FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15 (d) of
The Securities and Exchange Act of 1934
QUARTER ENDED: OCTOBER 26, 1996 COMMISSION FILE NO. 0-6544
BRUNO'S, INC.
STATE OF INCORPORATION: ALABAMA I.R.S. EMPLOYER I.D. NO. 63-0411801
ADDRESS OF PRINCIPAL EXECUTIVE OFFICE (INCLUDING ZIP CODE)
800 Lakeshore Parkway, Birmingham, Alabama 35211
REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE
(205) 940-9400
OUTSTANDING COMMON STOCK AS OF OCTOBER 26, 1996 is 25,323,680
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15 (d) of
the Securities Exchange Act of 1934 during the preceding 12
months, and (2) has been subject to such filing requirements
for the past 90 days.
Yes (X) No ( )
<PAGE>
Commission File No. 0-6544
BRUNO'S, INC.
Index
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets at
October 26, 1996 and January 27, 1996 2
Condensed Consolidated Statements of Operations for the
Thirty-nine (39) and Thirteen (13) Week Periods Ended
October 26, 1996 and the Thirty-eight (38) and Twelve
(12) Week Periods Ended September 23, 1995 3
Condensed Consolidated Statements of Cash Flows for the
Thirty-nine (39) Week Period Ended October 26, 1996
and the Thirty-eight (38) Week Period Ended September
23, 1995 4
Notes to Condensed Consolidated Financial Statements 5-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Change in Securities 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 17
1
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION Commission File No. 0-6544
Item 1. Financial Statements
BRUNO'S, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF OCTOBER 26, 1996 AND JANUARY 27, 1996
(In Thousands Except Share and Per Share Amounts)
- - --------------------------------------------------------------------------------------------
<CAPTION>
October 26, January 27,
1996 1996
(unaudited)
--------------- ---------------
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents $ 37,937 $ 57,387
Receivables 25,755 25,294
Inventories, net of LIFO reserve of $9,305 and
and $8,505, respectively 200,257 215,589
Prepaid expenses 11,060 11,225
Deferred income taxes 7,352 6,733
------------ ------------
Total current assets 282,361 316,228
------------ ------------
Property and equipment, net 431,616 491,664
Noncurrent assets:
Deferred income taxes 8,035 --
Intangibles and other assets, net 51,994 65,254
------------ ------------
Total noncurrent assets 60,029 65,254
------------ ------------
Total $ 774,006 $ 873,146
============ ============
LIABILITIES AND DEFICIENCY IN NET ASSETS:
Current liabilities:
Current maturities of long-term debt and capitalized
lease obligations $ 1,844 $ 1,938
Accounts payable 171,694 167,283
Accrued income taxes -- 583
Accrued payroll and related expenses 16,864 17,975
Closed store accrual 25,077 10,600
Other accrued expenses 49,319 52,136
------------ ------------
Total current liabilities 264,798 250,515
------------ ------------
Noncurrent liabilities:
Long-term debt 789,077 834,223
Capitalized lease obligations 16,752 17,963
Deferred income taxes -- 21,082
Other noncurrent liabilities 39,280 30,706
------------ ------------
Total noncurrent liabilities 845,109 903,974
------------ ------------
Deficiency in net assets:
Common Stock, $.01 par value, 60,000,000
shares authorized; 25,323,680 and 25,007,015
issued and outstanding, respectively 253 250
Paid-in capital (587,984) (592,096)
Shareholders' notes receivable (1,941) --
Retained earnings 253,771 310,503
------------ ------------
Total deficiency in net assets (335,901) (281,343)
------------ ------------
Total $ 774,006 $ 873,146
============ ============
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
2
<PAGE>
<TABLE>
Commission File No. 0-6544
BRUNO'S, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THIRTY-NINE AND THIRTEEN WEEK PERIODS ENDED OCTOBER 26, 1996
AND THE THIRTY-EIGHT AND TWELVE WEEK PERIODS ENDED SEPTEMBER 23, 1995
(In Thousands Except Share and Per Share Amounts)
- - -------------------------------------------------------------------------------------------------------------
(UNAUDITED)
<CAPTION>
October 26, September 23, October 26, September 23,
1996 1995 1996 1995
(39 Weeks) (38 Weeks) (13 Weeks) (12 Weeks)
------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
NET SALES $ 2,146,720 $ 2,087,008 $ 694,223 $ 655,180
COST AND EXPENSES:
Cost of products sold 1,631,668 1,608,583 530,826 508,597
Store operating, selling and administrative expenses 406,614 402,583 134,586 119,719
Merger expenses -- 29,610 -- 29,610
Loss on divestiture of stores 88,588 -- 88,588 --
Depreciation and amortization 42,762 38,934 14,654 12,897
Interest expense, net 63,071 22,069 20,558 11,097
------------ ------------ ------------ ------------
Total cost and expenses 2,232,704 2,101,779 789,212 681,920
------------ ------------ ------------ ------------
Loss before provision for income tax benefit
and extraordinary item (85,984) (14,771) (94,989) (26,740)
INCOME TAX BENEFIT (30,427) (277) (33,849) (4,506)
------------ ------------ ------------ ------------
Loss before extraordinary item (55,557) (14,494) (61,140) (22,234)
EXTRAORDINARY ITEM, NET 1,175 3,742 513 3,742
------------ ------------ ------------ ------------
Net loss $ (56,732) $ (18,236) $ (61,653) $ (25,976)
============ ============ ============ ============
LOSS PER COMMON SHARE:
Loss before extraordinary item $ (2.21) $ (0.21) $ (2.43) $ (0.40)
Extraordinary Item, net (0.05) (0.05) (0.02) (0.07)
------------ ------------ ------------ ------------
Net loss $ (2.26) $ (0.26) $ (2.45) $ (0.47)
============ ============ ============ ============
CASH DIVIDENDS PER COMMON SHARE $ -- $ 0.30 $ -- $ --
============ ============ ============ ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 25,151,810 70,398,39 25,196,838 55,005,000
============ ============ ============ ============
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
3
<PAGE>
<TABLE>
Commission File No. 0-6544
BRUNO'S, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THIRTY-NINE WEEK PERIOD ENDED OCTOBER 26, 1996
AND THE THIRTY-EIGHT WEEK PERIOD ENDED SEPTEMBER 23, 1995
(Amounts In Thousands)
- - --------------------------------------------------------------------------------------------
(UNAUDITED)
<CAPTION>
October 26, September 23,
1996 1995
(39 Weeks) (38 Weeks)
-------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (56,732) $ (18,236)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Extraordinary item, net 1,175 3,742
Loss on divestiture of stores 88,588 --
Depreciation and amortization 42,762 38,934
LIFO provision 400 1,037
Change in assets and liabilities (13,929) 74,731
------------ ------------
Total adjustments 118,996 118,444
------------ ------------
Net cash provided by operating activities 62,264 100,208
------------ ------------
INVESTING ACTIVITIES:
Proceeds from sale of property 1,823 6,447
Capital expenditures (39,260) (36,672)
------------ ------------
Net cash used in investing activities (37,437) (30,225)
------------ ------------
FINANCING ACTIVITIES:
Proceeds from issuance of term loan facilities -- 470,000
Proceeds from issuance of senior subordinated notes -- 400,000
Debt issuance costs -- (40,880)
Redemption of common stock -- (879,956)
Reductions of long-term debt (46,451) (245,515)
Sale of common stock 2,174 250,004
Dividends paid -- (10,060)
------------ ------------
Net cash used in financing activities (44,277) (56,407)
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (19,450) 13,576
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 57,387 5,486
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 37,937 $ 19,062
============ ============
<FN>
See notes to condensed consolidated financial statements.
</FN>
</TABLE>
4
<PAGE>
Commission File No. 0-6544
BRUNO'S, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THIRTY-NINE AND THIRTEEN WEEK PERIODS ENDED OCTOBER 26, 1996
AND THE THIRTY-EIGHT AND TWELVE WEEK PERIODS ENDED SEPTEMBER 23, 1995
(In Thousands Except Share and Per Share Amounts)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements
include the accounts of Bruno's, Inc. and its wholly owned
subsidiaries. Significant inter-company balances and transactions
have been eliminated in consolidation.
In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments
necessary for a fair statement of the consolidated financial
position and results of operations of the Company for the
interim periods. In December 1995, the Company changed its
fiscal year to a 52 or 53 week year ending on the Saturday
closest to January 31 from a 52 or 53 week year ending on the
Saturday closest to June 30.
Due to the change in year end described above, the consolidated
statements of operations compare the thirty-nine (39) and thirteen
(13) week periods ended October 26, 1996 to the thirty-eight (38)
and twelve (12) week periods ended September 23, 1995. The results
of operations of the Company for the thirty-nine weeks ended October
26, 1996, are not necessarily indicative of the results that may be
expected for the entire year.
2. LOSS PER SHARE
Loss per share was computed based on the weighted average
number of common shares outstanding during the respective periods. At
October 26, 1996, 25,323,680 shares were outstanding. Stock options
and warrants outstanding are common stock equivalents but were excluded
from loss per common share computations because their effect either was
not material or would be antidilutive to the calculation of loss per share.
3. CONTINGENCIES
In 1991, the Company received a favorable termination letter with respect
to the termination of the employee pension plan of a supermarket chain
acquired by the Company in 1989. Pursuant to that termination,
distributions were made to all participants of that employee pension plan.
After all of the benefit liabilities were paid, remaining plan assets
of approximately $2.7 million were transferred to the Company as a
reversion of excess pension assets. On June 15, 1992, the Company
received a letter from the Pension Benefit Guaranty Corporation
("PBGC") contending that inappropriate actuarial assumptions were used
to determine the value of the benefits distributed and that additional
distributions must be made to numerous former participants in the plan.
In August 1994, the Company filed suit in the U.S. District
Court for the Northern District of Alabama challenging the
PBGC's determination. In April 1995, the District Court
entered summary judgment against the Company and in favor of the PBGC.
5
<PAGE>
Commission File No. 0-6544
The Company appealed the District Court's ruling to the
U.S. Court of Appeals for the Eleventh Circuit, which ruled against
the Company. The Company is currently making additional distributions
to the former participants in the plan. At October 26, 1996, the
Company had established a reserve of $1.6 million in its consolidated
financial statements to cover the additional distributions.
In addition, the Company is a party to various legal and
taxing authority proceedings incidental to its business.
In the opinion of management, the ultimate liability with
respect to these actions will not materially affect the
financial position or results of operations of the Company.
On May 23, 1996, the Company entered into an agreement to
purchase Seessel Holdings, Inc. ("SHI"), which owns and
operates a retail supermarket business in Memphis,
Tennessee, for $62 million in cash. SHI had formerly
entered into an agreement with Fleming Companies, Inc.
("Fleming") under which SHI gave Fleming the right of
first refusal to elect to acquire SHI on the same terms
as the agreement with the Company. A dispute regarding
whether Fleming properly exercised its right of first
refusal was resolved on November 20, 1996 in the
Company's favor. The Company plans to complete the
acquisition of SHI by mid-December 1996. The Company
may pursue other acquisition opportunities as and
when they become available.
4. DIVESTITURE PROGRAM
During the period ended October 26, 1996, management
evaluated the Company's market strategy, geographic
positioning and store level return on assets. As a
result of this evaluation, the Company developed a formal
program in the quarter ended October 26, 1996 to sell or
close the Company's distribution center in Vidalia,
Georgia and approximately 47 stores (the "Divestiture
Program"). The 47 stores included in the Divestiture
Program consist of 33 Piggly Wiggly stores in Georgia,
nine FoodMax stores in Georgia and South Carolina, two
Food World stores in Florida, one Food World store in
Mississippi, one Food World store in Alabama, and one
Food Fair store in Alabama. The Divestiture Program will
effect approximately 3,000 employees.
The Company retained an investment banking firm to
contact potential buyers and to structure and manage a
competitive bidding process. As of December 10, 1996,
the Company has completed transactions involving the
sale of 27 of the 47 stores included in the Divestiture
Program. Sale proceeds from the transactions totaled
$11.7 million plus a payment for counted inventory of $7.4 million.
The Company has executed a contract for the sale of two
additional stores for anticipated sale proceeds of $2.3
million plus a payment for counted inventory. It is
expected that this transaction will be closed in late
December 1996. Additionally, the Company recently completed
going out of business sales on the remaining 18 stores for
which buyers were not found. These 18 stores had total
inventory at cost of $7.7 million on October 26, 1996.
The Vidalia Distribution Center, which had total
inventory at cost of $16.3 million on October 26, 1996,
has also been closed.
The accompanying statements of operations for the thirty-
nine and thirteen weeks ended October 26, 1996 include a
charge of $88.6 million for costs associated with the
Divestiture Program. The $88.6 million consists of a
$55.0 million loss on the divestiture of fixed assets and
intangibles, net of proceeds of $14 million (of which
6
<PAGE>
Commission File No. 0-6544
$5.6 million was applied to goodwill), $18.5 million in future
rental payments, $8.4 million in inventory markdowns and
$6.7 million in severance costs, professional fees and
other miscellaneous expenses. See Management's
Discussion and Analysis for the operating results of the
stores included in the Divestiture Program for the thirty-
nine and thirteen week periods ended October 26, 1996.
7
<PAGE>
<TABLE>
Commission File No. 0-6544
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of significant factors affecting the Company's earnings during the
periods included in the accompanying condensed consolidated statements of operations. The thirty-nine (39) and thirteen (13)
week periods ended October 26, 1996 are compared to the thirty-eight (38) and twelve (12) week periods ended
September 23, 1995, and accordingly, certain of the period-to-period changes are a consequence of such difference.
A table showing the percentage of net sales represented by certain items in the Company's condensed consolidated
statements of operations follows:
<CAPTION>
COMPARISON OF:
----------------------------------------------------------
October 26, September 23, October 26, September 23,
1996 1995 1996 1995
(39 Weeks) (38 Weeks) (13 Weeks) (12 Weeks)
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales 100.00% 100.00% 100.00% 100.00%
Cost of products sold 76.01% 77.08% 76.46% 77.63%
Store operating, selling, and administrative expenses 18.94% 19.29% 19.39% 18.27%
---------- ---------- ---------- ----------
EBITDA 5.05% 3.63% 4.15% 4.10%
Merger expenses -- 1.42% -- 4.52%
Loss on divestiture of stores 4.13% -- 12.76% --
Depreciation and amortization 1.99% 1.87% 2.11% 1.97%
Interest expense, net 2.94% 1.06% 2.96% 1.69%
---------- ---------- ---------- ----------
Loss before provision for income tax benefit
and extraordinary item -4.01% -0.71% -13.68% -4.08%
Income tax benefit -1.42% -0.01% -4.88% -0.69%
Extraordinary item, net 0.05% 0.18% 0.07% 0.57%
---------- ---------- ---------- ----------
Net loss -2.64% -0.87% -8.88% -3.96%
========== ========== ========== ==========
</TABLE>
<TABLE>
A summary of the period to period changes in certain items included in the condensed statements of operations follows:
<CAPTION>
Increase (Decrease)
Thirty-nine weeks ended Thirteen weeks ended
October 26, 1996 and thirty-eight October 26, 1996 and twelve
weeks ended September 23, 1995 weeks ended September 23, 1995
--------------------------------------------------------------------------
Dollars in Thousands Except Per Share Amounts
$ % Change $ % Change
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales 59,712 2.86% 39,043 5.96%
Cost of products sold 23,085 1.44% 22,229 4.37%
Store operating, selling, and administrative expenses 4,031 1.00% 14,867 12.42%
----------- -----------
EBITDA 32,596 42.98% 1,947 7.25%
Merger expenses (29,610) -100.00% (29,610) -100.00%
Loss on divestiture of stores 88,588 -- 88,588 --
Depreciation and amortization 3,828 9.83% 1,757 13.62%
Interest expense, net 41,002 185.79% 9,461 85.26%
----------- -----------
Loss before provision for income tax benefit
and extraordinary item (71,213) 482.11% (68,249) 255.23%
Income tax benefit (30,150) 10884.48% (29,343) 651.20%
Extraordinary item, net (2,567) -68.60% (3,229) -86.29%
----------- -----------
Net loss (38,496) 211.10% (35,677) 137.35%
===========
Loss per common share before
extraordinary items (2.00) 952.38% (2.03) 507.50%
Loss per common share (2.00) 769.23% (1.98) 421.28%
=========== ===========
</TABLE>
8
<PAGE>
<TABLE>
Commission File No. 0-6544
A table showing separately the Company's continuing operations and the stores to be sold or closed follows:
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE
CONTINUING OPERATIONS VERSUS THE STORES TO BE DIVESTED
FOR THE THIRTY-NINE AND THIRTEEN WEEK PERIODS ENDED OCTOBER 26, 1996
(Amounts In Thousands)
- - ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Thirty-nine (39) Week Period Thirteen (13) Week Period
Ended October 26, 1996 Ended October 26, 1996
----------------------------------------- ----------------------------------------
Continuing Stores to be Total Continuing Stores to be Total
Operations Divested Company Operations Divested Company
------------- ------------- ------------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 1,941,020 $ 205,700 $ 2,146,720 $ 628,244 $ 65,979 $ 694,223
Cost of products sold 1,477,420 154,248 1,631,668 482,473 48,353 530,826
Store operating, selling, and administrative
expenses 355,280 51,334 406,614 117,766 16,820 134,586
------------ ------------ ------------ ------------ ----------- ----------
EBITDA 108,320 118 108,438 28,005 806 28,811
Loss on divestiture of stores -- 88,588 88,588 -- 88,588 88,588
Depreciation and amortization 37,056 5,706 42,762 12,706 1,948 14,654
------------ ------------ ----------- ------------ ----------- -----------
Operating Income (loss) $ 71,264 $ (94,176) $ (22,912) $ 15,299 $ (89,730) $ (74,431)
============ ============ =========== ============ =========== ===========
Thirty-nine (39) Week Period Thirteen (13) Week Period
Ended October 26, 1996 Ended October 26, 1996
----------------------------------------- ----------------------------------------
Continuing Stores to be Total Continuing Stores to be Total
Operations Divested Company Operations Divested Company
------------- ------------- ------------- ------------- ------------- -----------
Net sales 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
Cost of products sold 76.12% 74.99% 76.01% 76.80% 73.29% 76.46%
Store operating, selling, and administrative
expenses 18.30% 24.96% 18.94% 18.75% 25.49% 19.39%
------------ ------------ ----------- ------------ ----------- -----------
EBITDA 5.58% 0.06% 5.05% 4.46% 1.22% 4.15%
Loss on divestiture of stores -- 43.07% 4.13% -- 134.27% 12.76%
Depreciation and amortization 1.91% 2.77% 1.99% 2.02% 2.95% 2.11%
------------ ------------ ----------- ------------ ----------- -----------
Operating Income (loss) 3.67% -45.78% -1.07% 2.44% -136.00% -10.72%
============ ============ =========== ============ =========== ===========
</TABLE>
9
<PAGE>
BRUNO'S, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
COMPARISON OF OPERATIONS FOR THE THIRTY-NINE WEEK PERIOD
ENDED OCTOBER 26, 1996 TO THE THIRTY-EIGHT WEEK PERIOD ENDED
SEPTEMBER 23, 1995 (UNAUDITED)
Net Sales
Net sales increased $59.7 million or 2.9% for the period
ended October 26, 1996, as compared to the period ended
September 23, 1995. Excluding the impact of the thirty-
ninth week in the period ended October 26, 1996, sales
increased $6.5 million or 0.3%. The Company did not report
results of operations for the thirty-nine week period ended
October 28, 1995; however, same store sales decreased 0.4%
for the period ended October 26, 1996 compared to the period
ended October 28, 1995.
