<PAGE> 1
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-Q
----------------------
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED NOVEMBER 1, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________TO __________
COMMISSION FILE NUMBER 0-6544
------------------------------
BRUNO'S, INC.
(Exact name of registrant as specified in its charter)
------------------------------
STATE OF INCORPORATION: ALABAMA I.R.S. EMPLOYER I.D. NO. 63-0411801
ADDRESS OF PRINCIPAL EXECUTIVE OFFICES (INCLUDING ZIP CODE)
800 Lakeshore Parkway, Birmingham, Alabama 35211
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE
(205) 940-9400
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 ( )
NUMBER OF OUTSTANDING SHARES OF COMMON STOCK
AS OF DECEMBER 5, 1997 is 25,507,982
<PAGE> 2
Commission File No. 0-6544
BRUNO'S, INC.
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets at
November 1, 1997 and February 1, 1997 2
Condensed Consolidated Statements of Operations for the
Thirty-Nine (39) and Thirteen (13) Week Periods Ended
November 1, 1997 and October 26, 1996 3
Condensed Consolidated Statements of Cash Flows for the
Thirty-Nine (39) Week Periods Ended
November 1, 1997 and October 26, 1996 4
Notes to Condensed Consolidated Financial Statements 5-9
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10-19
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 2. Changes in Securities and Use of Proceeds 19
Item 3. Defaults Upon Senior Securities 19
Item 4. Submission of Matters to a Vote of Security Holders 19
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 20
SIGNATURE PAGE 21
INDEX OF EXHIBITS 22
</TABLE>
<PAGE> 3
Commission File No. 0-6544
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BRUNO'S, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
NOVEMBER 1, 1997 AND FEBRUARY 1,1997
(In Thousands Except Share and Per Share Amounts)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NOVEMBER 1, FEBRUARY 1,
1997 1997
(unaudited)
----------- -----------
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents $ 3,167 $ 4,908
Receivables 18,992 20,480
Inventories, net of LIFO reserve of $10,020
and $8,940, respectively 210,607 181,786
Prepaid expenses 12,284 10,468
Refundable income taxes 820 1,373
Deferred income taxes, net of valuation allowance of $26,713
and $8,345, respectively -- 14,534
--------- ---------
Total current assets 245,870 233,549
--------- ---------
Property and equipment, net of accumulated
depreciation of $332,921 and $313,369,
respectively 452,332 466,997
--------- ---------
Goodwill, net 48,944 50,824
Intangibles and other assets, net 33,662 40,061
--------- ---------
Total noncurrent assets 82,606 90,885
--------- ---------
Total $ 780,808 $ 791,431
========= =========
LIABILITIES AND DEFICIENCY IN NET ASSETS:
Current liabilities:
Current maturities of long-term debt
and capitalized lease obligations $ 3,755 $ 2,491
Accounts payable 167,047 149,614
Accrued payroll and related expenses 15,479 20,360
Accrued interest 15,327 22,630
Other accrued expenses 38,575 39,270
--------- ---------
Total current liabilities 240,183 234,365
--------- ---------
Noncurrent liabilities:
Long-term debt 904,195 813,722
Capitalized lease obligations 14,290 12,415
Deferred income taxes -- 6,742
Other noncurrent liabilities 45,380 54,336
--------- ---------
Total noncurrent liabilities 963,865 887,215
--------- ---------
Deficiency in net assets:
Common Stock, $.01 par value, 60,000,000
shares authorized; 25,507,982 and 25,333,607
issued and outstanding, respectively 255 253
Paid-in capital (586,944) (587,624)
Retained earnings 165,526 259,314
Shareholders' notes receivable (2,077) (2,092)
--------- ---------
Total deficiency in net assets (423,240) (330,149)
--------- ---------
Total $ 780,808 $ 791,431
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE> 4
Commission File No. 0-6544
BRUNO'S, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THIRTY-NINE AND THIRTEEN WEEK PERIODS ENDED NOVEMBER 1, 1997
AND OCTOBER 26, 1996
(In Thousands Except Share and Per Share Amounts)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
November 1, October 26, November 1, October 26,
1997 1996 1997 1996
(39 Weeks) (39 Weeks) (13 Weeks) (13 Weeks)
(unaudited) (unaudited) (unaudited) (unaudited)
------------ ------------ ------------- ------------
<S> <C> <C> <C> <C>
NET SALES $ 1,940,751 $ 2,146,720 $ 610,098 $ 694,223
------------ ------------ ------------ ------------
COST AND EXPENSES:
Cost of products sold 1,512,369 1,631,668 483,665 530,826
Store operating, selling and administrative expenses 392,507 406,614 135,606 134,586
Loss on divestiture of stores -- 88,588 -- 88,588
Impairment of long-lived assets 11,448 -- 11,448 --
Depreciation and amortization 45,292 42,762 15,131 14,654
Interest expense, net 65,131 63,072 22,429 20,558
------------ ------------ ------------ ------------
Total cost and expenses 2,026,747 2,232,704 668,279 789,212
------------ ------------ ------------ ------------
Loss before income taxes and
extraordinary item (85,996) (85,984) (58,181) (94,989)
INCOME TAX PROVISION (BENEFIT) 7,792 (30,427) 7,792 (33,849)
------------ ------------ ------------ ------------
Loss before extraordinary item (93,788) (55,557) (65,973) (61,140)
EXTRAORDINARY ITEM, NET -- 1,175 -- 513
------------ ------------ ------------ ------------
Net loss $ (93,788) $ (56,732) $ (65,973) $ (61,653)
============ ============ ============ ============
NET LOSS PER COMMON SHARE:
Loss before extraordinary item $ (3.70) $ (2.21) $ (2.60) (2.43)
Extraordinary item, net -- (0.05) -- (0.02)
------------ ------------ ------------ ------------
Net loss $ (3.70) $ (2.26) $ (2.60) (2.45)
============ ============ ============ ============
CASH DIVIDENDS PER COMMON SHARE $ $ -- $ -- $ --
============ ============ ============ ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 25,353,090 25,151,810 25,402,487 25,196,838
============ ============ ============ ============
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 5
BRUNO'S, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THIRTY-NINE WEEK PERIODS ENDED NOVEMBER 1, 1997
AND OCTOBER 26, 1996
(Amounts In Thousands)
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NOVEMBER 1, OCTOBER 26,
1997 1996
(39 WEEKS) (39 WEEKS)
(unaudited) (unaudited)
-------------- ---------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (93,788) $ (56,732)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Extraordinary item, net -- 1,175
Loss on divestiture of stores -- 88,588
Noncash impairment and other special charges 34,032 --
Depreciation and amortization 48,419 42,762
LIFO provision 1,080 400
Change in assets and liabilities (51,513) (13,929)
--------- --------
Total adjustments 32,018 118,996
--------- --------
Net cash provided by /(used in) operating activities (61,770) 62,264
--------- --------
INVESTING ACTIVITIES:
Proceeds from sale of property 27,400 1,823
Capital expenditures (56,461) (39,260)
--------- --------
Net cash used in investing activities (29,061) (37,437)
--------- --------
FINANCING ACTIVITIES:
Reductions of long-term debt (222) (45,146)
Net borrowings under revolving credit facilities 91,500 --
Reductions of capitalized lease obligations (2,885) (1,305)
Sale of common stock, net 697 2,174
--------- --------
Net cash provided by/(used in) financing activities 89,090 (44,277)
--------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,741) (19,450)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,908 57,387
========= ========
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,167 $ 37,937
========= ========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 6
Commission File No. 0-6544
BRUNO'S, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THIRTY-NINE AND THIRTEEN WEEK PERIODS ENDED NOVEMBER 1, 1997
AND OCTOBER 26, 1996
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements include
the accounts of Bruno's, Inc. and its wholly owned subsidiaries. Significant
intercompany balances and transactions have been eliminated in consolidation.
Operating results for the thirty-nine weeks ended November 1, 1997 are not
necessarily indicative of the results that may be expected for the entire fiscal
year. The unaudited condensed consolidated financial statements should be read
in conjunction with the consolidated financial statements and footnotes thereto
included in the Company's Annual Report on Form 10-K for the fiscal year ended
February 1, 1997.
In the opinion of management, the accompanying unaudited condensed 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.
2. NET LOSS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 128, Earnings per Share, which supersedes
Accounting Principles Bulletin (APB) Opinion No. 15, Earnings per Share, for
periods ending after December 15, 1997 including interim periods. Under SFAS
128, "basic" loss per share is computed based on the weighted average number of
common shares outstanding during the respective periods while "diluted" loss per
share considers the impact of any dilutive stock options or warrants outstanding
(potential common shares). Because of the antidilutive effect of potential
common shares, basic and diluted loss per share calculated under SFAS 128 are
identical. Earnings per share calculated under APB 15 are identical to those
calculated under SFAS 128.
3. IMPAIRMENT AND OTHER SPECIAL CHARGES
During the thirteen week period ended November 1, 1997, the Company recorded
$36.9 million in impairment and other special charges which impact four separate
lines of the condensed consolidated statement of operations.
The Company recognized $11.4 million of impairment charges during the period
consisting of (i) a $6.1 million reduction in the carrying value of certain of
the Company's excess properties which were identified for sale to reflect the
current fair market value of such properties, (ii) a write-off of $3.1 million
in franchise rights associated with the third quarter termination of the
franchise agreement between the Company and Piggly Wiggly Company, and (iii) a
write-off of $2.2 million of old point-of-sale equipment which is no longer
being utilized.
5
<PAGE> 7
The provision for cost of products sold includes $7.8 million of special charges
consisting primarily of (i) a retail markdown of store level inventory required
to implement the Company's new price reduction program and (ii) an increase in
the shrinkage provision for inventory located in the Birmingham Distribution
Center.
Selling, general and administrative expenses include $9.9 million of special
charges consisting of (i) a $4.0 million increase to general liability insurance
reserves to reflect better estimates, which became available during the third
quarter, of the ultimate actuarial liability for certain claims incurred between
1988 and 1995, (ii) a $2.9 million charge to provide for certain personnel
related matters including the severance arrangement with the former Chief
Executive Officer and the signing bonus and various fees and expenses associated
with the hiring of the new Chief Executive Officer during the third quarter, and
(iii) $3.0 million of other miscellaneous items.
The provision for income taxes for the thirteen week period ended November 1,
1997 represents an increase of $7.8 million in the valuation allowance to fully
reserve the Company's net deferred tax assets at November 1, 1997. SEE "DEFERRED
TAX ASSET AND VALUATION RESERVE" IN NOTE 6 OF THE NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS.
4. CONTINGENCIES
On June 6, 1997, a lawsuit was filed against the Company in the Circuit Court
for Jefferson County, Alabama by SNA, Inc. ("SNA") and A.B. Real Estate, Inc.
("A.B. Real Estate"). The lawsuit is styled A.B. Real Estate, Inc. et. al. v.
Bruno's, Inc., et al., Civil Action No. CV-97-3538. The complaint alleges that
SNA and A.B. Real Estate are engaged in the business of developing and managing
commercial real estate, that the Company had a contractual obligation to offer
for sale and to sell grocery store sites to SNA and A.B. Real Estate and to
lease such sites back from such entities, and that the Company's failure to
perform its obligations constitutes fraud within the meaning of Alabama law. The
complaint seeks to recover compensatory and punitive damages from the Company in
an unspecified amount. The Company believes that it has meritorious defenses to
the allegations contained in the complaint and intends to defend this lawsuit
vigorously.
The Company is also 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.
5. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
The Company and several lending institutions are parties to a Credit Agreement
dated as of August 18, 1995, as amended and restated as of June 2, 1997 (the
"Credit Agreement"). The Credit Agreement provides for a revolving credit
facility of $225 million (the "Revolving Credit Facility") and a term loan
facility of $350 million (the "Term Loan Facility"). On September 5, 1997, the
Company and the requisite lending institutions under the Credit Agreement
entered into an Amendment, Waiver and Agreement relating to the Credit Agreement
(the "First Amendment"). The Company and the requisite lending institutions
under the Credit Agreement entered into an additional Amendment, Waiver and
Agreement relating to the Credit Agreement as of December 1, 1997 (the "Second
Amendment"). The
6
<PAGE> 8
First Amendment reduced the amount that the Company may borrow under the
Revolving Credit Facility from $225 million to $200 million. In addition, the
First Amendment and the Second Amendment amended certain financial covenants
contained in the Credit Agreement. As of November 1, 1997, the Company had $155
million outstanding under the Revolving Credit Facility and $350 million
outstanding under the Term Loan Facility.
The Company's long-term debt as of November 1, 1997 is summarized as follows:
<TABLE>
<CAPTION>
(000's omitted)
----------------
<S> <C>
Term Loan $ 350,000
Senior Subordinated Notes 400,000
Revolving Credit Facility 155,000
Other Borrowings 260
----------------
905,260
Less current maturities 1,065
----------------
Long-Term Debt $ 904,195
================
</TABLE>
Prior to the First Amendment, the Credit Agreement contained certain restrictive
covenants which, among other things, required the Company to maintain (i) a
ratio of consolidated total debt to earnings before interest, taxes,
depreciation and amortization ("EBITDA") of 6.95 to 1.00 or less (with such
ratio decreasing over the term of the Credit Agreement), (ii) a ratio of
consolidated EBITDA to consolidated interest expense of 1.50 to 1.00 or greater
(with such ratio increasing over the term of the Credit Agreement), and (iii) a
consolidated fixed charge coverage ratio of 1.15 to 1.00 or greater (with such
ratio increasing over the term of the Credit Agreement). In calculating
compliance with these covenants, EBITDA is adjusted by the amount of certain
non-cash and non-recurring gains and charges. The covenants in the Credit
Agreement also limit, among other things, capital expenditures, dividends and
certain other debt payments by the Company.
The First Amendment amended the Credit Agreement by (i) deleting the
consolidated total debt to EBITDA ratio applicable to the periods ending August
2, 1997 and November 1, 1997, (ii) changing the consolidated EBITDA to
consolidated interest expense ratio to 1.25 to 1.00 for the period ending August
2, 1997 and to 1.10 to 1.00 for the period ending November 1, 1997, and (iii)
changing the consolidated fixed charge coverage ratio to 1.00 to 1.00 for the
periods ending August 2, 1997 and November 1, 1997. As of November 1, 1997, the
Company was in compliance with all covenants under the First Amendment.
The Second Amendment amended the Credit Agreement and the First Amendment by
(i) waiving any defaults and events of default that have occurred or may occur
with respect to the consolidated EBITDA to consolidated interest expense ratio,
the consolidated total debt to consolidated EBITDA ratio, and the consolidated
fixed charge ratio applicable to the periods ending on January 31, 1998 and May
2, 1998, (ii) adding a new financial covenant under which the Company's
consolidated EBITDA for the twelve-month period ended January 31, 1998 must be
at least $60 million and under which the Company's consolidated EBITDA for the
twelve-month period ended May 2, 1998 must be at least $40 million, (iii)
requiring the Company to pledge substantially all of the assets of the Company
and its subsidiaries to secure the Company's indebtedness under the Credit
Agreement, and (iv) increasing the interest rates applicable to the outstanding
indebtedness under the Credit Agreement.
7
<PAGE> 9
After giving effect to the Second Amendment, the Revolving Credit Facility ($155
million outstanding at November 1, 1997) and Tranche A of the Term Loan Facility
($150 million outstanding at November 1, 1997) bear interest at either the prime
rate plus 1.50%, or the eurodollar rate plus 2.50%. Tranche B of the Term Loan
Facility ($200 million outstanding at November 1, 1997) bears interest at either
the prime rate plus 2.00%, or the eurodollar rate plus 3.00%. The Company elects
whether interest on its loans will be based on the prime rate or the eurodollar
rate at the beginning of each interest rate period (as defined in the Credit
Agreement) applicable to such loans. Scheduled amortization of the loans made
under the Term Loan Facility commences in June 1998 and continues through April
2005.
The Company incurs commitment fees of 0.5% on the unused portion of the credit
available under the Credit Agreement.
Future scheduled principal payments for the Company's long-term debt are as
follows:
<TABLE>
<CAPTION>
Fiscal Year (000's omitted)
----------- ---------------
<S> <C>
1997 $ 65
1998 2,065
1999 18,065
2000 22,065
2001 26,000
Thereafter 837,000
==============
$905,260
==============
</TABLE>
6. DEFERRED TAX ASSET AND VALUATION RESERVE
During the third quarter, the Company re-evaluated its deferred tax asset to
determine the need for any valuation allowance which may be appropriate in light
of the Company's projections for taxable income and the expiration dates of the
Company's net operating loss carryforwards. Based on the results of this
evaluation, the Company has recorded an additional $7.8 million valuation
allowance to reflect the determination that its deferred tax asset may not be
realized. A valuation allowance of $10.6 million was established during the
second quarter of 1997. At November 1, 1997, the Company's net deferred tax
assets are fully reserved. The Company will continue to review this valuation
adjustment on a quarterly basis and make adjustments as appropriate.
