Company agrees, at the request of
Newco, to call for prepayment or redemption, or to prepay, redeem
and/or renegotiate, as the case may be, any then existing
indebtedness of the Company; provided that no such prepayment or
redemption shall themselves actually be made until
contemporaneously with or after the Effective Time of the Merger.
(f) (i) Newco has received the letter set forth in
Section 5.03(f) of the Disclosure Schedule. Newco hereby agrees
to use its reasonable best efforts, subject to normal conditions,
to arrange the financing in respect of the transactions
contemplated by this Agreement described in Section 6.02(f)
hereof, including, subject to normal conditions, using its
-67-
reasonable best efforts (A) to assist the Company in the
negotiation of definitive agreements with respect thereto and (B)
to satisfy all conditions applicable to Newco in such definitive
agreements. Newco will keep the Company informed of the status
of its efforts to arrange such financing, including making
reports with respect to significant developments. In the event
Newco is unable to arrange any portion of such financing in the
manner or from the sources originally contemplated, Newco will
use its reasonable best efforts, subject to normal conditions, to
arrange any such portion from alternative sources. Newco will
inform the Company within 24 hours of any determination made by
Newco that it is unable to arrange such financing on terms
satisfactory to it.
(ii) Subject to the Company having received the proceeds
of the financing described in Section 6.02(f) on terms
satisfactory to Newco, Newco at Closing will be capitalized with
an equity contribution of $270 million. Newco will be under no
obligation pursuant to the preceding sentence unless and until
the Company receives the proceeds of the financing described in
Section 6.02(f) on terms satisfactory to Newco. In addition,
Newco will be under no obligation under any circumstances to be
capitalized with equity of more than $270 million.
(g) In the event Newco shall so request, the Company
hereby agrees to take, prior to Closing, the actions set forth in
Section 5.03(g) of the Disclosure Schedule.
SECTION 5.04. Benefit Matters. Newco and the Company
agree, with the concurrence of the five executive Employees
listed in Section 5.04 of the Disclosure Schedule, that while it
is not anticipated that such listed employees will be long term
-68-
employees of the Company following the Merger, such listed
employees shall continue in the employ of the Company following
the Merger during the periods described in this Section 5.04 in
order to accomplish in an orderly fashion the transition of
ownership of the Company contemplated by this Agreement. In
connection therewith, if an employee so listed remains in the
employ of the Company until one year following the Effective Time
of the Merger (or such shorter period as may be determined by the
board of directors of the Company following the Merger), such
employee shall 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 the Effective Time of the
Merger (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 Section 4 of the Employment Continuity Agreement)
together with the retirement benefit that would have been payable
to him under the terms of Section 8 of the 1994 Employment and
Deferred Compensation Agreement (after giving effect to such
amendments to such agreement as are necessary to change the basis
for determining compensation under such agreement from the
calendar year to the Company's fiscal year) (the "1994
Agreement"); provided that in the case of Paul F. Garrison, the
Date of Payment shall be the earlier of (i) the thirtieth day
after negotiations in respect of the collective bargaining
agreement described in Section 4.01(a)(x) of the Disclosure
Schedule are completed and (ii) one year following the Effective
Time of the Merger; provided further that commencing on the later
-69-
of the date of the Closing and July 2, 1995 and continuing during
the post-Merger employment period with respect to each such five
employees, each such five employees 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); and provided, further, that if such employee
shall so request, the aforementioned retirement benefit shall be
paid in a single lump sum in an amount equal to the present value
of the payment stream set forth under Section 2 of the 1994
Agreement. The present value referred to in the preceding
sentence shall be determined by taking the aggregate amount of
the payments that would be due under Section 2 of the 1994
Agreement and reducing such amount by applying a discount rate of
8% per annum against such amount. The parties hereto anticipate
that the one year post-Merger employment period referenced in
this Section would be the maximum duration of any post-Merger
employment period in respect of the five listed employees and
agree that the board of directors of the Company following the
Merger and each such employee may mutually agree on a shorter
period.
SECTION 5.05. Indemnification. (a) For six years after
the Effective Time of the Merger, the Company shall indemnify all
present and former directors or officers of the Company and its
subsidiaries for acts or omissions occurring prior to the
Effective Time of the Merger to the fullest extent now provided
in their respective articles of organization or by-laws
consistent with applicable law, to the extent such acts or
-70-
omissions are uninsured (provided, that to the extent that during
any period insurance does not fully indemnify any person
contemplated to be indemnified in accordance with the terms of
this Section 5.05, the Company shall indemnify such person in
accordance with such terms) and shall, in connection with
defending against any action for which indemnification is
available hereunder and subject to Section 5.05(b) hereof,
reimburse such officers and directors, from time to time upon
receipt of sufficient supporting documentation, for any
reasonable costs and expenses reasonably incurred by such
officers and directors; provided that such reimbursement shall be
conditioned upon such officer's or director's agreement promptly
to return such amounts to the Company if a court of competent
jurisdiction shall ultimately determine that indemnification of
such officer or director is prohibited by applicable law. The
Company will maintain for a period of not less than six years
from the Effective Time of the Merger, the Company's current
directors' and officers' insurance and indemnification policy to
the extent that it provides coverage for events occurring prior
to the Effective Time of the Merger (the "D&O Insurance") for all
persons who are directors and officers of the Company on the date
of this Agreement; provided that the Company shall not be
required to spend in excess of (i) a $300,000 annual premium
therefor, in the event the Company in its sole discretion elects
not to continue any arrangement which, in exchange for an
increased premium, reduces the Company's co-payment obligation
("Allocation Form") or (ii) a $400,000 annual premium therefor,
in the event the Company in its sole discretion elects to
continue the Allocation Form; provided further that if the
-71-
Company would be required to spend per annum in excess of a
$300,000 premium, in the case of clause (i) above, or a $400,000
premium, in the case of clause (ii) above, to obtain insurance
having the maximum available coverage under the current policy,
the Company will be required to spend either $300,000 or
$400,000, as the case may be, to maintain or procure insurance
coverage pursuant hereto, subject to availability of such (or
similar) coverage.
(b) In furtherance of and not in limitation of the
preceding paragraph, the officers and directors of the Company
that are defendants in all litigation commenced by shareholders
of the Company with respect to the Merger and the other
transactions contemplated hereby (the "Subject Litigation"),
shall be entitled to be represented, at the reasonable expense of
the Company (to the extent that insurance does not fully
indemnify such person against such expense), in the Subject
Litigation by one counsel which such counsel shall be selected by
a plurality of such director defendants; provided that the
Company shall not be liable for any settlement effected without
its prior written consent or, prior to the Closing, the consent
of Newco, and that a condition to the indemnification payments
provided in paragraph 5.05(a) shall be that such officer/director
defendant not have settled any Subject Litigation without the
consent of the Company and, prior to the Closing, Newco; and
provided further that the Company and Newco shall have no
obligation hereunder to any officer/director defendant when and
if a court of competent jurisdiction shall ultimately determine
that indemnification of such officer/director defendant in the
manner contemplated hereby is prohibited by applicable law.
-72-
SECTION 5.06. Public Announcements. Neither Newco, on
the one hand, nor the Company, on the other hand, will issue any
press release or public statement with respect to the
transactions contemplated by this Agreement, the Option Agreement
and the Stockholders Agreement, including the Merger, without the
other party's prior consent, except as may be required by
applicable law, court process or by obligations pursuant to any
listing agreement with NASDAQ. In addition to the foregoing,
Newco and the Company will consult with each other before
issuing, and provide each other the opportunity to review and
comment upon, any such press release or other public statements
with respect to such transactions. The parties agree that the
initial press release or releases to be issued with respect to
the transactions contemplated by this Agreement shall be mutually
agreed upon prior to the issuance thereof.