Same store sales for the operations of the Company excluding
the stores to be sold or closed in the fourth quarter
increased 0.3% for the period ended October 26, 1996
compared to the period ended October 28, 1995. Same store
sales for the stores to be sold or closed decreased 7.2% for
the same period.
Gross Profit
Gross profit (net sales less cost of products sold) as a
percentage of net sales was 24.0% in the period ended
October 26, 1996, as compared to 22.9% in the period ended
September 23, 1995. The increase in gross profit was
primarily due to improved buying and pricing practices
resulting from the implementation of a new distribution
center ordering system.
Gross profit for the operations of the Company excluding the
stores to be sold or closed in the fourth quarter was 23.9%
for the period ending October 26, 1996. Gross profit for
the stores to be sold or closed was 25.0%.
Store Operating, Selling and Administrative Expenses
Store operating, selling and administrative expenses as a
percentage of net sales was 18.9% for the period ended
October 26, 1996, as compared to 19.3% for the period ended
September 23, 1995. The decline was primarily the result of
an unusual adjustment recorded in the period ended
September 23, 1995 to increase the self-insurance reserve
by $22.2 million.
Excluding the self-insurance adjustment, store operating,
selling and administrative expenses as a percentage of net
sales increased to 18.9% for the period ended October 26,
1996 from 18.2% for the period ended September 23, 1995 due
to costs associated with increased promotional activities.
10
<PAGE>
Commission File No. 0-6544
Because the stores being sold or closed during the fourth
quarter are typically smaller volume stores, they tend to
have higher store operating, selling and administrative
expenses as a percentage of net sales. For the period ended
October 26, 1996, store operating, selling and administrative
expenses as a percentage of sales were 25.0% for the stores
being sold or closed compared to 18.3% for the Company's
continuing operations.
Merger Expenses
On August 18, 1995, Crimson Acquisition Corp. was merged
into and with the Company (the "Merger"). Merger expenses
recorded in the period ended September 23, 1995 are related
to the Merger. These expenses consist primarily of
professional and advisory fees as well as payments to
certain Company officers, other employees and directors
pursuant to employment and option agreements.
Earnings Before Interest, Taxes, Depreciation, and
Amortization (EBITDA)
EBITDA, excluding the impact of the loss on the divestiture,
increased $32.6 million or 43.0% in the period ended October
26, 1996 compared to the period ended September 23, 1995.
The period ended September 23, 1995 included the adjustment
to increase the Company's self-insurance reserve.
EBITDA for the operations of the Company excluding the
stores to be sold or closed in the fourth quarter was
$108,320 for the period ended October 26, 1996 compared to
$118 for the stores being sold or closed for the same
period.
Interest Expense, Net
The $41.0 million increase in net interest expense for the
period ended October 26, 1996, compared to the period ended
September 23, 1995 is attributable to financing incurred in
connection with Merger.
Loss on Divestiture of Stores
During the period ended October 26, 1996, management
evaluated the Company's market strategy, geographic
positioning and store level return on assets. As a result
of this evaluation, the Company developed a formal program
in the quarter ended October 26, 1996 to sell or close the
Company's distribution center in Vidalia, Georgia and
approximately 47 stores (the "Divestiture Program"). The 47
stores included in the Divestiture Program consist of 33
Piggly Wiggly stores in Georgia, nine FoodMax stores in
Georgia and South Carolina, two Food World stores in
Florida, one Food World store in Mississippi, one Food World
store in Alabama, and one Food Fair store in Alabama. The
Divestiture Program will effect approximely 3,000 employees.
The Company retained an investment banking firm to contact
potential buyers and to structure and manage a competitive
bidding process. As of December 10, 1996, the Company has
completed transactions involving the sale of 27 of the 47
stores included in the Divestiture Program. Sale proceeds
from the transactions totaled $11.7 million plus
11
<PAGE>
Commission File No. 0-6544
a payment for counted inventory of $7.4 million. The Company
has executed a contract for the sale of two additional stores
for anticipated sale proceeds of $2.3 million plus a payment for
counted inventory. It is expected that this transaction will be
closed in late December 1996. Additionally, the Company
recently completed going out of business sales on the
remaining 18 stores for which buyers were not found. These
18 stores had total inventory at cost of $7.7 million on
October 26, 1996. The Vidalia Distribution Center, which
had total inventory at cost of $16.3 million on October 26,
1996, has also been closed.
The accompanying statement of operations for the thirty-nine
week period ended October 26, 1996 includes a charge of
$88.6 million for costs associated with the Divestiture
Program. The $88.6 million consists of a $55.0 million loss
on the divestiture of fixed assets and intangibles, net of
proceeds of $14 million (of which $5.6 million was applied
to goodwill), $18.5 million in future rental payments, $8.4
million in inventory markdowns and $6.7 million in severance
costs, professional fees and other miscellaneous expenses.
Income Taxes
The Company's effective income tax benefits during the
periods ended October 26, 1996 and September 23, 1995
reflect the loss before provision for income taxes and
extraordinary items.
Extraordinary Item, Net
In the period ended October 26, 1996, the Company prepaid
$45 million in principal amount of its $475 million term
loan facility entered into in connection with the Merger.
As a result of this repayment, the related debt issuance
costs of $1,175 (net of tax of $720) were written off in the
period ended October 26, 1996. In the period ended
September 23, 1995, the Company terminated an interest rate
swap agreement and wrote off debt acquisition costs. As a
result of these activities, $3,742 (net of tax of $2,294)
was written off in the period ended September 23, 1995.
COMPARISON OF OPERATIONS FOR THE THIRTEEN WEEK PERIOD ENDED
OCTOBER 26, 1996 TO THE TWELVE WEEK PERIOD ENDED SEPTEMBER
23, 1995 (UNAUDITED)
Net Sales
Net sales increased $39.0 million or 6.0% in the thirteen-
week period ended October 26, 1996 as compared to the twelve-
week period ended September 23, 1995. Excluding the impact
of the thirteenth week in the period ended October 26, 1996,
sales decreased $14.2 million or 2.2%. The Company did not
report results of operations for the thirteen-week
period ended October 28, 1995; however, same store sales
decreased 2.3% for the thirteen-week period ended October
26, 1996 as compared to the thirteen-week period ended
October 28, 1995 due to a number of recent new store
openings by competitors in the Company's trading areas.
Same store sales for the operations of the Company excluding
the stores to be sold or closed in the fourth quarter
decreased 1.8% for the period ended October 26, 1996
compared to the period ended October 28, 1995. Same store
sales for the stores to be sold or closed decreased 6.3% for
the same period.
12
<PAGE>
Commission File No. 0-6544
Gross Profit
Gross profit (net sales less cost of products sold) as a
percentage of net sales was 23.5% in the period ended
October 26, 1996, as compared to a gross profit percentage
of 22.4% for the period ended September 23, 1995. The
increase in gross profit was primarily due to improved
buying and pricing practices resulting from the
implementation of a new distribution center ordering system.
Gross profit for the Company's continuing operations was
23.2% for the period ended October 26, 1996. Gross profit
for the stores to be sold or closed was 26.7%.
Store Operating, Selling and Administrative Expenses
Store operating, selling and administrative expenses as a
percentage of net sales was 19.4% for the period ended
October 26, 1996, as compared to 18.3% for the period ended
September 23, 1995. The increase was primarily due to costs
associated with increased promotional activities.
Because the stores being sold or closed during the fourth
quarter are typically smaller volume stores, they tend to
have higher store operating, selling and administrative
expenses as a percentage of net sales. For the period ended
October 26, 1996, store operating, selling and administrative
expenses as a percentage of net sales was 25.5% for the
stores being sold or closed compared to 18.8% for the
Company's continuing operations.
Merger Expenses
Merger expenses recorded in the period ended September 23,
1995 are related to the Merger. These expenses consist
primarily of professional and advisory fees as well as
payments to certain Company officers, other employees and
directors pursuant to employment and option agreements.
Earnings Before Interest, Taxes, Depreciation, and
Amortization (EBITDA)
EBITDA, excluding the impact of the loss on the divestiture,
increased $1.9 million or 7.2% in the period ended October
26, 1996 compared to the period ended September 23, 1995 due
to the additional week in the current year's period.
EBITDA for the operations of the Company excluding the
stores to be sold or closed in the fourth quarter was
$28,005 for the period ended October 26, 1996 compared to a
$806 for the stores being sold or closed for the same
period.
Loss on Divestiture of Stores
The accompanying statement of operations for the thirteen
week period ended October 26, 1996 includes a charge of
$88.6 million for costs associated with the Divestiture
Program. The $88.6 million consists of a $55.0 million loss
on the divestiture of fixed assets and intangibles, net of
proceeds of $14 million (of which $5.6 million was applied
to goodwill), $18.5 million in future rental payments, $8.4
million in inventory markdowns and $6.7 million in severance
costs, professional fees and other miscellaneous expenses.
13
<PAGE>
Commission File No. 0-6544
Interest Expense, Net
The $9.5 million increase in net interest expense for the
period ended October 26, 1996, compared to the period ended
September 23, 1995 is attributable to financing incurred in
connection with the Merger.
Income Taxes
The Company's effective income tax benefits for the periods
ended October 26, 1996 and September 23, 1995 reflect the
loss before provision for income taxes and extraordinary
items.
Extraordinary Item, Net
In the period ended October 26, 1996, the Company prepaid
$20 million in principal amount of its $475 million term
loan facility entered into in connection with the Merger.
As a result of this repayment, the related debt issuance
costs of $513 (net of tax of $315) were written off in the
period ended October 26, 1996. In the period ended
September 23, 1995, the Company terminated an interest rate
swap agreement and wrote off debt acquisition costs. As a
result of these activities, $3,742 (net of tax of $2,294)
were written off in the period ended September 23, 1995.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has funded working capital
requirements, capital expenditures and other cash
requirements primarily through cash flow from operations.
Operating activities generated $62.3 million and $100.2
million, respectively, in cash in each of the
periods ended October 26, 1996 and September 23, 1995. The
Company believes that operating cash flows will be
sufficient to fund store expansion and working capital
needs; however, if the Company needs additional cash, it has
a $125 million undrawn revolving credit facility available.
There were no borrowings outstanding under this facility
during the thirty-nine week period ended October 26, 1996.
Cash flows used in investing activities were $37.4 million
and $30.2 million for the thirty-nine week period ended
October 26, 1996 and the thirty-eight week period ended
September 23, 1995, respectively. Proceeds from the sale of
certain property totaled $1.8 million during the thirty-nine
week period ended October 26, 1996 compared to $6.4 million
during the thirty-eight week period ended September 23,
1995. Capital expenditures were $39.3 in the thirty-nine
week period ended October 26, 1996 compared to $36.6 million
in the thirty-eight week period ended September 23, 1995.
The Company's capital expenditures are primarily related to the
opening of new and replacement stores and investments in
purchasing and warehousing systems technology. The Company
believes that capital expenditures for the remainder of
fiscal 1996 will be financed through cash flows from
operations, existing cash balances and, if necessary,
borrowings under its revolving credit facility.
14
<PAGE>
Commission File No. 0-6544
The primary use of cash in financing activities during the
thirty-nine week period ended October 26, 1996, was $46.5
million in long-term debt repayments, of which $45 million
was a prepayment under the term loan facility. The Company
also generated $2.2 million through sales of shares of the
Company's common stock to executives of the Company.
The Company's financing arrangements contain certain
restrictions that limit its ability to make future
borrowings beyond the amounts currently available and to pay
dividends.
On May 23, 1996, the Company entered into an agreement to
purchase Seessel Holdings, Inc. ("SHI"), which owns and
operates a retail supermarket business in Memphis,
Tennessee, for $62 million in cash. SHI had formerly
entered into an agreement with Fleming Companies, Inc.
("Fleming") under which SHI gave Fleming the right of
first refusal to elect to acquire SHI on the same terms
as the agreement with the Company. A dispute regarding
whether Fleming properly exercised its right of first
refusal was resolved on November 20, 1996 in the Company's
favor. The Company plans to complete the acquisition of
SHI by mid-December. The acquisition will be financed
through cash flows from operations, existing cash
balances and borrowings under the Company's revolving credit
facility. The Company may pursue other acquisition
opportunities as and when they become available.
On October 26, 1996, the Company announced the Divestiture
Program. As of the date hereof, the Divestiture Program is
substantially complete. See note 4 to the Company's
consolidated financial statements for the thirty-nine and
thirteen week periods ended October 26, 1996 for a
discussion of the Divestiture Program.
15
<PAGE>
Commission File No. 0-6544
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
In 1991, the Company received a favorable termination letter with respect
to the termination of the employee pension plan of a supermarket chain
acquired by the Company in 1989. Pursuant to that termination,
distributions were made to all participants of that employee pension plan.
After all of the benefit liabilities were paid, remaining plan assets
of approximately $2.7 million were transferred to the Company as a
reversion of excess pension assets. On June 15, 1992, the Company
received a letter from the Pension Benefit Guaranty Corporation
("PBGC") contending that inappropriate actuarial assumptions were used
to determine the value of the benefits distributed and that additional
distributions must be made to numerous former participants in the plan.
In August 1994, the Company filed suit in the U.S. District
Court for the Northern District of Alabama challenging the
PBGC's determination. In April 1995, the District Court
entered summary judgment against the Company and in favor of the PBGC.
The Company appealed the District Court's ruling to the
U.S. Court of Appeals for the Eleventh Circuit, which ruled against
the Company. The Company is currently making additional distributions
to the former participants in the plan. At October 26, 1996, the
Company had established a reserve of $1.6 million in its consolidated
financial statements to cover the additional distributions.
In addition, the Company is a party to various legal and
taxing authority proceedings incidental to its business.
In the opinion of management, the ultimate liability with
respect to these actions will not materially affect the
financial position or results of operations of the Company.
Item 2. Change In Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
16
<PAGE>
Commission File No. 0-6544
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Description
------- ---------------
10.36 Employment Agreement, dated September 12, 1996,
between the Company and Walter M. Grant.
10.37 Employment Agreement, dated September 12, 1996,
between the Company and James J. Hagan.
10.38 Employment Agreement, dated September 12, 1996,
between the Company and Laura Hayden.
10.39 Form of Management Stockholder's Agreement, dated
September 30, 1996, between the Company and each of
Walter M. Grant, James J. Hagan and Laura Hayden.
10.40 Form of Non-Qualified Stock Option Agreement,
dated as of September 30, 1996, between the Company
and each of Walter M. Grant, James J. Hagan and
Laura Hayden.
10.41 Schedule of Terms of Management Stockholder's
Agreements and Non-Qualified Stock Option Agreements
executed by each of Walter M. Grant, James J. Hagan
and Laura Hayden.
27 Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K
None
17
<PAGE>
Commission File No. 0-6544
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, as amended, the Registrant has duly caused this
report to be signed on its behalf by the undersigned
thereunto duly authorized.
BRUNO'S, INC.
_________________
James J. Hagan,
Senior Vice President-Finance
and Chief Financial Officer
Dated: December 10, 1996
18
<PAGE>
<TABLE>
Commission File No. 0-6544
BRUNO'S, INC.
FORM 10-Q
(For Quarter Ended October 26, 1996)
INDEX OF EXHIBITS
-------------------
<CAPTION>
Exhibit Number Description Numbered Pages
- - ----------------------------------------------------------------------------------
<S> <C> <C>
10.36 Employment Agreement, dated September 12, 1996,
between the Company and Walter M. Grant. 1-12
10.37 Employment Agreement, dated September 12, 1996,
between the Company and James J. Hagan. 1-11
10.38 Employment Agreement, dated September 12, 1996,
between the Company and Laura Hayden. 1-13
10.39 Form of Management Stockholder's Agreement,
dated as of September 30, 1996, between the Company
and each of Walter M. Grant, James J. Hagan, and 1-19
Laura Hayden.
10.40 Form of Non-Qualified Stock Option Agreement,
dated as of September 30, 1996, between the Company
and each of Walter M. Grant, James J. Hagan, and 1-12
Laura Hayden.
10.41 Schedule of Terms of Management Stockholder's Agreements 1
and Non-Qualified Stock Option Agreements executed
by each of Walter M. Grant, James J. Hagan, and
Laura Hayden.
27 Financial Data Schedule
19
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-Mos
<FISCAL-YEAR-END> Jan-27-1996
<PERIOD-START> Jan-28-1996
<PERIOD-END> Oct-27-1996
<CASH> 37,937
<SECURITIES> 0
<RECEIVABLES> 25,755
<ALLOWANCES> 0
<INVENTORY> 200,257
<CURRENT-ASSETS> 282,361
<PP&E> 431,616
<DEPRECIATION> 42,762
<TOTAL-ASSETS> 774,006
<CURRENT-LIABILITIES> 264,798
<BONDS> 400,000
<COMMON> 253
0
0
<OTHER-SE> (335,901)
<TOTAL-LIABILITY-AND-EQUITY> 774,006
<SALES> 2,146,720
<TOTAL-REVENUES> 2,146,720
<CGS> 1,631,668
<TOTAL-COSTS> 1,631,668
<OTHER-EXPENSES> 495,202
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 63,071
<INCOME-PRETAX> (85,984)
<INCOME-TAX> (30,427)
<INCOME-CONTINUING> (55,557)
<DISCONTINUED> 0
<EXTRAORDINARY> 1,175
<CHANGES> 0
<NET-INCOME> (56,732)
<EPS-PRIMARY> (2.26)
<EPS-DILUTED> (2.26)
</TABLE>
Commission File No. 0-6544
EMPLOYMENT AGREEMENT
AGREEMENT, made September 12, 1996, by and between
BRUNO'S, INC., an Alabama corporation (the "Company"), and WALTER
M. GRANT ("Executive").
RECITALS
In order to induce Executive to serve as an executive
officer of the Company, the Company desires to provide Executive
with compensation and other benefits on the terms and conditions
set forth in this Agreement.
Executive is willing to accept such employment and
perform services for the Company, on the terms and conditions
hereinafter set forth.
It is therefore hereby agreed by and between the
parties as follows:
1. Employment.
1.1 Subject to the terms and conditions of this
Agreement, the Company agrees to employ Executive during the
term hereof as its Senior Vice President, General Counsel,
and Secretary.
1.2 Subject to the terms and conditions of this
Agreement, Executive hereby accepts employment as Senior Vice
President, General Counsel and Secretary of the Company and
agrees to devote his full working time and efforts, to the best
of his ability, experience and talent, to the performance of
services, duties and responsibilities in connection therewith.
2. Term of Employment. Executive's term of employment
under this Agreement commenced on June 17, 1996 and, subject to the
1
<PAGE>
Commission File No. 0-6544
terms hereof, shall terminate on the earlier of (i) June 16, 1999
(the "Termination Date") or (ii) termination of Executive's
employment pursuant to this Agreement (alternatively, the "Term");
provided, however, that any termination of employment by Executive
(other than for death or Permanent Disability) may only be made upon
30 days prior written notice to the Company.
3. Compensation.
3.1 Salary. During the Term, the Company shall pay
Executive a base salary ("Base Salary") at the rate of $240,000
per annum. Base Salary shall be payable in accordance with the
ordinary payroll practices of the Company, but no less frequently
than monthly. Any increase in Base Salary shall be in the
reasonable discretion of the Company and, as so increased, shall
constitute "Base Salary" hereunder.
3.2 Annual Bonus. In addition to his Base Salary,
Executive shall be paid an annual bonus (the "Bonus") during the
term of his employment hereunder with a target amount equal to
50% of Base Salary (the "Target Bonus") and a maximum amount
equal to 100% of Base Salary based on performance criteria
determined by the Company in its reasonable discretion.
3.3 Compensation Plans and Programs. Executive shall be
eligible to participate in any compensation plan or program maintained
by the Company in which other senior executives of the Company
participate on terms comparable to those applicable to such other
senior executives.