In the prior year, the Company recorded a valuation allowance of $8.3 million
relating to net operating loss carryforwards existing at Seessel Holdings, Inc.
("Seessel's") as of the date on which Seessel's was acquired by the Company. In
the opinion of management, these net operating loss carryforwards are not likely
to be realized.
7. RECENT PRONOUNCEMENTS
In February 1997, the FASB issued SFAS No. 129, Disclosures of Information About
Capital Structure, which establishes standards for disclosing information about
an entity's capital structure. The Company is required to adopt this statement
in its current fiscal year, and it is not expected to have
8
<PAGE> 10
a material impact on the Company's financial statements. In June 1997, the FASB
issued SFAS No. 130, Reporting Comprehensive Income, which requires the
reporting and display of comprehensive income and its components in an entity's
financial statements. SFAS No. 130 is not expected to materially impact the
Company. Also issued in June 1997 was SFAS No. 131, Disclosures about Segments
of an Enterprise and Related Information, which specifies revised guidelines for
determining an entity's operating segments and the type and level of financial
information to be required. Because the Company operates primarily in the retail
grocery industry, management believes that the implementation of SFAS No. 131
will have no significant impact on future financial reporting. Companies are
required to adopt SFAS 130 and SFAS 131 in fiscal years beginning after December
15, 1997.
9
<PAGE> 11
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 operating results during the periods included in the
accompanying condensed consolidated statements of operations.
A table showing the percentage of net sales represented by certain items in the
Company's condensed consolidated statements of operations is as follows:
<TABLE>
<CAPTION>
NOVEMBER 1, OCTOBER 26, NOVEMBER 1, OCTOBER 26,
1997 1996 1997 1996
(39 WEEKS) (39 WEEKS) (13 WEEKS) (13 WEEKS)
---------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
Net sales 100.00% 100.00% 100.00% 100.00%
Cost of products sold 77.93% 76.01% 79.28% 76.46%
Store operating, selling, and administrative expenses 20.22% 18.94% 22.23% 19.39%
------ ------ ------ ------
EBITDA(1) 1.85% 5.05% -1.50% 4.15%
Loss on divestiture of stores 0.00% 4.13% 0.00% 12.76%
Impairment of long-lived assets 0.59% 0.00% 1.88% 0.00%
Depreciation and amortization 2.33% 1.99% 2.48% 2.11%
Interest expense, net 3.36% 2.94% 3.68% 2.96%
------ ------ ------ ------
Loss before income taxes
and extraordinary item -4.43% -4.01% -9.54% -13.68%
Income taxes (benefit) 0.40% -1.42% 1.28% -4.88%
Extraordinary item, net 0.00% 0.05% 0.00% 0.07%
------ ------ ------ ------
Net loss -4.83% -2.64% -10.81% -8.88%
====== ====== ====== ======
</TABLE>
A summary of the changes in certain items included in the condensed statements
of operations for the thirty-nine and thirteen week periods ended November 1,
1997 as compared to the thirty-nine and thirteen week periods ended October
26,1996 is as follows (dollars in thousands):
<TABLE>
<CAPTION>
Thirty-Nine Weeks Thirteen Weeks
Ended November 1, 1997 Ended November 1, 1997
Amounts % Change Amounts % Change
---------- -------- --------- --------
<S> <C> <C> <C> <C>
Net sales $(205,969) -9.59% $ (84,125) -12.12%
Cost of products sold (119,299) -7.31% (47,161) -8.88%
Store operating, selling, and administrative expenses (14,107) -3.47% 1,020 0.76%
--------- ------- --------- --------
EBITDA(1) (72,563) -66.92% (37,984) -131.84%
Loss on divestiture of stores (88,588) -100.00% (88,588) -100.00%
Impairment of long-lived assets 11,448 N/A 11,448 N/A
Depreciation and amortization 2,530 5.92% 477 3.26%
Interest expense, net 2,059 3.26% 1,871 9.10%
--------- ------- --------- --------
Loss before income taxes
and extraordinary item (12) N/A 36,808 N/A
Income taxes (benefit) 38,219 N/A 41,641 N/A
Extraordinary item, net (1,175) -100.00% (513) -100.00%
--------- ------- --------- --------
Net loss $ (37,056) N/A $ (4,320) N/A
========= ======= ========= ========
</TABLE>
(1) EBITDA -- For purposes of this document, EBITDA is defined as net sales
reduced by cost of products sold and store operating, selling and
administrative expenses.
10
<PAGE> 12
The following table contains a pro forma condensed consolidated statement of
operations for the thirty-nine week period ended October 26, 1996 reflecting
the acquisition of Seessel Holdings, Inc. and the sale or closing of 47 stores
during the fiscal year ended February 1, 1997 as if such events had occurred at
the beginning of such period.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THIRTY-NINE WEEK PERIOD ENDED OCTOBER 26, 1996 (UNAUDITED)
(Amounts In Thousands)
<TABLE>
<CAPTION>
THIRTY-NINE (39) WEEK PERIOD ENDED
------------------------------------------------------
OCTOBER 26, 1996
------------------------------------------------------
TOTAL
BRUNO'S COMPANY
(PRO FORMA) SEESSEL'S * (PRO FORMA)
------------ ---------- ----------
<S> <C> <C> <C>
Net sales $1,941,020 $134,026 $2,075,046
Cost of products sold 1,477,420 94,452 1,571,872
Store operating, selling, and
administrative expenses 355,280 32,604 387,884
---------- -------- ----------
EBITDA (as defined) 108,320 6,970 115,290
Depreciation and amortization 37,056 4,484 41,540
---------- -------- ----------
Operating income $ 71,264 $ 2,486 $ 73,750
========== ======== ==========
<CAPTION>
THIRTY-NINE (39) WEEK PERIOD ENDED
------------------------------------------------------
OCTOBER 26, 1996
------------------------------------------------------
TOTAL
BRUNO'S COMPANY
(PRO FORMA) SEESSEL'S * (PRO FORMA)
------------ ------------ ------------
<S> <C> <C> <C>
Net sales 100.00% 100.00% 100.00%
Cost of products sold 76.12% 70.47% 75.75%
Store operating, selling, and
administrative expenses 18.30% 24.33% 18.69%
---------- -------- ----------
EBITDA (as defined) 5.58% 5.20% 5.56%
Depreciation and amortization 1.91% 3.35% 2.00%
---------- -------- ----------
Operating income 3.67% 1.85% 3.55%
========== ======== ==========
</TABLE>
* The results of Seessel's represent, in all material respects, the internally
reported results of Seessel's for the thirty- nine week period ended October 26,
1996 except for depreciation and amortization which has been adjusted to reflect
the post-acquisition annualized expense.
11
<PAGE> 13
The following table contains a pro forma condensed consolidated statement of
operations for the thirteen week period ended October 26, 1996 reflecting the
acquisition of Seessel Holdings, Inc. and the sale or closing of 47 stores
during the fiscal year ended February 1, 1997 as if such events had occurred at
the beginning of such period.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THIRTEEN WEEK PERIOD ENDED OCTOBER 26, 1996 (UNAUDITED)
(Amounts In Thousands)
<TABLE>
<CAPTION>
THIRTEEN (13) WEEK PERIOD ENDED
--------------------------------------------------------
OCTOBER 26, 1996
--------------------------------------------------------
TOTAL
BRUNO'S COMPANY
(PRO FORMA) SEESSEL'S * (PRO FORMA)
------------- -------------- ---------------
<S> <C> <C> <C>
Net sales $ 628,244 $44,162 $ 672,406
Cost of products sold 482,473 31,176 513,649
Store operating, selling, and
administrative expenses 117,766 10,690 128,456
--------- ------- ------------
EBITDA (as defined) 28,005 2,296 30,301
Depreciation and amortization 12,706 1,448 14,154
--------- ------- ------------
Operating income $ 15,299 $ 848 $ 16,147
========= ======= ============
<CAPTION>
THIRTEEN (13) WEEK PERIOD ENDED
-------------------------------------------------------
OCTOBER 26, 1996
-------------------------------------------------------
TOTAL
BRUNO'S COMPANY
(PRO FORMA) SEESSEL'S * (PRO FORMA)
----------------- ----------------- ----------------
<S> <C> <C> <C>
Net sales
Cost of products sold 100.00% 100.00% 100.00%
Store operating, selling, and 76.80% 70.59% 76.39%
administrative expenses 18.75% 24.21% 19.10%
------ ------ ------
EBITDA (as defined) 4.46% 5.20% 4.51%
Depreciation and amortization 2.02% 3.28% 2.10%
------ ------ ------
Operating Income 2.44% 1.92% 2.40%
====== ====== ======
</TABLE>
* The results of Seessel's represent, in all material respects, the internally
reported results of Seessel's for the thirteen week period ended October 26,
1996 except for depreciation and amortization which has been adjusted to reflect
the post-acquisition annualized expense.
12
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
GENERAL
As of November 1, 1997, the Company operated a chain of 220 supermarkets and
combination food and drug stores. The Company also operated nine retail liquor
stores. As of October 26, 1996, the Company operated 255 supermarkets and
combination food and drug stores as well as nine retail liquor stores.
ACQUISITIONS AND DIVESTITURES
The Company, in December 1996, acquired all of the outstanding stock of Seessel
Holdings, Inc. ("Seessel's"), which owns and operates eight supermarkets in
Memphis, Tennessee and two supermarkets in Northern Mississippi, for $50.4
million in cash including direct acquisition costs. This acquisition was
accounted for using the purchase method.
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 during the fiscal year ended February 1,
1997 developed and completed a divestiture program (the "Divestiture Program")
under which the Company closed its distribution center located in Vidalia,
Georgia and sold or closed 47 stores. The 47 stores included 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.
IMPAIRMENT AND OTHER SPECIAL CHARGES
During the thirteen week period ended November 1, 1997, the Company recorded
$36.9 million in impairment and other special charges which impact four separate
lines of the condensed consolidated statement of operations.
The Company recognized $11.4 million of impairment charges during the period
consisting of (i) a $6.1 million reduction in the carrying value of certain of
the Company's excess properties which were identified for sale to reflect the
current fair market value of such properties, (ii) a write-off of $3.1 million
in franchise rights associated with the third quarter termination of the
franchise agreement between the Company and Piggly Wiggly Company, and (iii) a
write-off of $2.2 million of old point-of-sale equipment which is no longer
being utilized.
The provision for cost of products sold includes $7.8 million of special charges
consisting primarily of (i) a retail markdown of store level inventory required
to implement the Company's new price reduction program and (ii) an increase in
the shrinkage provision for inventory located in the Birmingham Distribution
Center.
Selling, general and administrative expenses include $9.9 million of special
charges consisting of (i) a $4.0 million increase to general liability insurance
reserves to reflect better estimates, which became available during the third
quarter, of the ultimate actuarial liability for certain claims incurred between
1988 and 1995, (ii) a $2.9 million charge to provide for certain personnel
related matters including the
13
<PAGE> 15
severance arrangement with the former Chief Executive Officer and the signing
bonus and various fees and expenses associated with the hiring of the new Chief
Executive Officer during the third quarter, and (iii) $3.0 million of other
miscellaneous items.
The provision for income taxes for the thirteen week period ended November 1,
1997 represents an increase of $7.8 million in the valuation allowance to fully
reserve the Company's net deferred tax assets at November 1, 1997. SEE "DEFERRED
TAX ASSET AND VALUATION RESERVE" IN NOTE 6 OF THE NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS.
RESULTS OF OPERATIONS (UNAUDITED)
COMPARISON OF OPERATIONS FOR THE THIRTY-NINE WEEK PERIOD ENDED NOVEMBER 1, 1997
TO THE THIRTY-NINE WEEK PERIOD ENDED OCTOBER 26, 1996
NET SALES
Net sales decreased $206.0 million in the thirty-nine week period ended November
1, 1997 as compared to the thirty-nine week period ended October 26, 1996.
Approximately $70 million of this decrease was due to the reduction in the
number of stores operated by the Company as a result of the Divestiture Program
partially offset by the increase in sales resulting from the acquisition of
Seessel's. Comparable store sales decreased 7.4% from the prior year due
primarily to increased competition in the Company's trade areas. The Company
believes that other factors which may have contributed to the decrease in
comparable store sales include a loss of customers due to increases in the
Company's prices to levels that were not competitive, a reduced level of
promotional activity compared to the prior year period, product shortages in the
Company's stores resulting from distribution problems and efforts to control
inventory, and reduced levels of customer service due to the Company's efforts
to control payroll costs. The Company has adopted and implemented strategies to
address the factors within the Company's control that have contributed to the
decline in sales. Management believes that the full benefits of these
strategies, if any, are not reflected in the Company's results for the
thirty-nine week period ended November 1, 1997. There can be no assurance that
these strategies will increase sales or will not otherwise have an adverse
effect on the Company's business.
GROSS PROFIT
Gross profit (net sales less cost of products sold) as a percentage of net sales
for the thirty-nine week period ended November 1, 1997 was 22.07% compared to
23.99% for the comparable period of the prior year. The decrease in gross profit
percentage was the result of a number of factors, including promotional activity
involving the Company's frequent shopper program, an increase in perishable
shrinkage due to the general softness in sales, increased distribution and
transportation expenses incurred to improve store inventory levels, and the $7.8
million of special charges described above in the provision for cost of goods
sold. The frequent shopper program, which was initiated during the third quarter
of the prior year, grants special discounts to customers with frequent shopper
cards in an effort to increase customer loyalty and increase the amount of the
Company's average transaction. As of November 1, 1997, there were 94 stores
offering the frequent shopper program. Excluding the impact of the special
charges of $7.8 million, gross profit as a percent of net sales was 22.48%.
14
<PAGE> 16
STORE OPERATING, SELLING AND ADMINISTRATIVE EXPENSES
Store operating, selling and administrative expenses as a percentage of net
sales increased to 20.22% for the thirty-nine week period ended November 1, 1997
compared to 18.94% for the comparable period of the prior year. The increase is
largely attributable to the impact of fixed costs on lower total sales and the
special charges of $9.9 million described above in the provision for selling,
general and administrative expenses. Excluding the impact of the special charges
of $9.9 million, store operating, selling and administrative expenses as a
percentage of net sales were 19.72%.
EBITDA (AS DEFINED ON PAGE 10)
EBITDA (as defined on page 10) decreased by $72.6 million for the year-to-date
period compared to the comparable period of the prior year. The decrease
resulted from the factors discussed above. Excluding the special charges of
$17.7 million in the provisions for cost of goods sold and selling, general and
administrative expenses, EBITDA decreased by $54.9 million to $53.6 million.
LOSS ON DIVESTITURE OF STORES
The accompanying condensed consolidated statement of operations for the 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
During the thirty-nine week period ended November 1, 1997, the Company conducted
an evaluation of the future realization of its net deferred tax assets. Based on
the results of this evaluation, the Company recorded valuation allowances of
$18.4 million (included within the income tax provision) to reflect the
determination that these assets may not be realized. SEE "DEFERRED TAX ASSET AND
VALUATION RESERVE" IN NOTE 6 OF THE NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS.
EXTRAORDINARY ITEM, NET
In the period ended October 26, 1996, the Company prepaid $45 million in
principal amount of its prior $475 million term loan facility. As a result of
this repayment, the related debt issuance costs of $1.2 million (net of tax of
$720,000) were written off in the period ended October 26, 1996.
COMPARISON OF OPERATIONS FOR THE THIRTEEN WEEK PERIOD ENDED NOVEMBER 1, 1997 TO
THE THIRTEEN WEEK PERIOD ENDED OCTOBER 26, 1996
NET SALES
Net sales decreased $84.1 million in the thirteen week period ended November 1,
1997 as compared to the thirteen week period ended October 26, 1996.
Approximately $20 million of this decrease was due to the reduction in the
number of stores operated by the Company as a result of the Divestiture Program
partially offset by the increase in sales resulting from the acquisition of
Seessel's.
15
<PAGE> 17
Comparable store sales decreased 11.0% from the prior year due primarily to
increased competition in the Company's trade areas. The Company believes that
other factors which may have contributed to the decrease in comparable store
sales include a loss of customers due to increases in the Company's prices to
levels that were not competitive, a reduced level of promotional activity
compared to the prior year period, product shortages in the Company's stores
resulting from distribution problems and efforts to control inventory, and
reduced levels of customer service due to the Company's efforts to control
payroll costs. The Company has adopted and implemented strategies to address the
factors within the Company's control that have contributed to the decline in
sales. Management believes that the full benefits of these strategies, if any,
are not reflected in the Company's results for the thirteen week period ended
November 1, 1997. There can be no assurance that these strategies will increase
sales or will not otherwise have an adverse effect on the Company's business.