SECTION 5.07. Affiliates. Prior to the Closing Date,
the Company shall deliver to Newco a letter identifying all
persons who are, at the time this Agreement is submitted for
approval to the stockholders of the Company, "affiliates" of the
Company for purposes of Rule 145 under the Securities Act. The
Company shall use its reasonable best efforts to cause each such
person to deliver to Newco on or prior to the Closing Date a
written agreement substantially in the form attached as Exhibit B
hereto.
SECTION 5.08. No Solicitation. Neither the Company nor
any of its subsidiaries shall (whether directly or indirectly
through advisors, agents or other intermediaries), nor shall the
Company or any of its subsidiaries authorize or permit any of its
or their officers, directors, agents, representatives, advisors
-73-
or subsidiaries to (a) solicit, initiate or take any action
knowingly to facilitate the submission of inquiries, proposals or
offers from any person relating to any acquisition or purchase of
a substantial amount of assets of the Company or any of its
Significant Subsidiaries or of over 20% of any class of equity
securities of the Company or any of its subsidiaries or any
tender offer (including a self tender offer) or exchange offer
that if consummated would result in any Person beneficially
owning 20% or more of any class of equity securities of the
Company or any of its subsidiaries, or any merger, consolidation,
business combination, sale of substantially all assets,
recapitalization, liquidation, dissolution or similar transaction
involving the Company or any of its subsidiaries other than the
transactions contemplated by this Agreement, the Option Agreement
and the Stockholders Agreement or any other transaction the
consummation of which would or could reasonably be expected to
impede, interfere with, prevent or materially delay the Merger or
which would or could reasonably be expected to materially dilute
the benefits to Newco of the transactions contemplated hereby
(collectively, "Transaction Proposals") or agree to or endorse
any Transaction Proposal, or (b) enter into or participate in any
discussions or negotiations regarding any of the foregoing, or
furnish to any other person any information with respect to its
business, properties or assets or any of the foregoing, or
otherwise cooperate in any way with, or assist or participate in,
facilitate or encourage, any effort or attempt by any other
person to do or seek any of the foregoing; provided, however,
that the foregoing shall not prohibit the Company from (i)
furnishing information pursuant to an appropriate confidentiality
-74-
letter (provided for informational purposes only to Newco)
concerning the Company and its businesses, properties or assets
to a third party who has made a Transaction Proposal, (ii)
engaging in discussions or negotiations with such a third party
who has made a Transaction Proposal, (iii) following receipt of a
Transaction Proposal, taking and disclosing to its stockholders a
position contemplated by Rule 14e-2(a) under the Exchange Act or
otherwise making disclosure to its stockholders, (iv) following
receipt of a Transaction Proposal, failing to make or withdrawing
or modifying its recommendation referred to in Section 3.01(p),
and/or (v) taking any non-appealable, final action ordered to be
taken by the Company by any court of competent jurisdiction but
in each case referred to in the foregoing clauses (i) through (v)
only to the extent that the Board of Directors of the Company
shall have concluded in good faith on the basis of advice from
outside counsel that such action is required to prevent the Board
of Directors of the Company from breaching its fiduciary duties
to the stockholders of the Company under Alabama law; provided,
further, that the Board of Directors of the Company shall not
take any of the foregoing actions referred to in clauses (i)
through (iv) until after reasonable notice to Newco with respect
to such action and that such Board of Directors shall, to the
extent it may do so without breaching such fiduciary duties,
continue to advise Newco after taking such action and, in
addition, if the Board of Directors of the Company receives a
Transaction Proposal, then the Company shall promptly inform
Newco of the terms and conditions of such proposal and the
identity of the person making it. The Company will immediately
cease and cause to be terminated any existing activities,
-75-
discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing.
SECTION 5.09. Resignation of Directors. Prior to the
Effective Time of the Merger, the Company shall deliver to Newco
evidence satisfactory to Newco of the resignation of all
directors of the Company (other than Ronald G. Bruno), effective
at the Effective Time of the Merger.
SECTION 5.10. Certain Agreements. Neither the Company
nor any subsidiary of the Company will waive or fail to enforce
any provision of any confidentiality or standstill or similar
agreement to which it is a party without the prior written
consent of Newco.
SECTION 5.11. Stop Transfer. The Company acknowledges
and agrees to be bound by and comply with the provisions of the
Stockholders Agreement as if a party thereto with respect to
transfers of record ownership of shares of Company Common Stock,
and agrees to notify the transfer agent for any shares of Company
Common Stock or voting rights certificates and provide such
documentation and do such other things as may be necessary to
effectuate the provisions of such agreement. In the event that
the Option is exercised prior to any termination of the Merger
Agreement, the Company shall take such actions as may be
reasonably necessary so that Newco (or its designee) shall,
subject to applicable law, be entitled at the stockholders
meeting called to vote on the Merger and the Merger Agreement to
vote the shares of Company Common Stock acquired pursuant to the
Option Agreement (including, with respect to such stockholders
meeting, adjourning such meeting, resetting the record date of
such meeting and/or resetting the date of such meeting).
-76-
SECTION 5.12. Golf Tournament. With respect to the
"Bruno's Memorial Classic" Senior PGA Golf Tournament conducted
in Birmingham, Alabama by the Bruno's Memorial Classic Foundation
(the "Golf Tournament"), it is agreed and understood that the
Company shall, for the 1995 and 1996 Golf Tournaments, continue
to provide economic and organizational support, at the same
aggregate level and in the same manner, taken as a whole, to the
Golf Tournament as has been provided to the Golf Tournament by
the Company over the prior three years, including, without
limitation, aid in the solicitation and recruiting of
participation of vendors and suppliers as sponsors and Pro-Am
participants by providing display space in food stores to vendors
and suppliers without cost to the Golf Tournament and by
assisting the Golf Tournament in communicating with those vendors
and suppliers. The Company represents that it has fully and
accurately described to Newco the aggregate level and manner of
economic and organizational support provided to the Golf
Tournaments by the Company over the prior three years.
ARTICLE VI
Conditions Precedent
SECTION 6.01. Conditions to Each Party's Obligation To
Effect the Merger. The respective obligation of each party to
effect the Merger is subject to the satisfaction or waiver on or
prior to the Closing Date of the following conditions:
(a) Company Stockholder Approval. The Company
Stockholder Approval shall have been obtained.
(b) HSR Act. The waiting period (and any extension
thereof) applicable to the Merger under the HSR Act shall have
been terminated or shall have expired.
-77-
(c) No Injunctions or Restraints. No temporary
restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or
other legal restraint or prohibition preventing the
consummation of the Merger shall be in effect; provided,
however, that the parties hereto shall use their best efforts
to have any such injunction, order, restraint or prohibition
vacated.
(d) Form S-4. The Form S-4 shall have become effective
under the Securities Act and shall not be the subject of any
stop order or proceedings seeking a stop order, and any
material "blue sky" and other state securities laws applicable
to the registration and qualification of the Common Stock of
the Company following the Merger shall have been complied
with.
SECTION 6.02. Conditions to Obligations of Newco. The
obligations of Newco to effect the Merger are further subject to
the following conditions:
(a) Representations and Warranties. The representations
and warranties of the Company set forth in this Agreement
shall be true and correct in all material respects in each
case as of the date of this Agreement and as of the Closing
Date as though made on and as of the Closing Date. Newco
shall have received a certificate signed on behalf of the
Company by the chief executive officer and the chief financial
officer of the Company to the effect set forth in this
paragraph.
(b) Performance of Obligations of the Company. The
Company shall have performed the obligations required to be
-78-
performed by it under this Agreement at or prior to the
Closing Date (except for such failures to perform as have not
had or could not reasonably be expected, either individually
or in the aggregate, to have a Material Adverse Effect with
respect to the Company or adversely affect the ability of the
Company to consummate the transactions herein contemplated or
perform its obligations hereunder).