2
<PAGE>
Commission File No. 06544
3.4 Relocation Allowance. To assist the Executive with his
relocation to the Birmingham, Alabama area, the Company agrees to pay to the
Executive a relocation allowance in the amount of $50,000. Such
payment shall be made upon the execution of this Agreement.
4. Employee Benefits.
4.1 Employee Benefit Programs, Plans and Practices.
The Company shall provide Executive during the term of his
employment hereunder with coverage under all employee pension and
welfare benefit programs, plans and practices (commensurate with
his positions in the Company and to the extent permitted under
any employee benefit plan) in accordance with the terms thereof,
which the Company makes available to its senior executives.
4.2 Vacation and Fringe Benefits. Executive shall be
entitled to twenty (20) business days paid vacation in each
calendar year, which shall be taken at such times as are
consistent with Executive's responsibilities hereunder. Unless
otherwise approved by the Company, any vacation days not taken in
any calendar year shall be forfeited without payment therefor.
In addition, Executive shall be entitled to the perquisites and
other fringe benefits, including, without limitation, a Company
automobile, made available to senior executives of the Company,
commensurate with his position with the Company.
5. Expenses. Executive is authorized to incur
reasonable expenses in carrying out his duties and
responsibilities under this Agreement, including, without
3
<PAGE>
Commission File No. 0-6544
limitation, expenses for travel and similar items related to such
duties and responsibilities. The Company will reimburse Executive
for all such expenses upon presentation by Executive from time to
time of appropriately itemized and approved (consistent with the
Company's policy) accounts of such expenditures.
6. Termination of Employment. The Company may terminate
Executive's employment at any time for any reason.
6.1 Termination Not for Cause or for Good Reason. (a)
If Executive's employment is terminated (i) by the Company other
than for Cause (as defined in this Section 6.1) or (ii) by
Executive for Good Reason (as defined in this Section 6.1) prior
to the Termination Date, Executive shall receive a severance
payment equal to twelve month's Base Salary, as in effect
immediately prior to the event giving rise to such termination,
payable in accordance with the ordinary payroll practices of the
Company, but no less frequently than monthly following such
termination of employment. In addition, the Company shall pay to
Executive any earned but unpaid bonus of Executive with respect
to the year preceding his termination.
(b) For purposes of this Agreement, "Good Reason" shall mean
any of the following (without Executive's express prior written
consent):
(i) Any material breach by the Company of any
provision of this Agreement, including a demotion by
the Company in Executive's position or the assignment
to Executive of duties or responsibilities which are
materially inconsistent with the duties or
responsibilities contemplated by Section 1 of this
Agreement (except, in either case, in connection with
the termination of Executive's employment for Cause, as
a result of Permanent Disability, as a result of
Executive's death or by Executive other than for Good
Reason); or
4
<PAGE>
Commission File No. 0-6544
(ii) A reduction by the Company in Executive's
Base Salary, other than a reduction which is part of a
general salary reduction program affecting senior
executives of the Company and which reduction is not,
on average, greater than the salary reduction (as a
percentage of Base Salary) of other senior executives
of the Company.
(c) For purposes of this Agreement, "Cause" mean any
of the following:
(i) willful malfeasance or willful misconduct by Executive in
connection with his employment;
(ii) continuing refusal by Executive to perform his
duties hereunder or any lawful direction of the Chief
Executive Officer of the Company ("CEO"), within 10 days
after notice of any such refusal to perform such duties or
direction was given to Executive;
(iii) any breach of the provisions of Section 13 of
this Agreement by Executive or any other material breach of
this Agreement by Executive; or
(iv) the commission by Executive of (A) any felony or (B) a
misdemeanor involving moral turpitude.
(d) For purposes of this Agreement, "Permanent
Disability" shall mean a disability that would entitle Executive
to receive benefits under the Company's long-term disability plan
applicable to senior executive officers as in effect from time to
time, which prevents the Executive from performing his duties
hereunder for 180 consecutive days or more.
6.2 Voluntary Termination by Executive; Discharge for
Cause; Death or Disability. (a) In the event that Executive's
employment is terminated (i) by the Company for Cause; (ii) by
Executive other than for Good Reason or (iii) as a result of the
Executive's Permanent Disability or death, prior to the Termination
Date, Executive shall only be entitled to receive the amounts
5
<PAGE>
Commission File No. 0-6544
already earned and accrued, including Base Salary through the date
of termination and any earned but unpaid bonus of Executive with
respect to the year preceding his termination, based on Executive's
employment with the Company prior to such termination. Executive
shall not be entitled, among other things, to the payment of any
Bonus in respect of all or any portion of the fiscal year in
which such termination occurs. After the termination of
Executive's employment under this Section 6.2 and payment of all
amounts due to Executive under the terms of this Agreement in the
event of the termination of Executive's employment under this
Section 6.2, the obligations of the Company under this Agreement
to make any further payments, or provide any benefits specified
herein (other than benefits required to be provided by applicable
law or under the terms of any employee benefit of the Company in
which the Executive was a participant) to Executive shall thereupon
cease and terminate. Termination of Executive pursuant to this
Section 6.2 shall be made by delivery to Executive of a notice from
the CEO setting forth in reasonable detail the reasons for such
termination.
7. Stock Arrangements. The Company shall provide
Executive with the opportunity to purchase 25,000 shares of
common stock, par value $.01 per share, of the Company at a price
of $12.00 per share. Executive and the Company shall enter into
the Management Stockholder's Agreement (the "Stock Agreement"),
substantially in the form attached hereto as Exhibit A, with such
changes as the Company shall deem necessary or desirable. In
addition, the Company shall grant options (the "Options") to
6
<PAGE>
Commission File No. 0-6544
Executive to purchase 56,250 shares of the Company's Common Stock at
an exercise price of $12.00 per share. With respect to Options
granted to Executive, Executive and the Company shall enter into
a standard form stock option agreement, with such changes as the
Company shall deem necessary or desirable.
8. Mitigation of Damages. Executive shall not be
required to mitigate damages or the amount of any payment
provided for under this Agreement by seeking other employment or
otherwise after the termination of his employment hereunder, and
no amounts earned by Executive, whether from self-employment, as
a common-law employee or otherwise, shall reduce the amount of
any termination amount otherwise payable to him.
9. Notices. All notices or communications hereunder
shall be in writing, addressed as follows:
To the Company:
William J. Bolton
Bruno's, Inc.
800 Lakeshore Parkway
Birmingham, Alabama 35211
with a copy to:
Alvin H. Brown, Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
To Executive:
Walter M. Grant
c/o Bruno's, Inc.
800 Lakeshore Parkway
Birmingham, Alabama 35211
7
<PAGE>
Commission File No. 0-6544
Any such notice or communication shall be delivered by hand or by
courier or sent certified or registered mail, return receipt
requested, postage prepaid, addressed as above (or to such other
address as such party may designate in a notice duly delivered as
described above), and the third business day after the actual
date of mailing shall constitute the time at which notice
was given.
10. Separability; Legal Fees. If any provision of this
Agreement shall be declared to be invalid or unenforceable, in
whole or in part, such invalidity or unenforceability shall not
affect the remaining provisions hereof which shall remain in full
force and effect. The Company shall pay the reasonable fees and
disbursements (not in excess of $7,500) of Executive's legal counsel
in connection with the negotiation and execution of this Agreement
and the other documents contemplated hereby. Other than as provided
in the foregoing sentence, each party shall bear the costs of any
legal fees and other fees and expenses which may be incurred in
respect of negotiating or enforcing its respective rights under this
Agreement.
11. Assignment. This Agreement shall be binding upon and
inure to the benefit of the heirs and representatives of Executive and
the assigns and successors of the Company, but neither this Agreement
nor any rights or obligations hereunder shall be assignable or otherwise
subject to hypothecation by Executive (except by will or by operation
of the laws of intestate succession) or by the Company, except that the
Company may assign this Agreement to any successor (whether by
merger, purchase or otherwise) to all or sustantally all of the stock,
8
<PAGE>
Commission File No. 0-6544
assets or businesses of the Company, if such successor expressly agrees
to assume the obligations of the Company hereunder.
12. Amendment. This Agreement may only be amended by
written agreement of the parties hereto.
13. Nondisclosure of Confidential Information; Non-
Competition. (a) Executive shall not, without the prior written
consent of the Company, use, divulge, disclose or make accessible
to any other person, firm, partnership, corporation or other
entity any Confidential Information pertaining to the business of
the Company or any of its affiliates, except (i) while employed
by the Company, in the business of and for the benefit of the
Company, or (ii) when required to do so by a court of competent
jurisdiction, by any governmental agency having supervisory
authority over the business of the Company, or by any
administrative body or legislative body (including a committee
thereof) with jurisdiction to order Executive to divulge,
disclose or make accessible such information. For purposes of
this Section 13(a), "Confidential Information" shall mean non-
public information concerning the financial data, strategic
business plans, product development (or other proprietary product
data), customer lists, marketing plans and other non-public,
proprietary and confidential information of the Company, Kohlberg
Kravis Roberts & Co. or their respective affiliates (the
"Restricted Group") or customers, that, in any case, is not
otherwise available to the public (other than by Executive's
breach of the terms hereof).
9
<PAGE>
Commission File No. 0-6544
(b) During the period of his employment hereunder and
for one year thereafter, Executive agrees that, without the prior
written consent of the Company, (A) he will not, directly or
indirectly, either as principal, manager, agent,
consultant, officer, stockholder, partner, investor, lender or
employee or in any other capacity, carry on, be engaged in or
have any financial interest in, any business which is in
competition with the business of the Company and (B) he shall
not, on his own behalf or on behalf of any person, firm or
company, directly or indirectly, solicit or offer employment to
any person who has been employed by the Restricted Group at any
time during the 12 months immediately preceding such
solicitation.
(c) For purposes of this Section 13, a business shall
be deemed to be in competition with the Company if it is
principally involved in the purchase, sale or other dealing in
any property or the rendering of any service purchased, sold,
dealt in or rendered by the Company as a material part of the
business of the Company within the same geographic area in which
the Company makes such purchases, sales or dealings or renders
such services. Nothing in this Section 13 shall be construed so
as to preclude Executive from investing in any publicly or
privately held company, provided Executive's beneficial ownership
of any class of such company's securities does not exceed 1% of
the outstanding securities of such class.
(d) Executive and the Company agree that this covenant
not to compete is a reasonable covenant under the circumstances,
and further agree that if in the opinion of any court of
competent jurisdiction such restraint is not reasonable in any
respect, such court shall have the right, power and authority to
excise or modify such provision or provisions of this covenant as
to the court shall appear not reasonable and to enforce the
10
<PAGE>
Commission File No. 0-6544
remainder of the covenant as so amended. Executive agrees that
any breach of the covenants contained in this Section 13 would
irreparably injure the Company. Accordingly, Executive agrees
that the Company may, in addition to pursuing any other remedies
it may have in law or in equity, cease making any payments otherwise
required by this Agreement and obtain an injunction against Executive
from any court having jurisdiction over the matter restraining any
further violation of this Agreement by Executive.
14. Beneficiaries; References. Executive shall be
entitled to select (and change, to the extent permitted under any
applicable law) a beneficiary or beneficiaries to receive any
compensation or benefit payable hereunder following Executive's
death, and may change such election, in either case by giving the
Company written notice thereof. In the event of Executive's
death or a judicial determination of his incompetence, reference
in this Agreement to Executive shall be deemed, where
appropriate, to refer to his beneficiary, estate or other legal
representative. Any reference to the masculine gender in this
Agreement shall include, where appropriate, the feminine.
15. Survivorship. The respective rights and obligations
of the parties hereunder shall survive any termination of this
Agreement to the extent necessary to the intended preservation of
such rights and obligations. The provisions of this Section 15
are in addition to the survivorship provisions of any other
section of this Agreement.
16. Governing Law. This Agreement shall be construed,
interpreted and governed in accordance with the laws of the State
of Alabama, without reference to rules relating to conflicts of
law.
11
<PAGE>
Commission File No. 0-6544
17. Effect on Prior Agreements. This Agreement
contains the entire understanding between the parties hereto and
supersedes in all respects any prior agreement or
understanding between the Company or any affiliate of the Company
and Executive as to employment matters other than the agreements
to in Section 7 hereof.
18. Withholding. The Company shall be entitled to withhold
from payment any amount of withholding required by law.
19. Counterparts. This Agreement may be executed in
two or more counterparts, each of which will be deemed an original.
BRUNO'S, INC.
By /s/ William J. Bolton
Name: William J. Bolton
Title: President and Chief
Executive Officer
EXECUTIVE
/s/ Walter M. Grant
Walter M. Grant
12
<PAGE>
Commission File No. 0-6544
EMPLOYMENT AGREEMENT
AGREEMENT, made September 12, 1996, by and between
BRUNO'S, INC., an Alabama corporation (the "Company"), and JAMES
J. HAGAN ("Executive").
RECITALS
In order to induce Executive to serve as an executive
officer of the Company, the Company desires to provide Executive
with compensation and other benefits on the terms and conditions
set forth in this Agreement.
Executive is willing to accept such employment and
perform services for the Company, on the terms and conditions
hereinafter set forth.
It is therefore hereby agreed by and between the
parties as follows:
1. Employment.
1.1 Subject to the terms and conditions of this
Agreement, the Company agrees to employ Executive during the term
hereof as its Senior Vice President and Chief Financial Officer.
1.2 Subject to the terms and conditions of this
Agreement, Executive hereby accepts employment as Senior Vice
President and Chief Financial Officer of the Company
and agrees to devote his full working time and efforts, to the
best of his ability, experience and talent, to the performance of
services, duties and responsibilities in connection therewith.
2. Term of Employment. Executive's term of employment
under this Agreement (the "Term") commenced on May 6, 1996 and,
subject to the terms hereof, shall terminate on the termination
1
<PAGE>
Commission File No. 0-6544
of Executive's employment pursuant to this Agreement (the
"Termination Date"); provided, however, that any termination of
employment by Executive (other than for death or Permanent Disability)
may only be made upon 30 days prior written notice to the Company.
3. Compensation.
3.1 Salary. During the Term, the Company shall pay
Executive a base salary ("Base Salary") at the rate of $275,000
per annum. Base Salary shall be payable in accordance with
the ordinary payroll practices of the Company, but no less
frequently than monthly. Any increase in Base Salary
shall be in the reasonable discretion of the Company and, as so
increased, shall constitute "Base Salary" hereunder.
3.2 Annual Bonus. In addition to his Base Salary,
Executive shall be paid an annual bonus (the "Bonus") during the
term of his employment hereunder with a target amount equal to
50% of Base Salary (the "Target Bonus") and a maximum amount
equal to 100% of Base Salary based on performance criteria
determined by the Company in its reasonable discretion.
3.3 Compensation Plans and Programs. Executive shall
be eligible to participate in any compensation plan or program
maintained by the Company in which other senior executives of the
Company participate on terms comparable to those applicable to
such other senior executives.
3.4 Payment of Relocation Allowance. To assist the Executive
with his relocation to the Birmingham, Alabama area, the Company
agrees to either reimburse the Executive for or pay directly the
expenses set forth on Exhibit A hereto to the extent actually
2
<PAGE>
Commission File No. 0-6544
incurred by Executive in relocating from the location of his
current residence (if other than the Birmingham area) to the
Birmingham area.
4. Employee Benefits.
4.1 Employee Benefit Programs, Plans and Practices.
The Company shall provide Executive during the term of his
employment hereunder with coverage under all employee pension and
welfare benefit programs, plans and practices (commensurate with
his positions in the Company and to the extent permitted under
any employee benefit plan) in accordance with the terms thereof,
which the Company makes available to its senior executives.
4.2 Vacation and Fringe Benefits. Executive shall be
entitled to twenty (20) business days paid vacation in each
calendar year, which shall be taken at such times as are
consistent with Executive's responsibilities hereunder. Unless
otherwise approved by the Company, any vacation days not taken in
any calendar year shall be forfeited without payment therefor.
In addition, Executive shall be entitled to the perquisites and
other fringe benefits, including, without limitation, a Company
automobile, made available to senior executives of the Company,
commensurate with his position with the Company.
5. Expenses. Executive is authorized to incur
reasonable expenses in carrying out his duties and
responsibilities under this Agreement, including, without
limitation, expenses for travel and similar items related
to such duties and responsibilities. The Company will reimburse
Executive for all such expenses upon presentation by Executive
from time to time of appropriately itemized and approved
(consistent with the Company's policy) accounts of such expenditures.
3
<PAGE>
Commission File No. 0-6544
6. Termination of Employment. The Company may terminate
Executive's employment at any time for any reason.
6.1 Termination Not for Cause or for Good Reason. (a)
If Executive's employment is terminated (i) by the Company other
than for Cause (as defined in this Section 6.1) or (ii) by
Executive for Good Reason (as defined in this Section 6.1),
Executive shall receive a severance payment equal to twelve
month's Base Salary, as in effect immediately prior to the
event giving rise to such termination, payable in accordance with
the ordinary payroll practices of the Company, but no less
frequently than semi-monthly following such termination
of employment. In addition, the Company shall pay to Executive
any earned but unpaid bonus of Executive with respect to the year
preceding his termination.
(b) For purposes of this Agreement, "Good Reason" shall mean
any of the following (without Executive's express prior written
consent):
(i) Any material breach by the Company of any
provision of this Agreement, including a demotion by
the Company in Executive's position or the assignment
to Executive of duties or responsibilities which are
materially inconsistent with the duties or
responsibilities contemplated by Section 1 of this
Agreement (except, in either case, in connection with
the termination of Executive's employment for Cause, as
a result of Permanent Disability, as a result of
Executive's death or by Executive other than for Good
Reason); or
(ii) A reduction by the Company in Executive's
Base Salary, other than a reduction which is part of a
general salary reduction program affecting senior
executives of the Company and which reduction is not,
on average, greater than the salary reduction (as a
percentage of Base Salary) of other senior executives
of the Company.
(c) For purposes of this Agreement, "Cause" mean any
of the following:
(i) willful malfeasance or willful misconduct by Executive in
connection with his employment;
(ii) continuing refusal by Executive to perform his duties
hereunder or any lawful direction of the Chief Executive Officer
of the Company ("CEO"), within 10 days after notice of any such
4
<PAGE>
Commission File No. 0-6544
refusal to perform such duties or direction was given to Executive;
(iii) any breach of the provisions of Section 13 of
this Agreement by Executive or any other material breach of
this Agreement by Executive; or
(iv) the commission by Executive of (A) any felony or (B) a
misdemeanor involving moral turpitude.
(d) For purposes of this Agreement, "Permanent
Disability" shall mean a disability that would entitle Executive
to receive benefits under the Company's long-term disability plan
applicable to senior executive officers as in effect from time to
time, which prevents the Executive from performing his duties
hereunder for 180 consecutive days or more.
6.2 Voluntary Termination by Executive; Discharge for
Cause; Death or Disability. (a) In the event that Executive's
employment is terminated (i) by the Company for Cause;
(ii) by Executive other than for Good Reason or (iii)
as a result of the Executive's Permanent Disability or death,
Executive shall only be entitled to receive the amounts already
earned and accrued, including Base Salary through the date of
termination and any earned but unpaid bonus of Executive with
respect to the year preceding his termination, based on
Executive's employment with the Company prior to such
termination. Executive shall not be entitled, among other
things, to the payment of any Bonus in respect of all or any
portion of the fiscal year in which such termination occurs.
After the termination of Executive's employment under this
Section 6.2 and payment of all amounts due to Executive under the
terms of this Agreement in the event of the termination of
Executive's employment under this Section 6.2, the obligations of
the Company under this Agreement to make any further payments, or
provide any benefits specified herein (other than benefits
required to be provided by applicable law or under the terms of
any employee benefit of the Company in
5
<PAGE>
Commission File No. 0-6544
which the Executive was a participant) to Executive shall
thereupon cease and terminate. Termination of Executive pursuant
to this Section 6.2 shall be made by delivery to Executive of a
notice from the CEO setting forth in reasonable detail the
reasons for such termination.