GROSS PROFIT
Gross profit (net sales less cost of products sold) as a percentage of net sales
for the thirteen week period ended November 1, 1997 was 20.72% compared to
23.54% in the comparable period of the prior year. The decrease in net profit
was the result of numerous factors, including the Company's frequent shopper
program discussed above, an increase in perishable shrinkage due to the general
softness in sales, increased distribution and transportation expenses incurred
to improve store inventory levels, and the $7.8 million of special charges
incurred during the thirteen week period ended November 1, 1997 in the provision
for cost of goods sold. Excluding the special charges, gross profit as a percent
of net sales was 22.01%.
STORE OPERATING, SELLING AND ADMINISTRATIVE EXPENSES
Store operating, selling and administrative expenses as a percentage of net
sales were 22.23% for the period ended November 1, 1997 compared to 19.39% in
the comparable period of the prior year. The increase is largely attributable to
the impact of fixed costs on lower total sales and the $9.9 million of special
charges incurred during the thirteen week period ended November 1, 1997 in the
provision for selling, general and administrative expenses. Excluding the
special charges, store operating, selling and administrative expenses as a
percentage of net sales were 20.61%.
EBITDA (AS DEFINED ON PAGE 10)
EBITDA (as defined on page 10) decreased by $38.0 million for the quarter ended
November 1, 1997 compared to the comparable quarter of the prior year. The
decrease resulted from the factors discussed above. Excluding the impact of the
special charges of $17.7 million in the provisions for cost of goods sold and
selling, general and administrative expenses, EBITDA decreased by $20.3 million
to $8.5 million.
LOSS ON DIVESTITURE OF STORES
The accompanying condensed consolidated statement of operations for the 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.
16
<PAGE> 18
INCOME TAXES
During the thirteen week period ended November 1, 1997, the Company conducted an
evaluation of the future realization of its net deferred tax assets. Based on
the results of this evaluation, the Company recorded an additional valuation
allowance of $7.8 million (included within the income tax provision) to reflect
the determination that these assets may not be realized. SEE "DEFERRED TAX ASSET
AND VALUATION RESERVE" IN NOTE 6 OF THE NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
EXTRAORDINARY ITEM, NET
In the thirteen week period ended October 26, 1996, the Company prepaid $20
million in principal amount of its prior $475 million term loan facility. As a
result of this repayment, the related debt issuance costs of $513,000 (net of
tax of $315,000) were written off in the thirteen week period ended October 26,
1996.
OTHER
During the thirteen week period ending January 31, 1998, the Company will
reassess the valuation of its long-lived assets in accordance with SFAS 121 in
view of the possible continuation of negative operating trends and the results
of independent appraisals of real estate owned by the Company which are
currently being performed. Such reassessment may result in a significant charge
during the thirteen week period ended January 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company and several lending institutions are parties to a Credit Agreement
dated as of August 18, 1995, as amended and restated as of June 2, 1997 (the
"Credit Agreement"). The Credit Agreement provides for a revolving credit
facility of $225 million (the "Revolving Credit Facility") and a term loan
facility of $350 million (the "Term Loan Facility"). On September 5, 1997, the
Company and the requisite lending institutions under the Credit Agreement
entered into an Amendment, Waiver and Agreement relating to the Credit Agreement
(the "First Amendment"). The Company and the requisite lending institutions
under the Credit Agreement entered into an additional Amendment, Waiver and
Agreement relating to the Credit Agreement as of December 1, 1997 (the "Second
Amendment"). The First Amendment reduced the amount that the Company may borrow
under the Revolving Credit Facility from $225 million to $200 million. In
addition, the First Amendment and the Second Amendment amended certain financial
covenants contained in the Credit Agreement. As of November 1, 1997, the Company
had $155 million outstanding under the Revolving Credit Facility and $350
million outstanding under the Term Loan Facility. SEE "SHORT-TERM BORROWINGS AND
LONG-TERM DEBT" IN NOTE 5 OF THE NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS.
The Credit Agreement contains financial covenants with which the Company must
comply in order to prevent a default. A default under the Credit Agreement could
have serious adverse consequences, including the loss of funding for the
operations of the Company. Due to declines in the Company's operating
performance, the Company sought and obtained amendments to certain financial
covenants contained in the Credit Agreement and a waiver of any defaults that
had occurred or may have occurred as a result of the Company's failure to comply
with such financial covenants. SEE "SHORT-TERM BORROWINGS AND LONG-TERM DEBT" IN
NOTE 5 OF THE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS." The First
Amendment had the effect of allowing the Company to remain in compliance with
the financial covenants contained in the Credit Agreement as of August 2, 1997
and
17
<PAGE> 19
November 1, 1997. In order to obtain the Second Amendment, the Company agreed to
pledge substantially all of the assets of the Company and its subsidiaries to
secure the Company's obligations under the Credit Agreement. The Company
believes that the Second Amendment will allow the Company to remain in
compliance with the financial covenants contained in the Credit Agreement
through July 23, 1998. An additional amendment to the Credit Agreement is likely
to be necessary to prevent the Company from being in default under the Credit
Agreement as of July 23, 1998.
Historically, the Company has funded working capital requirements, capital
expenditures, and other cash requirements primarily through cash flow from
operations and borrowings under the Credit Agreement. The Company believes that
operating cash flows, borrowings under the Credit Agreement and the proceeds
from the liquidation of certain assets will be sufficient to fund the Company's
working capital needs through July 23, 1998. If the Company is not successful in
liquidating assets or fails to achieve expected operating cash flow levels, the
Company may not thereafter be able to fund its working capital needs. The
Company's near-term capital expenditures will be held to a minimum operating
level. As discussed above, an additional amendment to the Credit Agreement is
likely to be necessary to prevent the Company from being in default under the
Credit Agreement as of July 23, 1998.
Operating activities used $61.8 million and generated $62.3 million,
respectively, in the periods ended November 1, 1997 and October 26, 1996. The
items most significantly influencing this change were the reduction in gross
profit combined with payments of accrued interest and increased inventory levels
in the Company's stores.
Cash flows used in investing activities were $29.1 million in the thirty-nine
week period ended November 1, 1997 compared to $37.4 million in the comparable
period of the prior year. Capital expenditures were $56.5 million for the
current year compared to $39.3 million in the prior year. The Company's capital
expenditures were primarily related to the remodeling of 15 stores and
investments in systems technology, including new point-of-sale cash registers
which have been installed in 159 of the Company's stores. The Company intends
that capital expenditures for the remainder of the current fiscal year will be
held to a minimum operating level and will be financed through cash flows from
operations, existing cash balances, proceeds from the liquidation of certain
assets and, if necessary, borrowings under the Credit Agreement. Cash flows from
investing activities for the thirty-nine week period ended November 1, 1997
include $27.4 million in proceeds related to the sale of certain properties and
assets.
Cash flows provided by financing activities were $89.1 million for the
thirty-nine week period ended November 1, 1997 compared to cash flows used in
financing activities of $44.3 million for the comparable period of the prior
year. Current year financing activities include $91.5 million in net borrowings
under the Revolving Credit Facility (excluding transfers from the Term Loan
Facility to the Revolving Credit Facility). Prior year financing activities
primarily consisted of a $45.0 million prepayment under the Company's previous
term loan facility.
YEAR 2000
The Company has devoted a project team to reviewing its purchased and developed
software for year 2000 compliance. Systems which require modification or
replacement have been identified and a plan for addressing issues has been
established.
18
<PAGE> 20
RECENT PRONOUNCEMENTS OF THE FASB
In February 1997, the FASB issued SFAS No. 129, Disclosures of Information About
Capital Structure, which establishes standards for disclosing information about
an entity's capital structure. The Company is required to adopt this statement
in its current fiscal year. In June 1997, the FASB issued SFAS No. 130,
Reporting Comprehensive Income, which requires the reporting and display of
comprehensive income and its components in an entity's financial statements.
SFAS No. 130 is not expected to materially impact the Company. Also issued in
June 1997 was SFAS No. 131, Disclosures about Segments of an Enterprise and
Related Information, which specifies revised guidelines for determining an
entity's operating segments and the type and level of financial information to
be required. Because the Company operates primarily in the retail grocery
industry, management believes that the implementation of SFAS No. 131 will have
no significant impact on future financial reporting. Companies are required to
adopt these statements in fiscal years beginning after December 15, 1997.
FORWARD-LOOKING STATEMENTS
A cautionary statement with respect to the forward-looking statements contained
in this Report is filed as Exhibit 99.1 to this Report.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGE IN SECURITIES AND USE OF PROCEEDS
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
19
<PAGE> 21
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description
- ------ -----------
4.8 Amendment, Waiver and Agreement dated as of December 1, 1997,
among the Company, the lending institutions that are parties
thereto, and The Chase Manhattan Bank as Administrative Agent.
10.46 Employment Agreement dated as of September 19, 1997 between the
Company and James A. Demme.
10.47 Schedule of Terms of Management Stockholder's Agreement and
Non-Qualified Stock Option Agreement executed by James A. Demme.
10.48 Settlement Agreement and General Release dated as of October 29,
1997 between the Company and William J. Bolton.
27 Financial Data Schedule.
99.1 Cautionary Statement for purposes of the "Safe Harbor"
provisions of the Private Securities Litigation Reform Act of
1995.
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K dated September 5, 1997 under
Item 5 "Other Events" and Item 7 "Financial Statements and Exhibits" to disclose
certain forward-looking information which was filed under the "Safe Harbor"
provisions of the Private Securities Litigation Reform Act of 1995.
The Company filed a Current Report on Form 8-K dated September 23, 1997 under
Item 5 "Other Events" to disclose the resignation of William J. Bolton as
Chairman of the Board of Directors and Chief Executive Officer and as a member
of the Board of Directors of the Company and to disclose the appointment of
James A. Demme to the positions formerly held by Mr. Bolton.
20
<PAGE> 22
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.
/s/ James J. Hagan
----------------------------
James J. Hagan,
Executive Vice President and
Chief Financial Officer
Dated: December 12, 1997
21
<PAGE> 23
BRUNO'S, INC.
FORM 10-Q REPORT
(For Quarter ended November 1, 1997)
INDEX OF EXHIBITS
Exhibit
Number Description
- ------ -----------
4.8 Amendment, Waiver and Agreement dated as of December 1, 1997,
among the Company, the lending institutions that are parties
thereto, and The Chase Manhattan Bank as Administrative Agent.
10.46 Employment Agreement dated as of September 19, 1997 between the
Company and James A. Demme.
10.47 Schedule of Terms of Management Stockholder's Agreement and
Non-Qualified Stock Option Agreement executed by James A. Demme.
10.48 Settlement Agreement and General Release dated as of October 29,
1997 between the Company and William J. Bolton.
27 Financial Data Schedule. (for SEC use only)
99.1 Cautionary Statement for purposes of the "Safe Harbor"
provisions of the Private Securities Litigation Reform Act of
1995.
22
<PAGE> 24
BRUNO'S, INC.
FORM 10-Q REPORT
(FOR QUARTER ENDED NOVEMBER 1, 1997)
INDEX OF EXHIBITS
-----------------
EXHIBIT
NUMBER DESCRIPTION
4.8 AMENDMENT, WAIVER AND AGREEMENT DATED AS OF DECEMBER 1, 1997,
AMONG THE COMPANY, THE LENDING INSTITUTIONS THAT ARE PARTIES
THERETO, AND THE CHASE MANHATTAN BANK AS ADMINISTRATIVE AGENT.
10.46 EMPLOYMENT AGREEMENT DATED AS OF SEPTEMBER 19, 1997 BETWEEN THE
COMPANY AND JAMES A. DEMME.
10.47 SCHEDULE OF TERMS OF MANAGEMENT STOCKHOLDER'S AGREEMENT AND
NON-QUALIFIED STOCK OPTION AGREEMENT EXECUTED BY JAMES A. DEMME.
10.48 SETTLEMENT AGREEMENT AND GENERAL RELEASE DATED AS OF OCTOBER 29,
1997 BETWEEN THE COMPANY AND WILLIAM J. BOLTON.
27 FINANCIAL DATA SCHEDULE.
99.1 CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS
OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.
<PAGE> 1
EXHIBIT 4.8
AMENDMENT, WAIVER AND AGREEMENT dated as of
December 1, 1997 (this AAmendment and Waiver@), to the
Credit Agreement dated as of August 18, 1995, as amended
and restated as of June 2, 1997, and as further amended as
of September 5, 1997 (the ACredit Agreement@), among
BRUNO'S, INC., an Alabama corporation (the ABorrower@),
the lending institutions from time to time parties thereto
(the ALenders@) and THE CHASE MANHATTAN BANK, a New York
banking corporation, as administrative agent (in such
capacity, the AAdministrative Agent@).
A. The Borrower has requested that the Lenders (a) agree to amend
certain provisions of the Credit Agreement, (b) grant certain waivers of
compliance by the Borrower with certain provisions of the Credit Agreement and
(c) enter into certain other agreements with respect to the Credit Agreement.
B. The Required Lenders are willing to agree to such amendments, grant
such waivers and enter into such agreements, in each case on the terms and
subject to the conditions set forth herein.
C. Capitalized terms used but not defined herein shall have the
meanings assigned to them in the Credit Agreement.
Accordingly, in consideration of the mutual agreements herein contained
and other good and valuable consideration, the sufficiency and receipt of which
are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. Amendment to Section 1 of the Credit Agreement. Effective as
of the date of this Amendment and Waiver (the "Effective Date"), the Borrower
and the Lenders hereby amend Section 1 of the Credit Agreement as follows:
(a) by inserting, after the words "or other disposition"
in the first line of the definition of the term "Asset Sale
Prepayment Event", the following words:
"(including any loss, damage, destruction or
condemnation or similar event resulting in
insurance settlements or condemnation awards
other than any insurance settlement or
condemnation award the proceeds of which the
Borrower has reinvested (or intends to reinvest
within one year of such insurance settlement or
condemnation award) in business units, assets or
properties located in the immediate vicinity of
the business units, assets or properties to which
such insurance settlement or condemnation award
related, provided that any portion of such
proceeds that has not been so reinvested within
such one-year period shall be deemed to be Net
Cash Proceeds of an Asset Sale Prepayment Event
<PAGE> 2
2
occurring on the last day of such one-year period
and be applied in accordance with Section
5.2(a)(i))".
(b) by inserting the following definition in the
appropriate alphabetical order:
"'Collateral' shall mean all the 'Collateral' as
defined in any Security Document and shall also include
the Mortgaged Properties.".
(c) by deleting the words "Pledge Agreement" in the
definition of the term "Credit Documents" and substituting
therefor the following words:
"Security Documents".
(d) by inserting the following definition in the
appropriate alphabetical order:
"'Mortgage' shall mean a mortgage, deed of trust,
deed to secure debt, assignment of leases and rents,
leasehold mortgage or other substantially similar
instrument granting a Lien on any Mortgaged Property to
secure the Obligations. Each Mortgage shall be
substantially in the form of Exhibit J.".
(e) by inserting the following definition in the
appropriate alphabetical order:
"'Joint Venture' shall mean any of the Persons
listed on Schedule 1.3.".
(f) by inserting the following definition in the
appropriate alphabetical order:
"'Mortgaged Property' shall mean, initially, each
parcel of real property and the improvements thereto owned
or leased by a Credit Party and identified on Schedule
1.2(a) (other than those properties (a) under contract of
sale (the "Real Property Contracted for Sale"), (b) having
a value not in excess of $100,000, (c) the environmental
condition of which, in the judgment of the Administrative
Agent, makes taking a mortgage thereon inadvisable, (d)
owned by a Joint Venture or (e) subject to Liens that
secure the Pledged IRBs (as defined in the Pledge
Agreement), in each case as specified on Schedule 1.2(a))
or Schedule 1.2(b) and, from time to time, includes each
other parcel of real property and improvements thereto
with respect to which a Mortgage is granted pursuant to
Section 9.12.".