(c) Consents, etc. Newco shall have received evidence,
in form and substance reasonably satisfactory to it, that such
licenses (including, without limitation, the continued
availability of all beer, wine and/or liquor licenses),
permits, consents, approvals, authorizations, qualifications
and orders of governmental authorities and other third parties
as are necessary in connection with the transactions
contemplated hereby have been obtained, except such licenses,
permits, consents, approvals, authorizations, qualifications
and orders which are not, individually or in the aggregate,
material to Newco or the Company or the failure of which to
have received would not (as compared to the situation in which
such license, permit, consent, approval, authorization,
qualification or order had been obtained) materially dilute
the aggregate benefits to Newco of the transactions reasonably
contemplated hereby.
(d) No Litigation. There shall not be pending or
threatened by any Governmental Entity any suit, action or
proceeding (or by any other person any suit, action or
proceeding which has a reasonable likelihood of success), (i)
challenging or seeking to restrain or prohibit the
consummation of the Merger or any of the other transactions
-79-
contemplated by this Agreement or the Stockholders Agreement
or seeking to obtain from Parent, Newco or any of their
affiliates any damages that are material to any such party,
(ii) seeking to prohibit or limit the ownership or operation
by the Company, Parent or any of their respective subsidiaries
of any material portion of the business or assets of the
Company or any of its subsidiaries, to dispose of or hold
separate any material portion of the business or assets of the
Company or any of its subsidiaries, as a result of the Merger
or any of the other transactions contemplated by this
Agreement or the Stockholders Agreement, (iii) seeking to
impose limitations on the ability of Parent or Newco (or any
designee of Newco pursuant to the Option Agreement) to acquire
or hold, or exercise full rights of ownership of, any shares
of Company Common Stock, including, without limitation, the
right to vote the Company Common Stock on all matters properly
presented to the stockholders of the Company or (iv) seeking
to prohibit Parent or any of its subsidiaries from effectively
controlling in any material respect the business or operations
of the Company or its subsidiaries.
(e) Affiliate Letters. Newco shall have received the
agreements referred to in Section 5.07.
(f) Financing. The Company shall have received the
proceeds of financing on terms satisfactory to Newco in an
amount sufficient to consummate the transactions contemplated
by this Agreement, including, without limitation (i) to pay,
with respect to all shares of Company Common Stock in the
Merger, the Cash Election Price pursuant to Section
2.01(c)(ii) (subject to Section 2.03), (ii) to refinance the
-80-
outstanding indebtedness of the Company, including, without
limitation, the Senior Notes, the Credit Agreement and any
other debt to be refinanced, (iii) to pay any fees and
expenses in connection with the transactions contemplated by
this Agreement or the financing thereof and (iv) to provide
for the working capital needs of the Company following the
Merger, including, without limitation, letters of credit.
SECTION 6.03. Conditions to Obligation of the
Company. The obligation of the Company to effect the Merger
is further subject to the following conditions:
(a) Representations and Warranties. The representations
and warranties of Newco set forth in this Agreement shall be
true and correct in all material respects, in each case as of
the date of this Agreement and as of the Closing Date as
though made on and as of the Closing Date. The Company shall
have received a certificate signed on behalf of Newco by an
authorized officer of Newco to the effect set forth in this
paragraph.
(b) Performance of Obligations of Newco. Newco shall
have performed the obligations required to be performed by
them under this Agreement at or prior to the Closing Date
(except for such failures to perform as have not had or could
not reasonably be expected, either individually or in the
aggregate, to have a Material Adverse Effect with respect to
Newco or adversely affect the ability of Newco to consummate
the transactions herein contemplated or perform its
obligations hereunder).
-81-
ARTICLE VII
Termination, Amendment and Waiver
SECTION 7.01. Termination. This Agreement may be
terminated and abandoned at any time prior to the Effective Time
of the Merger, whether before or after approval of matters
presented in connection with the Merger by the stockholders of
the Company:
(a) by mutual written consent of Newco and the Company;
or
(b) by either Newco or the Company if any Governmental
Entity shall have issued an order, decree or ruling or taken
any other action permanently enjoining, restraining or
otherwise prohibiting the Merger and such order, decree,
ruling or other action shall have become final and
nonappealable; or
(c) by either Newco or the Company if the Merger shall
not have been consummated on or before October 31, 1995 (other
than due to the failure of the party seeking to terminate this
Agreement to perform its obligations under this Agreement
required to be performed at or prior to the Effective Time of
the Merger); or
(d) by Newco, if any required approval of the
stockholders of the Company shall not have been obtained by
reason of the failure to obtain the required vote upon a vote
held at a duly held meeting of stockholders or at any
adjournment thereof; provided, however, that unless Newco
shall otherwise notify the Company within two weeks after such
failure to obtain the required vote, this Agreement shall
-82-
automatically terminate without any further action by any of
the parties hereto; or
(e) by Newco, if the Company shall have (1) withdrawn,
modified or amended in any respect adverse to Newco its
approval or recommendation of this Agreement or any of the
transactions contemplated herein, (2) failed as soon as
practicable to mail the Proxy Statement to its stockholders or
failed to include in such statement such recommendation, (3)
recommended any Transaction Proposal from a person other than
Newco or any of its affiliates or (4) resolved to do any of
the foregoing; or
(f) by Newco, if (i) the Company shall have exercised a
right specified in the first proviso to Section 5.08 with
respect to any Transaction Proposal and shall, directly or
through agents or representatives, continue discussions with
any third party concerning such Transaction Proposal for more
than 10 business days after the date of receipt of such
Transaction Proposal; (ii) taken any action described in
clause (v) of the first proviso to Section 5.08; or (iii) (1)
a Transaction Proposal that is publicly disclosed shall have
been commenced, publicly proposed or communicated to the
Company which contains a proposal as to price (without regard
to the specificity of such price proposal) and (2) the Company
shall not have rejected such proposal within 10 business days
of its receipt or the date its existence first becomes
publicly disclosed, if sooner; or
(g) by the Company, if the Company exercises, pursuant
to Section 5.08, the right specified in clause (iv) of the
first proviso to Section 5.08; or
-83-
(h) by Newco, on or before the close of the business on
the later of (x) May 8, 1995 and (y) the tenth calendar day
after all information to be included in the Disclosure
Schedule has been delivered to Newco (the later of such dates,
the "Section 7.01(h) Date"), if Newco and its affiliates shall
not be satisfied in its sole discretion with the results of
its due diligence investigation of the Company and its
subsidiaries. The parties hereby agree and acknowledge that
neither any such investigation nor any failure by Newco to
exercise its right of termination pursuant to this paragraph
(h) shall (i) diminish in any way or otherwise affect the
rights afforded to it pursuant to Section 5.02 or (ii) affect
in any way any representations or warranties of the Company
herein contained or the conditions to the obligations of the
parties hereto.
SECTION 7.02. Effect of Termination. In the event of
termination of this Agreement by either the Company or Newco as
provided in Section 7.01, this Agreement shall forthwith become
void and have no effect, without any liability or obligation on
the part of Newco or the Company, other than the provisions of
Section 3.01(n), the last sentence of Section 5.02(a), the second
sentence of Section 5.11, this Section 7.02, Section 8.02 and
Section 8.07. Nothing contained in this Section shall relieve
any party for any breach of the representations, warranties,
covenants or agreements set forth in this Agreement.
SECTION 7.03. Amendment. This Agreement may be amended
by the parties at any time before or after any required approval
of matters presented in connection with the Merger by the
stockholders of the Company; provided, however, that after any
-84-
such approval, there shall be made no amendment that by law
requires further approval by such stockholders without the
further approval of such stockholders. This Agreement may not be
amended except by an instrument in writing signed on behalf of
each of the parties.