7. Stock Arrangements. The Company shall provide
Executive with the opportunity to purchase 25,000 shares of
common stock, par value $.01 per share, of the Company at a price
of $12.00 per share. Executive and the Company shall enter into
the Management Stockholder's Agreement (the "Stock Agreement"),
substantially in the form attached hereto as Exhibit B, with such
changes as the Company shall deem necessary or desirable. In
addition, the Company shall grant options (the "Options") to
Executive to purchase 66,667 shares of the Company's Common Stock
at an exercise price of $12.00 per share. With respect to
Options granted to Executive, Executive and the Company shall
enter into a standard form stock option agreement, with such
changes as the Company shall deem necessary or desirable.
8. Mitigation of Damages. Executive shall not be
required to mitigate damages or the amount of any payment
provided for under this Agreement by seeking other employment or
otherwise after the termination of his employment hereunder, and
no amounts earned by Executive, whether from self-employment, as
a common-law employee or otherwise, shall reduce the amount of
any termination amount otherwise payable to him.
9. Notices. All notices or communications hereunder
shall be in writing, addressed as follows:
To the Company:
William J. Bolton
Bruno's, Inc.
800 Lakeshore Parkway
Birmingham, Alabama 35211
6
<PAGE>
Commission File No. 0-6544
with a copy to:
Alvin H. Brown, Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
To Executive:
James J. Hagan
c/o Bruno's, Inc.
800 Lakeshore Parkway
Birmingham, Alabama 35211
Any such notice or communication shall be delivered by hand or by
courier or sent certified or registered mail, return receipt
requested, postage prepaid, addressed as above (or to such other
address as such party may designate in a notice duly delivered
as described above), and the third business day after the actual
date of mailing shall constitute the time at which notice was given.
10. Separability; Legal Fees. If any provision of this
Agreement shall be declared to be invalid or unenforceable, in
whole or in part, such invalidity or unenforceability shall not
affect the remaining provisions hereof which shall remain in full
force and effect. The Company shall pay the reasonable fees and
disbursements (not in excess of $7,500) of Executive's legal
counsel in connection with the negotiation and
execution of this Agreement and the other documents contemplated
hereby. Other than as provided in the foregoing sentence, each
party shall bear the costs of any legal fees and other fees and
expenses which may be incurred in respect of negotiating or
enforcing its respective rights under this Agreement.
11. Assignment. This Agreement shall be binding upon and
inure to the benefit of the heirs and representatives of
Executive and the assigns and successors of the Company, but neither
this Agreement nor any rights or obligations hereunder shall be
assignable or otherwise subject to hypothecation by Executive
(except by will or by operation of the laws of intestate
succession) or by the Company, except that the Company may assign
this Agreement to any successor (whether by merger, purchase or
otherwise) to all or substantially all of the stock, assets or
businesses of the Company, if such successor expressly agrees to
assume the obligations of the Company hereunder.
12. Amendment. This Agreement may only be amended by
written agreement of the parties hereto.
13. Nondisclosure of Confidential Information; Non-
Competition. (a) Executive shall not, without the prior
written consent of the Company, use, divulge, disclose or
make accessible to any other person, firm, partnership,
corporation or other entity any Confidential Information
pertaining to the business of the Company or any of its
affiliates, except (i) while employed by the Company, in the
business of and for the benefit of the Company, or (ii) when
required to do so by a court of competent jurisdiction, by any
governmental agency having supervisory authority over the
business of the Company, or by any administrative body or
legislative body (including a committee thereof) with
jurisdiction to order Executive to divulge, disclose or
make accessible such information. For purposes of
this Section 13(a), "Confidential Information" shall mean non-
public information concerning the financial data, strategic
business plans, product development (or other proprietary product
data), customer lists, marketing plans and other non-public,
proprietary and confidential information of the Company, Kohlberg
Kravis Roberts & Co. or their respective affiliates (the
"Restricted Group") or customers, that, in any case, is not
otherwise available to the public (other than by Executive's
breach of the terms hereof).
7
<PAGE>
Commission File No. 0-6544
(b) During the period of his employment hereunder and
for one year thereafter, Executive agrees that, without the
prior written consent of the Company, (A) he will not, directly
or indirectly, either as principal, manager, agent, consultant,
officer, stockholder, partner, investor, lender or employee or in
any other capacity, carry on, be engaged in or have any financial
interest in, any business which is in competition with the
business of the Company and (B) he shall not, on his own behalf
or on behalf of any person, firm or company, directly or
indirectly, solicit or offer employment to any person who has
been employed by the Restricted Group at any time during the 12
months immediately preceding such solicitation.
(c) For purposes of this Section 13, a business shall
be deemed to be in competition with the Company if it is
principally involved in the purchase, sale or other dealing in
any property or the rendering of any service purchased, sold,
dealt in or rendered by the Company as a material part of the
business of the Company within the same geographic area in
which the Company makes such purchases, sales or dealings or
renders such services. Nothing in this Section 13 shall be
construed so as to preclude Executive from investing in any
publicly or privately held company, provided Executive's
beneficial ownership of any class of such company's securities
does not exceed 1% of the outstanding securities of such class.
(d) Executive and the Company agree that this covenant
not to compete is a reasonable covenant under the circumstances,
and further agree that if in the opinion of any court of competent
jurisdiction such restraint is not reasonable in any respect,
such court shall have the right, power and authority to excise or
modify such provision or provisions of this covenant as to the
court shall appear not reasonable and to enforce the remainder of the
8
<PAGE>
Commission File No. 0-6544
covenant as so amended. Executive agrees that any breach of the
covenants contained in this Section 13 would irreparably injure
the Company. Accordingly, Executive agrees that the Company may,
in addition to pursuing any other remedies it may have in law or in
equity, cease making any payments otherwise required by this
Agreement and obtain an injunction against Executive from any court
having jurisdiction over the matter restraining any further
violation of this Agreement by Executive.
14. Beneficiaries; References. Executive shall be
entitled to select (and change, to the extent permitted under any
applicable law) a beneficiary or beneficiaries to receive any
compensation or benefit payable hereunder following Executive's death,
and may change such election, in either case by giving the Company
written notice thereof. In the event of Executive's death or a
judicial determination of his incompetence, reference in this
Agreement to Executive shall be deemed, where appropriate, to
refer to his beneficiary, estate or other legal representative.
Any reference to the masculine gender in this Agreement shall include,
where appropriate, the feminine.
15. Survivorship. The respective rights and obligations
of the parties hereunder shall survive any termination of
this Agreement to the extent necessary to the intended
preservation of such rights and obligations. The provisions of
this Section 15 are in addition to the survivorship provisions of
any other section of this Agreement.
16. Governing Law. This Agreement shall be construed,
interpreted and governed in accordance with the laws of the
State of Alabama, without reference to rules relating to
conflicts of law.
9
<PAGE>
Commission File No. 0-6544
17. Effect on Prior Agreements. This Agreement
contains the entire understanding between the parties hereto and
supersedes in all respects any prior agreement or
understanding between the Company or any affiliate of the Company
and Executive as to employment matters other than the agreements
to in Section 7 hereof.
18. Withholding. The Company shall be entitled to withhold
from payment any amount of withholding required by law.
19. Counterparts. This Agreement may be executed in
two or more counterparts, each of which will be deemed an
original.
BRUNO'S, INC.
By /s/ William J. Bolton
Name: William J. Bolton
Title: President and Chief
Executive Officer
EXECUTIVE
/s/ James J. Hagan
James J. Hagan
10
<PAGE>
Commission File No. 0-6544
EMPLOYMENT AGREEMENT
AGREEMENT, made September 12, 1996, by and between
BRUNO'S, INC., an Alabama corporation (the "Company"), and LAURA
HAYDEN ("Executive").
RECITALS
In order to induce Executive to serve as an executive
officer of the Company, the Company desires to provide Executive
with compensation and other benefits on the terms and conditions
set forth in this Agreement.
Executive is willing to accept such employment and
perform services for the Company, on the terms and conditions
hereinafter set forth.
It is therefore hereby agreed by and between the
parties as follows:
1. Employment.
1.1 Subject to the terms and conditions of this Agreement, the
Company agrees to employ Executive during the term hereof as its Senior
Vice President - Human Resources.
1.2 Subject to the terms and conditions of this
Agreement, Executive hereby accepts employment as Senior Vice
President - Human Resources of the Company and agrees to devote
her full working time and efforts, to the best of her ability,
experience and talent, to the performance of services, duties and
responsibilities in connection therewith.
2. Term of Employment. Executive's term of employment
under this Agreement shall commence on July 8, 1996 and, subject to
the terms hereof, shall terminate on the earlier of (i) July 7, 1999
(the "Termination Date") or (ii) termination of Executive's
1
<PAGE>
Commission File No. 0-6544
employment pursuant to this Agreement (alternatively, the
"Term"); provided, however, that any termination of employment by
Executive (other than for death or Permanent Disability) may only
be made upon 30 days prior written notice to the Company.
3. Compensation.
3.1 Salary. During the Term, the Company shall pay
Executive a base salary ("Base Salary") at the rate of $190,000
per annum. Base Salary shall be payable in
accordance with the ordinary payroll practices of the Company,
but no less frequently than semi-monthly. Any increase in Base
Salary shall be in the reasonable discretion of the Company and,
as so increased, shall constitute "Base Salary" hereunder.
3.2 Annual Bonus. In addition to her Base Salary,
Executive shall be paid an annual bonus (the "Bonus") during the
term of her employment hereunder with a target amount equal to
50% of Base Salary (the "Target Bonus") and a maximum amount
equal to 100% of Base Salary based on performance criteria
determined by the Company in its reasonable discretion.
3.3 Compensation Plans and Programs. Executive shall
be eligible to participate in any compensation plan or program
maintained by the Company in which other senior executives of the
Company participate on terms comparable to those applicable to
such other senior executives.
3.4 Payment of Relocation Allowance. To assist the
Executive with her relocation to the Birmingham, Alabama area,
2
<PAGE>
Commission File No. 0-6544
the Company agrees to either reimburse the Executive for or pay
directly the expenses set forth on Exhibit A hereto to the extent
actually incurred by Executive in relocating from the location of
her current residence (if other than the Birmingham area) to the
Birmingham area.
4. Employee Benefits.
4.1 Employee Benefit Programs, Plans and Practices.
The Company shall provide Executive during the term of her
employment hereunder with coverage under all employee pension and
welfare benefit programs, plans and practices (commensurate with
her positions in the Company and to the extent permitted under
any employee benefit plan) in accordance with the terms thereof,
which the Company makes available to its senior executives.
4.2 Vacation and Fringe Benefits. Executive shall be
entitled to twenty (20) business days paid vacation in each
calendar year, which shall be taken at such times as are
consistent with Executive's responsibilities hereunder. Unless
otherwise approved by the Company, any vacation days not taken in
any calendar year shall be forfeited without payment therefor.
In addition, Executive shall be entitled to the perquisites and
other fringe benefits, including, without limitation, a Company
automobile, made available to senior executives of the Company,
commensurate with her position with the Company.
5. Expenses. Executive is authorized to incur
reasonable expenses in carrying out her duties and responsibilities
3
<PAGE>
Commission File No. 0-6544
under this Agreement, including, without limitation, expenses for
travel and similar items related to such duties and responsibilities.
The Company will reimburse Executive for all such expenses upon
presentation by Executive from time to time of appropriately
itemized and approved (consistent with the Company's policy)
accounts of such expenditures.
6. Termination of Employment. The Company may terminate
Executive's employment at any time for any reason.
6.1 Termination Not for Cause or for Good Reason. (a)
If Executive's employment is terminated (i) by the Company other
than for Cause (as defined in this Section 6.1) or (ii) by
Executive for Good Reason (as defined in this Section 6.1) prior
to the Termination Date, Executive shall receive a severance
payment equal to twelve month's Base Salary, as in effect
immediately prior to the event giving rise to such termination,
payable in accordance with the ordinary payroll practices of the
Company, but no less frequently than semi-monthly following such
termination of employment. In addition, the Company shall pay to
Executive any earned but unpaid bonus of Executive with respect
to the year preceding her termination.
(b) For purposes of this Agreement, "Good Reason" shall mean
any of the following (without Executive's express prior written
consent):
(i) Any material breach by the Company of any
provision of this Agreement, including a demotion by
the Company in Executive's position or the assignment
to Executive of duties or responsibilities which are
materially inconsistent with the duties or
responsibilities contemplated by Section 1 of this
Agreement (except, in either case, in connection with
the termination of Executive's employment for Cause, as
a result of Permanent Disability, as a result of
Executive's death or by Executive other than for Good
Reason); or
4
<PAGE>
Commission File No. 0-6544
(ii) A reduction by the Company in Executive's
Base Salary, other than a reduction which is part of a
general salary reduction program affecting senior
executives of the Company and which reduction is not,
on average, greater than the salary reduction (as a
percentage of Base Salary) of other senior executives
of the Company.
(c) For purposes of this Agreement, "Cause" mean any
of the following:
(i) willful malfeasance or willful misconduct by Executive in
connection with her employment;
(ii) continuing refusal by Executive to perform her
duties hereunder or any lawful direction of the Chief
Executive Officer of the Company ("CEO"), within 10 days
after notice of any such refusal to perform such duties or
direction was given to Executive;
(iii) any breach of the provisions of Section 13 of
this Agreement by Executive or any other material breach of
this Agreement by Executive; or
(iv) the commission by Executive of (A) any felony or
(B) a misdemeanor involving moral turpitude.
(d) For purposes of this Agreement, "Permanent
Disability" shall mean a disability that would entitle Executive
to receive benefits under the Company's long-term disability plan
applicable to senior executive officers as in effect from time to
time, which prevents the Executive from performing her duties
hereunder for 180 consecutive days or more.
6.2 Voluntary Termination by Executive; Discharge for
Cause; Death or Disability. In the event that Executive's
employment is terminated (i) by the Company
for Cause; (ii) by Executive other than for Good Reason or (iii)
as a result of the Executive's Permanent Disability or death,
prior to the Termination Date, Executive shall only be entitled
5
<PAGE>
Commission File No. 0-6544
to receive the amounts already earned and accrued, including Base
Salary through the date of termination and any earned but unpaid
bonus of Executive with respect to the year preceding her
termination, based on Executive's employment with the Company
prior to such termination. Executive shall not be entitled,
among other things, to the payment of any
Bonus in respect of all or any portion of the fiscal year in
which such termination occurs. After the termination of
Executive's employment under this Section 6.2 and payment of all
amounts due to Executive under the terms of this Agreement in the
event of the termination of Executive's employment under this
Section 6.2, the obligations of the Company under this Agreement
to make any further payments, or provide any benefits specified
herein (other than benefits required to be provided by applicable
law or under the terms of any employee benefit of the Company in
which the Executive was a participant) to Executive shall
thereupon cease and terminate. Termination of Executive pursuant
to this Section 6.2 shall be made by delivery to Executive of a
notice from the CEO setting forth in reasonable detail the reasons
for such termination.
7. Stock Arrangements. (a) The Company shall provide
Executive with the opportunity to purchase 15,625 shares of
common stock, par value $.01 per share, of the Company ("Common
Stock") at a price of $12.00 per share. Executive and the
Company shall enter into the Management Stockholder's Agreement
(the "Stock Agreement"), substantially in the form attached
hereto as Exhibit B, with such changes as the Company shall
deem necessary or desirable. In respect of the Common Stock to
be purchased pursuant to the Stock Agreement (the "Purchase
Stock"), the company shall lend to Executive half of
6
<PAGE>
Commission File No. 0-6544
such purchase price at an interest rate equal to the applicable
Federal rate as determined under Section 1274(d) of the Internal
Revenue Code of 1986, as amended, at the time such loan is made
(the "Loan"). The Loan shall be due upon the earliest of (i) one
year following termination of Executive's employment by the
Company without Cause or by Executive for Good Reason or
immediately upon the termination of Executive's employment for
any other reason, (ii) the disposition of the Purchase Stock by
Executive or (iii) seven years from the date of the purchase of
the Purchase Stock. The Loan shall be secured by the entire
amount of the Purchase Stock and the Company shall have full
recourse thereto in the event of Executive's default on the Loan.
Executive and the Company shall enter into written arrangements
necessary to effect the foregoing, including, without limitation,
a loan agreement, note and pledge agreement, upon such terms and
conditions as the parties shall agree.
(b) For each share of Purchase Stock purchased by
Executive pursuant to Section 7(a) hereof, Executive shall be
granted an option (the "Option") to purchase three shares of
Company stock at an exercise price of $12.00 per share. With
respect to Options granted to Executive, Executive and the
Company shall enter into a standard form stock option agreement,
with such changes as the Company shall deem necessary or
desirable.
8. Mitigation of Damages. Executive shall not be
required to mitigate damages or the amount of any payment
provided for under this Agreement by seeking other employment or
otherwise after the termination of her employment hereunder, and
7
<PAGE>
Commission File No. 0-6544
no amounts earned by Executive, whether from self-employment, as a
common-law employee or otherwise, shall reduce the amount of any
termination amount otherwise payable to her.
9. Notices. All notices or communications hereunder
shall be in writing, addressed as follows:
To the Company:
William J. Bolton
Bruno's, Inc.
800 Lakeshore Parkway
Birmingham, Alabama 35211
with a copy to:
Alvin H. Brown, Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
To Executive:
Laura Hayden
c/o Bruno's, Inc.
800 Lakeshore Parkway
Birmingham, Alabama 35211
Any such notice or communication shall be delivered by hand or by
courier or sent certified or registered mail, return receipt
requested, postage prepaid, addressed as above (or to such other
address as such party may designate in a notice duly delivered as
described above), and the third business day after the actual
date of mailing shall constitute the time at which notice
was given.
8
<PAGE>
Commission File No. 0-6544
10. Separability; Legal Fees. If any provision of this
Agreement shall be declared to be invalid or unenforceable, in
whole or in part, such invalidity or unenforceability shall not
affect the remaining provisions hereof which shall remain in full
force and effect. The Company shall pay the reasonable fees and
disbursements (not in excess of $7,500) of Executive's legal counsel
in connection with the negotiation and execution of this Agreement
and the other documents contemplated hereby. Other than as provided
in the foregoing sentence, each party shall bear the costs of any
legal fees and other fees and expenses which may be incurred in
respect of negotiating or enforcing its respective rights under this
Agreement.
11. Assignment. This Agreement shall be binding upon and
inure to the benefit of the heirs and representatives of
Executive and the assigns and successors of the
Company, but neither this Agreement nor any rights or obligations
hereunder shall be assignable or otherwise subject to
hypothecation by Executive (except by will or by operation of the
laws of intestate succession) or by the Company, except that the
Company may assign this Agreement to any successor (whether by
merger, purchase or otherwise) to all or substantially all of the
stock, assets or businesses of the Company, if such successor
expressly agrees to assume the obligations of the Company
hereunder.
12. Amendment. This Agreement may only be amended by
written agreement of the parties hereto.
13. Nondisclosure of Confidential Information; Non-
Competition. (a) Executive shall not, without the prior written
consent of the Company, use, divulge, disclose
9
<PAGE>
Commission File No. 0-6544
or make accessible to any other person, firm, partnership,
corporation or other entity any Confidential Information
pertaining to the business of the Company or any of its
affiliates, except (i) while employed by the Company, in the
business of and for the benefit of the Company, or (ii) when
required to do so by a court of competent jurisdiction, by any
governmental agency having supervisory authority over the
business of the Company, or by any administrative body or
legislative body (including a committee thereof) with
jurisdiction to order Executive to divulge, disclose or make
accessible such information. For purposes of this Section
13(a), "Confidential Information" shall mean non-public
information concerning the financial data, strategic business
plans, product development (or other proprietary product data),
customer lists, marketing plans and other non-public, proprietary
and confidential information of the Company, Kohlberg Kravis
Roberts & Co. or their respective affiliates (the "Restricted Group")
or customers, that, in any case, is not otherwise available to the
public (other than by Executive's breach of the terms hereof).