(g) by amending and restating in its entirety clause (iv)
of the definition of the term "Net Cash Proceeds" to read as
follows:
<PAGE> 3
3
"in the case of any Asset Sale Prepayment Event,
(A) until such time (the "Deduction Limitation Time") when
the aggregate amount of deductions from Net Cash Proceeds
on or after December 1, 1997, pursuant to this clause (iv)
equals $25,000,000, 100% of the amount of any proceeds of
such Asset Sale Prepayment Event that the Borrower has
used (or intends to use within one year of such Asset Sale
Prepayment Event) in the operation of the business of the
Borrower or any of the Subsidiaries (including for debt
service) and (B) after the Deduction Limitation Time, 50%
of the amount of any proceeds of such Asset Sale
Prepayment Event in excess of the amounts deducted from
Net Cash Proceeds in respect of such Asset Sale Prepayment
Event pursuant to clause (A) above, to the extent that the
Borrower has used (or intends to use within one year of
such Asset Sale Prepayment Event) such proceeds in the
operation of the business of the Borrower or any of the
Subsidiaries (including for debt service), provided that
the aggregate amount of proceeds from Asset Sale
Prepayment Events deducted from Net Cash Proceeds on or
after December 1, 1997, pursuant to this clause (B) shall
not exceed $35,000,000; provided, however, that any
portion of the proceeds from Asset Sale Prepayment Events
deducted pursuant to this clause (iv) that has not been so
used within the applicable one-year period shall be deemed
to be Net Cash Proceeds of an Asset Sale Prepayment Event
occurring on the last day of such one-year period and be
applied in accordance with Section 5.2(a)(i); provided,
further that with the consent of the Required Lenders, an
amount equal to 100% of any proceeds from an Asset Sale
Prepayment Event may be deducted from Net Cash Proceeds
pursuant to this clause (iv) and the dollar and percentage
limitations set forth in clauses (A) and (B) shall not
apply, and".
(h) by inserting the following definition in the
appropriate alphabetical order:
"'Secured Parties' shall have the meaning
assigned to such term in the Security Agreement.".
(i) by inserting the following definition in the
appropriate alphabetical order:
"'Security Agreement' shall mean the Security
Agreement, substantially in the form of Exhibit K, among
the Borrower, the Guarantors party thereto and the
Administrative Agent for the benefit of the Secured
Parties.".
(j) by inserting the following definition in the
appropriate alphabetical order:
"'Security Documents' shall mean the Mortgages,
the Security Agreement, the Pledge Agreement and each of
the security agreements, mortgages and other instruments
and documents
<PAGE> 4
4
executed and delivered pursuant to any of
the foregoing or pursuant to Section 9.12.".
SECTION 2. Amendment to Section 5 of the Credit Agreement.
(a) Effective as of the Effective Date, the Borrower and the Lenders hereby
amend Section 5.2(a)(i) of the Credit Agreement as follows:
(i) by deleting the words "within five Business Days after the
occurrence of such Prepayment Event" set forth in such Section and
substituting therefor the words "promptly after the occurrence of such
Prepayment Event and in no event later than the end of the first Business
Day after the day on which such Prepayment Event occurred"; and
(ii) by deleting all the text after the words "in an amount equal
to" in the eighth line of such Section and substituting therefor the words
"100% of the Net Cash Proceeds therefrom.".
(b) Effective as of the Effective Date, the Borrower and the
Lenders hereby amend and restate in its entirety Section 5.2(g) of the Credit
Agreement to read as follows:
"(g) Minimum Amount. Notwithstanding the provisions of Section
5.2(a)(i), no payment shall be required pursuant to Section 5.2(a)(i)
unless and until the aggregate amount of all Net Cash Proceeds from all
Prepayment Events not previously used to prepay Loans pursuant to this
Section 5.2 exceeds $1,000,000.".
SECTION 3. Amendment to Section 8 of the Credit Agreement.
Effective as of the Effective Date, the Borrower and the Lenders hereby amend
Section 8 of the Credit Agreement by inserting after Section 8.15 the following
new section:
"SECTION 8.16 Security Documents. (a) The Pledge Agreement
is effective to create in favor of the Administrative Agent, for
the ratable benefit of the Secured Parties, a legal, valid and
enforceable security interest in the Collateral (as defined in the
Pledge Agreement) and, when such Collateral is delivered to the
Administrative Agent, the Pledge Agreement shall constitute a
fully perfected first-priority Lien on, and security interest in,
all right, title and interest of the pledgor thereunder in such
Collateral, in each case prior and superior in right to any other
Person.
(b) The Security Agreement is effective to create in favor
of the Administrative Agent, for the ratable benefit of the
Secured Parties, a legal, valid and enforceable security interest
in the Collateral (as defined in the Security Agreement) in which
a Lien may be perfected by filing a financing statement and, when
financing statements in appropriate form are filed in the offices
specified on Schedule 6 to the Perfection Certificate, the
Security Agreement shall constitute a fully perfected Lien on all
right, title and interest of the grantors thereunder in such
Collateral (other than the Intellectual Property (as defined in
the Security Agreement)), in each case prior and superior in right
to any other Person, other than with respect to the rights of
Persons pursuant to Liens expressly permitted by Section 10.3.
<PAGE> 5
5
(c) When the Security Agreement is filed in the United
States Patent and Trademark Office and the United States Copyright
Office, the Security Agreement shall constitute a fully perfected
Lien on all right, title and interest of the Credit Parties in the
Intellectual Property in which a Lien may be perfected by filing,
recording or registering a security agreement, financing statement
or analogous document in the United States Patent and Trademark
Office or the United States Copyright Office, as applicable, in
each case prior and superior in right to any other Person, other
than with respect to the rights of Persons pursuant to Liens
expressly permitted by Section 10.3 (it being understood that
subsequent recordings in the United States Patent and Trademark
Office and the United States Copyright Office may be necessary to
perfect a lien on registered trademarks, trademark applications
and copyrights acquired by the Credit Parties after the date
hereof).
(d) Each Mortgage is effective to create in favor of the
Administrative Agent, for the ratable benefit of the Secured
Parties, a legal, valid and enforceable Lien on all of the Credit
Parties' right, title and interest in and to the Mortgaged
Properties thereunder and the proceeds thereof and, when the
Mortgages are filed in the offices specified on Schedule 8.16, the
Mortgages shall constitute a Lien on all right, title and interest
of the Credit Parties in such Mortgaged Properties and the
proceeds thereof, in each case prior and superior in right to any
other Person, other than with respect to the rights of Persons
pursuant to Liens expressly permitted by Section 10.3.
SECTION 4. Amendment to Section 9.12 of the Credit Agreement.
Effective as of the Effective Date, the Borrower and the Lenders hereby amend
and restate Section 9.12 of the Credit Agreement in its entirety to read as
follows:
"(a) Further Assurances. (a) The Borrower will, and will cause
each of the Guarantors to, pledge to the Administrative Agent, for the ratable
benefit of the Secured Parties, (i) all the capital stock of each Subsidiary
(provided that not more than 65% of the capital stock of any foreign Subsidiary
is required to be pledged) formed or otherwise purchased or acquired after the
date hereof, in each case pursuant to a supplement to the Pledge Agreement in
form and substance reasonably satisfactory to the Administrative Agent and (ii)
all evidences of Indebtedness in excess of $100,000 received by the Borrower or
any of the domestic Subsidiaries in connection with any disposition of assets
pursuant to Section 10.5(b), in each case pursuant to a supplement to the Pledge
Agreement in form and substance reasonably satisfactory to the Administrative
Agent.
(b) The Borrower will, and will cause each of the Guarantors
to, execute any and all further documents, financing statements, agreements
and instruments, and take all further action (including filing Uniform
Commercial Code and other financing statements, mortgages and deeds of
trust), that may be required under applicable law, or that the Required
Lenders or the Administrative Agent may reasonably request, in order to
effectuate the transactions contemplated by the Credit Documents and in
order to grant, preserve, protect and perfect the validity and first
priority (with such exceptions as are expressly permitted by the Credit
Documents) of the security interests created or intended to be created by
the Security Documents. The Borrower will cause
<PAGE> 6
6
any subsequently acquired or organized domestic Subsidiary to execute each
applicable Security Document in favor of the Administrative Agent. In
addition, from time to time, the Borrower will, at its cost and expense,
promptly secure the Obligations by pledging or creating, or causing to be
pledged or created, perfected security interests with respect to such of
its assets and properties as the Administrative Agent or the Required
Lenders shall designate (other than cash, except for the cash proceeds of
Collateral to the extent a security interest in such cash proceeds is
perfected by operation of law as a result of the Secured Parties' security
interest in such Collateral) it being understood that it is the intent of
the parties that the Obligations shall be secured by, among other things,
substantially all the assets of the Borrower (including real and other
properties acquired subsequent to the Closing Date but excluding cash to
the extent described in the preceding parenthetical). Such security
interests and Liens will be created under the Security Documents and other
security agreements, mortgages, deeds of trust and other instruments and
documents in form and substance reasonably satisfactory to the
Administrative Agent, and the Borrower shall deliver or cause to be
delivered to the Lenders all such instruments and documents (including
legal opinions, title insurance policies, environmental assessment reports
or environmental insurance policies, appraisals, surveys and lien searches)
as the Administrative Agent shall reasonably request to evidence compliance
with this Section. The Borrower agrees to provide such evidence as the
Administrative Agent shall reasonably request as to the perfection and
priority status of each such security interest and Lien.
(c) Upon the request of the Administrative Agent with respect
to (i) any of the properties of the Borrower or any Subsidiary with respect
to which the Borrower had entered into negotiations for the sale thereof on
or before December 1, 1997, as indicated on Schedule 1.2(a) (the "Real
Properties Under Negotiation for Sale"), or (ii) any of the properties of
the Borrower or any Subsidiary with respect to which the Administrative
Agent has requested that a Mortgage be executed pursuant to clause (d)
below, the Borrower shall deliver or cause to be delivered to the
Administrative Agent instruments and documents with respect to such
property (including title insurance policies, environmental assessment
reports or environmental insurance policies, surveys, independent
appraisals and lien searches) that are comparable to the instruments and
documents delivered to the Administrative Agent with respect to the
Mortgaged Properties (other than the Real Properties Under Negotiation for
Sale), in each case in form and substance reasonably satisfactory to the
Administrative Agent.
(d) Upon the request of the Administrative Agent, the Borrower
or any Subsidiary shall deliver to the Administrative Agent with respect to
(i) any Real Property Contracted for Sale that has not been sold by
February 1, 1998, or (ii) any of the properties of the Borrower or any
Subsidiary the environmental condition of which, in the judgment of the
Administrative Agent, initially made taking a mortgage thereon inadvisable,
as indicated on Schedule 1.2(a), counterparts of a Mortgage signed on
behalf of the record owner of such property.".
SECTION 5. Amendment to Section 10 of the Credit Agreement. (a)
Effective as of the Effective Date, the Borrower and the Lenders hereby
amend Section 10.2(b) of the Credit Agreement by inserting after the words
"any other Subsidiary" set forth therein the following words:
<PAGE> 7
7
", provided that any obligation of an obligor of such
Indebtedness in an amount in excess of $100,000 shall be evidenced by a
promissory note, which shall have been pledged to the Administrative
Agent pursuant to the Pledge Agreement, for the benefit of the Lenders,
as security for the Obligations (as defined in the Pledge Agreement)".
(b) Effective as of the Effective Date, the Borrower and the
Lenders hereby amend Section 10.5(b) of the Credit Agreement by deleting
the amount "$5,000,000" set forth therein and substituting therefor the
amount "$100,000".
(c) Effective as of the Effective Date, the Borrower and the
Lenders hereby amend Section 10.5(b) of the Credit Agreement as follows:
(i) by deleting the words ", provided that (i)" set forth
therein and substituting therefor the following words:
"on an arms' length basis (as determined in good faith by the
board of directors of the Borrower at the time of such sale, transfer
or disposal (which determination shall be evidenced by a written
resolution of the board of directors of the Borrower approving such
sale, transfer or disposal, a copy of which, certified by the Secretary
of the Borrower, shall be provided to the Administrative Agent prior to
such sale, transfer or disposal)), provided that (i) any such sale,
transfer or disposal by the Borrower or any Subsidiary shall be to a
party unrelated to the Borrower or any Affiliate of the Borrower (other
than any Affiliate of KKR engaged in the Borrower's line of business),
(ii)"; and
(ii) by deleting the phrase "(ii)" set forth therein and
substituting therefor the following phrase "(iii)".
(d) Effective as of the Effective Date, the Borrower and the
Lenders hereby amend Section 10.6(k) of the Credit Agreement by inserting
at the end of such Section the following words:
", provided that during the period from and
including December 1, 1997, to and including July 31,
1998, the amount of investments made pursuant to this
clause (k) shall not exceed $7,000,000 in the
aggregate".
(e) Effective as of the Effective Date, the Borrower and the
Lenders hereby amend Section 10 of the Credit Agreement by inserting after
Section 10.12 thereof the following new section:
"10.13 Minimum Consolidated EBITDA. The
Borrower will not permit Consolidated EBITDA for any
Test Period ending on or about any date set forth
below to be less than the amount set forth below
opposite such date:
<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C>
January 31, 1998 $60,000,000
May 2, 1998 $40,000,000
</TABLE>
<PAGE> 8
8
SECTION 6. Amendment to Section 11 of the Credit Agreement.
(a) Effective as of the Effective Date, the Borrower and the Lenders hereby
amend Section 11.2 of the Credit Agreement by deleting the words "the Pledge
Agreement" set forth therein and substituting therefor the words "any Security
Document".
(b) Effective as of the Effective Date, the Borrower and the
Lenders hereby amend Section 11.3 of the Credit Agreement by deleting the words
"the Pledge Agreement" set forth therein and substituting therefor the
following words "any Security Document".
(c) Effective as of the Effective Date, the Borrower and the
Lenders hereby amend and restate in its entirety Section 11.8 of the Credit
Agreement to read as follows:
"SECTION 11.8 Security Interests. Any material security
interest created under any Security Document shall cease to be, or
shall be asserted by the Borrower or any Credit Party not to be, a
valid, perfected, first-priority (except as otherwise expressly
provided for in this Agreement or such Security Document) security
interest in the securities, assets or properties covered thereby,
except to the extent that any such loss of perfection or priority
results from the failure of the Administrative Agent to maintain
possession of certificates representing securities pledged under the
Pledge Agreement and except to the extent that such loss is covered by
a lender's title insurance policy and the related issuer promptly after
such loss shall have acknowledged in writing that such loss is covered
by such title insurance policy; or".
SECTION 7. Amendment to Section 13.16 of the Credit Agreement.
Effective as of the Effective Date, the Borrower and the Lenders hereby amend
Section 13.16 of the Credit Agreement by deleting the words "the Borrower's" in
the ninth line of such section and substituting therefor the words "such
Lender's".
SECTION 8. Amendment to Section 1 of the Credit Agreement. (a)
Effective as of the Effective Date, the Borrower and the Lenders hereby amend
Section 1 of the Credit Agreement by (i) inserting after Schedule 1.1 new
Schedules 1.2 (a) and 1.2(b) in the form of Exhibit A attached hereto and new
Schedule 1.3 in the form of Exhibit B attached hereto and (ii) inserting after
Schedule 8.12 a new Schedule 8.16 in the form of Exhibit C attached hereto.
(b) Effective as of the Effective Date, the Borrower and the
Lenders hereby amend Section 1 of the Credit Agreement by inserting after
Exhibit I new Exhibits J and K in the form of Exhibits D and E, respectively,
attached hereto.
SECTION 9. Amendment to the Pledge Agreement. (a) Effective as
of the Effective Date, the Borrower, the other Credit Parties party to the
Pledge Agreement and the Lenders hereby amend the Pledge Agreement by deleting
the words "the indebtedness (the 'Pledged Debt')" in the sixth recital thereof
and substituting therefor the following words:
"(i) the Borrower's industrial revenue bonds as described on
Schedule II (the 'Pledged IRBs'), (ii) promissory notes
evidencing intercompany Indebtedness (the 'Intercompany
Notes') required to be pledged pursuant to Section 10.2(b) of
the Credit Agreement and (iii) the indebtedness (together with
the Pledged IRBs and the Intercompany Notes, the 'Pledged
Debt')".
(b) Effective as of the Effective Date, the Borrower and the
Lenders hereby amend the Pledge Agreement by inserting after Schedule I a new
Schedule II in
<PAGE> 9
9
the form of Exhibit F attached hereto.
SECTION 10. Waiver. (a) The Lenders hereby waive any Defaults
and Events of Default that have occurred or may occur with respect to the
Borrower's failure to comply with the covenants set forth in Sections 10.9,
10.10 and 10.11 of the Credit Agreement with respect to the Test Period ending
on January 31, 1998.