SECTION 7.04. Extension; Waiver. At any time prior to
the Effective Time of the Merger, the parties may (a) extend the
time for the performance of any of the obligations or other acts
of the other parties, (b) waive any inaccuracies in the
representations and warranties contained in this Agreement or in
any document delivered pursuant to this Agreement or (c) subject
to the proviso of Section 7.03, waive compliance with any of the
agreements or conditions contained in this Agreement. Any
agreement on the part of a party to any such extension or waiver
shall be valid only if set forth in an instrument in writing
signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of such rights.
SECTION 7.05. Procedure for Termination, Amendment,
Extension or Waiver. A termination of this Agreement pursuant to
Section 7.01, an amendment of this Agreement pursuant to Section
7.03 or an extension or waiver pursuant to Section 7.04 shall, in
order to be effective, require in the case of Newco or the
Company, action by its Board of Directors or the duly authorized
designee of its Board of Directors.
-85-
ARTICLE VIII
General Provisions
SECTION 8.01. Nonsurvival of Representations and
Warranties. None of the representations and warranties in this
Agreement or in any instrument delivered pursuant to this
Agreement shall survive the Effective Time of the Merger and all
such representations and warranties will be extinguished on
consummation of the Merger and neither the Company nor any
officer, director or employee or shareholder shall be under any
liability whatsoever with respect to any such representation or
warranty after such time. This Section 8.01 shall not limit any
covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time of the Merger.
SECTION 8.02. Fees and Expenses. (a) In addition to
any other amounts which may be payable or become payable pursuant
to any other paragraph of this Section 8.02, the Company shall
(provided that (i) Newco is not then in material breach of its
obligations under this Agreement and (ii) Newco has not exercised
its right of termination pursuant to Section 7.01(h) hereof),
promptly, but in no event later than one business day after the
termination of this Agreement (or from time to time after
Closing), reimburse KKR & Co. for all out-of-pocket expenses and
fees (including, without limitation, fees payable to all banks,
investment banking firms and other financial institutions, and
their respective agents and counsel, and all fees of counsel,
accountants, financial printers, experts and consultants to Newco
and its affiliates), whether incurred prior to, on or after the
date hereof, in connection with the Merger and the consummation
of all transactions contemplated by this Agreement, the Option
-86-
Agreement and the Stockholders Agreement and the financing
thereof; provided that, except as set forth in the next
succeeding proviso or with respect to any reimbursement following
the Closing, in no event shall the Company be required to pay in
excess of an aggregate of $3 million pursuant to this paragraph
(a); and provided further that in the event a fee is payable to
KKR & Co. pursuant to Section 8.02(b) hereof, the Company shall
be required to pay expenses pursuant to this paragraph (a) up to
a maximum of $12.5 million.
(b) (i) If this Agreement shall have been terminated in
accordance with its terms and either of the following shall have
occurred prior to such termination: (A) any corporation
(including the Company or any of its subsidiaries or affiliates),
partnership, person, other entity or "group" (as referred to in
Section 13(d)(3) of the Exchange Act) other than Newco or any of
its affiliates (collectively, "Persons") shall have become the
beneficial owner of more than 20% of the outstanding shares of
Company Common Stock; or (B)(x) any Person (other than Newco or
any of its affiliates) shall have made, or proposed, communicated
or disclosed in a manner which is or otherwise becomes public
(including being known by stockholders of the Company owning of
record or beneficially in the aggregate 5% or more of the
outstanding shares of Company Common Stock) a bona fide intention
to make a Transaction Proposal (including by making such a
Transaction Proposal) and (y) on or prior to October 31, 1996,
the Company either consummates with a Person a transaction the
proposal of which would otherwise qualify as a Transaction
Proposal under Section 5.08 or enters into an agreement with a
Person with respect to a transaction the proposal of which would
-87-
otherwise qualify as a Transaction Proposal under Section 5.08
(whether or not such Person is the Person referred to in clause
(x) above); or
(ii) if this Agreement is terminated pursuant to Section
7.01(e), Section 7.01(f) or Section 7.01(g);
then the Company shall, (1) in the case of clause (b)(i)(A) and
(b)(ii) above, promptly, but in no event later than one business
day after the termination of this Agreement and (2) in the case
of clause (b)(i)(B) above, promptly, but in no event later than
one business day after an event specified in subclause (y)
thereof shall have occurred, pay KKR & Co. a fee of $30 million
in cash, which amount shall be payable in same day funds. No
termination of this Agreement at a time when a fee is reasonably
expected to be payable pursuant to this Section 8.02(b) following
termination of this Agreement shall be effective until such fee
is paid. Only one fee in the aggregate of $30 million shall be
payable pursuant to this Section 8.02(b). No amount payable
pursuant to any of the other provisions of this Section 8.02
shall reduce the amount of the fee payable pursuant to this
paragraph (b).
(c) If the Merger shall be consummated in accordance
with this Agreement, then the Company following the Merger shall
pay to KKR & Co., on the Closing Date, a fee of $15 million in
cash, which amount shall be payable in same day funds. No amount
payable pursuant to any of the other provisions of this Section
8.02 shall reduce the amount of the fee payable pursuant to this
paragraph (c).
-88-
(d) In addition to the other provisions of this Section
8.02, in the event a fee is or becomes payable pursuant to
Section 8.02(b) hereof, the Company agrees promptly, but in no
event later than two business days following written notice
thereof, together with related bills or receipts, to reimburse
KKR & Co. and Newco for all reasonable out-of-pocket costs, fees
and expenses, including, without limitation, the reasonable fees
and disbursements of counsel and the expenses of litigation,
incurred in connection with collecting the expenses pursuant to
paragraph (a) of this Section and the fee pursuant to paragraph
(b) of this Section, as a result of any breach by the Company of
its obligations under this Section 8.02.
(e) Except as provided otherwise in paragraph (a) above,
all costs and expenses incurred in connection with this
Agreement, the Option Agreement and the Stockholders Agreement
and the transactions contemplated hereby and thereby shall be
paid by the party incurring such expenses, except that the
Company shall pay all costs and expenses (i) in connection with
printing and mailing the Proxy Statement and the Form S-4, as
well as all SEC filing fees relating to the transactions
contemplated herein and (ii) of obtaining any consents of any
third party.
SECTION 8.03. Notices. All notices, requests, claims,
demands and other communications under this Agreement shall be in
writing and shall be deemed given if delivered personally or sent
by overnight courier (providing proof of delivery) to the parties
at the following addresses (or at such other address for a party
as shall be specified by like notice):
-89-
(a) if to Newco, to
c/o Kohlberg Kravis Roberts & Co.
9 West 57th Street
New York, New York 10019
Attention: Paul E. Raether
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Attention: David J. Sorkin, Esq.
(b) if to the Company, to
Bruno's, Inc.
800 Lakeshore Parkway
Birmingham, Alabama 35211
Attention: Ronald G. Bruno
with copies to:
Sirote & Permutt
2222 Arlington Avenue South
Birmingham, Alabama 35205
Attention: Richard Cohn, Esq.
SECTION 8.04. Definitions. For purposes of this
Agreement:
(a) an "affiliate" of any person means another person
that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common
control with, such first person;
(b) "knowledge" with respect to the Company means the
actual knowledge of the following officers and employees (as
well as any of their successors) of the Company and its
subsidiaries: Ronald G. Bruno, Glenn J. Griffin, Kenneth J.
Bruno, Paul F. Garrison and R. Michael Conley, and, without
duplication, the employees in charge of environmental, tax,
labor, employee benefits and real estate matters or any of the
-90-
foregoing, in each case after reasonable investigation and
inquiry.