(b) During the period of her employment hereunder and
for one year thereafter, Executive agrees that, without the
prior written consent of the Company, (A) she will not, directly
or indirectly, either as principal, manager, agent, consultant,
officer, stockholder, partner, investor, lender or employee or in
any other capacity, carry on, be engaged in or have any financial
interest in, any business which is in competition with the
business of the Company and (B) she shall not, on her own behalf
or on behalf of any person, firm or company, directly or
indirectly, solicit or offer employment to any person who has
been employed by the Restricted Group at any time during the 12
months immediately preceding such solicitation.
10
<PAGE>
Commission File No. 0-6544
(c) For purposes of this Section 13, a business shall
be deemed to be in competition with the Company if it is
principally involved in the purchase, sale or other dealing in
any property or the rendering of any service purchased, sold,
dealt in or rendered by the Company as a material part of the
business of the Company within the same geographic area in
which the Company makes such purchases, sales or dealings or
renders such services. Nothing in this Section 13 shall be
construed so as to preclude Executive from investing in any
publicly or privately held company, provided Executive's
beneficial ownership of any class of such company's securities
does not exceed 1% of the outstanding securities of such class.
(d) Executive and the Company agree that this covenant
not to compete is a reasonable covenant under the circumstances,
and further agree that if in the opinion of any court of
competent jurisdiction such restraint is not reasonable in any
respect, such court shall have the right, power and authority to
excise or modify such provision or provisions of this covenant as
to the court shall appear not reasonable and to enforce the
remainder of the covenant as so amended. Executive agrees that
any breach of the covenants contained in this Section 13 would
irreparably injure the Company. Accordingly, Executive agrees
that the Company may, in addition to pursuing any other remedies
it may have in law or in equity, cease making any payments
otherwise required by this Agreement and obtain an injunction
against Executive from any court having jurisdiction over the
matter restraining any further violation of this Agreement by
Executive.
11
<PAGE>
Commission File No. 0-6544
14. Beneficiaries; References. Executive shall be
entitled to select (and change, to the extent permitted under
any applicable law) a beneficiary or beneficiaries to receive any
compensation or benefit payable hereunder following Executive's
death, and may change such election, in either case by giving the
Company written notice thereof. In the event of Executive's
death or a judicial determination of her incompetence, reference
in this Agreement to Executive shall be deemed, where
appropriate, to refer to her beneficiary, estate or other legal
representative. Any reference to the masculine gender in this
Agreement shall include, where appropriate, the feminine.
15. Survivorship. The respective rights and obligations
of the parties hereunder shall survive any termination of this
Agreement to the extent necessary to the intended preservation of
such rights and obligations. The provisions of this Section 15
are in addition to the survivorship provisions of any other
section of this Agreement.
16. Governing Law. This Agreement shall be construed,
interpreted and governed in accordance with the laws of the State
of Alabama, without reference to rules relating to conflicts of
law.
17. Effect on Prior Agreements. This Agreement
contains the entire understanding between the parties hereto and
supersedes in all respects any prior agreement or
understanding between the Company or any affiliate of the Company
and Executive as to employment matters other than the agreements
to in Section 7 hereof.
18. Withholding. The Company shall be entitled to
withhold from payment any amount of withholding required by law.
12
<PAGE>
Commission File No. 0-6544
19. Counterparts. This Agreement may be executed in
two or more counterparts, each of which will be deemed an
original.
BRUNO'S, INC.
By /s/ William J. Bolton
Name: William J. Bolton
Title: President and Chief
Executive Officer
EXECUTIVE
/s/ Laura Hayden
Laura Hayden
Exhibit A
In connection with Executive's relocation to the
Birmingham, Alabama area, the Company shall reimburse Executive
for the following expenses, subject to reasonable substantiation
thereof:
1. Reasonable travel costs, including airfare and lodging,
associated with locating a residence in the Birmingham
area.
2. The reasonable costs of moving company fees incurred in
moving Executive's household to the Birmingham area and
of local moving (from temporary housing and storage to
permanent housing).
3. The reasonable costs of temporary housing and storage
in the Birmingham area for a period not to exceed six
months.
13
<PAGE>
Commission File No. 0-6544
FORM OF MANAGEMENT STOCKHOLDER'S AGREEMENT
This Management Stockholder's Agreement (this
"Agreement") is entered into as of ________________ between
BRUNO'S, INC., an Alabama corporation (the "Company"), and
__________________ (the "Purchaser") (the Company and the
Purchaser being hereinafter collectively referred to as the
"Parties").
RECITALS
On August 18, 1995, Crimson Acquisition Corp., an
Alabama corporation ("Crimson"), merged with and into the Company
(the "Merger"). In connection with the Merger, the Company has
sold and proposes to sell shares of its Common Stock, par value
$.01 per share (the "Common Stock"), to key employees of the
Company and certain other investors at a price of $12 per share
of Common Stock.
This Agreement is one of several other agreements
("Other Purchasers' Agreements") which have been, or which in the
future will be, entered into between the Company and other
individuals who are or will be key employees of the Company or
one of its subsidiaries (collectively, the "Other Purchasers").
In addition, the Company has also entered into, and may in the
future enter into, agreements (the "Investors' Agreements") with
other purchasers (collectively, the "Investors") pursuant to
which the Investors purchased or will purchase shares of Common
Stock.
The Company has agreed to sell _______ shares of Common
Stock to Purchaser so that Purchaser shall receive, in the
aggregate, _______ shares of Common Stock (the "Purchase Stock").
In addition, the Company will grant to Purchaser an option or
options to purchase Common Stock ("Options") at an exercise price
of $12 per share of Common Stock pursuant to the terms of the
1996 Stock Purchase and Option Plan for Key Employees of Bruno's,
Inc. and Subsidiaries (the "Option Plan") and the "Non-Qualified
Stock Option Agreement" attached hereto as Exhibit A. The
Options may be granted as Time Options or Performance Options
(each as defined in the Non-Qualified Stock Option Agreement).
AGREEMENT
To implement the foregoing and in consideration of the
mutual agreements contained herein, the Parties agree as follows:
1. Purchase of Stock; Issuance of Options.
(a) Subject to the terms and conditions hereinafter
set forth, the Purchaser hereby subscribes for and shall
purchase, and the Company shall sell to the Purchaser, the
Purchase Stock at a purchase price of $12 per share on
_____________ (the "Purchase Date"). The Company shall have
1
<PAGE>
Commission File No. 0-6544
no obligation to sell any Purchase Stock to any person who (i) is
a resident or citizen of a state or other jurisdiction in which
the sale of the Purchase Stock to him or her would constitute a
violation of the securities or "blue sky" laws of such jurisdiction
or (ii) is not an employee of the Company or any of its subsidiaries
on the date hereof.
(b) The aggregate price for the Purchase Stock shall
be $_______ (such amount hereinafter sometimes referred to as the
"Purchase Price"). The Purchase Price shall be paid in the
following manner: the Purchaser shall deliver to the Company on
the Purchase Date cash or a check or checks payable to the order
of the Company in the aggregate amount of the Purchase Price. In
consideration of receipt of the Purchase Price, the Company will
deliver to the Purchaser a certificate, registered in the
Purchaser's name, for the Purchase Stock, which shall be subject
to the terms and conditions hereinafter set forth.
(c) Subject to the terms and conditions hereinafter
set forth and upon and as of the Purchase Date, the Company shall
issue to the Purchaser the Options and the Parties shall execute
and deliver to each other copies of the Non-Qualified Stock
Option Agreement concurrently with the issuance of the Options.
2. Purchaser's Representations, Warranties and Agreements.
(a) The Purchaser agrees and acknowledges that he will
not, directly or indirectly, offer, transfer, sell, assign,
pledge, hypothecate or otherwise dispose of (any such act being
herein referred to herein as a "transfer") any shares of the
Purchase Stock and, at the time of exercise, the Common Stock
issuable upon exercise of the Options (collectively, the "Stock")
unless such transfer complies with Section 3 of this Agreement.
Furthermore, if the Purchaser is an "affiliate" (as defined under
Rule 405 of the rules and regulations promulgated under the Act
and as interpreted by the Board of Directors of the Company) of
the Company (an "Affiliate"), the Purchaser agrees and
acknowledges that he will not transfer any shares of the Stock
unless (i) the transfer is pursuant to an effective registration
statement under the Securities Act of 1933, as amended, and the
rules and regulations in effect thereunder (the "Act"), and in
compliance with applicable provisions of state securities laws or
(ii) (A) counsel for the Purchaser (which counsel shall be
reasonably acceptable to the Company) shall have furnished the
Company with an opinion, satisfactory in form and substance to
the Company, that no such registration is required because of the
availability of an exemption from registration under the Act and
(B) if the Purchaser is a citizen or resident of any country
other than the United States, or the Purchaser desires to effect
any transfer in any such country, counsel for the Purchaser
(which counsel shall be reasonably satisfactory to the Company)
shall have furnished the Company with an opinion or other advice
reasonably satisfactory in form and substance to the Company to
the effect that such transfer will comply with the securities
laws of such jurisdiction. Notwithstanding the foregoing, the
Company acknowledges and agrees that any of the following
transfers are deemed to be in compliance with the Act and this
Agreement and no opinion of counsel is required in connection
therewith: (x) a transfer made pursuant to Section 4, 5 or 6
hereof, (y) a transfer upon the death of the Purchaser to his
executors, administrators, testamentary trustees, legatees or
beneficiaries (the "Purchaser's Estate") or a transfer to the
executors, administrators, testamentary trustees, legatees or
beneficiaries of a person who has become a holder of Stock in
accordance with the terms of this Agreement, provided that it is
expressly understood that any such transferee shall be
2
<PAGE>
Commission File No. 0-6544
bound by the provisions of this Agreement and (z) a transfer made
after the Purchase Date in compliance with the federal securities
laws to a trust or custodianship the beneficiaries of which may
include only the Purchaser, his spouse or his lineal descendants
(a "Purchaser's Trust") or a transfer made after the third
anniversary of the Purchase Date to such a trust by a person who
has become a holder of Stock in accordance with the terms of this
Agreement, provided that such transfer is made expressly subject
to this Agreement and that the transferee agrees in writing to be
bound by the terms and conditions hereof.
(b) The certificate (or certificates) representing the
Stock shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY
NOT BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED,
HYPOTHECATED OR OTHERWISE DISPOSED OF UNLESS SUCH
TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR
OTHER DISPOSITION COMPLIES WITH THE PROVISIONS OF THE
MANAGEMENT STOCKHOLDER'S AGREEMENT DATED AS OF
___________, 1996 BETWEEN BRUNO'S, INC. ("THE COMPANY")
AND THE PURCHASER NAMED ON THE FACE HEREOF (A COPY OF
WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY).
EXCEPT AS OTHERWISE PROVIDED IN SUCH AGREEMENT, NO
TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR
OTHER DISPOSITION OF THE SHARES REPRESENTED BY THIS
CERTIFICATE MAY BE MADE EXCEPT (A) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), AND IN COMPLIANCE
WITH APPLICABLE PROVISIONS OF STATE SECURITIES LAWS OR
(B) IF (I) THE COMPANY HAS BEEN FURNISHED WITH A
SATISFACTORY OPINION OF COUNSEL FOR THE HOLDER THAT
SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION
OR OTHER DISPOSITION IS EXEMPT FROM THE PROVISIONS OF
SECTION 5 OF THE ACT OR THE RULES AND REGULATIONS IN
EFFECT THEREUNDER, AND IN COMPLIANCE WITH APPLICABLE
PROVISIONS OF STATE SECURITIES LAWS, AND (II) IF THE
HOLDER IS A CITIZEN OR RESIDENT OF ANY COUNTRY OTHER
THAN THE UNITED STATES, OR THE HOLDER DESIRES TO EFFECT
ANY SUCH TRANSACTION IN ANY SUCH COUNTRY, THE COMPANY
HAS BEEN FURNISHED WITH A SATISFACTORY OPINION OR OTHER
ADVICE OF COUNSEL FOR THE HOLDER THAT SUCH TRANSACTION
WILL NOT VIOLATE THE LAWS OF SUCH COUNTRY."
(c) The Purchaser acknowledges that he has been
advised that (i) the Stock has been registered on Form S-8 under
the Act, (ii) a restrictive legend in the form heretofore set
forth shall be placed on the certificates representing the Stock
and (iii) a notation shall be made in the appropriate records of
the Company indicating that the Stock is subject to restrictions
on transfer and appropriate stop transfer restrictions will be
issued to the Company's transfer agent with respect to the Stock.
If the Purchaser is an Affiliate, the Purchase also acknowledges
3
<PAGE>
Commission File No. 0-6544
that (1) the Stock must be held indefinitely and the Purchaser must
continue to bear the economic risk of the investment in the Stock
unless it is subsequently registered under the Act or an
exemption from such registration is available, (2) it is not
anticipated that there will be any market on an exchange or a
quotation service for the Stock, (3) when and if shares of the
Stock may be disposed of without registration in reliance on Rule
144 of the rules and regulations promulgated under the Act, such
disposition can be made only in limited amounts in accordance
with the terms and conditions of such Rule, (4) if the Rule 144
exemption is not available, public sale without registration will
require compliance with Regulation A or some other exemption
under the Act,
(d) If any shares of the Stock are to be disposed of
in accordance with Rule 144 under the Act or otherwise, the
Purchaser shall promptly notify the Company of such intended
disposition and shall deliver to the Company at or prior to the
time of such disposition such documentation as the Company may
reasonably request in connection with such sale and, in the case
of a disposition pursuant to Rule 144, shall deliver to the
Company an executed copy of any notice on Form 144 required to be
filed with the Securities and Exchange Commission (the "SEC").
(e) The Purchaser agrees that, if any shares of the
capital stock of the Company are offered to the public pursuant
to an effective registration statement under the Act (other than
registration of securities issued under an employee plan), the
Purchaser will not effect any public sale or distribution of any
shares of the Stock not covered by such registration statement
within 7 days prior to, or within 180 days after, the effective
date of such registration statement, unless otherwise agreed to
in writing by the Company.
(f) The Purchaser represents and warrants that (i) he
has received and reviewed the document(s) comprising the
Prospectus (the "Prospectus") relating to the Purchase Stock and
the documents referred to therein, certain of which documents set
forth the rights, preferences and restrictions relating to the
Stock and (ii) he has been given the opportunity to obtain any
additional information or documents and to ask questions and
receive answers about such documents, the Company and the
business and prospects of the Company which he deems necessary to
evaluate the merits and risks related to his investment in the
Purchase Stock and to verify the information contained in the
Prospectus and the information received as indicated in this
Section 2(f)(ii), and he has relied solely on such information.
(g) The Purchaser further represents and warrants that
(i) his financial condition is such that he can afford to bear
the economic risk of holding the Purchase Stock for an indefinite
period of time and has adequate means for providing for his
current needs and personal contingencies, (ii) he can afford to
suffer a complete loss of his investment in the Purchase Stock,
(iii) he understands and has taken cognizance of all risk factors
related to the purchase of the Purchase Stock, including those
set forth in the Prospectus referred to above, and (iv) his
knowledge and experience in financial and business matters are
such that he is capable of evaluating the merits and risks of his
purchase of the Purchase Stock as contemplated by this Agreement.
4
<PAGE>
Commission File No. 0-6544
3. Restriction on Transfer.
Except for transfers permitted by clauses (x), (y) and
(z) of Section 2(a) or a sale of shares of Stock pursuant to an
effective registration statement under the Act filed by the
Company or pursuant to the Sale Participation Agreement (as
defined below), the Purchaser agrees that he will not transfer
any shares of the Stock at any time prior to the fifth
anniversary of the Purchase Date. No transfer of any such shares
in violation hereof shall be made or recorded on the books of the
Company and any such transfer shall be void and of no effect.
4. Right of First Refusal.
If at any time after the fifth anniversary of the
Purchase Date and prior to a Public Offering (as defined below),
the Purchaser receives a bona fide offer to purchase any or all
of his shares of Stock (the "Offer") from a third party (the
"Offeror") which the Purchaser wishes to accept, the Purchaser
shall cause the Offer to be reduced to writing and shall notify
the Company in writing of his wish to accept the Offer. The
Purchaser's notice shall contain an irrevocable offer to sell
such shares of Stock to the Company (in the manner set forth
below) at a purchase price equal to the price contained in, and
on the same terms and conditions of, the Offer, and shall be
accompanied by a true copy of the Offer (which shall identify the
Offeror). At any time within 30 days after the date of the
receipt by the Company of the Purchaser's notice, the Company
shall have the right and option to purchase, or to arrange for a
third party to purchase, all of the shares of Stock covered by
the Offer either (i) at the same price and on the same terms and
conditions as the Offer or (ii) if the Offer includes any
consideration other than cash, then at the sole option of the
Company, at the equivalent all cash price, determined in good
faith by the Company's Board of Directors, by delivering a
certified bank check or checks in the appropriate amount (and any
such non-cash consideration to be paid) to the Purchaser at the
principal office of the Company against delivery of certificates
or other instruments representing the shares of the Purchase
Stock so purchased, appropriately endorsed by the Purchaser. If
at the end of such 30 day period, the Company has not tendered
the purchase price for such shares in the manner set forth above,
the Purchaser may during the succeeding 30 day period sell not
less than all of the shares of Stock covered by the Offer to the
Offeror at a price and on terms no less favorable to the
Purchaser than those contained in the Offer. Promptly after such
sale, the Purchaser shall notify the Company of the consummation
thereof and shall furnish such evidence of the completion and
time of completion of such sale and of the terms thereof as may
reasonably be requested by the Company. If, at the end of 30
days following the expiration of the 30 day period for the
Company to purchase the Stock, the Purchaser has not completed
the sale of such shares of the Stock as aforesaid, all the
restrictions on sale, transfer or assignment contained in this
Agreement shall again be in effect with respect to such shares of
the Stock.
5. Purchaser's Resale of Stock and Options to the
Company Upon The Purchaser's Death or Disability.
(a) Except as otherwise provided herein, if at any
time prior to a Public Offering (i) the Purchaser is still in the
employ of the Company or any subsidiary of the
Company, or had retired from the Company and its subsidiaries at
age 62 or over (or such other age as may be approved by the Board
of Directors of the Company) after having been employed
5
<PAGE>
Commission File No. 0-6544
by the Company or any subsidiary for at least three years after
the Purchase Date, and (ii) the Purchaser either dies or becomes
permanently disabled, then the Purchaser, the Purchaser's Estate
or a Purchaser's Trust, as the case may be, shall have the right,
for six months following the date of death or permanent
disability, to (A) sell to the Company, and the Company shall be
required to purchase, on one occasion, all or any portion of the
shares of Stock then held by the Purchaser, the Purchaser's Trust
and/or the Purchaser's Estate, as the case may be, at the
Section 5 Repurchase Price, as determined in accordance with
Section 7, and (B) require the Company to pay to the Purchaser or
the Purchaser's Estate, as the case may be, an additional amount
equal to the Option Excess Price determined on the basis of a
Section 5 Repurchase Price as provided in Section 8 with respect
to the termination of outstanding Options held by the Purchaser.