(b) The Lenders hereby waive through 5:00 p.m., New York City
time, on July 23, 1998, any Defaults and Events of Default that have occurred or
may occur with respect to the Borrower's failure to comply with the covenants
set forth in Sections 10.9, 10.10 and 10.11 of the Credit Agreement with respect
to the Test Period ending on May 2, 1998, it being understood that (i) such
waiver shall not be effective after 5:00 p.m., New York City time, on July 23,
1998, and (ii) any Defaults and Events of Default that would, in the absence of
the waiver set forth above, have occurred with respect to the Borrower's failure
to comply with such covenants with respect to such Test Period shall be
reinstated immediately after such time and thereafter remain in effect
regardless of the Borrower's compliance with the covenants set forth in Section
10.9, 10.10 and 10.11 of the Credit Agreement with respect to subsequent Test
Periods.
(c) The Lenders hereby waive any Defaults that may occur prior
to August 1 1998 (but not any Defaults that may occur or otherwise be in effect
on or after August 1, 1998), with respect to the Borrower's failure to comply
with the covenants set forth in Sections 10.9, 10.10 and 10.11 of the Credit
Agreement with respect to the Test Period ending on August 1, 1998.
SECTION 11. Fees. In consideration of the agreements of the
Required Lenders contained in Sections 1 through 10 of this Amendment and
Waiver, the Borrower agrees to pay to the Administrative Agent (a) for the
account of each Lender, an amendment fee (a "Lender's Fee") in an amount equal
to 0.0625% of the sum of (i) such Lender's Revolving Credit Commitment as of the
Effective Date and (ii) the outstanding principal amount of Term Loans held by
such Lender as of the Effective Date and (b) for the account of each Lender that
has executed this Amendment and Waiver on or before December 10, 1997, an
amendment fee (a "Signing Fee"; all the Lender's Fees and Signing Fees are
collectively referred to herein as the "Amendment Fees") in an amount equal to
0.1875% of the sum of (i) such Lender's Revolving Credit Commitment as of the
Effective Date and (ii) the outstanding principal amount of Term Loans held by
such Lender as of the Effective Date. The Amendment Fees shall be payable in
immediately available funds. Once paid, the Amendment Fees shall not be
refundable.
SECTION 12. Agreement. (a) Notwithstanding any of the
provisions of the Credit Agreement, the Lenders shall not be obligated to make
or issue, and the Borrower shall not request the making or issuance of, any
Revolving Credit Loans, Swingline Loans or Letters of Credit that would, at any
time, have the effect of causing the sum of (i) the aggregate principal amount
of Revolving Credit Loans outstanding at such time, (ii) the aggregate principal
amount of Swingline Loans outstanding at such time and (iii) the Letter of
Credit Outstandings at such time to exceed $200,000,000, provided that with the
consent of the Supermajority Revolving Credit Lenders, the provisions of this
Section 12(a) shall not apply.
<PAGE> 10
10
(b) On or before February 1, 1998, the Borrower and the
Subsidiaries that own Mortgaged Properties (as defined in the Credit Agreement
after giving effect to this Amendment and Waiver) shall deliver to the
Administrative Agent, (i) a policy or policies of title insurance issued by a
nationally recognized title insurance company, insuring the Lien of each
Mortgage (as defined in the Credit Agreement after giving effect to this
Amendment and Waiver) as a valid first Lien on the Mortgaged Property described
therein (other than any such Mortgaged Property that (A) is not owned in fee by
the Borrower or a Subsidiary and is not a ground lease or (B) is a Real Property
Under Negotiation for Sale), free of any other Liens except Liens permitted by
Section 10.3 of the Credit Agreement, in form and substance reasonably
acceptable to the Administrative Agent, together with such endorsements,
coinsurance and reinsurance as the Administrative Agent or the Required Lenders
may reasonably request and (ii) an as-built survey of each Mortgaged Property
(other than any such Mortgaged Property that is (A) is not owned in fee by the
Borrower or a Subsidiary and is not a ground lease or (B) is a Real Property
Under Negotiation for Sale), in form and substance reasonably acceptable to the
Administrative Agent.
(c) On or before February 1, 1998, the Borrower and the
Subsidiaries that own Mortgaged Properties shall deliver to the Administrative
Agent an appraisal of (i) each Mortgaged Property (other than Real Properties
Under Negotiation for Sale) and (ii) each property subject to Liens that secure
the Pledged IRBs reasonably satisfactory to the Administrative Agent prepared by
an independent appraiser reasonably acceptable to the Administrative Agent. In
the event that the appraised value of any Mortgaged Property as set forth in the
appraisals required to be delivered pursuant to this clause (c) (the "Final
Appraised Value") is greater than the preliminary value established by the
Administrative Agent for such Mortgaged Property prior to the date hereof, the
Borrower and the Subsidiaries shall, to the extent reasonably required by the
Administrative Agent, (i) execute and deliver an amendment or supplement to the
Mortgage on such Mortgaged Property to ensure that the amount of the Obligations
secured by such Mortgage is not less than the Final Appraised Value of such
Mortgaged Property and (ii) pay any additional mortgage recording or similar tax
with respect to the difference between the preliminary appraised value
established by the Administrative Agent and the Final Appraised Value for such
Mortgaged Property and execute and deliver all amendments to the Mortgages and
other documents required in connection with the payment of any such tax.
(d) On or before December 31, 1997, the Borrower and the
Subsidiaries shall deliver to the Administrative Agent, with respect to each
Fee-owned Mortgaged Property (as defined below) for which the Administrative
Agent did not receive signed counterparts of a Mortgage pursuant to Section
14(e) of this Amendment and Waiver, counterparts of a Mortgage signed on behalf
of the record owner of such Fee-owned Mortgaged Property.
(e) On or before December 31, 1997, the Borrower and the
Subsidiaries shall deliver to the Administrative Agent, with respect to each
Leased Mortgaged Property (as defined below) for which the Administrative Agent
did not receive signed counterparts of a Mortgage pursuant to Section 14(e) of
this Amendment and Waiver, counterparts of a Mortgage signed on behalf of the
record owner of such Leased Mortgaged Property.
<PAGE> 11
11
(f) On or before December 31, 1997, the Borrower and the
Guarantors shall deliver to the Administrative Agent (i) all documents and
instruments, including Uniform Commercial Code financing statements, required by
law or reasonably requested by the Administrative Agent to be filed, registered
or recorded to create or perfect the Liens intended to be created under the
Security Agreement on the Collateral (as defined in the Security Agreement) with
respect to which such documents and instruments were not delivered to the
Administrative Agent pursuant to Section 14(d)(i) of this Amendment and Waiver
and (ii) any additional results to the search requested in Section 14(d)(ii) of
this Amendment and Waiver of the Uniform Commercial Code (or equivalent) filings
made with respect to the Borrower and the Guarantors and copies of the financing
statements (or similar documents) disclosed by such search, and evidence
reasonably satisfactory to the Administrative Agent that the Liens indicated by
such financing statements (or similar documents) are permitted by Section 10.3
of the Credit Agreement or have been released.
(g) The Administrative Agent, in its reasonable discretion,
may retain an environment assessment firm to conduct, at the Borrower's expense,
environmental assessments, in form, scope and substance acceptable to the
Administrative Agent, of (i) each Mortgaged Property and (ii) each property of
the Borrower or any Subsidiary that is subject to Liens that secure the Pledged
IRBs, as set forth on Schedule 1.2(a). In addition, with respect to (i) each
Mortgaged Property and (ii) each property of the Borrower or any Subsidiary that
is subject to Liens that secure the Pledged IRBs, as indicated on Schedule
1.2(a), the Administrative Agent may require that the Borrower deliver to the
Administrative Agent on or before January 31, 1998, an environmental insurance
policy from an insurance company reasonably satisfactory to the Administrative
Agent and with such premiums and other terms and providing such coverage as is
reasonably satisfactory to the Administrative Agent, in each case with respect
to any environmental hazards, liabilities or remedial action to which the
Borrower or any of the Subsidiaries may be subject with respect thereto. The
Administrative Agent shall inform the Borrower on or before December 31, 1997,
whether it will require the Borrower to deliver such environmental insurance
policies.
(h) The Borrower will take, or cause the Subsidiaries to take,
such actions (including the payment of insurance premiums) as are necessary to
maintain in effect, with the same level of coverage, any environmental insurance
policies delivered to the Administrative Agent pursuant to clause (g)(ii) of
this Section 12.
(i) The Borrower will, or will cause the Subsidiaries to, use
commercially reasonable efforts to (a) obtain a consent and agreement in form
and substance reasonably satisfactory to the Administrative Agent from each
landlord under each lease of a Mortgaged Property and (b) record, with respect
to each Leased Mortgaged Property, the lease or a memorandum thereof in the real
property records where such Leased Mortgaged Property is located.
(j) The Borrower hereby agrees that any failure to comply with
the provisions of clauses (b) through (h) of this Section 12 shall be deemed to
be an Event of Default under the Credit Agreement.
(k) Notwithstanding any of the provisions of the Credit
Agreement, the
<PAGE> 12
12
Borrower and the Lenders agree that, from and including December 1, 1997, to but
excluding July 31, 1998, (i) the Applicable ABR Margin shall be equal to (A) the
percentage applicable to Level VIII Status in the table set forth in the
definition of the term "Applicable ABR Margin" plus (B) 0.25% and (ii) the
Applicable Eurodollar Margin shall be equal to (A) the percentage applicable to
Level VIII Status in the table set forth in the definition of the term
"Applicable Eurodollar Margin" plus (B) 0.25%.
SECTION 13. Representations and Warranties. To induce the
other parties hereto to enter into this Amendment and Waiver, the Borrower
represents and warrants to each of the Lenders and the Administrative Agent
that, after giving effect to this Amendment and Waiver on the Effective Date:
(a) the representations and warranties set forth in Section 8
of the Credit Agreement are true and correct in all material respects on and as
of the date hereof with the same effect as though made on and as of the date
hereof, except to the extent such representations and warranties expressly
relate to an earlier date;
(b) no Default or Event of Default has occurred and is
continuing;
(c) Schedule 1.2(a) attached hereto lists completely and
correctly in all material respects as of the Effective Date all of the real
property owned by the Borrower and the other Credit Parties and the addresses
thereof (including those properties subject to ground leases as indicated) and
indicates (a) each such property that is a Real Property Contracted for Sale (as
defined in the Credit Agreement after giving effect to this Amendment and
Waiver), (b) each such property that has a value (determined in a manner
reasonably satisfactory to the Administrative Agent) not in excess of $100,000,
(c) each such property that is one of the Real Properties Under Negotiation for
Sale, (d) each such property that is owned by a Joint Venture and (e) each such
property that is subject to Liens that secure the Pledged IRBs. The Borrower and
such other Credit Parties own in fee all the real property (other than ground
leases as indicated on Schedule 1.2(a)) set forth on Schedule 1.2(a).
(d) Schedule 1.2(b) attached hereto lists completely and
correctly in all material respects as of the Effective Date all of the real
property leased by the Borrower and the other Credit Parties (and the addresses
thereof) other than real properties leased by the Borrower or any other Credit
Party that are (a) subject to a lease that prohibits a leasehold mortgage or (b)
subject to a lease that has a value (determined in a manner reasonably
satisfactory to the Administrative Agent) not in excess of $100,000. The
Borrower and such other Credit Parties have valid leasehold interests in all the
real property set forth on Schedule 1.2(b) and in all ground leases as indicated
on Schedule 1.2(a).
SECTION 14. Conditions to Effectiveness. This Amendment and
Waiver shall become effective as of the Effective Date on the date that:
(a) the Administrative Agent shall have received counterparts
of this Amendment and Waiver that, when taken together, bear the
signatures of the Borrower, the other Credit Parties party to the
Pledge Agreement and the Required Lenders;
<PAGE> 13
13
(b) the Administrative Agent shall have received the
Amendment Fees;
(c) the Administrative Agent shall have received the written
opinions of (i) Simpson Thacher & Bartlett, special New York counsel to
the Borrower, and (ii) each local counsel listed on Schedule 1 attached
hereto, in each case in form and substance reasonably satisfactory to
the Administrative Agent and covering such matters relating to this
Amendment and Waiver and the other Credit Documents as the
Administrative Agent shall reasonably request (and the Borrower hereby
requests such counsels to deliver such opinions);
(d) the Administrative Agent shall have received counterparts
of the Security Agreement signed on behalf of the Borrower and each
Guarantor, together with the following:
(i) all documents and instruments, including
Uniform Commercial Code financing statements,
required by law or reasonably requested by the
Administrative Agent to be filed, registered or
recorded to create or perfect the Liens intended to
be created under the Security Agreement (with
exceptions reasonably acceptable to the
Administrative Agent); and
(ii) a completed Perfection Certificate
dated the Effective Date and signed by an executive
officer or financial officer of the Borrower,
together with all attachments contemplated thereby,
including the results of a search of the Uniform
Commercial Code (or equivalent) filings made with
respect to the Borrower and the Guarantors in the
jurisdictions contemplated by the Perfection
Certificate and copies of the financing statements
(or similar documents) disclosed by such search, and
evidence reasonably satisfactory to the
Administrative Agent that the Liens indicated by such
financing statements (or similar documents) are
permitted by Section 10.3 of the Credit Agreement or
have been released;
(e)(i) the Administrative Agent shall have received
counterparts of a Mortgage with respect to a number of Mortgaged
Properties that are (A) owned in fee by the Borrower or any Subsidiary
or (B) subject to a ground lease (collectively, the "Fee-owned
Mortgaged Properties") constituting a substantial majority of, and in
no event less than 75% of, the total number of Fee-owned Mortgaged
Properties existing as of the Effective Date, in each case signed on
behalf of the record owner of the applicable Fee-owned Mortgaged
Property;
(ii) the Administrative Agent shall have received
counterparts of a Mortgage with respect to a number of Mortgaged
Properties that are leased by the Borrower or any Subsidiary (the
"Leased Mortgaged Properties") constituting not less than 10% of the
total number of Leased Mortgaged Properties existing as of the
Effective Date, in each case signed on behalf of the record owner of
the applicable Leased Mortgaged Property;
(f) the Administrative Agent shall have received the
instruments
<PAGE> 14
14
evidencing the Pledged IRBs pledged under the Pledge Agreement (as
amended by this Amendment and Waiver) and such instruments of transfer
with respect to the Pledged IRBs as are satisfactory to the
Administrative Agent in order to give effect to the pledge granted
under the Pledge Agreement (as amended by this Amendment and Waiver);
(g) the Administrative Agent shall have received a certificate
of each Credit Party, dated the Effective Date with appropriate
insertions, executed by the President or any Vice President and the
Secretary or any Assistant Secretary of such Credit Party, and
attaching the documents referred to in clauses (h) and (i) below;
(h) the Administrative Agent shall have received a copy of the
resolutions, in form and substance reasonably satisfactory to the
Administrative Agent, of the Board of Directors of each Credit Party
(or a duly authorized committee thereof) authorizing the execution,
delivery and performance of this Amendment and Waiver and the Credit
Documents to which it is a party;
(i) the Administrative Agent shall have received true and
complete copies of the certificate of incorporation and by-laws of each
Credit Party;
(j) the representations and warranties set forth in Section 13
of this Amendment and Waiver shall be true and correct; and
(k) all legal matters incident to this Amendment and Waiver
and the other Credit Documents shall be reasonably satisfactory to the
Administrative Agent and Cravath, Swaine & Moore, counsel for the
Administrative Agent.
SECTION 15. Effect of Amendment and Waiver. Except as
expressly set forth herein, this Amendment and Waiver shall not by implication
or otherwise limit, impair, constitute a waiver of, or otherwise affect the
rights and remedies of the Lenders, the Administrative Agent, the Letter of
Credit Issuer or the Borrower under the Credit Agreement or any other Credit
Document, and shall not alter, modify, amend or in any way affect any of the
terms, conditions, obligations, covenants or agreements contained in the Credit
Agreement or any other Credit Document, all of which are ratified and affirmed
in all respects and shall continue in full force and effect. Nothing herein
shall be deemed to entitle the Borrower to a waiver, amendment, modification or
other change of any of the terms, conditions, obligations, covenants or
agreements contained in the Credit Agreement or any other Credit Document in
similar or different circumstances. This Amendment and Waiver shall apply and be
effective only with respect to the provisions of the Credit Agreement
specifically referred to herein.
SECTION 16. Credit Document. This Amendment and Waiver shall
be a Credit Document for all purposes.