(c) "Material Adverse Change" or "Material Adverse
Effect" means, when used in connection with the Company, any
change or effect that either individually or in the aggregate
with all other such changes or effects is materially adverse
to the business, assets, operations, properties, condition
(financial or otherwise), results of operations or prospects
of the Company and its subsidiaries (including the Ventures)
taken as a whole;
(d) "person" means an individual, corporation,
partnership, joint venture, association, trust, unincorporated
organization or other entity; and
(e) a "subsidiary" of any person means another person,
an amount of the voting securities, other voting ownership or
voting partnership interests of which is sufficient to elect
at least a majority of its Board of Directors or other
governing body (or, if there are no such voting interests, 50%
or more of the equity interests of which) is owned directly or
indirectly by such first person.
SECTION 8.05. Interpretation. When a reference is made
in this Agreement to a Section, Exhibit or Schedule, such
reference shall be to a Section of, or an Exhibit or Schedule to,
this Agreement unless otherwise indicated. The table of contents
and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall
be deemed to be followed by the words "without limitation".
-91-
SECTION 8.06. Counterparts. This Agreement may be
executed in one or more counterparts, all of which shall be
considered one and the same agreement and shall become effective
when one or more counterparts have been signed by each of the
parties and delivered to the other parties.
SECTION 8.07. Entire Agreement; No Third-Party
Beneficiaries. This Agreement and the other agreements referred
to herein constitute the entire agreement, and supersede all
prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter of this Agreement.
This Agreement, other than Sections 5.05 and 8.02, is not
intended to confer upon any person other than the parties any
rights or remedies.
SECTION 8.08. GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF ALABAMA, REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE
GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS.
SECTION 8.09. Assignment. Neither this Agreement nor
any of the rights, interests or obligations under this Agreement
shall be assigned, in whole or in part, by operation of law or
otherwise by any of the parties without the prior written consent
of the other parties. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and
assigns.
SECTION 8.10. Enforcement. The parties 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. It is
-92-
accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions of this
Agreement.
-93-
IN WITNESS WHEREOF, Newco and the Company have caused
this Agreement to be signed by their respective officers
thereunto duly authorized, all as of the date first written
above.
CRIMSON ACQUISITION CORP.
By: /s/ James H. Greene, Jr.
Name: James H. Greene, Jr.
Title: President
BRUNO'S, INC.
By: /s/ Ronald G. Bruno
Name: Ronald G. Bruno
Title: Chairman CEO
-94-
EXHIBIT A
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
BRUNO'S, INC.
STATE OF ALABAMA )
)
COUNTY OF JEFFERSON )
TO THE HONORABLE JUDGE OF PROBATE OF JEFFERSON COUNTY, ALABAMA:
Pursuant to the provisions of Article 10 of Chapter 2B
of Title 10 of the Code of Alabama of 1975 ( 10-2B-10.01, et
seq.), the undersigned corporation executes the following Amended
and Restated Articles of Incorporation:
FIRST: The name of the corporation is Bruno's, Inc.
SECOND: 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 30,000,000 shares of
Common Stock, par value $0.01 each.
-1-
5. The registered office and registered agent of the
Corporation is The Corporation Company, 60 Commerce Street,
Montgomery, AL 36104.
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
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 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
-2-
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 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.
THIRD: The foregoing Amended and Restated Articles of
Incorporation were adopted by the shareholders of the corporation
on ____________, 1995, in the manner prescribed by the Alabama
Business Corporation Act.
-3-
FOURTH: 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 ___________ shares of such
Common Stock outstanding, and the holders of such shares were
entitled to cast one vote per share, or an aggregate of _________
votes. There were _____ votes entitled to be cast by the holders
of the Common Stock of the corporation indisputably represented
at the meeting.
FIFTH: 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 ___________,
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 _________, 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.
Dated this ______ day of ___________ , 1995.
BRUNO'S, INC.
By ________________________________
(Name of Officer Executing Document)
Its _______________________________
This instrument prepared by:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017-3954
-4-
EXHIBIT B
Form of Company Affiliate Letter
Gentlemen:
The undersigned, a holder of shares of Common Stock,
par value $.01 per share ("Company Stock"), of Bruno's, Inc., an
Alabama corporation (the "Company"), is entitled to retain in
connection with the merger (the "Merger") of the Company with
Crimson Acquisition Inc., an Alabama corporation, securities (the
"Securities") of the Company. The undersigned acknowledges that
the undersigned may be deemed an "affiliate" of the Company
within the meaning of Rule 145 ("Rule 145") promulgated under the
Securities Act of 1933 (the "Act"), although nothing contained
herein should be construed as an admission of such fact.
If in fact the undersigned were an affiliate under the
Act, the undersigned's ability to sell, assign or transfer the
Securities retained by the undersigned pursuant to the Merger may
be restricted unless such transaction is registered under the Act
or an exemption from such registration is available. The
undersigned understands that such exemptions are limited and the
undersigned has obtained advice of counsel as to the nature and
conditions of such exemptions, including information with respect
to the applicability to the sale of such securities of Rules 144
and 145(d) promulgated under the Act.
The undersigned hereby represents to and covenants with
the Company that the undersigned will not sell, assign or
transfer any of the Securities retained by the undersigned
-1-
pursuant to the Merger except (i) pursuant to an effective
registration statement under the Act, (ii) in conformity with the
volume and other limitations of Rule 145 or (iii) in a
transaction which, in the opinion of independent counsel
reasonably satisfactory to the Company or as described in a
"no-action" or interpretive letter from the Staff of the
Securities and Exchange Commission (the "SEC"), is not required
to be registered under the Act.
In the event of a sale or other disposition by the
undersigned of Securities pursuant to Rule 145, the undersigned
will supply the Company with evidence of compliance with such
Rule, in the form of a letter in the form of Annex I hereto. The
undersigned understands that the Company may instruct its
transfer agent to withhold the transfer of any Securities
disposed of by the undersigned, but that upon receipt of such
evidence of compliance the transfer agent shall effectuate the
transfer of the Securities sold as indicated in the letter.
The undersigned acknowledges and agrees that
appropriate legends will be placed on certificates representing
Securities retained by the undersigned in the Merger or held by a
transferee thereof, which legends will be removed by delivery of
substitute certificates upon receipt of an opinion in form and
substance reasonably satisfactory to the Company from independent
counsel reasonably satisfactory to the Company to the effect that
such legends are no longer required for purposes of the Act.
The undersigned acknowledges that (i) the undersigned
has carefully read this letter and understands the requirements
hereof and the limitations imposed upon the distribution, sale,
-2-
transfer or other disposition of Securities and (ii) the receipt
by Newco of this letter is an inducement and a condition to
Newco's obligations to consummate the Merger.
Very truly yours,
Dated:
-3-
ANNEX I
TO EXHIBIT B
[Name] [Date]
On __________________ the undersigned sold the
securities ("Securities") of the Company (the "Company")
described below in the space provided for that purpose (the
"Securities"). The Securities were retained by the undersigned
in connection with the merger of Crimson Acquisition Corp. with
and into Bruno's, Inc.
Based upon the most recent report or statement filed by
the Company with the Securities and Exchange Commission, the
Securities sold by the undersigned were within the prescribed
limitations set forth in paragraph (e) of Rule 144 promulgated
under the Securities Act of 1933, as amended (the "Act").
The undersigned hereby represents that the Securities
were sold in "brokers' transactions" within the meaning of
Section 4(4) of the Act or in transactions directly with a
"market maker" as that term is defined in Section 3(a)(38) of the
Securities Exchange Act of 1934, as amended. The undersigned
further represents that the undersigned has not solicited or
arranged for the solicitation of orders to buy the Securities,
and that the undersigned has not made any payment in connection
-1-
with the offer or sale of the Securities to any person other than
to the broker who executed the order in respect of such sale.