The Purchaser, the Purchaser's Estate and/or the Purchaser's
Trust, as the case may be, shall send written notice to the
Company of its intention to sell shares of Stock and to terminate
such Options in exchange for the payment referred to in the
preceding sentence (the "Redemption Notice"). The completion of
the purchase shall take place at the principal office of the
Company on the tenth business day after the giving of the
Redemption Notice. The Section 5 Repurchase Price and any
payment with respect to the Options as described above shall be
paid by delivery to the Purchaser, the Purchaser's Estate or the
Purchaser's Trust, as the case may be, of a certified bank check
or checks in the appropriate amount payable to the order of the
Purchaser, the Purchaser's Estate or the Purchaser's Trust, as
the case may be, against delivery of certificates or other
instruments representing the Purchase Stock so purchased and
appropriate documents cancelling the Options so terminated
appropriately endorsed or executed by the Purchaser, the
Purchaser's Estate or the Purchaser's Trust, or his or its duly
authorized representative. For purposes of this Agreement,
Purchaser shall be deemed to have a "permanent disability" when
the majority of the Board of Directors of the Company shall, in
good faith, so determine.
(b) Notwithstanding anything in Section 5(a) to the contrary
and subject to Section 11, if there exists and is continuing a
default or an event of default on the part of the Company or any
subsidiary of the Company under any loan, guarantee or other
agreement under which the Company or any subsidiary of the
Company has borrowed money or if the repurchase referred to in
Section 5(a) would result in a default or an event of default on
the part of the Company or any subsidiary of the Company under
any such agreement or if a repurchase would not be permitted
under Section 10-2B-6.31 of the Alabama Business Corporation Act
(the "ABCA") or would otherwise violate the ABCA (or if the
Company reincorporates in another state, the business corporation
law of such state) (each such occurrence being an "Event"), the
Company shall not be obligated to repurchase any of the Purchase
Stock or the Options from the Purchaser, the Purchaser's Estate
or the Purchaser's Trust, as the case may be, until the first
business day which is 10 calendar days after all of the foregoing
Events have ceased to exist (the "Repurchase Eligibility Date");
provided, however, that (i) the number of shares of Purchase
Stock subject to repurchase under this Section 5(b) shall be that
number of shares of Purchase Stock, and (ii) the number of
Exercisable Option Shares (as defined in Section 8) for purposes
of calculating the Option Excess Price payable under this Section
5(b) shall be the number of Exercisable Option Shares, held by
the Purchaser, the Purchaser's Estate or a Purchaser's Trust, as
the case may be, at the time of delivery of a Redemption Notice
in accordance with Section 5(a) hereof; provided, further, that
the Repurchase Calculation Date shall be determined in accordance
with Section 7 as of the Repurchase Eligibility Date (unless the
Section 5 Repurchase Price would be greater if the Repurchase
Calculation Date had been determined as if no Event
6
<PAGE>
Commission File No. 0-6544
had occurred in which case, solely for purposes of this proviso,
the Repurchase Calculation Date shall be determined as if no
Event had occurred). All Options exercisable as of the date of a
Redemption Notice shall continue to be exercisable until the
repurchase pursuant to such Redemption Notice.
(c) Notwithstanding any other provision of this
Section 5 to the contrary and subject to Section 11, the
Purchaser, the Purchaser's Estate or the Purchaser's Trust, as
the case may be, shall have the right to withdraw any Redemption
Notice which has been pending for 60 or more days and which has
remained unsatisfied because of the provisions of Section 5(b).
6. The Company's Option to Repurchase Stock
and Options of Purchaser.
(a) If, on or prior to the fifth anniversary of the
Purchase Date, (i) the Purchaser's active employment with the
Company (and/or, if applicable, its subsidiaries) is voluntarily
or involuntarily terminated for any reason whatsoever, with or
without Cause, (ii) the beneficiaries of a Purchaser's Trust
shall include any person or entity other than the Purchaser, his
spouse or his lineal descendants, or (iii) the Purchaser shall
effect a transfer of any of the Stock other than as permitted in
this Agreement (alternatively, a "Call Event"), the Company shall
have the right to purchase all, but not less than all, of the
shares of the Stock then held by the Purchaser or a Purchaser's
Trust at the Section 6 Repurchase Price determined in accordance
with Section 7 hereof; provided, however, that if the termination
of employment results from (A) the death or permanent disability
of the Purchaser or (B) the retirement of the Purchaser from the
Company or any of its subsidiaries at age 62 or over (or such
other age as may be approved by the Board of Directors of the
Company) after having been employed by the Company or its
subsidiaries for at least three years after the Purchase Date,
the Company shall have the right to purchase all, but not less
than all, of the shares of the Purchase Stock then held by the
Purchaser or a Purchaser's Trust but the Repurchase Price shall
be the Section 5 Repurchase Price. The Company shall have a
period of 75 days from the date of a Call Event in which to give
notice in writing to the Purchaser of the exercise of such
election ("Call Notice"). In the event that the Company
exercises its right to repurchase shares of the Purchase Stock
pursuant to this Section 6, the Company shall also pay the
Purchaser an amount equal to the Option Excess Price determined
on the basis of the Section 6 Repurchase Price or the Section 5
Repurchase Price, as the case may be, as provided in Section 8,
with respect to the termination of outstanding Options held by
the Purchaser.
(b) The completion of the purchases pursuant to the
foregoing shall take place at the principal office of the Company
on the tenth business day after the giving of notice of the
exercise of the option to purchase. The Section 5 Repurchase
Price or the Section 6 Repurchase Price, as the case may be, and
any payment with respect to the Options as described above shall
be paid by delivery to the Purchaser of a certified bank check or
checks in the appropriate amount payable to the order of the
Purchaser against delivery of certificates or other instruments
representing the Purchase Stock so purchased and appropriate
documents canceling the Options so terminated, appropriately
endorsed or executed by the Purchaser, the Purchaser's Trust or
his or its authorized representative.
7
<PAGE>
Commission File No. 0-6544
(c) Notwithstanding any other provision of this
Section 6 to the contrary and subject to Section 11, if there
exists and is continuing any Event, the Company shall delay the
repurchase of any of the Purchase Stock or the Options (pursuant
to a Call Notice timely given in accordance with Section 6(a)
hereof) from the Purchaser, the Purchaser's Estate, or the
Purchaser's Trust, as the case may be, until the Repurchase
Eligibility Date; provided, however, that (i) the number of
shares of Purchase Stock subject to repurchase under this Section
6(c) shall be that number of shares of Purchase Stock and (ii)
the number of Exercisable Option Shares for purposes of
calculating the Option Excess Price payable under this Section
6(c) shall be the number of Exercisable Option Shares held by the
Purchaser, the Purchaser's Estate or a Purchaser's Trust, as the
case may be, at the time of delivery of a Call Notice in
accordance with Section 6(a) hereof; provided, further, that the
Repurchase Calculation Date shall be determined in accordance
with Section 7 based on the Repurchase Eligibility Date (unless
the applicable Repurchase Price would be greater if the
Repurchase Calculation Date had been determined as if no Event
had occurred, in which case, solely for purposes of this proviso,
the Repurchase Calculation Date shall be determined as if no
Event had occurred). All Options exercisable as of the date of a
Call Notice shall continue to be exercisable until the repurchase
pursuant to such Call Notice.
7. Determination of Repurchase Price.
(a) The Section 5 Repurchase Price and the Section 6
Repurchase Price are hereinafter collectively referred to as the
"Repurchase Price." The Repurchase Price shall be calculated on
the basis of the unaudited financial statements of the Company or
the Market Price Per Share (as defined in Section 7(f)) as of the
last day of the month preceding the later of (i) the month in
which the event giving rise to the repurchase occurs and (ii) the
month in which the Repurchase Eligibility Date occurs
(hereinafter called the "Repurchase Calculation Date"). The
event giving rise to the repurchase shall be the death, permanent
disability, retirement or termination of employment, as the case
may be, of the Purchaser, not the giving of any notice required
pursuant to Section 5 or 6.
(b) Prior to a Public Offering (as hereinafter
defined) the Section 5 Repurchase Price shall be a per share
Repurchase Price equal to $12 plus the amount, if any, by which
the Book Value Per Share (as defined in Section 7(d)) as of the
Repurchase Calculation Date exceeds $12. After a Public
Offering, the Section 5 Repurchase Price shall be a per share
Repurchase Price equal to $12 plus the amount, if any, by which
the Market Price Per Share as of the Repurchase Calculation Date
exceeds $12.
(c) Prior to a Public Offering, the Section 6
Repurchase Price shall be a per share Repurchase Price equal to
the lesser of (i) the Book Value Per Share or (ii) $12 plus (x)
the Percentage (as defined below) multiplied by (y) the amount,
if any, by which the Book Value Per Share as of the Repurchase
Calculation Date exceeds $12. After a Public Offering, the
Section 6 Repurchase Price shall be a per share Repurchase Price
equal to the lesser of (i) Market Price Per Share or (ii) $12
plus (a) the Percentage multiplied by (b) the amount, if any, by
which the Market Price Per Share as of the Repurchase Calculation
Date exceeds $12; provided, however, that in the event of
Purchaser's termination without Cause by the Company (and/or, if
applicable, its subsidiaries) or with Good Reason by the
Purchaser, the Section 6 Repurchase Price shall be
8
<PAGE>
Commission File No. 0-6544
the Book Value Per Share or Market Price Per Share, as the case
may be. For purposes of this Agreement the following definitions
shall apply: "Cause" shall mean (i) the Purchaser's willful and
continued failure to perform Purchaser's duties with respect to
the Company or its subsidiaries which continues beyond ten days
after a written demand for substantial performance is delivered
to Purchaser by the Company or (ii) misconduct by Purchaser
involving (x) dishonesty or breach of trust in connection with
Purchaser's employment or (y) conduct which would be a reasonable
basis for an indictment of Purchaser for a felony or for a
misdemeanor involving moral turpitude; and "Good Reason" shall
mean (i) a reduction in Purchaser's base salary or (ii) a
substantial reduction in Purchaser's duties and responsibilities
other than as approved by the Chief Executive Officer of the
Company. Notwithstanding the immediately preceding sentence, the
definitions in any employment agreement in effect on the date
hereof between the Company and Purchaser of "Cause" and "Good
Reason" shall supersede and replace the definitions of "Cause"
and "Good Reason" in the immediately preceding sentence and shall
be deemed incorporated by reference in this Agreement in their
entirety.
The "Percentage" shall be determined as follows:
<TABLE>
<CAPTION>
Repurchase Calculation Date Percentage
- - --------------------------- ----------
<S> <C>
Purchase Date through and including the first 0%
anniversary of the Purchase Date
After the first anniversary of the Purchase 20%
Date through and including the second
anniversary of the Purchase Date
After the second anniversary of the Purchase 40%
Date through and including the third
anniversary of the Purchase Date
After the third anniversary of the Purchase 60%
Date through and including the fourth
anniversary of the Purchase Date
After the fourth anniversary of the Purchase 80%
Date through and including the fifth
anniversary of the Purchase Date
After the fifth anniversary of the Purchase 100%
Date
</TABLE>
(d) For purposes of this Agreement, "Book Value Per
Share" shall be the quotient of (a) (i) $300 million plus (ii)
the aggregate net income of the Company from and after the date
of the Merger (as decreased by any net losses from and after the
date of the Merger) plus (iii) the aggregate dollar amount
contributed to the Company after the date of the Merger as equity
by the shareholders of the Company (including consideration to be
received upon exercise of the Options and other stock
equivalents) plus (iv) unusual charges taken during the Company's
transition period ended January 27, 1996 which, net of taxes,
total $88.251 million, (v) plus, to the extent reflected as
deductions to Book Value Per Share in clause (ii) above, or
minus, to the extent reflected as additions to Book Value Per
Share in clause (ii) above, unusual items recognized by the
Company, if and to the extent determined in the sole discretion
of the Compensation Committee of the Board of Directors of the
Company, minus, (vi) the aggregate
9
<PAGE>
Commission File No. 0-6544
dollar amount of any dividends paid by the Company after the date
of the Merger divided by (b) the sum of the number of shares of
Common Stock then outstanding and the number of shares of Common
Stock issuable upon the exercise of all outstanding stock options
and other rights to acquire Common Stock and the conversion of
all securities convertible into shares of Common Stock. The
calculations set forth in clauses (a)(ii), (a)(iii), (a)(v) and
(a)(vi) of the immediately preceding sentence shall be determined
in accordance with generally accepted accounting principles
applied on a basis consistent with any prior periods as reflected
in the consolidated financial statements of the Company.
(e) As used herein the term "Public Offering" shall
mean the sale of shares of Common Stock to the public subsequent
to the date hereof pursuant to a registration statement under the
Act which has been declared effective by the SEC (other than a
registration statement on Form S-8 or any other similar form)
which results in an active trading market in the Common Stock if
such a market does not already exist. A "Qualified Public
Offering" shall mean a Public Offering pursuant to an effective
registration statement relating to the sale of shares of the
Company Stock held by any and all of KKR Partners II, L.P. and
Crimson Associates, L.P., a Delaware limited partnership;
provided, however, that a "Qualified Public Offering" shall be
deemed to have occurred if there has been a Public Offering and
there exists an active trading market in 40% or more of the
Common Stock.
(f) As used herein the term "Market Price Per Share"
shall mean the price per share equal to the average of the last
sale price of the Common Stock on the Repurchase Calculation Date
on each exchange on which the Common Stock may at the time be
listed or, if there shall have been no sales on any of such
exchanges on the Repurchase Calculation Date, the average of the
closing bid and asked prices on each such exchange at the end of
the Repurchase Calculation Date or if there is no such bid and
asked price on the Repurchase Calculation Date on the next
preceding date when such bid and asked price occurred or, if the
Common Stock shall not be so listed, the average of the closing
sales prices as reported by NASDAQ at the end of the Repurchase
Calculation Date in the over-the-counter market. If the Common
Stock is not so listed or reported by NASDAQ, then the Market
Price Per Share shall be the Book Value Per Share.
(g) In determining the Repurchase Price, appropriate
adjustments shall be made for any future issuances of rights to
acquire and securities convertible into Common Stock and any
stock dividends, splits, combinations, recapitalizations or any
other adjustment in the number of outstanding shares of Common
Stock.
8. Stock Issued to Purchaser Upon Exercise of Stock
Options; Termination of Options.
(a) The Company may from time to time grant to the
Purchaser, in addition to the Options, options under the Option
Plan to purchase shares of Common Stock at $12 per share or at a
different option exercise price. The term "Purchase Stock" as
used in this Agreement shall include all shares of Common Stock
of the Company purchased by the Purchaser pursuant to this
Agreement and issued to the Purchaser by the Company upon
exercise of the Options and of any other stock options held by
the Purchaser.
10
<PAGE>
Commission File No. 0-6544
(b) All outstanding Options granted to the Purchaser
under the Option Plan or otherwise, whether or not then
exercisable, will be automatically terminated upon the payment by
the Company to the Purchaser, pursuant to the provisions of
Sections 5 or 6 of this Agreement, of an amount equal to the
Option Excess Price. If the Option Excess Price is zero or a
negative number, all outstanding stock options granted to the
Purchaser under the Option Plan or otherwise, whether or not then
exercisable, shall be automatically terminated upon the
repurchase of Stock as provided in Sections 5 or 6. The Option
Excess Price is the excess, if any, of the Section 5 Repurchase
Price or the Section 6 Repurchase Price, depending on which
Repurchase Price is being used to repurchase the remainder of the
Stock, over the Option Price (as defined in the Option Plan)
multiplied by the number of Exercisable Option Shares. For
purposes hereof, "Exercisable Option Shares" shall mean the
shares of Common Stock which, at the time of determination of the
Option Excess Price, could be purchased by the Purchaser upon
exercise of his outstanding options.
9. The Company's Representations and Warranties.
(a) The Company represents and warrants to the
Purchaser that (i) this Agreement has been duly authorized,
executed and delivered by the Company and (ii) the Purchase
Stock, when issued and delivered in accordance with the terms
hereof, will be duly and validly issued, fully paid and
nonassessable.
(b) If the Company shall have engaged in a Public
Offering, the Company will file the reports required to be filed
by it under the Act and the Exchange Act and the rules and
regulations adopted by the SEC thereunder, to the extent required
from time to time to enable the Purchaser to sell shares of Stock
without registration under the Act within the limitations of the
exemptions provided by (A) Rule 144 under the Act, as such Rule
may be amended from time to time, or (B) any similar rule or
regulation hereafter adopted by the SEC. Notwithstanding
anything contained in this Section 10(b), the Company may
deregister under Section 12 of the Exchange Act if it is then
permitted to do so pursuant to the Exchange Act and the rules and
regulations thereunder. Nothing in this Section 9(b) shall be
deemed to limit in any manner the restrictions on sales of Stock
contained in this Agreement.
10. "Piggyback" Registration Rights.
(a) If the Purchaser is an Affiliate of the Company,
effective upon the purchase of Common Stock pursuant to this
Agreement, until the later of (i) the first occurrence of a
Qualified Public Offering (as defined in Section 7(e) above) or
(ii) the fifth anniversary of the Purchase Date, the Purchaser
hereby agrees to be bound by all of the terms, conditions and
obligations of the Registration Rights Agreement dated as of
August 18, 1995, among the Company (as successor by Merger to
Crimson Acquisition Corp.) and certain of the Investors (the
"Registration Rights Agreement") and, in the case of a Qualified
Public Offering and subject to the limitations set forth in this
Section 10, shall have all of the rights and privileges of the
Registration Rights Agreement, in each case as if the Purchaser
were an original party (other than the Company) thereto;
provided, however, that the Purchaser shall not have any rights
to request registration under Section 3 of the Registration
Rights Agreement; and provided further, that the
11
<PAGE>
Commission File No. 0-6544
Purchaser shall not be bound by any amendments to the
Registration Rights Agreement unless Purchaser consents thereto.
Notwithstanding anything to the contrary contained in the
Registration Rights Agreement, the Purchaser's rights and
obligations under the Registration Rights Agreement shall be
subject to the limitations and additional obligations set forth
in this Section 10. All shares of Stock purchased by the
Purchaser pursuant to this Agreement and held by the Purchaser,
the Purchaser's Trust or the Purchaser's Estate, including shares
purchased upon the exercise of Options, shall be deemed to be
Registrable Securities as defined in the Registration Rights
Agreement.
(b) The Company will promptly notify the Purchaser in
writing (a "Notice") of any proposed registration (a "Proposed
Registration") in connection with a Qualified Public Offering.
If within 15 days of the receipt by the Purchaser of such Notice,
the Company receives from the Purchaser, the Purchaser's Trust or
the Purchaser's Estate a written request (a "Request") to
register shares of Stock held by the Purchaser, the Purchaser's
Estate or the Purchaser's Trust (which Request will be
irrevocable unless otherwise mutually agreed to in writing by the
Purchaser and the Company), shares of Stock will be so registered
as provided in this Section 10; provided, however, that for each
such registration statement only one Request, which shall be
executed by the Purchaser, the Purchaser's Trust or the
Purchaser's Estate, as the case may be, may be submitted for all
Registrable Securities held by the Purchaser, the Purchaser's
Estate and the Purchaser's Trust.
(c) The maximum number of shares of Stock which will
be registered pursuant to a Request will be the lowest of (i) the
number of shares of Stock then held by the Purchaser (which for
purposes of this subparagraph (c) shall include shares held by
the Purchaser's Estate or a Purchaser's Trust), including all
shares of Stock which the Purchaser is then entitled to acquire
under an unexercised Option to the extent then exercisable or
(ii) the maximum number of shares of Stock which the Company can
register in the Proposed Registration without adverse effect on
the offering in the view of the managing underwriters (reduced
pro rata with all Other Purchasers) as more fully described in
subsection (d) of this aggregate number of shares of Common Stock
the Purchaser and all Other Purchasers have requested be
registered) and all Other Purchasers are permitted to register
under the Registration Rights Agreement.