SECTION 17. Expenses. The Borrower agrees to pay the
reasonable out-of-pocket expenses of the Administrative Agent, including but not
limited to the reasonable fees, charges and disbursements (including but not
limited to any mortgage filing fees or any Uniform Commercial Code filing or
search fees) of Cravath,
<PAGE> 15
15
Swaine & Moore, counsel for the Administrative Agent, incurred in connection
with the preparation, execution and delivery of this Amendment and Waiver, the
Security Agreement or the Mortgages or any subsequent waiver, amendment or
modification of the Credit Agreement or any other Credit Document and the
security arrangements in connection herewith and therewith. In addition, the
Borrower agrees to pay any taxes due with respect to the Mortgages and any
amendments or supplements thereto and the reasonable costs and expenses incurred
in connection with the environmental assessment reports and the environmental
insurance policies requested by the Administrative Agent pursuant to Section
12(g) above.
SECTION 18. Counterparts. This Amendment and Waiver may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed an original, but all such counterparts together shall constitute but one
and the same instrument. Delivery of any executed counterpart of a signature
page of this Amendment and Waiver by facsimile transmission shall be effective
as delivery of a manually executed counterpart hereof.
SECTION 19. Applicable Law. THIS AMENDMENT AND WAIVER SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
SECTION 20. Headings. The headings of this Amendment and
Waiver are for purposes of reference only and shall not limit or otherwise
affect the meaning hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment and
Waiver to be duly executed by their duly authorized officers, all as of the date
and year first above written.
BRUNO'S, INC.,
by
/s/ JOHN STAKEL
------------------------------
Name: John Stakel
Title: Assistant Treasurer
A.F. STORES, INC.,
by
/s/ JOHN STAKEL
------------------------------
Name: John Stakel
Title: Assistant Treasurer
<PAGE> 16
16
BR AIR, INC.,
by
/s/ JOHN STAKEL
------------------------------
Name: John Stakel
Title: Assistant Treasurer
FOOD MAX, INC.,
by
/s/ JOHN STAKEL
------------------------------
Name: John Stakel
Title: Assistant Treasurer
FOOD MAX OF GEORGIA, INC.,
by
/s/ JOHN STAKEL
------------------------------
Name: John Stakel
Title: Assistant Treasurer
FOOD MAX OF MISSISSIPPI, INC.,
by
/s/ JOHN STAKEL
------------------------------
Name: John Stakel
Title: Assistant Treasurer
FOOD MAX OF TENNESSEE, INC.,
by
/s/ JOHN STAKEL
------------------------------
Name: John Stakel
Title: Assistant Treasurer
BRUNO'S FOOD STORES, INC.,
by
/s/ JOHN STAKEL
------------------------------
Name: John Stakel
Title: Assistant Treasurer
<PAGE> 17
17
PWS HOLDING CORPORATION,
by
/s/ JOHN STAKEL
------------------------------
Name: John Stakel
Title: Assistant Treasurer
GEORGIA SALES COMPANY,
by
/s/ JOHN STAKEL
------------------------------
Name: John Stakel
Title: Assistant Treasurer
SEESSEL HOLDINGS, INC.,
by
/s/ JOHN STAKEL
------------------------------
Name: John Stakel
Title: Assistant Treasurer
SSS ENTERPRISES, INC.,
by
/s/ JOHN STAKEL
------------------------------
Name: John Stakel
Title: Assistant Treasurer
LAKESHORE FOODS, INC.,
by
/s/ JOHN STAKEL
------------------------------
Name: John Stakel
Title: Assistant Treasurer
THE CHASE MANHATTAN BANK, as
Administrative Agent and as a
Lender,
by
/s/ WILLIAM RINDFUSS
------------------------------
Name: William Rindfuss
Title: Vice President
<PAGE> 18
18
AMSOUTH BANK OF ALABAMA,
by
/s/ SCOTT CORRIGAN
--------------------------------
Name: Scott Corrigan
Title: Vice President
BANK OF AMERICA,
by
--------------------------------
Name:
Title:
BANK OF AMERICA ILLINOIS,
by
--------------------------------
Name:
Title:
THE BANK OF NOVA SCOTIA,
by
/s/ W.J. BROWN
--------------------------------
Name: W. J. Brown
Title: Vice President
BANKERS TRUST COMPANY,
by
/s/ ROBERT R. TELESCA
--------------------------------
Name: Robert R. Telesca
Title: Assistant Vice President
BANK OF TOKYO - MITSUBISHI TRUST
COMPANY,
by
/s/ DAVID C. MCLAUGHLIN
--------------------------------
Name: David C. McLaughlin
Title: Vice President
<PAGE> 19
19
CIBC INC,
by
/s/ CHRISTOPHER KLECZKOWSKI
--------------------------------
Name: Christopher Kleczhowski
Title: Executive Director
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., "RABOBANK
NEDERLAND", New York Branch,
by
/s/ W. JEFFREY VOLLACK
--------------------------------
Name: W. Jeffrey Vollack
Title: Senior Vice President
Manager, Special Asset
Management
by
/s/ ALISTAIR B. TURNBULL
--------------------------------
Name: Alistair B. Turnbull
Title: Vice President, Special
Asset Management
D.K. ACQUISITION PARTNERS, L.P.,
by
/s/
--------------------------------
Name:
Title:
FIRST UNION NATIONAL BANK,
by
/s/ VICKI J. CRISPENS
--------------------------------
Name: Vicki J. Crispens
Title: Assistant Vice President
FLEET NATIONAL BANK,
by
/s/ FRED N. MANNING
--------------------------------
Name: Fred N. Manning
Title: Senior Vice President
<PAGE> 20
20
by
/s/ CHRISTOPHER G. DANIEL
--------------------------------
Name: Christopher G. Daniel
Title: Vice President
THE INDUSTRIAL BANK OF JAPAN,
LIMITED,
by
/s/ TAKUYA HONJO
--------------------------------
Name: Takuya Honjo
Title: Senior Vice President
KEYPORT LIFE INSURANCE COMPANY,
Chancellor LGT Senior Secured
Management, Inc., as Portfolio
Advisor,
by
/s/ STEPHEN M. ALFIERI
--------------------------------
Name: Stephen M. Alfieri
Title: Managing Director
KZH-SOLEIL CORPORATION (formerly
known as KZH Holding Corporation),
by
--------------------------------
Name:
Title:
KZH HOLDING CORPORATION III/OAKMONT,
by
--------------------------------
Name:
Title:
MERRILL LYNCH, PIERCE, FENNER,
by
/s/ NEIL BRISSON
--------------------------------
Name: Neil Brisson
Title: Director
<PAGE> 21
21
MITSUI LEASING CAPITAL CORPORATION,
by
/s/ JEFFREY PARISI
--------------------------------
Name: Jeffrey Parisi
Title: Senior Vice President
ML DEBT STRATEGIES FUND, INC.,
by
--------------------------------
Name:
Title:
NATIONSBANK, N.A.,
by
/s/ NANCY S. GOLDMAN
--------------------------------
Name: Nancy S. Goldman
Title: Vice President
OCTAGON CREDIT INVESTORS LOAN
PORTFOLIO (a unit of The Chase
Manhattan Bank),
by
--------------------------------
Name:
Title:
PILGRIM AMERICA PRIME RATE TRUST,
by
/s/ DANIEL A. NORMAN
--------------------------------
Name: Daniel A. Norman
Title: Senior Vice President
THE SAKURA BANK, LIMITED,
by
/s/
--------------------------------
Name:
Title:
<PAGE> 22
22
SENIOR HIGH INCOME PORTFOLIO, INC.,
by
--------------------------------
Name:
Title:
THE SUMITOMO BANK, LIMITED,
by
--------------------------------
Name:
Title:
SOUTHTRUST BANK, N.A.,
by
/s/ T. KNUDSEN
--------------------------------
Name: T. Knudsen
Title: Senior Vice President
THE TRAVELERS INSURANCE COMPANY,
by
/s/ ROBERT M. MILLS
--------------------------------
Name: Robert M. Mills
Title:
VAN KAMPEN AMERICAN CAPITAL PRIME
RATE INCOME TRUST,
by
/s/ JEFFREY W. MAILLET
--------------------------------
Name: Jeffrey W. Maillet
Title: Senior Vice President &
Director
DLJ CAPITAL FUNDING, INC.,
by
--------------------------------
Name:
Title:
<PAGE> 23
23
GOLDMAN SACHS CREDIT PARTNERS,
by
/s/ JOHN E. URBAN
--------------------------------
Name: John E. Urban
Title: Authorized Signer
AERIES FINANCE LTD.,
by
--------------------------------
Name:
Title:
AMARA-2 FINANCE LTD.,
by
--------------------------------
Name:
Title:
CAPTIVA FINANCE LTD.,
by
--------------------------------
Name:
Title:
CAPTIVA II FINANCE LTD.,
by
--------------------------------
Name:
Title:
COMMERCIAL LOAN FUNDING TRUST I,
by
--------------------------------
Name: Michelle Swanson
Title:
<PAGE> 24
24
INDOSUEZ CAPITAL FUNDING III,
LIMITED,
by Indosuez Capital Luxembourg,
as Collateral Manager,
by
/s/ FRANCOISE BERTHELOT
--------------------------------
Name: Francoise Berthelot
Title: Authorized Signatory
MERRILL LYNCH PRIME RATE PORTFOLIO,
by
--------------------------------
Name:
Title:
PAMCO CAYMAN LTD.,
by
/s/ MARK K. OKADA
--------------------------------
Name: Mark K. Okada
Title: Executive Vice President
STRATA FUNDING LTD.,
by
--------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.46
EMPLOYMENT AGREEMENT
AGREEMENT, made as of September 19, 1997, by and between
BRUNO'S INC., an Alabama corporation (the "Company") and JAMES A. DEMME
("Executive").
RECITALS
In order to induce Executive to serve as the Chairman of the
Board and Chief Executive Officer of the Company, the Company desires to provide
Executive with compensation and other benefits on the terms and conditions set
forth in this Agreement.
Executive is willing to accept such employment and perform
services for the Company, on the terms and conditions hereinafter set forth.
It is therefore hereby agreed by and between the parties as
follows:
1. Employment.
1.1 Subject to the terms and conditions of this Agreement,
the Company agrees to employ Executive during the term hereof as its Chairman of
the Board and Chief Executive Officer. In his capacity as the Chairman of the
Board and Chief Executive Officer of the Company, Executive shall report to the
Board of Directors of the Company (the "Board") and shall have the customary
powers, responsibilities and authorities of chief executive officers of
corporations of the size, type and nature of the Company, as it exists from time
to time, as are assigned by the Board.
1.2 Subject to the terms and conditions of this Agreement,
Executive hereby accepts employment as the Chairman of the Board and Chief
Executive Officer of the Company commencing as soon as possible after the date
hereof but in no event later than October 1, 1997, and agrees to devote his full
working time and efforts (except for permitted vacation periods and reasonable
periods of illness and other incapacity), to the best of his ability, experience
and talent, to the performance of services, duties and responsibilities in
<PAGE> 2
2
connection therewith. Executive shall perform such duties and exercise such
powers, commensurate with his position, as the Chairman of the Board and Chief
Executive Officer of the Company as the Board shall from time to time delegate
to him on such terms and conditions and subject to such restrictions as such
Board may reasonably from time to time impose. The Company hereby agrees to take
all reasonable and necessary corporate action to ensure that Executive is
elected to the Board of Directors.
1.3 Nothing in this Agreement shall preclude Executive from
engaging, so long as, in the reasonable determination of such Board, such
activities do not interfere with his duties and responsibilities hereunder, in
charitable and community affairs, from managing any passive investment made by
him in publicly traded equity securities or other property (provided that no
such investment may exceed 1% of the equity of any entity, without the prior
approval of such Board of Directors) or from serving, subject to the prior
approval of such Board of Directors, as a member of boards of directors or as a
trustee of any other corporation, association or entity. For purposes of the
preceding sentence, any approval of the Board required therein shall not be
unreasonably withheld.
2. Term of Employment. Executive's term of employment under
this Agreement shall commence as soon as possible after the date hereof, but in
any event no later than October 1, 1997, and, subject to the terms hereof, shall
terminate (the "Termination Date") on the earlier of (i) September 30, 2000, or
(ii) termination of Executive's employment pursuant to this Agreement; provided,
however, that any termination of employment by Executive (other than for death,
Permanent Disability or Good Reason) may only be made upon 90 days prior written
notice to the Company and any termination of employment by
<PAGE> 3
3
Executive for Good Reason may only be made upon 30 days prior written notice to
the Company.
3. Compensation.
3.1 Signing Bonus. As soon as practicable after commencement
of his employment with the Company, the Company shall pay Executive a cash bonus
equal to $1,200,000, which in part represents payment of any annual bonus that
may otherwise be earned by Executive for the remainder of calendar year 1997.
3.2 Salary. The Company shall pay Executive a base salary
("Base Salary") at the rate of $400,000 per annum for the period commencing on
the beginning of Executive's term of employment hereunder and ending on the
Termination Date. Base Salary shall be payable in accordance with the ordinary
payroll practices of the Company. Any increase in Base Salary shall be in the
discretion of the Board and, as so increased, shall constitute "Base Salary"
hereunder.
3.3 Annual Bonus. In addition to his Base Salary, Executive
shall, commencing with the fiscal year beginning on February 1, 1998, and
continuing each fiscal year thereafter, be paid an annual bonus (the "Bonus")
during the term of his employment hereunder with a target amount equal to not
less than 50% of Base Salary (the "Target Bonus") and a maximum amount equal to
100% of Base Salary based on the satisfaction of performance criteria
established by the Board on or before the beginning of the fiscal year to which
the performance criteria relates.
3.4 Special Bonus. In the event that the closing price of
the shares of Company common stock ("Common Stock") for 90 consecutive trading
days averages at least $12/share, Executive will be entitled to a cash bonus
equal to $3,000,000 reduced by the
<PAGE> 4
4
amount of the appreciation (whether or not then realized) on the Purchase Stock
(as hereinafter defined); provided, however, that at the election of Executive,
such bonus may be paid 50% in cash and 50% in Common Stock. Such bonus will be
paid to Executive within ten days after expiration of such 90-day period.
3.5 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.
3.6 Relocation and Payment of Relocation Expenses. Executive
agrees that he and his family shall relocate to the Birmingham, Alabama area no
later than September 30, 1998. To assist the Executive with his relocation to
the Birmingham, Alabama area, the Company agrees to provide Executive with the
benefits and reimbursements set forth on Schedule A hereto to the extent
actually incurred by Executive in connection with his relocation from the
Oklahoma City, Oklahoma area to the Birmingham, Alabama area.
4. Employee Benefits.
4.1 Employee Benefit Programs, Plans and Practices. The
Company shall provide Executive during the term of his employment hereunder with
coverage under all employee pension and welfare benefit programs, plans and
practices (commensurate with his positions in the Company and to the extent
permitted under any employee benefit plan) in accordance with the terms thereof,
which the Company makes available to its senior executives.
4.2 Vacation and Fringe Benefits. While employed hereunder,
Executive shall be entitled to no less than twenty-five (25) business days paid
vacation in each calendar
<PAGE> 5
5
year, which shall be taken at such times as are consistent with Executive's
responsibilities hereunder. In addition, while employed hereunder, Executive
shall be entitled to the perquisites and other fringe benefits made available to
senior executives of the Company, commensurate with his position with the
Company.
5. Expenses. Executive is authorized to incur reasonable
expenses in carrying out his duties and responsibilities under this Agreement,
including, without limitation, expenses for travel (including reasonable travel
expenses for Executive's spouse for relevant industry meetings) and similar
items related to such duties and responsibilities. The Company will reimburse
Executive for all such expenses upon presentation by Executive from time to time
of appropriately itemized and approved (consistent with the Company's policy)
accounts of such expenditures.
6. Termination of Employment.
6.1 Termination Without Cause or Resignation for Good Reason.
(a) The Company may terminate Executive's employment at any time for any reason.
If Executive's employment is terminated by the Company other than for Cause (as
defined in Section 6.4 hereof) or as a result of Executive's death or Permanent
Disability (as defined in Section 6.2 hereof) or if Executive terminates his
employment for Good Reason (as defined in Section 6.1 (c) hereof) prior to
September 30, 2000, Executive shall receive such payments, if any, under
applicable plans or programs, including but not limited to those referred to in
Section 3.4 and 4.1 hereof, to which he is entitled pursuant to the terms of
such plans or programs. In addition, Executive shall be entitled to receive an
amount (the "Termination Amount") in lieu of any Bonus in respect of all or any
portion of the fiscal year in which such termination occurs and any other cash
compensation (other than the Vacation Payment and the
<PAGE> 6
6
Compensation Payment, as defined below), which Termination Amount shall be
payable in twenty-four monthly installments at the beginning of each month
following such termination of employment. The Termination Amount shall consist
of an amount equal to two times the sum of the Executive's annual Base Salary
plus the Bonus he actually received in the year prior to the year in which the
termination occurs. In addition, Executive shall be entitled to receive a cash
lump sum payment in respect of accrued but unused vacation days (the "Vacation
Payment") and to compensation earned but not yet paid (including Base Salary and
any deferred Bonus payments ) (the "Compensation Payment"), and to continued
coverage for 24 months under any employee medical, disability and life insurance
plans in accordance with the respective terms thereof.