Very truly yours,
[Space to be provided for description of securities]
-2-
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT dated as of April 20, 1995 by
and between Crimson Acquisition Corp., an Alabama Corporation
("Newco"), and Bruno's, Inc., an Alabama corporation (the
"Company").
RECITALS
Concurrently herewith, Newco, a wholly owned subsidiary
of BI Associates L.P., a Delaware limited partnership ("Parent"),
and the Company are entering into an Agreement and Plan of Merger
of even date herewith (the "Merger Agreement"; capitalized terms
used but not defined herein shall have the meanings set forth in
the Merger Agreement) pursuant to which Newco will be merged with
and into the Company (the "Merger"), whereby each share of common
stock, par value $.01 per share, of the Company ("Company Common
Stock") issued and outstanding immediately prior to the Effective
Time of the Merger will be converted into either (A) the right to
retain, at the election of the holder thereof and subject to the
terms of the Merger Agreement, common stock, par value $.01 per
share, of the Company or (B) the right to receive cash, other
than (i) shares of Company Common Stock owned, directly or
indirectly, by the Company or any subsidiary of the Company or by
Parent, Newco or any other subsidiary of Parent and (ii)
Dissenting Shares.
As a condition to Newco's willingness to enter into the
Merger Agreement, Newco requires that the Company agree, and
believing it to be in the best interests of the Company, the
Company has agreed, among other things, to grant to Newco the
Option (as hereinafter defined).
2
AGREEMENT
To implement the foregoing and in consideration of the
mutual agreements contained herein, the parties agree as follows:
I. Option to Purchase Shares.
A. Grant of Option. In consideration for the payment
of $100 and other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the Company hereby
grants to Newco (or its designee) an irrevocable option to
purchase up to 15,541,570 newly issued shares of Company Common
Stock (the "Shares"), on the terms and subject to the conditions
set forth herein (the "Option"). At the time that the Option is
exercised, Newco shall be entitled to designate whether any or
all of the Shares shall be newly issued Shares or, if the Company
then holds shares of Company Common Stock in treasury, Shares of
treasury stock of the Company.
B. Exercise of Option.
1. The Option may be exercised by Newco (or its
designee), in whole or in part, at any time, or from time to
time, during the period beginning on the date hereof and ending
on the Expiration Date. As used herein, the term "Expiration
Date" means the first to occur of (i) the Effective Time of the
Merger and (ii) April 30, 1996. In the event that the Option is
exercised prior to the termination of the Merger Agreement, the
Company shall take such actions as may be reasonably necessary so
that Newco (or its designee) shall, subject to applicable law, be
entitled at the stockholders meeting to vote on the Merger and
the Merger Agreement to vote the shares of Company Common Stock
issued upon exercise of such Option (including, with respect to
3
such stockholders meeting, adjourning such meeting, resetting the
record date of such meeting and/or resetting the date of such
meeting).
2. In the event Newco (or its designee) wishes to
exercise the Option, Newco shall send a written notice to the
Company of its intention to so exercise the Option (a "Notice"),
specifying the number of Shares to be purchased, and the place,
time and date of the closing of such purchase (the "Closing Date"
or the "Closing"), which date shall not be less than two business
days nor more than ten business days from the date on which a
Notice is delivered; provided, that the respective obligations of
each party hereto to consummate the purchase of the Shares at the
Closing shall be subject to the satisfaction or waiver on or
prior to the Closing Date of the following conditions: (i) such
purchase would not otherwise violate or cause the violation of,
any applicable law or regulations (including, the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act") and (ii) no statute, rule, regulation, decree, order or
injunction shall have been promulgated, enacted, entered into, or
enforced by any governmental agency or authority or court which
prohibits delivery of the Shares, whether temporary, preliminary
or permanent (provided, however, that the parties hereto shall
use their best efforts to have any such order, decree or
injunction vacated or reversed); and provided further, that the
obligation of Newco to purchase the Shares at the Closing is
further subject to the condition that such purchase would not
otherwise violate or cause the violation of the rules of the
NASDAQ National Market System ("NASDAQ"). In the event the
4
Closing is delayed as a result of the immediately preceding
sentence, the Closing Date shall be within five business days
following the cessation of such violation, potential violation,
statute, rule, regulation, decree, order or injunction, as the
case may be; provided that, notwithstanding any prior notice of
intention to exercise the Option, Newco shall not be obligated to
purchase any Shares pursuant hereto after the date six months
following the date of such Notice.
3. At any Closing, the Company shall deliver to Newco
(or its designee) all of the Shares to be purchased by delivery
of a certificate or certificates evidencing such Shares in the
denominations designated by Newco in the Notice.
C. Payments. 1. In the event Newco exercises the
Option, Newco (or, at Newco's option, its designee) shall, at any
Closing, deliver to the Company an amount in cash equal to $12.50
(the "Exercise Price") multiplied by the number of Shares
purchased pursuant to this Section 1, which will be paid by wire
transfer of same day funds to an account designated by the
Company.
2. In the event that a payment is actually made to
KKR & Co. pursuant to Section 8.02(b) of the Merger Agreement,
the Exercise Price shall be adjusted upward (retroactively if
necessary and net of any taxes or brokerage fees paid or payable
in connection with the sale, tender or exchange of shares by
Newco or its designee) to reflect (i) with respect to any Shares
actually sold, tendered, or exchanged in any third party
transaction that triggered a payment pursuant to Section 8.02(b)
of the Merger Agreement, the price per share (subject to the
5
calculation principles set forth in the next succeeding sentence)
actually paid to holders of Company Common Stock as a result of
any such third party transaction and (ii) with respect to any
Shares sold, tendered or exchanged to another party or parties by
Newco (or its designee) other than pursuant to such third party
transaction, the price per share (subject to the calculation
principles set forth in clause (i) of the next succeeding
sentence) actually paid to Newco (or its designee) by such other
party or parties in consideration for such Shares (the "Exercise
Price Adjustment"). To the extent the "price per share" referred
to in the preceding sentence consists in whole or in part of non-
cash consideration, it shall be based on the trading market value
thereof or if there is no trading market for such consideration,
the fair market value as determined by an independent investment
banker jointly selected by Newco and the Company. The Exercise
Price Adjustment shall be payable with respect to shares actually
sold, tendered or exchanged promptly following receipt of the
consideration therefor (and, if necessary, the valuation thereof
and the good faith estimation by Newco of any taxes which it
expects to be payable), and Newco agrees promptly, but in no
event later than two business days following such event, to
notify the Company of the receipt of such consideration.
D. Listing of Shares. In the event Newco exercises
the Option herein granted and receives newly issued Shares in
connection therewith, the Company shall use its best efforts to
take, or cause to be taken, all actions necessary to list the
Shares on NASDAQ.
II. Representations and Warranties.
6
A. Representations and Warranties of Newco. Newco
hereby represents and warrants to the Company as follows:
1. Organization, Standing and Corporate Power. Newco
is a corporation duly organized, validly existing and in
good standing under the laws of the State of Alabama and has
the requisite corporate power and authority to carry on its
business as now being conducted. Newco is duly qualified or
licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such
jurisdictions where the failure to be so qualified or
licensed (individually or in the aggregate) would not have a
material adverse effect on Newco.