(d) If a Proposed Registration involves an
underwritten offering and the managing underwriter advises the
Company in writing that, in its opinion, the number of shares of
Stock requested to be included in the Proposed Registration
exceeds the number which can be sold in such offering, so as to
be likely to have an adverse effect on the price, timing or
distribution of the shares of Stock offered in such Qualified
Public Offering as contemplated by the Company, then the Company
will include in the Proposed Registration (i) first, 100% of the
shares of Stock the Company proposes to sell and (ii) second, to
the extent of the number of shares of Stock requested to be
included in such registration which, in the opinion of such
managing underwriter, can be sold without having the adverse
effect referred to above, the number of shares of Stock which the
"Holders" (as defined in the Registration Rights
Agreement), including, without limitation, the Purchaser and
Other Purchasers have requested to be included in the Proposed
Registration, such amount to be allocated pro rata among all
12
<PAGE>
Commission File No. 0-6544
requesting Holders on the basis of the relative number of shares
of Stock then held by each such Holder (provided that any shares
thereby allocated to any such Holder that exceed such Holder's
request will be reallocated among the remaining requesting
Holders in like manner).
(e) Upon delivering a Request the Purchaser will, if
requested by the Company, execute and deliver a custody agreement
and power of attorney in form and substance satisfactory to the
Company with respect to the shares of Stock to be registered
pursuant to this Section 10 (a "Custody Agreement and Power of
Attorney"). The Custody Agreement and Power of Attorney will
provide, among other things, that the Purchaser will deliver to
and deposit in custody with the custodian and attorney-in-fact
named therein a certificate or certificates representing such
shares of Stock (duly endorsed in blank by the registered owner
or owners thereof or accompanied by duly executed stock powers in
blank) and irrevocably appoint said custodian and
attorney-in-fact as the Purchaser's agent and attorney-in-fact
with full power and authority to act under the Custody Agreement
and Power of Attorney on the Purchaser's behalf with respect to
the matters specified therein.
(f) The Purchaser agrees that he will execute such
other agreements as the Company may reasonably request to further
evidence the provisions of this Section 10.
(g) Notwithstanding anything to the contrary in the
foregoing, the Purchaser shall have no registration rights under
this Section 10 unless he is an Affiliate of the Company.
11. Pro Rata Repurchases.
Notwithstanding anything to the contrary contained in
Sections 5, 6 or 7, if at any time consummation of all purchases
and payments to be made by the Company pursuant to this Agreement
and the Other Purchasers' Agreements would result in an Event,
then the Company shall make purchases from, and payments to, the
Purchaser and Other Purchasers pro rata (on the basis of the
proportion of the number of shares of Stock and the number of
Options each such Purchaser and all Other Purchasers have elected
or are required to sell to the Company) for the maximum number of
shares of Stock and shall pay the Option Excess Price for the
maximum number of Options permitted without resulting in an Event
(the "Maximum Repurchase Amount"). The provisions of Section
5(b) and 6(c) shall apply in their entirety to payments and
repurchases with respect to Options and shares of Stock which may
not be made due to the limits imposed by the Maximum Repurchase
Amount under this Section 11. Until all of such Stock and
Options are purchased and paid for by the Company, the Purchaser
and the Other Purchasers whose Stock and Options are not
purchased in accordance with this Section 11 shall have priority,
on a pro rata basis, over other purchases of Common Stock and
Options by the Company pursuant to this Agreement and Other
Purchasers' Agreements.
12. Rights to Negotiate Repurchase Price.
Nothing in this Agreement shall be deemed to restrict
or prohibit the Company from purchasing shares of Stock or
Options from the Purchaser, at any time, upon such terms and
conditions, and for such price, as may be mutually agreed upon
between the Parties, whether or not at the time of such purchase
circumstances exist which specifically grant the Company the
13
<PAGE>
Commission File No. 0-6544
right to purchase, or the Purchaser the right to sell, shares of
Stock or the Company has the right to pay, or the Purchaser has
the right to receive, the Option Excess Price under the terms of
this Agreement.
13. Covenant Regarding 83(b) Election.
Except as the Company may otherwise agree in writing,
the Purchaser hereby covenants and agrees that he will make an
election provided pursuant to Treasury Regulation 1.83-2 with
respect to the Stock, including without limitation, the Stock to
be acquired pursuant to Section 1 and the Stock to be acquired
upon each exercise of the Purchaser's Options; and Purchaser
further covenants and agrees that he will furnish the Company
with copies of the forms of election the Purchaser files within
30 days after the date hereof, and within 30 days after each
exercise of Purchaser's Non-Qualified Options and with evidence
that each such election has been filed in a timely manner.
14. Notice of Change of Beneficiary.
Immediately prior to any transfer of Stock to a
Purchaser's Trust, the Purchaser shall provide the Company with a
copy of the instruments creating the Purchaser's Trust and with
the identity of the beneficiaries of the Purchaser's Trust. The
Purchaser shall notify the Company immediately prior to any
change in the identity of any beneficiary of the Purchaser's
Trust.
15. Expiration of Certain Provisions.
The provisions contained in Sections 4, 5 and 6 of this
Agreement and the portion of any other provision of this
Agreement which incorporates the provisions of Sections 4, 5 and
6, shall terminate and be of no further force or effect with
respect to any shares of Stock sold by the Purchaser (i) pursuant
to an effective registration statement filed by the Company
pursuant to Section 10 hereof or (ii) pursuant to the terms of
the Sale Participation Agreement of even date herewith, among the
Purchaser, KKR Partners II, L.P. and Crimson Associates, L.P.
The provisions contained in Sections 2(e), 3, 4, 5, 6
and 13 of this Agreement, and the portion of any other provisions
of this Agreement which incorporate the provisions of such
Sections, shall terminate and be of no further force or effect
upon the consummation of a merger, reorganization, business
combination or liquidation of the Company, or a sale of Common
Stock owned by the Investors, but only if such merger,
reorganization, business combination, liquidation or sale of
Common Stock results in KKR Associates, a New York limited
partnership, or any affiliate thereof, no longer having the power
(i) to elect a majority of the Board of Directors of the Company
or such other corporation which succeeds to the Company's rights
and obligations pursuant to such merger, reorganization, business
combination, liquidation or stock sale, or (ii) if the resulting
entity of such merger, reorganization, business combination,
liquidation or stock sale is not a corporation, to select the
general partner(s) or other persons or entities controlling the
operations and business of the resulting entity.
14
<PAGE>
Commission File No. 0-6544
16. Recapitalizations, etc.
The provisions of this Agreement shall apply, to the
full extent set forth herein with respect to the Stock or the
Options, to any and all shares of capital stock of the Company or
any capital stock, partnership units or any other security
evidencing ownership interests in any successor or assign of the
Company (whether by merger, consolidation, sale of assets or
otherwise) which may be issued in respect of, in exchange for, or
substitution of the Stock or the Options, by reason of any stock
dividend, split, reverse split, combination, recapitalization,
liquidation, reclassification, merger, consolidation or
otherwise.
17. Purchaser's Employment by the Company.
Nothing contained in this Agreement or in any other
agreement entered into by the Company and the Purchaser
contemporaneously with the execution of this Agreement (i)
obligates the Company or any subsidiary of the Company to employ
the Purchaser in any capacity whatsoever or (ii) prohibits or
restricts the Company (or any such subsidiary) from terminating
the employment, if any, of the Purchaser at any time or for any
reason whatsoever, with or without Cause, and the Purchaser
hereby acknowledges and agrees that neither the Company nor any
other person has made any representations or promises whatsoever
to the Purchaser concerning the Purchaser's employment or
continued employment by the Company or any subsidiary of the
Company.
18. State Securities Laws.
The Company hereby agrees to use its best efforts to
comply with all state securities or "blue sky" laws which might
be applicable to the sale of the Stock and the issuance of the
Options to the purchaser.
19. Binding Effect:
The provisions of this Agreement shall be binding upon
and accrue to the benefit of the parties hereto and their
respective heirs, legal representatives, successors and assigns.
In the case of a transferee permitted under Section 2(a) hereof,
such transferee shall be deemed the Purchaser hereunder;
provided, however, that no transferee (including without
limitation, transferees referred to in Section 2(a) hereof) shall
derive any rights under this Agreement unless and until such
transferee has delivered to the Company a valid undertaking and
becomes bound by the terms of this Agreement.
20. Amendment.
This Agreement may be amended only by a written
instrument signed by the Parties hereto.
21. Closing.
Except as otherwise provided herein, the closing of
each purchase and sale of shares of Stock and the payment
15
<PAGE>
Commission File No. 0-6544
of the Option Excess Price, if any, pursuant to this Agreement
shall take place at the principal office of the Company on the
tenth business day following delivery of the notice by either
Party to the other of its exercise of the right to purchase or
sell such Stock hereunder or to cause the payment of the Option
Excess Price, if any.
22. Applicable Law.
The laws of the state of Alabama (or if the Company
reincorporates in another state, of that state) shall govern the
interpretation, validity and performance of the terms of this
Agreement, regardless of the law that might be applied under
principles of conflicts of law. Any suit, action or proceeding
against the Purchaser, with respect to this Agreement, or any
judgment entered by any court in respect of any thereof, may be
brought in any court of competent jurisdiction in the State of
Alabama (or if the Company reincorporates in another state, in
that state) or New York, as the Company may elect in its sole
discretion, and the Purchaser hereby submits to the non-exclusive
jurisdiction of such courts for the purpose of any such suit,
action, proceeding or judgment. By the execution and delivery of
this Agreement, the Purchaser appoints The Corporation Trust
Company, at its office in New York, New York or Montgomery,
Alabama (or if the Company reincorporates in another state, an
office in that state), as the case may be, as his agent upon
which process may be served in any such suit, action or
proceeding. Service of process upon such agent, together with
notice of such service given to the Purchaser in the manner
provided in Section 25 hereof, shall be deemed in every respect
effective service of process upon him in any suit, action or
proceeding. Nothing herein shall in any way be deemed to limit
the ability of the Company to serve any such writs, process or
summonses in any other manner permitted by applicable law or to
obtain jurisdiction over the Purchaser, in such other
jurisdictions and in such manner, as may be permitted by
applicable law. The Purchaser hereby irrevocably waives any
objections which he may now or hereafter have to the laying of
the venue of any suit, action or proceeding arising out of or
relating to this Agreement brought in any court of competent
jurisdiction in the State of Alabama (or if the Company
reincorporates in another state, in that state) or New York, and
hereby further irrevocably waives any claim that any such suit,
action or proceeding brought in any such court has been brought
in any inconvenient forum. No suit, action or proceeding against
the Company with respect to this Agreement may be brought in any
court, domestic or foreign, or before any similar domestic or
foreign authority other than in a court of competent jurisdiction
in the State of Alabama (or if the Company reincorporates in
another state, in that state) or New York, and the Purchaser
hereby irrevocably waives any right which he may otherwise have
had to bring such an action in any other court, domestic or
foreign, or before any similar domestic or foreign authority.
The Company hereby submits to the jurisdiction of such courts for
the purpose of any such suit, action or proceeding.
23. Assignability of Certain Rights by the Company.
The Company shall have the right to assign any or all
of its rights or obligations to purchase shares of Stock pursuant
to Sections 4, 5 and 6 hereof; provided, however, that the
Company shall remain obligated to perform its obligations
notwithstanding such assignment in the event that such assignee
fails to perform the obligations so assigned to it.
16
<PAGE>
Commission File No. 0-6544
24. Miscellaneous.
In this Agreement (i) all references to "dollars" or
"$" are to United States dollars and (ii) the word "or" is not
exclusive. If any provision of this Agreement shall be declared
illegal, void or unenforceable by any court of competent
jurisdiction, the other provisions shall not be affected, but
shall remain in full force and effect.
25. Notices.
All notices and other communications provided for
herein shall be in writing and shall be deemed to have been duly
given if delivered by hand (whether by overnight courier or
otherwise) or sent by registered or certified mail, return
receipt requested, postage prepaid, to the Party to whom it is
directed:
(a) If to the Company, to it at the following address:
c/o Kohlberg Kravis Roberts & Co.
2800 Sand Hill Road
Suite 200
Menlo Park, California 94025
Attn: James H. Greene, Jr.
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017-3909
Attn: David J. Sorkin, Esq.
(b) If to the Purchaser, to him at the
address set forth below under his signature;
or at such other address as either party
shall have specified by notice in writing to the
other.
26. Covenant Not to Compete; Confidential
Information.
(a) In consideration of the Company entering into this
Agreement with the Purchaser, the Purchaser hereby agrees
effective as of the Purchase Date, for so long as the Purchaser
is employed by the Company or one of its subsidiaries and for a
period of one year thereafter (the "Noncompete Period"), the
Purchaser shall not, directly or indirectly, engage in the
production, sale or distribution of any product produced, sold or
distributed by the Company or its subsidiaries on the date hereof
or during the Noncompete Period anywhere in the world in which
the Company or its subsidiaries is doing business other than
through the Purchaser's
17
<PAGE>
Commission File No. 0-6544
employment with the Company or any of its subsidiaries. At the
Company's option, the Noncompete Period may be extended for an
additional one year period if (i) within nine months of the
termination of the Purchaser's employment, the Company gives the
Purchaser notice of such extension and (ii) beginning with the
first anniversary of such termination, the Company pays the
Purchaser an amount equal to the Purchaser's base salary on the
date of the termination of his employment. Such amount shall be
paid in installments in a manner consistent with the then current
salary payment policies of the Company. For purposes of this
Agreement, the phrase "directly or indirectly engage in" shall
include any direct or indirect ownership or profit participation
interest in such enterprise, whether as an owner, stockholder,
partner, joint venturer of otherwise, and shall include any
direct or indirect participation in such enterprise as a
consultant, licensor of technology or otherwise.
(b) The Purchaser will not disclose or use at any time
any Confidential Information (as defined below) of which the
Purchaser is or becomes aware, whether or not such information is
developed by him, except to the extent that such disclosure or
use is directly related to and required by the Purchaser's
performance of duties, if any, assigned to the Purchaser by the
Company. As used in this Agreement, the term "Confidential
Information" means information that is not generally known to the
public and that is used, developed or obtained by the Company or
its subsidiaries in connection with its business, including but
not limited to (i) products or services, (ii) fees, costs and
pricing structures, (iii) designs, (iv) computer software,
including operating systems, applications and program listings,
(v) flow charts, manuals and documentation, (vi) data bases,
(vii) accounting and business methods, (viii) inventions,
devices, new developments, methods and processes, whether
patentable or unpatentable and whether or not reduced to
practice, (ix) customers and clients and customer or client
lists, (x) other copyrightable works, (xi) all technology and
trade secrets, and (xii) all similar and related information in
whatever form. Confidential Information will not include any
information that has been published in a form generally available
to the public prior to the date the Purchaser proposes to
disclose or use such information. The Purchaser acknowledges and
agrees that all copyrights, works, inventions, innovations,
improvements, developments, patents, trademarks and all similar
or related information which relate to the actual or anticipated
business of the Company and its subsidiaries (including its
predecessors) and conceived, developed or made by the Purchaser
while employed by the Company or its subsidiaries belong to the
Company. The Purchaser will perform all actions reasonably
requested by the Company (whether during or after the Noncompete
Period) to establish and confirm such ownership at the Company's
expense (including without limitation assignments, consents,
powers of attorney and other instruments).
(c) Notwithstanding clauses (a) and (b) above, if at
any time a court holds that the restrictions stated in such
clauses (a) and (b) are unreasonable or otherwise unenforceable
under circumstances then existing, the parties hereto agree that
the maximum period, scope or geographic area determined to be
reasonable under such circumstances by such court will be
substituted for the stated period, scope or area. Because the
Purchaser's services are unique and because the Purchaser has had
access to Confidential Information, the parties hereto agree that
money damages will be an inadequate remedy for any breach of this
Agreement. In the event a breach or threatened breach of this
Agreement, the Company or its successors or assigns may, in
addition to other rights and remedies existing in their favor,
apply to any court of competent jurisdiction for specific
performance and/or injunctive relief in order to enforce, or
18
<PAGE>
Commission File No. 0-6544
prevent andy violations of, the provisions hereof (without the
posting of a bond or other security).
(d) Notwithstanding the foregoing paragraphs (a), (b)
and (c), the provisions of any employment agreement in effect on
the date hereof between the Company and Purchaser which contains
covenants relating to confidentiality and competition shall
supersede and replace the provisions of paragraphs (a), (b) and
(c) and shall be deemed incorporated by reference in this
Agreement in their entirety.
IN WITNESS WHEREOF, the Parties have executed this
Agreement as of the date first above written.
BRUNO'S, INC.
By_________________________________
William J. Bolton
Chairman and Chief Executive Officer
___________________________________
___________________________________
___________________________________
Address
19
<PAGE>
Commission File No. 0-6544
FORM OF NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, dated as of _______________, is made by
and between Bruno's, Inc., an Alabama corporation hereinafter
referred to as the "Company", and ________, an employee of the
Company or a Subsidiary (as defined below) or Affiliate (as
defined below) of the Company, hereinafter referred to as
"Optionee".
WHEREAS, the Company wishes to afford the Optionee the
opportunity to purchase shares of its Common Stock, par value
$.01 per share (the "Common Stock");
WHEREAS, the Company wishes to carry out the Plan (as
hereinafter defined), the terms of which are hereby incorporated
by reference and made a part of this Agreement; and
WHEREAS, the Committee (as hereinafter defined),
appointed to administer the Plan, has determined that it would be
to the advantage and best interest of the Company and its
stockholders to grant the Non-Qualified Options provided for
herein to the Optionee as an incentive for increased efforts
during his term of office with the Company or its Subsidiaries or
Affiliates, and has advised the Company thereof and instructed
the undersigned officers to issue said Options;
NOW, THEREFORE, in consideration of the mutual
covenants herein contained and other good and valuable
consideration, receipt of which is hereby acknowledged, the
parties hereto do hereby agree as follows:
ARTICLE I
DEFINITIONS
Whenever the following terms are used in this
Agreement, they shall have the meaning specified in the Plan or
below unless the context clearly indicates to the contrary.
Section 1.1 - Affiliate
"Affiliate" shall mean, with respect to the Company,
any corporation directly or indirectly controlling, controlled
by, or under common control with, the Company or any other entity
designated by the Board of Directors of the Company in which the
Company or an Affiliate has an interest.
1
<PAGE>
Commission File No. 0-6544
Section 1.2 - Cause
"Cause" shall mean, except as otherwise provided in an
employment agreement between the Company and the Optionee, (i)
misconduct by the Optionee involving dishonesty or breach of
trust in connection with Optionee's employment or (ii) conduct
which (A) would be a reasonable basis for an indictment of a
felony or a misdemeanor involving moral turpitude and (B) is
reasonably likely to be injurious to the Company.
Section 1.3 - Code
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
Section 1.4 - Committee
"Committee" shall mean the Compensation Committee of
the Company.
Section 1.5 - Grant Date
"Grant Date" shall mean the date on which the Options
provided for in this Agreement were granted.
Section 1.6 Management Stockholder's Agreement
"Management Stockholder's Agreement" shall mean that
certain Management Stockholder's Agreement dated as of
________________ between the Optionee and the Company.
Section 1.7 - Options
"Options" shall mean the non-qualified options, which
may include a Time Option and/or a Performance Option, to
purchase Common Stock granted under this Agreement.
Section 1.8 - Performance Option
"Performance Option" shall mean an Option with respect
to which the commencement of exercisability is governed by
Section 3.1(c) hereof.
Section 1.9 - Permanent Disability
The Optionee shall be deemed to have a "Permanent
Disability" if the Optionee is unable to engage in the activities
required by the Optionee's job by reason of any medically
determined physical or mental impairment which can be expected to
result in death or which has lasted or can be expected to last
for a continuous period of not less than 12 months.
2
<PAGE>
Commission File No. 0-6544
Section 1.10 - Plan
"Plan" shall mean the 1996 Stock Purchase and Option
Plan for Key Employees of Bruno's, Inc. and Subsidiaries.