(b) The Vacation Payment and the Compensation Payment shall be
paid by the Company to Executive within 30 days after the termination of
Executive's employment by check payable to the order of Executive or by wire
transfer to an account specified by Executive.
(c) For purposes of this Agreement, "Good Reason" shall mean
any of the following (which occur without Executive's express prior written
consent):
(i) any material breach by the Company of any provision of
this Agreement, including any material reduction by the Company of
Executive's duties, authority, support or responsibilities (except in
connection with the termination of Executive's employment for Cause, as
a result of Permanent Disability, as a result of Executive's death or
by Executive other than for Good Reason);
(ii) the Board requiring that Executive perform his duties and
responsibilities for the Company at a location other than the
Birmingham, Alabama area; or
(iii) a reduction by the Company in Executive's employee
benefits, Bonus opportunity, or Base Salary, other than a reduction in
Base Salary which is part of a general cost reduction affecting at
least ninety percent (90%) of the
<PAGE> 7
7
officers of the Company which does not exceed twenty percent (20%) of
Executive's Base Salary.
6.2 Permanent Disability. If the Executive becomes disabled
to an extent which entitles him to long-term benefits under the Company's
long-term disability benefit plan applicable to senior executive officers as in
effect on the date hereof ("Permanent Disability"), the Company or Executive may
terminate Executive's employment on written notice thereof, and Executive shall
receive or commence receiving, as soon as practicable:
(i) amounts payable pursuant to the terms of a disability
insurance policy or similar arrangement which the Company maintains
during the term hereof;
(ii) the Target Bonus in respect of the fiscal year in which
his termination occurs, prorated by a fraction, the numerator of which
is the number of days of the fiscal year until termination and the
denominator of which is 365;
(iii) the Vacation Payment and the Compensation Payment; and
(iv) such payments under applicable plans or programs,
including but not limited to those referred to in Section 3.4 and 4.1
hereof, to which he is entitled pursuant to the terms of such plans or
programs.
6.3 Death. In the event of Executive's death during the term
of his employment hereunder, Executive's estate or designated beneficiaries
shall receive or commence receiving, as soon as practicable:
(i) the Target Bonus in respect of the fiscal year in which
his death occurs, prorated by a fraction, the numerator of which is the
number of days of the fiscal year until his death and the denominator
of which is 365;
(ii) any death benefits provided under the employee benefit
programs, plans and practices referred to in Section 4.1 hereof, in
accordance with their terms;
(iii) the Vacation Payment and the Compensation Payment; and
(iv) such payments under applicable plans or programs,
including but not limited to those referred to in Section 3.4 and 4.1
hereof, to which
<PAGE> 8
8
Executive's estate or designated beneficiaries are entitled pursuant to
the terms of such plans or programs.
6.4 Termination for Cause; Resignation Without Good Reason.
(a) The Company shall have the right to terminate the employment of Executive
for Cause. In the event that Executive's employment is terminated by the Company
for Cause or by Executive other than for Good Reason or other than as a result
of the Executive's Permanent Disability or death, prior to September 30, 2000,
Executive shall only be entitled to receive the Compensation Payment and shall
not be entitled to the payment of any other compensation otherwise included
under this Agreement. After the termination of Executive's employment under this
Section 6.4., the obligations of the Company under this Agreement to make any
further payments, or provide any benefits specified herein, to Executive shall
thereupon cease and terminate.
(b) As used herein, the term "Cause" shall be limited to (i)
willful malfeasance or willful misconduct by Executive in connection with his
employment which is injurious to the Company, (ii) willful, substantial and
continuing refusal by Executive to perform his duties hereunder or any lawful
direction of the Board of Directors of the Company as required under Section
1.3, which continues beyond ten days after a written demand for substantial
performance is delivered to Executive by the Company, (iii) any breach of the
provisions of Section 13 of this Agreement by Executive or any other material
breach of this Agreement by Executive which continues beyond ten days after a
written demand for substantial performance is delivered to Executive by the
Company or (iv) the indictment of Executive of (a) any felony or (b) a
misdemeanor involving moral turpitude; provided, however, that in the event
Executive is subsequently found not guilty or the charges against Executive are
dismissed, any amounts that would have been due Executive hereunder if he had
<PAGE> 9
9
been terminated without Cause shall be paid to Executive on the same basis as if
a Termination without Cause has occurred on the date he was actually terminated.
Termination of Executive pursuant to this Section 6.4 shall be made by delivery
to Executive of a copy of a resolution duly adopted by the affirmative vote of
not less than a majority of the Directors at a meeting of the Board of Directors
of the Company called and held for the purpose (after 30 days prior written
notice to Executive and reasonable opportunity for Executive to be heard before
the Board prior to such vote), finding that in the reasonable judgment of such
Board, Executive was guilty of conduct set forth in any of clauses (i) through
(iv) above and specifying the particulars thereof.
6.5 Expiration of Agreement. In the event of Executive's
termination of employment by the Company without Cause or resignation by
Executive for Good Reason, in either case following the expiration of the term
of this Agreement, Executive shall receive an amount equal to two times the sum
of (i) the Executive's annual Base Salary and (ii) the amount of the Bonus that
he actually received in the year prior to the year in which his termination
occurs, payable in 24 monthly installments at the beginning of each month
following such termination of employment. In addition, Executive shall be
entitled to receive a lump sum payment equal to the sum of (i) the Vacation
Payment and (ii) the Compensation Payment as soon as practicable following such
termination.
7. Stock Arrangements; Grant of Stock Options. As soon as
practicable after the execution of this Agreement, Executive and the Company
shall enter into the Management Stockholder's Agreement on terms and conditions
mutually acceptable to the parties and Executive shall purchase $1,000,000 of
Common Stock at the current market price. In combination with Executive's
personal funds, the Company shall lend to Executive such
<PAGE> 10
10
amount (the "Loan"), as is necessary in order to enable Executive to make such
purchase; provided, however, that the Loan shall be prepaid in the amount equal
to the net after-tax proceeds of the Signing Bonus that Executive shall receive
pursuant to Section 3.1 of this Agreement no later than 60 days after payment of
the Signing Bonus and calculation of the amount of net after-tax proceeds
thereof. The Loan shall accrue interest at the applicable federal rate as in
existence at the time the Loan is made and principal and interest shall be due
upon the earliest of (i) the termination of Executive's employment for Cause or
resignation without Good Reason, (ii) one year after the termination of
Executive's employment without Cause or resignation for Good Reason, death or
Permanent Disability, (iii) disposition of the Executive's Common Stock and (iv)
seven years following the date Executive purchases Common Stock pursuant to this
Section 7. The Loan will be secured by all of Executive's Purchase Stock (Common
Stock purchased by Executive pursuant to this Section 7) and may be prepaid by
Executive from the net after-tax proceeds of any annual Bonus paid to him.
Otherwise the Purchase Stock will be subject to the terms of the existing form
of the Management Stockholder's Agreement. Promptly after commencement of his
employment hereunder, Executive will also be granted options to purchase 250,000
shares of Common Stock at an exercise price of $12/share. All other terms will
be consistent with the Company's 1996 Stock Purchase and Option Plan.
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 neither any such damages nor the amount of any payment provided
for under this Agreement shall be subject to offset or any other reduction by
reason of Executive's securing other employment.
<PAGE> 11
11
9. Notices. All notices or communications hereunder shall be
in writing, addressed as follows:
To the Company:
c/o Kohlberg Kravis Roberts & Co.
9 West 57th Street
New York, New York 10019
with a copy to:
Alvin H. Brown, Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
To Executive:
Mr. James A. Demme
1305 West Irvine
Edmond, Oklahoma 73013
with a copy to:
Kenni B. Merritt, Esq.
Crowe & Dunlevy
20 N. Broadway
Oklahoma City, Oklahoma 73102
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.
<PAGE> 12
12
Except to the extent expressly provided otherwise in the next sentence, each
party shall bear the costs of any legal fees and other fees and expenses which
may be incurred in respect of enforcing its respective rights under this
Agreement. The Company shall pay the reasonable fees and disbursements (not in
excess of $5,000) of Executive's legal counsel in connection with the
negotiation and execution of this Agreement and the other documents contemplated
hereby; provided, however, that no such payment shall be made without reasonable
substantiation of the amounts.
11. Assignment. This contract shall be binding upon and inure
to the benefit of the heirs and representatives of Executive and the assigns and
successors of the Company, but neither this Agreement nor any rights or
obligations hereunder shall be assignable or otherwise subject to hypothecation
by Executive (except by will or by operation of the laws of intestate
succession) or by the Company, except that the Company may assign this Agreement
to any successor (whether by merger, purchase or otherwise) to all or
substantially all of the stock, assets or businesses of the Company, if such
successor expressly agrees to assume the obligations of the Company hereunder.
12. Amendment. This Agreement may only be amended by written
agreement of the parties hereto.
13. Nondisclosure of Confidential Information;
Non-competition. (a) Executive shall not, without the prior written consent of
the Company, use, divulge, disclose or make accessible to any other person,
firm, partnership, corporation or other entity any Confidential Information
pertaining to the business of the Company or any of its affiliates, except (i)
while employed by the Company, in the business of and for the benefit of the
company, or (ii) when required to do so by a court of competent jurisdiction, by
any
<PAGE> 13
13
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, its subsidiaries,
Kohlberg Kravis Roberts & Co. or any affiliate of Kohlberg Kravis & Roberts &
Co. principally engaged in the retail grocery business in existence as of the
date of Executive's termination of employment (the "Restricted Group") or
customers, that, in any case, is not otherwise available to the public (other
than by Executive's breach of the terms hereof).
(b) During the period of his employment hereunder and for 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 in Competition (as defined in Section 13(c)) with the business
of the Restricted Group and (B) he shall not, on his own behalf or on behalf of
any person, firm or company, directly or indirectly, solicit or offer employment
to any person who has been employed by the Restricted Group at any time during
the 12 months immediately preceding such solicitation.
(c) For purposes of this Section 13, a business shall be
deemed to be in "Competition" with the Restricted Group if it is principally
engaged in the retail grocery business within the same geographic area in which
the Restricted Group conducts such
<PAGE> 14
14
business. Nothing in this Section 13 shall be construed so as to preclude
Executive from investing in any publicly or privately held company, provided
Executive's beneficial ownership of any class of such company's securities does
not exceed 1% of the outstanding securities of such class.
(d) Executive and the Company agree that this covenant not to
compete is a reasonable covenant under the circumstances, and further agree that
if in the opinion of any court of competent jurisdiction such restraint is not
reasonable in any respect, such court shall have the right, power and authority
to excise or modify such provision or provisions of this covenant as to the
court shall appear not reasonable and to enforce the remainder of the covenant
as so amended. Executive agrees that any breach of the covenants contained in
this Section 13 would irreparably injure the Company. Accordingly, Executive
agrees that the Company may, in addition to pursuing any other remedies it may
have in law or in equity, obtain an injunction against Executive from any court
having jurisdiction over the matter restraining any further violation of this
Agreement by Executive and cease making any payments otherwise required by this
Agreement; provided, however, that in the event a court of competent
jurisdiction, which recognizes the validity of the provisions of this Section
13, finds the Executive not to be in violation of the provisions of this Section
13, then the Company shall pay to Executive, in a lump sum, within ten days of
such determination, all amounts that would have been payable to Executive
hereunder through the date of such determination and continue making any other
payments due with respect to periods of time subsequent to such determination in
accordance with the provisions of this Agreement.
14. Beneficiaries; References. Executive shall be entitled to
select (and change, to the extent permitted under any applicable law) a
beneficiary or beneficiaries to
<PAGE> 15
15
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, and the Company shall pay amounts payable under this
Agreement, unless otherwise provided herein, in accordance with the terms of
this Agreement, to Executive's personal or legal representatives, executors,
administrators, heirs, distributees, devisees, legatees or estate, as the case
may be. Any reference to the masculine gender in this Agreement shall include,
where appropriate, the feminine.
15. Survival. 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.
Specifically, but not exclusively, notwithstanding the expiration of the term of
this Agreement, the provisions of Section 6.5 and Section 13 hereunder shall
remain in effect as long as is necessary to give effect thereto. 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 or other agreement or understanding between the Company or any
affiliate of the company and
<PAGE> 16
16
Executive other than the Management Stockholder's Agreement referred to in
Section 7 hereof.
18. Withholding. The Company shall be entitled to withhold
from payment any amount of withholding required by law.
19. Indemnity. The Company or one of its subsidiaries, as
appropriate, shall indemnify Executive for any claim arising out of or in
connection with Executive's service as an officer or director of the Company or
as a trustee or plan administrator of any of the Company's employee benefit
plans, and as an officer, director or employee of any of the Company's
subsidiaries, in the same manner and to the same extent as the Company or such
subsidiary, as appropriate, indemnifies its then current officers, directors or
employees.
20. Counterparts. This Agreement may be executed in two or
more counterparts, each of which will be deemed an original.
BRUNO'S INC.
By: /s/ Paul E. Raether
----------------------------
Name: Paul E. Raether
Title: Member of the Executive
Committee
/s/ James A. Demme
--------------------------------
James A. Demme
<PAGE> 1
EXHIBIT 10.47
SCHEDULE OF TERMS OF
MANAGEMENT STOCKHOLDER'S AGREEMENT
AND
NON-QUALIFIED STOCK OPTION AGREEMENT(1)
EXECUTED BY JAMES A. DEMME
<TABLE>
<CAPTION>
PURCHASE SHARES TIME PERFORMANCE
NAME DATE PURCHASED OPTIONS OPTIONS
---- ---- --------- ------- -------
<S> <C> <C> <C> <C>
JAMES A. DEMME 9/19/97 200,000(2) 125,000(3) 125,000(3)
</TABLE>
(1) MR. DEMME EXECUTED A MANAGEMENT STOCKHOLDER'S AGREEMENT AND A NON-QUALIFIED
STOCK OPTION AGREEMENT IN SUBSTANTIALLY THE FORM OF THE MANAGEMENT
STOCKHOLDER'S AGREEMENT ATTACHED AS EXHIBIT 10.39 AND THE NON-QUALIFIED
STOCK OPTION AGREEMENT ATTACHED AS EXHIBIT 10.40 TO THE COMPANY'S REPORT ON
FORM 10-Q DATED OCTOBER 26, 1996.
(2) MR. DEMME PURCHASED 200,000 SHARES OF THE COMPANY'S COMMON STOCK AT A PRICE
OF $5.00 PER SHARE, RESULTING IN AN AGGREGATE PURCHASE PRICE OF $1,000,000.
MR. DEMME PAID $625,355 FOR THE SHARES ACQUIRED BY HIM IN CASH AND OBTAINED
A LOAN FROM THE COMPANY IN THE PRINCIPAL AMOUNT OF $374,645. THE LOAN IS
SECURED BY ALL OF THE SHARES PURCHASED BY MR. DEMME.
(3) THE EXERCISE PRICE FOR THE STOCK OPTIONS GRANTED TO MR. DEMME IS $12.00 PER
SHARE.
<PAGE> 1
EXHIBIT 10.48
SETTLEMENT AGREEMENT AND GENERAL RELEASE
dated as of October 29, 1997.
WHEREAS, William J. Bolton ("Mr. Bolton") has been employed
by Bruno's, Inc. (the "Company"); and
WHEREAS, Mr. Bolton and the Company have entered into an
agreement regarding Mr. Bolton's termination by the Company as Chief Executive
Officer, Chairman of the Board and Member of the Board of Directors of the
Company, membership on any committee or subcommittee of the Board of Directors
of the Company or any of its subsidiaries, and all other positions held by Mr.