2. Authority; Noncontravention. Newco has all
requisite corporate power and authority to enter into this
Agreement and to consummate the transactions contemplated by
this Agreement. The execution and delivery of this
Agreement by Newco and the consummation by Newco of the
transactions contemplated by this Agreement have been duly
authorized by all necessary corporate action on the part of
Newco. This Agreement has been duly executed and delivered
by and constitutes a valid and binding obligation of Newco,
enforceable against Newco in accordance with its terms. The
execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated by this
Agreement and compliance with the provisions of this
Agreement will not, conflict with, or result in any breach
7
or violation of, or default (with or without notice or lapse
of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation
or to loss of a material benefit under, or result in the
creation of any Lien upon any of the properties or assets of
Newco under, (i) the certificate of incorporation, or
by-laws of Newco, (ii) any loan or credit agreement, note,
bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license
applicable to Newco or their respective properties or assets
or (iii) subject to the governmental filings and other
matters referred to in the following sentence, any judgment,
order, decree, statute, law, ordinance, rule or regulation
applicable to Newco or their respective properties or
assets, other than, in the case of clauses (ii) and (iii),
any such conflicts, breaches, violations, defaults, rights,
losses or Liens that individually or in the aggregate would
not (x) have a material adverse effect on Newco, (y)
materially impair the ability of Newco to perform their
respective obligations under this Agreement or (z) prevent
the consummation of any of the transactions contemplated by
this Agreement. No consent, approval, order or
authorization of, or registration, declaration or filing
with, or notice to, any Governmental Entity is required by
or with respect to Newco in connection with the execution
and delivery of this Agreement by Newco or the consummation
by Newco, as the case may be, of any of the transactions
contemplated by this Agreement, except for (i) filings under
8
the HSR Act, if applicable, (ii) the filing with the SEC of
such reports under Sections 13 and 16 of the Exchange Act as
may be required in connection with this Agreement and the
transactions contemplated by this Agreement and (iii) such
other consents, approvals, orders, authorizations,
registrations, declarations, filings or notices as may be
required under the "takeover" or "blue sky" laws of various
states.
3. Distribution. Any Shares acquired by Newco (or any
designee of Newco) upon exercise of the Option will not be
taken with a view to the public distribution thereof and
will not be transferred or otherwise disposed of except in a
transaction registered or exempt from registration under the
Securities Act.
B. Representations and Warranties of the Company.
The Company hereby represents and warrants to Newco as follows:
1. Organization, Standing and Corporate Power. The
Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Alabama
and has the requisite corporate power and authority to carry
on its business as now being conducted. The Company is duly
qualified or licensed to do business and is in good standing
in each jurisdiction in which the nature of its business or
the ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such
jurisdictions where the failure to be so qualified or
licensed (individually or in the aggregate) would not have a
material adverse effect on the Company.
9
2. Option Shares. Subject to Section 2.2(c), the
Company has taken all necessary corporate and other action
to authorize, and to permit it to deliver, and at all times
from the date hereof until such time as the obligation to
deliver Shares hereunder terminates, will have reserved for
delivery (in the case of Shares of treasury stock) or
issuance (in the case of newly issued Shares), upon exercise
of the Option, 15,541,570 shares of Company Common Stock.
All of such Shares are (in the case of Shares of treasury
stock), or shall be (in the case of newly issued Shares),
duly authorized, validly issued, fully paid and
nonassessable with no personal liability attached to the
ownership thereof and are approved for listing on NASDAQ (in
the case of Shares of treasury stock). Upon delivery of
such Shares, such Shares shall be free and clear of all
claims, Liens, encumbrances, security interests and charges
of any nature whatsoever and shall not be subject to any
preemptive right of any stockholder of the Company.
3. Authority; Noncontravention. The Company has the
requisite corporate and other power and authority to enter
into this Agreement and to consummate the transactions
contemplated by this Agreement. The execution and delivery
of this Agreement by the Company and the consummation by the
Company of the transactions contemplated by this Agreement
have been duly authorized by all necessary corporate action
on the part of the Company. This Agreement has been duly
executed and delivered by the Company and constitutes a
valid and binding obligation of the Company, enforceable
10
against the Company in accordance with its terms. The
execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated by this
Agreement and compliance with the provisions of hereof will
not, conflict with, or result in any breach or violation of,
or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of
a material benefit under, or result in the creation of any
Lien upon any of the properties or assets of the Company or
any of its subsidiaries under, (i) the Articles of
Incorporation, as amended, or By-laws, as amended, of the
Company or the comparable charter or organizational
documents of any of its subsidiaries, (ii) any loan or
credit agreement, note, note purchase agreement, bond,
mortgage, indenture, lease or other agreement, instrument,
permit, concession, franchise or license applicable to the
Company or any of its subsidiaries or their respective
properties or assets or (iii) subject to the governmental
filings and other matters referred to in the following
sentence, any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or
any of its subsidiaries or their respective properties or
assets, other than, in the case of clauses (ii) and (iii),
any such conflicts, breaches, violations, defaults, rights,
losses or Liens that individually or in the aggregate would
not (x) have a material adverse effect on the Company,
(y) impair the ability of the Company to perform its
11
obligations under this Agreement or (z) prevent the
consummation of any of the transactions contemplated by this
Agreement. No consent, approval, order or authorization of,
or registration, declaration or filing with, or notice to,
any Governmental Entity, is required by or with respect to
the Company or any of its subsidiaries in connection with
the execution and delivery of this Agreement by the Company
or the consummation by the Company of the transactions
contemplated hereby, except for (i) filings under the HSR
Act, if applicable, (ii) the filing with the SEC of such
reports under Sections 13 and 16 of the Exchange Act, as may
be required in connection with this Agreement.
III. Adjustment Upon Changes in Capitalization. In the
event of any change in the number of issued and outstanding
shares of Company Common Stock by reason of any stock dividend,
split-up, merger, recapitalization, combination, exchange of
shares, spin-off or other change in the corporate or capital
structure of the Company which could have the effect of diluting
or otherwise diminishing Newco's rights hereunder (including any
issuance of Company Common Stock or other equity security of the
Company at a price below the fair value thereof), the number and
kind of Shares or other securities subject to the Option and the
Exercise Price shall be appropriately adjusted so that Newco
shall receive upon exercise (or, if such a change occurs between
exercise and Closing, upon Closing) of the Option the number and
kind of shares or other securities or property that Newco would
have received in respect of the Shares that Newco is entitled to
purchase upon exercise of the Option if the Option had been
12
exercised (or the purchase thereunder had been consummated, as
the case may be) immediately prior to such event. The rights of
Newco under this Section shall be in addition to, and shall in no
way limit, its rights against the Company for breach of the
Merger Agreement.
IV. Registration of Shares Under the Securities Act.
(a) If the Option is exercised and if Newco (or its designees)
shall so request in writing, the Company shall use its best
efforts to effect, from time to time, the registration under the
Securities Act or any successor statute then in effect, and any
applicable state law (a "Demand Registration"), of such number of
Shares owned by Newco (or its designee) as Newco (or its
designee) shall request and to keep such Demand Registration
effective for a period of not less than 90 days, unless, in the
written opinion of counsel to the Company, which opinion shall be
delivered to Newco and which shall be satisfactory in form and
substance to Newco and its counsel, such Demand Registration is
not required in order to lawfully sell and distribute such Shares
in the manner contemplated by Newco (or its designee). The
Company may delay the filing of a Demand Registration required
hereunder for a single period of up to 90 days if it believes in
good faith that it would be disadvantageous to the Company for
such Demand Registration to be effected at the time requested by
Newco (or its designee).