Section 1.11 - Pronouns
The masculine pronoun shall include the feminine and
neuter, and the singular the plural, where the context so
indicates.
Section 1.12 - Retirement
"Retirement" shall mean retirement at age 62 or over
(or such other age as may be approved by the Board of Directors
of the Company) after having been employed by the Company or a
Subsidiary for at least three years after the Grant Date.
Section 1.13 - Secretary
"Secretary" shall mean the Secretary of the Company.
Section 1.14 - Subsidiary
"Subsidiary" shall mean any corporation in an unbroken
chain of corporations beginning with the Company if each of the
corporations, or group of commonly controlled corporations (other
than the last corporation in the unbroken chain), then owns stock
possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
Section 1.15- Time Option
"Time Option" shall mean an Option with respect to
which the commencement of exercisability is governed by Section
3.1(a) hereof.
Section 1.16 - Trigger Date
"Trigger Date" shall mean _____________ (the date on
which the Optionee commenced employment with the Company).
3
<PAGE>
Commission File No. 0-6544
ARTICLE II
GRANT OF OPTIONS
Section 2.1 - Grant of Options
For good and valuable consideration, on and as of the
date hereof the Company irrevocably grants to the Optionee a Time
Option and/or a Performance Option to purchase any part or all of
an aggregate of the number of shares set forth with respect to
each such Option on the signature page hereof of its $.01 par
value Common Stock upon the terms and conditions set forth in
this Agreement.
Section 2.2 - Exercise Price
Subject to Section 2.4, the exercise price of the
shares of stock covered by the Options shall be $12 per share
without commission or other charge.
Section 2.3 - Consideration to the Company
In consideration of the granting of these Options by
the Company, the Optionee agrees to render faithful and efficient
services to the Company or a Subsidiary or Affiliate, with such
duties and responsibilities as the Company shall from time to
time prescribe. Nothing in this Agreement or in the Plan shall
confer upon the Optionee any right to continue in the employ of
the Company or any Subsidiary or Affiliate or shall interfere
with or restrict in any way the rights of the Company and its
Subsidiaries or Affiliates, which are hereby expressly reserved,
to terminate the employment of the Optionee at any time for any
reason whatsoever, with or without cause.
Section 2.4 - Adjustments in Options Pursuant to Merger,
Consolidation, etc.
Subject to Section 9 of the Plan, in the event that the
outstanding shares of the stock subject to an Option are, from
time to time, changed into or exchanged for a different number or
kind of shares of the Company or other securities of the Company
by reason of a merger, consolidation, recapitalization,
reclassification, stock split, stock dividend, combination of
shares, or otherwise, the Committee shall make an appropriate and
equitable adjustment in the number and kind of shares and/or the
amount of consideration as to which or for which, as the case may
be, such Option, or portions thereof then unexercised, shall be
exercisable. Any such adjustment made by the Committee shall be
final and binding upon the Optionee, the Company and all other
interested persons.
4
<PAGE>
Commission File No. 0-6544
ARTICLE III
PERIOD OF EXERCISABILITY
Section 3.1 - Commencement of Exercisability
(a) Time Options shall become exercisable as follows:
<TABLE>
<CAPTION>
Percentage of Time Option
Date Time Option Shares Granted As to Which
Becomes Exercisable Time Option Is Exercisable
- - -------------------------- --------------------------
<S> <C>
After the first anniversary
of the Trigger Date 20%
After the second anniversary
of the Trigger Date 40%
After the third anniversary
of the Trigger Date 60%
After the fourth anniversary
of the Trigger Date 80%
After the fifth anniversary
of the Trigger Date 100%
</TABLE>
Notwithstanding the foregoing, the Time Option shall
become immediately exercisable as to 100% of the shares of Common
Stock subject to such Option immediately prior to a Change of
Control (but only to the extent such Option has not otherwise
terminated or become exercisable). A "Change of Control" means
(i) a sale of all or substantially all of the assets of the
Company to a Person or Group who is not an Affiliate of Kohlberg
Kravis Roberts & Co., L.P. ("KKR"), (ii) a sale by KKR or any of
its Affiliates resulting in (A) more than 50% of the voting stock
of the Company being held by a Person or Group that does not
include KKR or any of its Affiliates and (B) more than 50% of the
seats on the Board of Directors of the Company being controlled
by or being designees of a party or parties other than KKR or any
of its Affiliates, or (iii) a merger or consolidation of the
Company into another Person which is not an Affiliate of KKR.
"Person" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association,
joint venture, governmental authority or other entity of whatever
nature. "Group" means two or more Persons acting together as a
partnership, limited partnership, syndicate or other group for
the purpose of acquiring, holding or disposing of securities of
the Company.
5
<PAGE>
Commission File No. 0-6544
(c) The Performance Option shall become exercisable
with respect to 20% of the shares of Common Stock subject to such
Option on each Vesting Date following a Determination Date that
the Company's Cumulative EBITDA equals or exceeds the Cumulative
EBITDA Target as of such Determination Date and the actual EBITDA
for that year equals or exceeds the EBITDA Target for that year.
If the Company's EBITDA for a Plan Year is less than 100% of the
EBITDA Target for such Plan Year (a "Missed Year"), no such
Performance Option shall become exercisable with respect to any
additional shares of Common Stock on the Vesting Date for such
Plan Year. If, for any Plan Year subsequent to a Missed Year,
EBITDA exceeds the EBITDA Target and Cumulative EBITDA exceeds
the Cumulative EBITDA Target, then any prior percentage of
Performance Options in respect of prior Missed Years shall become
exercisable (but only to the extent such Option has not otherwise
terminated or become exercisable).
Notwithstanding the foregoing, the Performance Option
shall become exercisable as to 100% of the shares of Common Stock
subject to such Option after seven years after the Trigger Date
(but only to the extent such Option has not otherwise terminated
or become exercisable).
(d) For purposes of Section 3.1(c):
(i) "Cumulative EBITDA" means with respect to any
Performance Option, the sum of the EBITDA for the Company
and its consolidated subsidiaries during the period
commencing on January 28, 1996 and ending on the last day of
the Plan Year preceding the Determination Date.
(ii) "Cumulative EBITDA Targets" means with respect to
any Performance Option, the sum of the EBITDA Targets for
the period commencing on January 28, 1996 and ending on the
last day of the Plan Year preceding the Determination Date.
(iii) "Determination Date" means February 15 of each
calendar year.
(iv) "EBITDA" shall mean, with respect to the Company
and its consolidated subsidiaries, net income before net
interest expense, income taxes, depreciation and
amortization, writedown of property and securities,
extraordinary loss on extinguishment of debt, loss on
disposal of discontinued operations and loss from operation
of discontinued operations.
(v) "EBITDA Target" shall have the meaning ascribed to
such term in Schedule I hereto for Plan Years 1997 through
2001 and such other targets as are established by the
Committee with respect to subsequent Plan Years; provided,
that to the extent that the Company or any of its
subsidiaries disposes or acquires assets out of the ordinary
course of business the Committee will decrease or increase,
as the case may be, the EBITDA Target for such dispositions
or acquisitions.
(vi) "Plan Year" means (i) the period from January 28,
1996 to February 1, 1997 with respect to Plan Year 1997 and
(ii) thereafter, the period commencing on the day
immediately succeeding the close of the prior Plan Year
until the Saturday closest to each January 31st.
6
<PAGE>
Commission File No. 0-6544
(vii) "Vesting Date" means August 18th of each
calendar year.
(e) Notwithstanding the foregoing, no Option shall
become exercisable as to any additional shares of Common Stock
following the termination of employment of the Optionee for any
reason other than a termination of employment because of death,
Permanent Disability or Retirement of the Optionee and any Option
(other than as provided in the next succeeding sentence) which is
non-exercisable as of the Optionee's termination of employment
shall be immediately cancelled. In the event of a termination of
employment because of such death, Permanent Disability or
Retirement, the Time Options (but not the Performance Options)
shall immediately become exercisable as to all shares of Common
Stock subject thereto.
Section 3.2 - Expiration of Options
Except as otherwise provided in Section 5 or 6 of the
Management Stockholder's Agreement, the Options may not be
exercised to any extent by the Optionee after the first to occur
of the following events:
(a) The tenth anniversary of the Grant Date; or
(b) The first anniversary of the date of the
Optionee's termination of employment by reason of death,
Permanent Disability or Retirement; or
(c) The first business day which is fifteen calendar
days after the earlier of (i) 75 days after termination of
employment of the Optionee for any reason other than for
death, Permanent Disability or Retirement or (ii) the
delivery of notice by the Company that it does not intend to
exercise its call right under Section 6 of the Management
Stockholder's Agreement; provided, however, that in any
event the Options shall remain exercisable under this
subsection 3.2(c) until at least 45 days after termination
of employment of the Optionee for any reason other than for
death, Permanent Disability or Retirement; or
(d) The date the Option is terminated pursuant to
Section 5, 6 or 8(b) of the Management Stockholder's
Agreement;
(e) The date of an Optionee's termination of
employment by the Company for Cause; or
(f) If the Committee so determines pursuant to Section
9 of the Plan, the effective date of either the merger or
consolidation of the Company into another Person, or the
exchange or acquisition by another Person of all or
substantially all of the Company's assets or 80% or more of
its then outstanding voting stock, or the recapitalization,
reclassification, liquidation or dissolution of the Company.
At least ten (10) days prior to the effective date of such
merger, consolidation, exchange, acquisition,
recapitalization, reclassification, liquidation or
dissolution, the Committee shall give the Optionee notice of
such event if the Option has then neither been fully
exercised nor become unexercisable under this Section 3.2.
7
<PAGE>
Commission File No. 0-6544
ARTICLE IV
EXERCISE OF OPTIONS
Section 4.1 - Person Eligible to Exercise
During the lifetime of the Optionee, only he may
exercise an Option or any portion thereof. After the death of
the Optionee, any exercisable portion of an Option may, prior to
the time when an Option becomes unexercisable under Section 3.2,
be exercised by his personal representative or by any person
empowered to do so under the Optionee's will or under the then
applicable laws of descent and distribution.
Section 4.2 - Partial Exercise
Any exercisable portion of an Option or the entire
Option, if then wholly exercisable, may be exercised in whole or
in part at any time prior to the time when the Option or portion
thereof becomes unexercisable under Section 3.2; provided,
however, that any partial exercise shall be for whole shares of
Common Stock only.
Section 4.3- Manner of Exercise
An Option, or any exercisable portion thereof, may be
exercised solely by delivering to the Secretary or his office all
of the following prior to the time when the Option or such
portion becomes unexercisable under Section 3.2:
(a) Notice in writing signed by the Optionee or the
other person then entitled to exercise the Option or portion
thereof, stating that the Option or portion thereof is
thereby exercised, such notice complying with all applicable
rules established by the Committee;
(b) Full payment (in cash, by check or by a
combination thereof) for the shares with respect to which
such Option or portion thereof is exercised;
(c) A bona fide written representation and agreement,
in a form satisfactory to the Committee, signed by the
Optionee or other person then entitled to exercise such
Option or portion thereof, stating that the shares of stock
are being acquired for his own account, for investment and
without any present intention of distributing or reselling
said shares or any of them except as may be permitted under
the Securities Act of 1933, as amended (the "Act"), and then
applicable rules and regulations thereunder, and that the
Optionee or other person then entitled to exercise such
Option or portion thereof will indemnify the Company against
and hold it free and harmless from any loss, damage, expense
or liability resulting to the Company if any sale or
distribution of the shares by such person is contrary to the
representation and agreement referred to above; provided,
however, that the Committee may, in its absolute discretion,
take whatever additional actions it deems appropriate to
ensure the observance and performance of such representation
and agreement and to effect compliance with the Act and any
other federal or state securities laws or regulations;
8
<PAGE>
Commission File No. 0-6544
(d) Full payment to the Company of all amounts which,
under federal, state or local law, it is required to
withhold upon exercise of the Option; and
(e) In the event the Option or portion thereof shall
be exercised pursuant to Section 4.1 by any person or
persons other than the Optionee, appropriate proof of the
right of such person or persons to exercise the option.
Without limiting the generality of the foregoing, the Committee
may require an opinion of counsel acceptable to it to the effect
that any subsequent transfer of shares acquired on exercise of an
Option does not violate the Act, and may issue stop-transfer
orders covering such shares. Share certificates evidencing stock
issued on exercise of this Option shall bear an appropriate
legend referring to the provisions of subsection (c) above and
the agreements herein. The written representation and agreement
referred to in subsection (c) above shall, however, not be
required if the shares to be issued pursuant to such exercise
have been registered under the Act, and such registration is then
effective in respect of such shares.
Section 4.4 - Conditions to Issuance of Stock Certificates
The shares of stock deliverable upon the exercise of an
Option, or any portion thereof, may be either previously
authorized but unissued shares or issued shares which have then
been reacquired by the Company. Such shares shall be fully paid
and nonassessable. The Company shall not be required to issue or
deliver any certificate or certificates for shares of stock
purchased upon the exercise of an Option or portion thereof prior
to fulfillment of all of the following conditions:
(a) The obtaining of approval or other clearance from
any state or federal governmental agency which the Committee
shall, in its absolute discretion, determine to be necessary
or advisable; and
(b) The lapse of such reasonable period of time
following the exercise of the Option as the Committee may
from time to time establish for reasons of administrative
convenience.
Section 4.5 - Rights as Stockholder
The holder of an Option shall not be, nor have any of
the rights or privileges of, a stockholder of the Company in
respect of any shares purchasable upon the exercise of the Option
or any portion thereof unless and until certificates representing
such shares shall have been issued by the Company to such holder.
9
<PAGE>
Commission File No. 0-6544
ARTICLE V
MISCELLANEOUS
Section 5.1 - Administration
The Committee shall have the power to interpret the
Plan and this Agreement and to adopt such rules for the
administration, interpretation and application of the Plan as are
consistent therewith and to interpret or revoke any such rules.
All actions taken and all interpretations and determinations made
by the Committee shall be final and binding upon the Optionee,
the Company and all other interested persons. No member of the
Committee shall be personally liable for any action,
determination or interpretation made in good faith with respect
to the Plan or the Options. In its absolute discretion, the
Board of Directors may at any time and from time to time exercise
any and all rights and duties of the Committee under the Plan and
this Agreement.
Section 5.2 - Options Not Transferable
Except as provided in the Management Stockholder's
Agreement, neither the Options nor any interest or right therein
or part thereof shall be liable for the debts, contracts or
engagements of the Optionee or his successors in interest or
shall be subject to disposition by transfer, alienation,
anticipation, pledge, encumbrance, assignment or any other means
whether such disposition be voluntary or involuntary or by
operation of law by judgment, levy, attachment, garnishment or
any other legal or equitable proceedings (including bankruptcy),
and any attempted disposition thereof shall be null and void and
of no effect; provided, however, that this Section 5.2 shall not
prevent transfers by will or by the applicable laws of descent
and distribution.
Section 5.3 - Shares to Be Reserved
The Company shall at all times during the term of the
Options reserve and keep available such number of shares of stock
as will be sufficient to satisfy the requirements of this
Agreement.
Section 5.4 - Notices
Any notice to be given under the terms of this
Agreement to the Company shall be addressed to the Company in
care of its Secretary, and any notice to be given to the Optionee
shall be addressed to him at the address given beneath his
signature hereto. By a notice given pursuant to this Section
5.4, either party may hereafter designate a different address for
notices to be given to him. Any notice which is required to be
given to the Optionee shall, if the Optionee is then deceased, be
given to the Optionee's personal representative if such
representative has previously informed the Company of his status
and address by written notice under this Section 5.4. Any notice
shall have been deemed duly given when enclosed in a properly
sealed envelope or wrapper addressed as aforesaid, deposited
(with postage prepaid) in a post office or branch post office
regularly maintained by the United States Postal Service.
10
<PAGE>
Commission File No. 0-6544
Section 5.5 - Titles
Titles are provided herein for convenience only and are
not to serve as a basis for interpretation or construction of
this Agreement.
Section 5.6 - Applicability of Plan and Management Stockholder's
Agreement
The Options and the shares of Common Stock issued to
the Optionee upon exercise of the Options shall be subject to all
of the terms and provisions of the Plan and the Management
Stockholder's Agreement, to the extent applicable to the Options
and such shares. In the event of any conflict between this
Agreement and the Plan, the terms of the Plan shall control. In
the event of any conflict between this Agreement or the Plan and
the Management Stockholder's Agreement, the terms of the
Management Stockholder's Agreement shall control.
Section 5.7 - Amendment
This Agreement may be amended only by a writing
executed by the parties hereto which specifically states that it
is amending this Agreement.
Section 5.8 - Governing Law
The laws of the State of Alabama (or if the Company
reincorporates in another state, the laws of that state) shall
govern the interpretation, validity and performance of the terms
of this Agreement regardless of the law that might be applied
under principles of conflicts of laws.
Section 5.9 - Jurisdiction
Any suit, action or proceeding against the Optionee
with respect to this Agreement, or any judgment entered by any
court in respect of any thereof, may be brought in any court of
competent jurisdiction in the State of Alabama (or if the Company
reincorporates in another state, in that state) or New York, as
the Company may elect in its sole discretion, and the Optionee
hereby submits to the non-exclusive jurisdiction of such courts
for the purpose of any such suit, action, proceeding or judgment.
The Optionee hereby irrevocably waives any objections which he
may now or hereafter have to the laying of the venue of any suit,
action or proceeding arising out of or relating to this Agreement
brought in any court of competent jurisdiction in the State of
Alabama (or if the Company reincorporates in another state, in
that state) or New York, and hereby further irrevocably waives
any claim that any such suit, action or proceeding brought in any
such court has been brought in any inconvenient forum. No suit,
action or proceeding against the Company with respect to this
Agreement may be brought in any court, domestic or foreign, or
before any similar domestic or foreign authority other than in a
court of competent jurisdiction in the State of Alabama (or if
the Company reincorporates in another state, in that state) or
New York, and the Optionee hereby irrevocably waives any right
which he may otherwise have had to bring such an action in any
other court, domestic or foreign, or before any similar domestic
or foreign authority. The Company hereby submits to the
jurisdiction of such courts for the purpose of any such suit,
action or proceeding.
11
<PAGE>
Commission File No. 0-6544
IN WITNESS WHEREOF, this Agreement has been executed
and delivered by the parties hereto.
BRUNO'S, INC.
By:____________________________
_
William J. Bolton
Chairman and Chief
Executive Officer:
Aggregate number of shares of
Common Stock for which the Time
Option granted hereunder is
_________________________ exercisable (50% of total
Optionee number of shares):
__________
_________________________
_________________________
Address Aggregate number of shares
of Common Stock for which the
Performance Option granted
hereunder is exercisable (50%
of total number of shares):
Optionee's Taxpayer __________
Identification Number:
_________________________
12
<PAGE>
<TABLE>
Schedule of Terms of
Management Stockholder's Agreements
and
Non-Qualified Stock Option Agreements
Executed by
Walter M. Grant, James J. Hagan
and Laura Hayden
<CAPTION>
Purchase Shares Time Performance
Name Date Purchased Options Options
---------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Walter M. Grant 9/30/96 25,000 (1) 28,125 28,125
James J. Hagan 9/30/96 25,000 (1) 33,333.5 33,333.5
Laura Hayden 9/30/96 15,625 (2) 23,437.5 23,437.5
<FN>
(1) The purchase price for the shares acquired by Mr. Grant and
Mr. Hagan was paid in cash.
(2) Ms. Hayden paid one-half of the purchase price for the
shares acquired by her in cash and obtained a loan from the
Company in an amount equal to the balance of the purchase
price. The loan is secured by all of the shares purchased
by Ms. Hayden.
</FN>
</TABLE>