Bolton at the Company or any of its subsidiaries, the effective date of such
termination being September 19, 1997 (the "Effective Date"); and
WHEREAS, Mr. Bolton and the Company have reached a full and
final compromise and settlement of all matters, disputes, causes of action,
claims, contentions and differences between them and the Company's divisions,
merged entities and affiliates, subsidiaries, parents, branches, predecessors,
successors, assigns, officers, directors, trustees, employees, agents,
stockholders, administrators, representatives, attorneys, insurers or
fiduciaries, past, present or future (the "Released Parties"), including but not
limited to any and all claims arising from or derivative of Mr. Bolton's
employment with the Company and his termination from employment with the
Company; and
WHEREAS, as a condition precedent to the Company performing
its obligations as provided for herein, Mr. Bolton agrees that he will execute
and comply fully with the terms of this Settlement Agreement and General Release
(the "Release"); and
WHEREAS, Mr. Bolton (i) is represented by William Kunkel of
Skadden, Arps, Slate, Meagher & Flom (Illinois) and (ii) understands that in
executing the Release he is,
<PAGE> 2
2
inter alia, giving up any rights and claims he may have under the Age
Discrimination in Employment Act of 1967, as amended, 29 U.S.C. Section 621 et
seq. ("ADEA"), and (iii) has been given a period of not less than twenty-one
(21) days within which to consider this Release;
NOW THEREFORE, in consideration of the foregoing and for other
good and valuable consideration, Mr. Bolton and the Company agree and covenant
as follows:
1. By entering into this Release, the Released Parties do not
admit, and each specifically denies, any liability, wrongdoing or violation of
any law, statute, regulations, agreement or policy.
2. The Company agrees to treat Mr. Bolton's resignation of his
employment with the Company, effective September 19, 1997, as a termination
without "Cause" by the Company, under the terms of the employment agreement
between Mr. Bolton and the Company dated August 17, 1995 (the "Employment
Agreement").
3. In consideration of the obligations upon Mr. Bolton as set
forth in this Release, and in full settlement and final satisfaction of any and
all claims, contractual or otherwise, which Mr. Bolton had, has or may have
against the Company or the Released Parties with respect to his employment, the
termination of his employment with the Company, or otherwise arising on or prior
to the date of execution of this Release, except to the extent that any such
claim concerns an allegation that the Company has failed to comply with any
obligations created by this Release:
(a) The Company agrees to pay (or has paid) to Mr. Bolton
the gross amount of Nine Hundred Sixty Thousand Dollars ($960,000.00), less
withholding taxes and other deductions required by law. The payment described in
this subparagraph 3(a) shall be made as follows:
<PAGE> 3
3
(i) Twenty-Four Thousand Six Hundred and Fifteen
Dollars and Thirty-Eight Cents ($24,615.38) by check, direct deposit or wire
transfer to Mr. Bolton, shall be delivered to Mr. Bolton in thirty-nine (39)
bi-weekly installments;
(ii) In satisfaction of two of the thirty-nine (39)
bi-weekly installments required under Section 3(a)(i), above, payments totalling
Forty-Nine Thousand Two Hundred and Thirty Dollars and Seventy-Six Cents
($49,230.76) have been made to Mr. Bolton prior to the execution of this
Release; and
(iii) The remaining thirty-seven (37) bi-weekly
installments in the amount of Twenty-Four Thousand Six Hundred and Fifteen
Dollars and Thirty-Eight Cents ($24,615.38) each shall be made in accordance
with Section 3(a)(i), above.
(b) The Company further agrees to compensate Mr. Bolton
for sixteen (16) accrued, but unused, vacation days, the payment of which shall
be made in a cash lump sum of Twenty-Four Thousand, Six Hundred and Fifteen
Dollars and Thirty-Eight Cents ($24,615.38), less withholding taxes and other
deductions required by law.
4. Mr. Bolton, for and in consideration of the payments as
set forth in this Release and for other good and valuable consideration, hereby
releases and forever discharges, and by this Release does release and forever
discharge, the Released Parties of and from all debts, obligations, promises,
covenants, collective bargaining obligations, agreements, contracts,
endorsements, bonds, controversies, suits or causes of actions known or unknown,
suspected or unsuspected, of every kind and nature whatsoever, which may
heretofore have existed or which may now exist, including but not limited to
those arising under the ADEA, Title VII of the Civil Rights Act of 1964,
<PAGE> 4
4
as amended, 42 U.S.C. Section 2000e et seq., the Fair Labor Standards Act, as
amended, 29 U.S.C. Section 201 et seq., the Equal Pay Act, as amended, 29 U.S.C.
Section 206(d), the Employee Retirement Income Security Act of 1974, as amended,
29 U.S.C. Section 1001 et seq., the Americans with Disabilities Act, as amended,
42 U.S.C. Section 12101 et seq., the Reconstruction Era Civil Rights Act, as
amended, 42 U.S.C. Section 1981 et seq., the Rehabilitation Act of 1973, as
amended, 29 U.S.C. Section 701 et seq., the Family and Medical Leave Act of
1992, 29 U.S.C. Section 2601 et seq., and any and all state or local laws
regarding employment discrimination and/or federal, state or local laws of any
type or description regarding employment, including but not limited to any
claims arising from or derivative of Mr. Bolton's employment with the Company
and Mr. Bolton's resignation from employment with the Company or otherwise, as
well as any rights or claims Mr. Bolton or his attorney has or may have for
costs, expenses, attorneys' fees or otherwise. Nothing contained herein shall
affect Mr. Bolton's rights under any Company defined contribution plan.
5. Mr. Bolton covenants and agrees not to sue, file any
grievance, arbitration or other proceeding, administrative or judicial, against
the Released Parties in any court of law or equity, or before any administrative
agency, with respect to any matter whatsoever released hereby, including but not
limited to matters arising from or derivative of Mr. Bolton's employment with
the Company and Mr. Bolton's resignation from employment with the Company or
otherwise.
6. (a) Mr. Bolton and the Company expressly understand and
agree that the Company's obligations under this Release are in lieu of any and
all other amounts to which Mr. Bolton might be, is now or may become entitled to
receive from the Released Parties upon any claim whatsoever and, without
limiting the generality of the foregoing, Mr. Bolton expressly waives any right
or claim that he may have or assert to employment or reinstatement to employment
with the Released Parties, or payment for backpay, front pay, interest, bonuses,
damages, accrued vacation, accrued sick leave, medical, dental, optical or
<PAGE> 5
5
hospitalization benefits, accidental death and dismemberment coverage, long term
disability coverage, stock options, pensions, education benefits, automobile
usage benefits, life insurance benefits, overtime, severance pay, liquidated
damages and/or attorneys' fees or costs. Nothing contained herein shall affect
Mr. Bolton's rights under any Company defined contribution plan.
(b) The Company agrees to continue Mr. Bolton's coverage
under any medical, dental, disability and life insurance plans in which Mr.
Bolton is currently enrolled for a period of 18 months, to terminate on March
20, 1999. Thereafter, Mr. Bolton may, at his option and as provided for under
the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, 29
U.S.C. Section 119, et seq., continue his medical insurance coverage, at his
own, and not the Company's, expense.
7. (a) Mr. Bolton agrees to sell, at such time or times as the
Company shall indicate, all shares of Common Stock in the Company held by him as
of the Effective Date through a broker designated by the Company. Mr. Bolton
further agrees to enter into all customary documents in connection with the
opening and administration of brokerage accounts and to enter into and, if
required, file all such documents as are necessary to comply with federal and
state securities laws, and agrees to cause the proceeds of the sale(s) of his
shares of Common Stock in the Company to be remitted pursuant to Section 7(b),
below.
(b) Mr. Bolton agrees to use all proceeds from the sale(s)
of his shares of Common Stock in the Company to repay the outstanding principal
amount of the promissory note executed by Mr. Bolton as of February 15, 1996,
payable to the Company (the "Note"), plus the amount of accrued but unpaid
interest on the Note. Upon completion of the sale of all of Mr. Bolton's shares
of Common Stock in the Company and upon the transfer
<PAGE> 6
6
of all such sale proceeds to the Company, the Company shall cancel the Note and
any remaining indebtedness of Mr. Bolton thereunder.
8. (a) Mr. Bolton agrees that, without limiting the Released
Parties' remedies, any material violation or breach by him of this Release shall
give rise to an action by the Company for relief including, but not limited to,
damages caused by such breach and shall forever release and discharge the
Company from the performance of its obligations arising from this Release but
shall not release Mr. Bolton from the performance of his obligations pursuant to
this Release. In no event shall Mr. Bolton be obligated to seek other employment
or take any other action by way of mitigation of the amounts payable to Mr.
Bolton under any of the provisions of this Release; and no amount payable under
this Release shall be reduced because Mr. Bolton receives salary, compensation
or benefits in respect of any other employment or business activity, except as
provided in Section 10.
(b) Mr. Bolton agrees not to make any material disparaging
statements about the Company, the Released Parties or the Company's personnel
policies and practices to any of the Company's customers, competitors,
suppliers, employees, former employees, or the press or other media in any
country.
(c) The Company agrees not to issue any press release or
other media announcement of any material disparaging statements about Mr. Bolton
to any person and shall use its reasonable best efforts to avoid having any of
its officers or directors make any such statements.
9. (a) Mr. Bolton represents that he will return to the
Company any letters, files, documents, equipment, supplies, security access
passes, property or other items in his possession or control which were
entrusted or issued to him during the course of his employment with the Company.
<PAGE> 7
7
(b) Mr. Bolton further agrees and covenants, as a
condition of the Company's performance of its obligations arising from this
Release, that Mr. Bolton will regard and preserve as confidential all personnel
information pertaining to present and former employees of the Company or the
Released Parties that has been obtained by Mr. Bolton in the course of his
employment, whether he has such information in his memory or in writing or in
any other physical form, and will otherwise regard and preserve all other
nondisclosure obligations pursuant to Section 13(a) of the Employment Agreement.
(c) The Company represents and warrants that, to the
knowledge of its officers and directors, as of the date hereof the Company has
no claim against Mr. Bolton for any breach of his duties or responsibilities
committed while employed by the Company.
10. (a) Mr. Bolton further covenants and agrees, as a
condition of the Company's performance of its obligations arising from this
Release, that Mr. Bolton will regard and preserve all noncompete and other
obligations specifically set forth in Sections 13(b) and (c) of the Employment
Agreement.
(b) Mr. Bolton agrees that he will not apply for or
otherwise seek employment with the Released Parties.
11. Mr. Bolton and the Company expressly covenant and agree
that the covenant not to compete as established in Section 13 of the Employment
Agreement is a reasonable covenant under the circumstances, and covenant and
agree to be bound by Section 13(d) of the Employment Agreement.
12. The Company shall indemnify, in accordance with the
Articles of Incorporation of the Company and to the fullest extent of applicable
law, Mr. Bolton if he becomes a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative ("Claim"),
<PAGE> 8
8
by reason of the fact that he was a director, officer, employee or agent of the
Company or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation (including but not limited to
a subsidiary or affiliate of the Company), partnership, joint venture, trust or
other enterprise, against expenses (including attorney's fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred in defending a
civil or criminal action, suit or proceeding. Expenses of Mr. Bolton incurred in
defending a civil or criminal action, suit or proceeding will be paid by the
Company as they are incurred upon receipt of an undertaking by or on behalf of
Mr. Bolton to repay the amount if it is ultimately determined by a court of
competent jurisdiction that he is not entitled to be indemnified by the Company.
The Company's obligations described in this paragraph shall continue for a
period of not less than five (5) years after the Effective Date; provided,
however, that all rights to indemnification in respect of any Claim asserted or
made within such period shall continue until the final disposition of the Claim.
13. Should any provision of this Release be found to be in
violation of any law, or ineffective or barred for any reason whatsoever, the
remainder of this Release shall be in full force and effect to the maximum
extent permitted by law.
14. The Company and Mr. Bolton agree to execute such other
documents and to take such other actions as may be reasonably necessary to
further the purposes of this Release.
15. (a) Mr. Bolton acknowledges and agrees that, in deciding
to execute this Release, he has had the opportunity to consult with legal,
financial and other personal advisors of his own choosing as he deems
appropriate, in assessing whether to execute this Release and that he has
consulted with legal counsel. Mr. Bolton represents and acknowledges that no
representations, statement, promise, inducement, threat or suggestion has been
made by the
<PAGE> 9
9
Company or the Released Parties to influence him to sign this Release except
such statements as are expressly set forth herein. Mr. Bolton agrees that he has
been given a minimum of twenty-one (21) days within which to consider the terms
and effects of this Release and to consult with, and to ask any questions that
he may have of anyone, including legal counsel and other personal advisors of
his own choosing, and that he has executed this Release voluntarily and with
full understanding of its terms and effects. Mr. Bolton further agrees that no
fact, evidence, event or transaction currently unknown to him but which
hereafter may become known to him shall affect in any way or manner the final
and unconditional nature of this Release.
(b) This Release shall not become effective until the 8th
day following the date on which Mr. Bolton signs this Release as indicated
below, and no payments shall be due, owing or paid by the Company unless and
until the Release becomes effective, it being understood between Mr. Bolton and
the Company that Mr. Bolton has a period of seven (7) days within which to
revoke such signature.
16. The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume and
agree expressly to perform this Release in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Thereafter the Company (prior to such succession) shall have no
further obligations with respect to this Release but will continue to be
entitled to the benefit hereof. As used in this Release, "Company" shall mean
the Company as hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this Release, by
operation of law or otherwise.
<PAGE> 10
10
17. The respective rights and obligations of the parties
hereunder shall survive any termination of this Release to the extent necessary
to the intended preservation of such rights and obligations. The provisions of
this section 17 are in addition to the survivorship provisions of any other
section of this Release.
18. The foregoing represents the entire agreement between Mr.
Bolton and the Company and supersedes all prior agreements or understandings,
written or oral, between them. This Release may not be changed or modified,
except by a written instrument signed by Mr. Bolton and the Company.
19. This Release 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.
20. This Release may be executed in two or more counterparts,
each of which will be deemed an original.
/s/ William J. Bolton
- ------------------------------
William J. Bolton
2209 Longleaf Blvd
Vestavia Hills, Alabama 36243
Dated: This 31st day of October, 1997
<PAGE> 11
11
STATE OF ALABAMA )
: ss.:
COUNTY OF JEFFERSON )
On October 31, 1997, before me personally came William J.
Bolton to me known and known to me to be the individual described in, and who
executed, the foregoing General Release, and duly acknowledged to me that he
executed same.
/s/ Jayne R. Amerine
--------------------
Notary Public
Bruno's, Inc.
By: /s/ James A. Demme
-------------------
James A. Demme
Chairman of the Board and
Chief Executive Officer
Bruno's, Inc.
800 Lakeshore Parkway
Birmingham, Alabama 35211
Dated: This 31st day of October, 1997.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF BRUNO'S, INC. FOR THE QUARTER ENDED NOVEMBER 1, 1997, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> FEB-02-1997
<PERIOD-END> NOV-01-1997
<CASH> 3,167
<SECURITIES> 0
<RECEIVABLES> 18,992
<ALLOWANCES> 0
<INVENTORY> 210,607
<CURRENT-ASSETS> 245,870
<PP&E> 785,253
<DEPRECIATION> 332,921
<TOTAL-ASSETS> 780,808
<CURRENT-LIABILITIES> 240,183
<BONDS> 400,000
0
0
<COMMON> 255
<OTHER-SE> (423,495)
<TOTAL-LIABILITY-AND-EQUITY> 780,808
<SALES> 1,940,751
<TOTAL-REVENUES> 1,940,751
<CGS> 1,512,369
<TOTAL-COSTS> 1,512,369
<OTHER-EXPENSES> 449,247
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 65,131
<INCOME-PRETAX> (85,996)
<INCOME-TAX> 7,792
<INCOME-CONTINUING> (93,788)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (93,788)
<EPS-PRIMARY> (3.70)
<EPS-DILUTED> (3.70)
</TABLE>
<PAGE> 1
EXHIBIT 99.1
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR"
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements to encourage companies to provide prospective
information about their companies without fear of litigation so long as those
statements are identified as forward-looking and are accompanied by meaningful
cautionary statements identifying important factors that could cause actual
results to differ materially from those projected in the statement. The Company
desires to take advantage of the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995 in connection with the forward-looking
statements contained in this report. Accordingly, the Company hereby identifies
the following important factors which could cause the Company's financial
results to differ materially from any such results which might be projected,
forecast, estimated or budgeted by the Company in forward-looking statements:
(a) Heightened competition, including specifically
the intensification of price competition; the entry of new competitors;
and the expansion, renovation and opening of new stores by new and
existing competitors.
(b) Failure to obtain new customers or retain
existing customers.
(c) Inability to carry out marketing, sales and
capital plans.
(d) Insufficiency of financial resources to renovate
and expand store base.
(e) Prolonged dispute with labor.
(f) Economic downturn in the Southeast region.
(g) Loss or retirement of key executives.
(h) Higher selling, general and administrative
expenses occasioned by the need for additional advertising, marketing,
administrative, or management information systems expenditures.
(i) Adverse publicity and news coverage.
The foregoing review of factors pursuant to the Private Litigation Securities
Reform Act of 1995 should not be construed as exhaustive or as any admission
regarding the adequacy of disclosures made by the Company prior to this filing.