(b) In lieu of effecting any Demand Registration for
Newco (or its designee), the Company may use its best efforts to
effect a "shelf" registration statement on appropriate forms
pursuant to Rule 415 under the Securities Act (or any similar
13
rule that may be adopted) with respect to such number of Shares
owned by Newco (or its designee) as Newco (or its designee) shall
request and to keep such registration continuously effective (a
"Shelf Registration" and, together with any Demand Registration,
a "Registration"). If Newco (or its designee) desires to sell or
otherwise transfer any Shares pursuant to the Shelf Registration,
Newco (or its designee) shall notify the Company of its intention
to do so by written notice received by the Company at least two
business days prior to such sale or transfer. Newco (or its
designee) may thereafter effect such sale or transfer within 15
days of the delivery of such notice unless at least one business
day prior thereto the Company elects to delay such sale or
transfer (for a single period of up to 90 days) as a result of a
good faith determination that it would be disadvantageous to the
Company to prepare a Prospectus or any amendment to the
Registration Statement with respect to the Shelf Registration to
permit such sale or transfer.
(c) The Company shall use its best efforts to cause
Shares registered pursuant to a Registration to be designated for
listing on the NASDAQ National Market System or any national
securities exchange on which the Company Common Stock is then
listed, subject to official notice of issuance, which notice
shall be given by the Company upon issuance. The out-of-pocket
expenses incurred by the Company and Newco (or its designee) in
connection with any requested Registration pursuant to this
Section 4 (including the registration fee payable to the SEC in
connection with such Registration) shall be borne by the Company.
14
The Company shall have no obligation hereunder after four
Registrations pursuant to this Section 4 have been effected.
V. Public Announcements. The initial press release
with respect to the transactions contemplated hereby shall be
mutually satisfactory to the parties and thereafter, except as
may be required by applicable securities laws, court process or
by obligations pursuant to any listing agreement with a
securities exchange, no party shall issue any press release or
make any public statements relating to the transactions
contemplated hereby, including the exercise of the Option,
without the consent of the Company on the one hand and Newco on
the other, which consent will not be unreasonably withheld.
VI. Best Efforts; Further Assurances. (a) From time
to time, at the other party's request and without further
consideration, each party hereto shall execute and deliver such
additional documents and take all such further action as may be
necessary or desirable to consummate the transactions
contemplated by this Agreement, including, without limitation, to
vest in Newco (or its designee) good title to any Shares
purchased hereunder.
(b) The Company and Newco shall, as promptly as
practicable, file notification and report forms under the HSR Act
with the Federal Trade Commission (the "FTC") and the Antitrust
Division of the Department of Justice (the "Antitrust Division")
and make any other necessary filings with the applicable
Governmental Entities related to the transactions contemplated by
this Agreement and shall use their best efforts to respond as
promptly as practicable to all inquiries received from the FTC or
15
the Antitrust Division or such other Governmental Entities for
additional information or documentation. The Company shall,
subject to the condition that the transactions contemplated
herein actually occur, make any and all divestitures and
undertakings required in order to comply with the antitrust
requirements or laws of any governmental entity, including the
HSR Act, in connection with the transactions contemplated by this
Agreement; provided that no such divestiture or undertaking shall
be made unless acceptable to Newco. The costs and expenses of
obtaining and complying with the antitrust requirements of the
FTC, the Antitrust Division or any other Governmental Entity
shall be paid by the Company.
VII. Survival of Certain Provisions. The respective
representations and warranties of the Company and Newco contained
herein or in any certificates or other documents delivered at or
prior to any Closing shall not be deemed waived or otherwise
affected by any investigation made by the other party hereto,
shall survive the closing of the transactions contemplated hereby
for one year, and the agreements contained herein shall survive
the closing of the transactions contemplated hereby. The Option
shall survive any termination of the Merger Agreement.
VIII. Miscellaneous.
A. Entire Agreement; Assignment. This Agreement
(i) constitutes the entire agreement among the parties with
respect to the subject matter hereof and supersedes all other
prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof and
(ii) shall not be assigned by operation of law or otherwise,
16
provided that Newco may assign its rights and obligations
hereunder to Parent or any direct or indirect wholly owned
subsidiary of Parent, but no such assignment shall relieve Newco
of its obligations hereunder if such assignee does not perform
such obligations. Subject to the foregoing, this Agreement will
be binding upon, inure to the benefit of, and be enforceable by
the parties hereto and their respective successors (including any
successor in interest by merger, sale of all or substantially all
of the assets or otherwise) and assigns.
B. Amendments. This Agreement may not be modified,
amended, altered or supplemented, except upon the execution and
delivery of a written agreement executed by the parties hereto.
C. Notices. All notices, requests, claims, demands
and other communications under this Agreement shall be in writing
and shall be deemed given if delivered personally or sent by
overnight courier (providing proof of delivery) to the parties at
the following addresses (or at such other address for a party as
shall be specified by like notice):
1. if to Newco, to
c/o Kohlberg Kravis Roberts & Co.
9 West 57th Street
New York, New York 10019
Attention: Paul E. Raether
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Attention: David J. Sorkin, Esq.
17
2. if to the Company, to
Bruno's, Inc.
800 Lakeshore Parkway
Birmingham, Alabama 35211
Attention: Ronald G. Bruno
with copies to:
Sirote & Permutt
2222 Arlington Avenue South
Birmingham, Alabama 35205
Attention: Richard Cohn, Esq.
D. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New
York, regardless of the laws that might otherwise govern under
applicable principles of conflicts of laws thereof.
E. Enforcement. The parties 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. It is accordingly
agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement.
F. Counterparts. This Agreement may be executed in
two counterparts, each of which shall be deemed to be an
original, but both of which shall constitute one and the same
Agreement.
G. Descriptive Headings. The descriptive headings
used herein are inserted for convenience of reference only and
are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
18
H. Severability. Whenever possible, each provision
or portion of any provision of this Agreement will be interpreted
in such manner as to be effective and valid under applicable law
but if any provision or portion of any provision of this
Agreement is held to be invalid, illegal or unenforceable in any
respect under any applicable law or rule in any jurisdiction,
such invalidity, illegality or unenforceability will not affect
any other provision or portion of any provision in such
jurisdiction, and this Agreement will be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or
unenforceable provision or portion of any provision had never
been contained herein. Without limiting the generality of the
foregoing, in the event that the number of Shares issuable upon
exercise of the Option is held to be invalid, illegal or
unenforceable for any reason (including as a result of the
failure to obtain any required vote of stockholders to authorize
such issuance), the number of Shares so issuable shall be reduced
to that number which could validly and legally be issued.
I. Definitions. For purposes of this Agreement:
1. an "affiliate" of any person means another person
that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under
common control with, such first person;
2. "beneficially own" or "beneficial ownership" with
respect to any securities shall mean having "beneficial
ownership" of such securities (as determined pursuant to
Rule 13d-3 under the Exchange Act), including pursuant to
any agreement, arrangement or understanding, whether or not
19
in writing. Without duplicative counting of the same
securities by the same holder, securities beneficially owned
by a person shall include securities beneficially owned by
all other persons with whom such person would constitute a
"group" as described in Section 13(d)(3) of the Exchange
Act.
3. "material adverse effect" means, when used in
connection with the Company, any effect that either
individually or in the aggregate with all other such effects
is materially adverse to the business, assets, properties,
condition (financial or otherwise), results of operations or
prospects of the Company and its subsidiaries taken as a
whole;
4. "person" means an individual, corporation,
partnership, joint venture, association, trust,
unincorporated organization or other entity; and
5. a "subsidiary" of any person means another person,
an amount of the voting securities, other voting ownership
or voting partnership interests of which is sufficient to
elect at least a majority of its Board of Directors or other
governing body (or, if there are no such voting interests,
50% or more of the equity interests of which) is owned
directly or indirectly by such first person.
IN WITNESS WHEREOF, the Company and Newco have caused
this Agreement to be duly executed as of the day and year first
above written.
BRUNO'S, INC.
By: /s/ Ronald G. Bruno
Name: Ronald G. Bruno
Title: Chairman CEO
CRIMSON ACQUISITION CORP.
By: /s/ James H. Greene, Jr.
Name: James H. Greene, Jr.
Title: President
